SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Amending Part IV -- Item 14)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to ____________
Commission file number 0-16345
SED INTERNATIONAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 22-271544
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4916 North Royal Atlanta Drive, Atlanta, Georgia 30085
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
COMMON STOCK PURCHASE RIGHTS
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K/A or any amendments to this Form 10-K/A. [ ]
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant was approximately $20.6 million as of September 24,
1999 based upon the last sale price of the Common Stock as reported on
the Nasdaq National Market on that day.
There were 7,016,453 shares of Common Stock, $.01 par value,
outstanding at September 24, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates information by reference from the Registrant's
definitive proxy statement for the 1999 annual meeting of shareholders
scheduled to be held on November 9, 1999, which proxy statement will
be filed no later than 120 days after the close of the Registrant's
fiscal year ended June 30, 1999.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this
Report:
1. Financial Statements. The following financial
statements and the report of the Registrant's
independent auditors thereon are incorporated
herein by reference to Item 8 to Registrant's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 (SEC File No. 0-16345) ("1999
Form 10-K").
- Independent Auditors' Report
- Consolidated Balance Sheets at June 30, 1998
and 1999
- Consolidated Statements of Operations for the
years ended June 30, 1997, 1998 and 1999
- Consolidated Statements of Shareholders'
Equity for the years ended June 30, 1997,
1998 and 1999
- Consolidated Statements of Cash Flows for the
years ended June 30, 1997, 1998 and 1999
- Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
- Schedules:
Schedule II for Valuation and Qualifying
accounts is incorporated herein by reference
to "Supplemental Disclosures" in Note 11 of
the Notes to Consolidated Financial
Statements to Registrant's 1999 Form 10-K.
Schedules other than the Schedule presented are
omitted because the information required is not
applicable or the required information is shown in
the consolidated financial statements or notes
thereto.
3. Exhibits Incorporated by Reference or Filed with
this Report.
Exhibit
Number Description
3.1 Articles of Incorporation of the Registrant. (1)
3.2 Bylaws of the Registrant. (2)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles
of Incorporation and Bylaws of the Registrant,
respectively, defining rights of holders of common
stock of the Registrant.
<PAGE>
4.2 Form of Rights Agreement, dated as of October 31, 1996
between the Registrant and National City Bank.(3)
10.1 Form of Lease Agreement dated as of January 1, 1991
between Royal Park, Registrant and SED International,
Inc. (Formerly Southern Electronics Distributors, Inc.)
("SED International").(4)
10.2 Lease Agreement dated May 16, 1990 between The
Equitable Life Assurance Society of the United States
and SED International(5), as amended March 20, 1992.(6)
10.3 Southern Electronics Corporation 1986 Stock Option Plan
dated September 3, 1986, together with related forms of
Incentive Stock Option Agreement and NonQualified
Stock Option Agreement.(7)/*/
10.4 Form of First Amendment dated September 14, 1989 to
Southern Electronics Corporation 1986 Stock Option
Plan.(8)/*/
10.5 Second Amendment dated November 7, 1989 to Southern
Electronics Corporation 1996 Stock Option Plan.(9)/*/
10.6 Third Amendment dated July 17, 1992 to Southern
Electronics Corporation 1986 Stock Option Plan.(10)/*/
10.7 Southern Electronics Corporation 1988 Restricted Stock
Plan, together with related form of Restricted Stock
Agreement.(11)/*/
10.8 First Amendment dated November 7, 1989 to Southern
Electronics Corporation 1988 Restricted Stock
Plan.(12)/*/
10.9 Second Amendment dated July 17, 1992 to Southern
Electronics Corporation 1988 Restricted Stock
Plan.(13)/*/
10.10 Form of Southern Electronics Corporation 1991 Stock
Option Plan, together with related forms of Incentive
Stock Option Agreement and NonQualified Stock Option
Agreement. (14) /*/
10.11 First Amendment dated July 17, 1992 to Southern
Electronics Corporation 1991 Stock Option Plan.(15)/*/
10.12 Second Amendment dated August 30, 1996 to Southern
Electronics Corporation 1991 Stock Option Plan.(16)/*/
10.13 Form of NonQualified Stock Option Agreement dated as of
August 28, 1992 between the Registrant and Cary
Rosenthal.(17)/*/
10.14 Employment Agreements dated November 7, 1989, between
the Registrant, SED International and each of Gerald
Diamond and Jean Diamond (18)/*/, each as amended by
form of Amendment No. 1 dated September 24,
1991.(19)/*/
10.15 SED International, Inc. Savings Plan effective as of
January 1, 1991, together with Savings Plan Trust and
Savings Plan Adoption Agreement.(20)/*/
10.16 Lease Agreement dated November 1992 between H.G.
Pattillo and Elizabeth M. Pattillo and SED
International.(21)
10.17 Lease Agreement dated August 9, 1993 between New World
Partners Joint Venture and SED International and
Addendum I thereto ("NWPJV Lease"). (22)
10.18 Second Addendum to NWPJV Lease dated January 10, 1996
among New World Partners Joint Venture, New World
Partners Joint Venture Number Two and SED
International. (23)
10.19 Third Addendum to NWPJV Lease dated July 24, 1996
between New World Partners Joint Venture Number Two and
SED International. (24)
10.20 Amendment to Lease for 4775 N. Royal Atlanta Drive.(25)
10.21 Form of NonQualified Stock Option Agreement dated as of
May 21, 1993 between the Registrant and Cary Rosenthal
(see Exhibit 10.13)./*/
<PAGE>
10.22 Form of NonQualified Stock Option Agreement, dated as
of September 13, 1994 between the Registrant and Cary
Rosenthal (see Exhibit 10.13)./*/
10.23 Form of NonQualified Stock Option Agreement for
Directors. (26)/*/
10.24 1995 Formula Stock Option Plan, together with related
form of NonQualified Stock Option Agreement.(27)
10.25 Adoption Agreement for Swerdlin & Registrant Regional
Prototype Standardized 401(k) Profit Sharing Plan and
Trust, as amended. (28)/*/
10.26 Third Amendment dated September 12, 1996 to the
Southern Electronics Corporation Stock Option
Plan.(29)/*/
10.27 Industrial Real Estate Lease (Multi-Tenant Facility)
dated as of March 6, 1997, between Majestic Realty Co.
and Patrician Associates, Inc., as landlord (the
"Landlord"), and SED International, as Tenant, together
with Option to Extend Term dated as of March 26, 1997,
between the Landlord and SED International, as Tenant.
(30)
10.28 Lease Agreement made August 11, 1997, between Gwinnett
Industries, Inc. and SED International. (31)
10.29 Lease Agreement made February 3, 1998, between First
Industrial Harrisburg, L.P. and SED International. (32)
10.30 Second Amendment to Employment Agreement effective July
1, 1998 between SED International and Gerald Diamond.
(33)/*/
10.31 Second Amendment to Employment Agreement effective July
1, 1998 between SED International and Jean Diamond.
(34)/*/
10.32 1999 Stock Option Plan dated July 20, 1999, together
with related forms of Stock Option Agreement and
Restriction Agreement. (35)/*/
10.33 Third Amendment to Employment Agreement effective
December 16, 1998 between SED International and Jean
Diamond. (36)/*/
10.34 Third Amendment to Employment Agreement effective July
1, 1999 between SED International and Gerald
Diamond. (37)/*/
10.35 Fourth Amendment to Employment Agreement effective July
1, 1999 between SED International and Jean Diamond.
(38)/*/
10.36 Employment Agreement effective June 1, 1999, between
SED International and Ronell Rivera. (39)/*/
10.37 Form of Second Amended and Restated Credit Agreement
dated as of August 31, 1999, among the Registrant and
SED International as Borrowers and Wachovia Bank, N.A.
as Agent. (40)/*/
10.38 Form of Indemnification Agreement entered into with
each of the directors of the Registrant and the
Registrant. (41)/*/
10.39 Form of Indemnification Agreement entered into with
each of the officers of the Registrant and the
Registrant. (42)/*/
10.40 Form of Lease Agreement dated as of April 1, 1999
between Diamond Chip Group, L.L.C. and SED
International. /*/
21 Subsidiaries of the Registrant. (43)
23 Independent Auditors' Consent. (44)
24 Power of Attorney. (45)
27 Financial Data Schedule. (46)
- --------------------
/*/Management contract or compensatory plan or arrangement with one or
more directors or executive officers.
<PAGE>
(1) Incorporated herein by reference to Exhibit 3.1 to the Registrant's
1999 Form 10-K.
(2) Incorporated herein by reference to Exhibit 3.2 to Registrant's
1999 Form 10-K.
(3) Incorporated herein by reference to Exhibit 7 to the Registrant's
Current Report on Form 8-K dated October 30, 1996.
(4) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1991 (SEC File No. 0-16345) ("1991 Form 10-K").
(5) Incorporated herein by reference to Exhibit 10.8 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1990 (SEC File No. 0-16345) ("1990 Form 10-K").
(6) Incorporated herein by reference to Exhibit 10.5 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1992 (SEC File No. 0-16345) ("1992 Form 10-K").
(7) Incorporated herein by reference to Exhibit 10.12 to Registrant's
("Registration Statement") on Form S1, filed September 5, 1986
(Reg. No. 338494).
(8) Incorporated herein by reference to Exhibit 10.22 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1988 (SEC File No. 0-16345).
(9) Incorporated herein by reference to Exhibit 10.25 to Registrant's
1990 Form 10-K.
(10) Incorporated herein by reference to Exhibit 10.12 to Registrant's
1992 Form 10-K.
(11) Incorporated herein by reference to Exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1988 (SEC File No. 0-16345).
(12) Incorporated herein by reference to Exhibit 10.26 to Registrant's
1990 Form 10-K.
(13) Incorporated herein by reference to Exhibit 10.15 to Registrant's
1992 Form 10-K.
(14) Incorporated herein by reference to Annex A to Registrant's
definitive Supplemental Proxy Statement dated October 18, 1991
(SEC File No. 0-16345).
(15) Incorporated herein by reference to Exhibit 10.17 to Registrant's
1992 Form 10-K.
(16) Incorporated herein by reference to Appendix A to Registrant's
Proxy Statement pertaining to Registrant's 1995 Annual Meeting of
Stockholders dated October 1, 1995 (SEC File No. 0-16345).
(17) Incorporated herein by reference to Exhibit 10.18 to Registrant's
1992 Form 10-K.
(18) Incorporated herein by reference to Exhibit 6(a) to Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1989 (SEC File No. 0-16345).
(19) Incorporated herein by reference to Exhibit 10.13 to Registrant's
1991 Form 10-K.
(20) Incorporated herein by reference to Exhibit 10.15 to Registrant's
1991 Form 10-K.
(21) Incorporated herein by reference to Exhibit 10.24 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1993 (SEC File No. 0-16345) ("1993 Form 10-K").
(22) Incorporated herein by reference to Exhibit 10.25 to Registrant's
1993 Form 10-K.
(23) Incorporated herein by reference to Exhibit 10.32 to Registrant's
Annual Report on Form l0-K for the fiscal year ended June 30,
1996 (SEC File No. 0-16345) ("1996 Form 10-K").
(24) Incorporated herein by reference to Exhibit 10.33 to Registrant's
1996 Form 10-K.
(25) Incorporated herein by reference to Exhibit 10.26 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1995 (SEC File No. 0-16345) ("1995 Form 10-K").
(26) Incorporated herein by reference to Exhibit 10.29 to Registrant's
1995 Form 10-K.
(27) Incorporated herein by reference to Appendix B to Registrant's
Proxy Statement pertaining to Registrant's 1995 Annual Meeting of
Stockholders dated October 1, 1995 (SEC File No. 0-16345).
(28) Incorporated herein by reference to Exhibit 10.41 to Registrant's
1996 Form 10-K.
(29) Incorporated herein by reference to Appendix A to Registrant's
Proxy Statement pertaining to Registrant's 1996 Annual Meeting of
Stockholders dated October 1, 1996 (SEC File No. 0-16345).
(30) Incorporated herein by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 (SEC File No. 0-16345).
(31) Incorporated herein by reference to Exhibit 10.40 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30,
1997 (SEC File No. 0-16345).
<PAGE>
(32) Incorporated herein by reference to Exhibit 10.45 to Registrants
Annual Report on Form 10-K for the fiscal year ended June 30,
1998 (SEC File No. 01-6345) ("1998 Form 10-K").
(33) Incorporated herein by reference to Exhibit 10.48 to Registrant's
1998 Form 10-K.
(34) Incorporated herein by reference to Exhibit 10.49 to Registrant's
1998 Form 10-K.
(35) Incorporated herein by reference to Exhibit 10.32 to Registrant's
1999 Form 10-K.
(36) Incorporated herein by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1998 (SEC File No. 0-16345).
(37) Incorporated herein by reference to Exhibit 10.34 to Registrant's
1999 Form 10-K.
(38) Incorporated herein by reference to Exhibit 10.35 to Registrant's
1999 Form 10-K.
(39) Incorporated herein by reference to Exhibit 10.36 to Registrant's
1999 Form 10-K.
(40) Incorporated herein by reference to Exhibit 10.37 to Registrant's
1999 Form 10-K.
(41) Incorporated herein by reference to Exhibit 10.38 to Registrant's
1999 Form 10-K.
(42) Incorporated herein by reference to Exhibit 10.39 to Registrant's
1999 Form 10-K.
(43) Incorporated herein by reference to Exhibit 21 to Registrant's
1999 Form 10-K.
(44) Incorporated herein by reference to Exhibit 23 to Registrant's
1999 Form 10-K.
(45) Incorporated herein by reference to Exhibit 24 to Registrant's
1999 Form 10-K.
(46) Incorporated herein by reference to Exhibit 27 to Registrant's
1999 Form 10-K.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during
the quarter ended June 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SED INTERNATIONAL HOLDINGS, INC.
Date: September 29, 1999 By: /s/ Larry G. Ayers
Larry G. Ayers
Vice President - Finance, Chief
Financial Officer, Secretary and
Treasurer
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 indicated this 29th day
of September, 1999.
/s/ Gerald Diamond
Gerald Diamond
Chairman of the Board, Chief
Executive Officer and Director
(principal executive officer)
[Signatures continued on following page]
<PAGE>
/s/ Larry G. Ayers
Larry G. Ayers
Vice President - Finance,
Chief Financial Officer, Secretary
and Treasurer
(principal financial and
accounting officer)
*
Stewart I. Aaron
Director
*
Joel Cohen
Director
*
Mark Diamond
Director
*
Ray D. Risner
Director
*
Cary Rosenthal
Director
*/s/ Larry G. Ayers
Larry G. Ayers
Attorney-In-Fact
<PAGE>
LEASE AGREEMENT
STATE OF GEORGIA
DEKALB COUNTY
The Landlord : Diamond Chip Group, L.L.C.
2460 Spalding Drive
Dunwoody, Georgia 30350
The Tenant : SED International, Inc.
4916 N. Royal Atlanta Drive
Tucker, Georgia 30085-5044
The Premises : Shall mean the tract or parcel of land
identified and described on Exhibit "A"
attached hereto and made a part hereof,
and all buildings and improvements
thereon
The Lease Date : April 1, 1999
The Exhibits : Legal Description [per Premises
definition]
[The Exhibit is incorporated into this Lease by reference.]
In consideration of the following terms and conditions, and
for other good and valuable considerations (the receipt and
sufficiency of all of which are hereby acknowledged) the
parties agree to the following terms.
1. TERM.
1.01. Term. The Term of this Lease begins on the Lease Date
specified above on the first page, and ends at midnight on
September 30, 2006. There shall be no renewal of this Lease
Agreement, except as set forth in Section 12.25 below.
2. THE PREMISES.
2.01 The Premises. Landlord leases and rents to Tenant, and
Tenant leases and rents from Landlord the Premises defined
above, and located on the property described in Exhibit A
[hereinafter sometimes called the Property below],
according to the provisions of this Lease. No easement for
light, air or view is included in this Lease of the
Premises, and no diminution of light or air or view by any
structure which may be now or hereafter erected shall affect
this Lease. Landlord reserves the right to erect or to grant
others the right to erect utility poles and other poles for
billboards or other purposes on the Premises, so long as
this does not reduce
<PAGE>
the number of existing parking spaces, interfere with access
to and from the Premises or parking, or interfere with
Tenant's rights to use the Premises for the purpose
described in 2.02 below.
2.02. Use of Premises. Tenant may use and occupy Premises for
general office and distribution uses and purposes,
including, without limitation use as a telephone and
internet call center, and other uses presently being made of
the Premises by Tenant, and all functions and purposes now
or hereafter incidental to the foregoing uses and purposes.
Tenant's use of the Premises shall not violate any
ordinance, law or regulation of any governmental body, any
pertinent zoning restrictions, or any Rules and Regulations
of Landlord covered below, or promulgated hereafter. Tenant
agrees to conduct its business in the manner of, and
according to, generally accepted business principles.
2.03. Condition of Premises. As this lease is a continuation of a
prior occupancy, Tenant accepts the Premises as is, Tenant
agrees that the Premises are in good and satisfactory
condition for the use intended by Tenant, and Tenant agrees
that Landlord is not responsible for any defects in the
condition of the property or Premises, either latent or
patent, and there are no warranties relating to the Property
and/or to the Premises, either expressed or implied.
2.04. Alteration of Premises. Any improvement or alteration to the
Premises required because of Tenant's actual or contemplated
use of the Premises shall be Tenant's obligation to
undertake and complete at its expense. Tenant shall not be
obligated to make any improvements or alterations required
by any statute, rule, regulation, ordinance, code or other
legal requirement, unless the need for such improvement or
alteration is required as a result of a particular use that
Tenant makes of the Premises other than general office and
warehouse uses and purposes.
3. RENT AND ADJUSTMENTS.
3.01. Base Rent.
(a) The Rent Commencement Date is the Lease Date, shown
on the first page above. The 1st Lease Year shall be
a period of six (6) months which begins on the Rent
Commencement Date and expires on September 30, 1999.
The 2nd "Lease Year" begins on October 1, 1999 (the
"Rent Adjustment Date") and runs for the next 12
complete calendar months. Each subsequent "Lease Year"
begins on the next anniversary of the Rent Adjustment
Date and runs for 12 months.
(b) Beginning on the Rent Commencement Date, Tenant shall
pay Landlord a Base Annual Rent for each year of the
Term. This Base Annual Rent shall be the minimum due
during each Lease Year of the Term. During the 1st
Lease Year (which is a short year - 6 months) the Base
Annual Rent shall be $88,181.52 ($14,696.92 per month).
During the 2nd Lease Year the Base Annual Rent shall be
$253,138.50. After the 2nd Lease Year, upon each
anniversary of the Rent Adjustment Date, the prior
Lease Year's Base
<PAGE>
Annual Rent shall be increased by three percent (3%).
Thus, the Base Annual Rent for Lease Years three
through eight of the Term shall be as shown below:
Lease Year Base Annual Rent
3 $260,732.66
4 $268,554.64
5 $276,611.28
6 $284,909.62
7 $293,456.91
8 $302,260.62
(c) The Base Annual Rent shall be payable in twelve equal
consecutive monthly installments [called the Base
Monthly Rent ]. For example, the Base Monthly Rent for
the 1st Lease Year shall be $14,696.92, and the Base
Monthly Rent for the 2nd Lease Year shall be
$21,094.88. The first Base Monthly Rent is due and
payable on the Rent Commencement Date. Thereafter, each
Base Monthly Rent payment shall be paid in advance of
the first day of each calendar month during the Lease
Term, without demand and at Landlord's office (or such
place as Landlord designates). Notwithstanding this
3.01(c), should the Lease Term begin on any date other
than the first day of the month, Tenant shall pay a
prorated portion of the first month's rent. Should the
Lease Term end on any date other than the last day of
the month, Tenant shall pay a prorated portion of the
last month's rent.
3.02. Additional Rent based on Operating Expenses. In
addition, Tenant shall pay as Additional Rent 100% of
the Operating Expenses [defined below] for the
Building during the Term of the Lease.
(a) Operating Expenses means the reasonable and direct cost
and expense of the following items to the extent
incurred by Landlord in connection with the operation
of the Premises: electricity, gas, water and sewerage
to the extent not metered and billed to tenant.
(b) Operating Expenses does not include Landlord's cost and
expense of maintaining those items enumerated in 6.01
for which Landlord is responsible, nor any other
structures, such as billboards.
(c) As soon as practical after the end of each calendar
year, Landlord shall prepare a Statement of Operating
Expenses, along with a computation of the Additional
Rent due the Landlord from the Tenant. Tenant agrees
to pay Landlord this Additional Rent within ten days
following receipt of this Statement. However,
notwithstanding anything in this paragraph to the
contrary, Landlord shall also have the right to demand,
and Tenant shall pay upon such demand, one twelfth
(1/12) of the estimated current
<PAGE>
Operating Expenses on a monthly basis, which will then
be subject to annual adjustment for reconciliation with
the Operating Expenses actually incurred.
(d) If this Lease ends other than upon the end of a
calendar year, Landlord shall make a good-faith
prorated computation of the Operating Expenses due
hereunder through the end of the Lease term, and Tenant
shall pay this amount upon demand. At the end of that
calendar year in which this Lease ended, and upon
compilation of the actual figures, any excess paid by
Tenant shall be promptly returned by Landlord, or any
deficiency shall be paid to Landlord by Tenant on
demand (as the case may be).
(e) Should Landlord so instruct, Tenant shall pay any such
Operating Expense directly to the utility company,
service company, or other billing entity.
(f) Landlord's books and records for Operating Expenses and
Taxes (as defined in Section 3.03 below) shall be kept
in Atlanta, Georgia and kept in accordance with
Generally Accepted Accounting Principles consistently
applied, on an accrual basis. Tenant shall have the
right to audit the Landlord's books and records
concerning the Operating Expenses at any time upon not
less than ten (10) days prior notice to Landlord.
3.03. Additional Rent from Taxes. As further Additional Rent
during the term of this Lease, Tenant shall also pay
upon demand 100% of all real property taxes, ad valorem
taxes, special assessments, governmental charges
relating to the real estate interest in the Premises
and any other governmental charges levied on the
Premises ("Taxes"). Notwithstanding the foregoing, the
term "Taxes" shall specifically exclude all federal,
state and local income taxes, and all estate, gift,
transfer, succession, inheritance, intangible and
franchise taxes.
(a) Tenant's payment of taxes, as provided above, shall be
payable on the later of (i) the date within fifteen
(15) days after receipt of notice from Landlord of the
amount due, or (ii) the date fifteen (15) days prior to
the date such taxes are due to be paid to the taxing
authority.
(b) If the final year of the Lease Term fails to coincide
with the tax year, then Tenant shall pay its pro rata
share for that portion of that last Lease Year. If such
taxes for the year in which the lease ends are not
ascertainable before payment of the last month's rent,
then the amount of such taxes assessed against the
property for the previous tax year shall be used as a
basis of determining the pro rata share, if any, to be
paid by Tenant for that portion of the last Lease Year.
Should Landlord so instruct, Tenant shall pay any such
tax directly to the taxing governmental entity.
3.04. Payment of Rent. All of Tenant's Rent and all other
obligations provided for in this Lease herein shall be
cumulative; and the payment by Tenant of
<PAGE>
all such amounts shall be made to Landlord at its
office (or such other place as Landlord specifies),
without deduction or set off for any reason, except as
otherwise expressly set forth in Section 12.06 of this
Lease.
3.05. Accord and Satisfaction. No payment by Tenant, or
receipt by Landlord, of a lesser amount other than that
stipulated herein for Rent, or any other charge, shall
be deemed to be other than on account for the earliest
stipulated Rent or other charge then due. No
endorsement or statement on a check or letter
accompanying any check or payment shall be deemed an
accord and satisfaction. Landlord may accept such check
or payment without prejudice to Landlord's rights to
recover the balance of such Rent or other charge, or
pursue any other remedy in this Lease, at law or in
equity.
3.06. Interest on Past-Due Rent. Any installment of Rent
required to be paid by Tenant under this Lease which is
not paid when due shall bear interest at the rate of
twelve percent (12%) per annum from the due date until
paid. This interest is intended to reimburse Landlord
for expenses incurred by reason of such failure by
Tenant. It is agreed by Tenant that such an interest is
not a penalty.
4. TENANT'S CARE.
4.01. Tenant's Care.
(a) Tenant will take good care of the Premises and its
fixtures and improvements, at Tenant's expense; and
Tenant will not suffer or permit any active or
permissive waste or injury to the Premises. Tenant
shall (at its expense but under Landlord's direction)
promptly r epair any damage to the Premises caused by
the misuse by, or neglect of, the Tenant, its
employees, agents, and all persons permitted on the
Premises by Tenant.
(b) Without Landlord's written consent, which consent shall
not be unreasonably withheld, conditioned or delayed,
Tenant will not make alterations, additions or
improvements in or about the Premises, and if any
activities of Tenant on the Premises increase the rate
of fire insurance on the Premises, Tenant shall pay
such increase. Tenant agrees that it shall not be
unreasonable for Landlord to withhold Landlord's
consent to any alteration, addition, or improvement
requested by Tenant if such alteration, addition or
improvement impairs the load bearing structural
integrity of the foundations of the building located on
the Premises. Within ten (10) days after Tenant
requests Landlord's consent to any alterations,
additions or improvements, Landlord may give Tenant
written notice (the "Removal Notice") specifying that
all or any portion of such alterations, additions or
improvements will have to be removed prior to the
expiration of the Term and the Premises restored prior
to the expiration of the Term. All alterations,
additions or improvements of a permanent nature, other
than
<PAGE>
fixtures and trade fixtures, made or installed by
Tenant to the Premises shall become the property of
Landlord at the expiration of this Lease; provided,
however, that if Landlord gave Tenant a timely "Removal
Notice" as specified above, then Landlord reserves the
right to require Tenant to remove the alterations,
additions or improvements made to the Premises by
Tenant after the date of this Lease whose removal was
specified and required in such Removal Notice.
Notwithstanding any other term or provision of this
Lease to the contrary, Tenant has no obligation to
remove any of the alterations, additions or
installations that exist on the Premises as of the date
of this Lease, and Landlord agrees to accept the
Premises back in its current condition and
configuration.
(c) No later than the last day of the Term, Tenant will
remove all of its personal property, equipment not
physically attached to the Premises, fixtures and trade
fixtures, and repair all injury done by (or in
connection with) the removal of this property. Tenant
shall thus surrender the Premises (together with all
keys to Premises) in as good a condition as it was at
the beginning of the Term, except for ordinanry wear
and tear, and damage by fire or other casualty. All of
Tenant's property remaining on the Premises after
expiration of the Term shall be deemed conclusively
abandoned, and may be removed by Landlord. In such
case, Tenant shall reimburse Landlord promptly upon
demand for the costs of such removal, subject however
to Landlord's right to require Tenant to remove certain
alterations, improvements or additions made to Premises
by Tenant, after the date of this Lease, under
Paragraph 4.01(b).
(d) In doing any work related to the installation of
Tenant's furnishings, fixtures, or equipment in the
Premises, Tenant will use only contractors or workmen
approved in advance and in writing by Landlord, such
approval not to be unreasonably withheld, conditioned
or delayed. Tenant shall promptly remove or bond any
lien for material or labor claimed against the Premises
by such contractors or workmen if such claim should
arise from work requested by Tenant; and Tenant hereby
indemnifies and holds Landlord harmless from and
against any and all costs, expenses or liabilities
incurred by Landlord as a result of such claims and
liens, and Landlord s defending against same (including
Landlord's attorney s fees).
5. RULES AND REGULATIONS.
5.01. Rules and Regulations of Premises.
(a) The sidewalks, entry passages, and other areas of the
Premises shall not be obstructed by Tenant, or used for
purposes other than those of ingress, egress, and
parking, as designated. The water closets and other
water apparatus shall not be used for any other purpose
than those for which they
<PAGE>
were constructed, and no sweeping, rubbish, or other
obstructing substances shall be thrown in them.
(b) Tenant shall not install or paint any signs on any
exterior or interior doors, plate glass or exterior
walls. Tenant may place a sign in the vicinity of
Tenant's entrance doors, but such sign shall be of such
order, size and style as is approved by Landlord in
advance and in writing, such approval not to be
unreasonably withheld, conditioned or delayed; and the
approved sign shall be installed at such place as
Landlord designates. Landlord hereby approves all of
the existing signage of Tenant.
(c) If Tenant wishes to install in, or use on the Premises,
any computer (other than a minicomputer), duplicating,
or other large business machinery or equipment; or any
additional machinery requiring more amperes of
electricity in use on the date this Lease is signed;
then Tenant is required to first obtain Landlord s
written consent, such consent not to be unreasonably
withheld, conditioned or delayed. If Tenant requires
any interior wiring for any machinery or equipment,
such wiring shall be done by an electrician approved by
Landlord, such approval not to be unreasonably
withheld, conditioned or delayed.
(d) In all cases, Landlord retains the right to approve the
weight per square foot and position of heavy articles
including (but not limited to) iron safes, computers,
duplicating equipment, or air compressors, such
approval not to be unreasonably withheld, conditioned
or delayed.
5.02. Future Rules and Regulations. Landlord reserves the
right to promulgate additional reasonable rules and
regulations, in the future for the safety, order and
cleanliness of the Premises. All rules and regulations
for the Premises shall be subject and subordinate to
this Lease. In the event of any conflict between said
rules and regulations and other provisions of this
Lease, the other terms and provisions of this Lease
shall control. With respect to the provisions of this
Section 5.02 of the Lease, Landlord agrees that Tenant
shall not be required to comply with rules and
regulations that adversely affect its use of the
Premises and/or the parking areas of the Building or
require Tenant to pay any additional rent or other
money to Landlord.
6. SERVICES AND REPAIRS.
6.01. Landlord's Exclusive Responsibilities. Landlord shall
maintain in good condition and repair the foundations (and
the structural soundness of the foundations) and exterior
walls (but not glass) of the Premises, the plumbing and
electrical systems (but not these systems fixtures in the
Premises), and utility lines from the points of common
connection to the respective points at which public
utilities are responsible for such utility lines, at
Landlord's sole cost and expense. However, if any of these
are damaged by Tenant, (or by its agents, employees,
invitees or
<PAGE>
licensees), Tenant shall be solely responsible for all costs
of repairing such damage, and shall reimburse Landlord for
the repair immediately upon demand, that sum to be
considered Additional Rent.
6.02. Tenant's Obligations to Repair. Tenant agrees to promptly
make:
(a) all repairs and maintenance (except those Landlord is
required to make under 6.01), to maintain in good
order at all times the windows and doors of the
Premises; the HVAC, electrical, and plumbing fixtures
of the Premises; the HVAC systems of the Premises; and
landscaping surrounding the Premises;
(b) maintain exterior lighting, signage and grounds care,
including the sweeping of walks and parking areas, and
the maintenance of attractive landscaping;
(c) trash removal, cleaning services, custodial services
(including the provision of toilet supplies and
lighting supplies), security, parking lot maintenance
(such as sweeping, sealing and patching of asphalt, but
Tenant shall not be required to repave the parking or
driveway areas during the last year of the Term), and
grounds maintenance.
If Tenant should commit an Act of Default as a result of
failing to perform the Tenant's obligations under this
Section 6.02, Landlord may perform the same, and such
payment shall be added as Additional Rental of the Premises,
immediately payable upon demand, along with an
administrative charge of Fifty and No/100ths Dollars
($50.00).
6.03. Usage of Services. The services specified here in Section 6
are predicated on certain usage of the Premises by Tenant
during normal business hours which shall be from 7:00 a.m.
to 9:00 p.m. on Mondays through Fridays, except for national
holidays. If:
- enant uses services (or utilities which are not metered
and billed directly to Tenant) in an amount, or for a
period in excess of, normal usage (in Landlord's sole
opinion); or
- Tenant places in the Premises appliances or equipment
requiring excessive electrical service (in Landlord s
sole opinion).
Landlord shall have the right to charge Tenant as Additional
Rent a reasonable sum as reimbursement for the direct cost
of such added services. In the event of disagreement as to
the reasonableness of such charge, the opinion of the
appropriate local utility company, or of an independent
professional engineering firm, shall prevail and shall be
binding upon the Landlord and Tenant.
6.04. Liens. No encumbrances, charges or liens against the
Premises shall exist because of any services or materials
requested by by Tenant or its
<PAGE>
independent contractors. Tenant shall discharge by bond or
otherwise within ten (10) days of notice of its existence,
any lien, encumbrance or other charge arising in violation
of this Section.
6.05. Interruption of Services. Except as set forth in Section
12.06 below, Landlord shall not be liable for any damages
directly or indirectly resulting from interruption in the
furnishing of services to Tenant by any cause beyond
Landlord's reasonably control.
7. UTILITIES.
7.01. Tenant's Expenses. To the extent that separate metering
devices are installed, Tenant shall contract and pay for all
utilities used or consumed in the Premises, including any
tap-in, connection and metering fees, including (but not
limited to) electricity, water, sewer, and gas, incurred in
connection with the Premises, or used by Tenant in
connection therewith, on or before the due date for those
bills. If Tenant does not pay these expenses, Landlord may
pay the same, and such payment shall be added as Additional
Rental of the Premises and paid pursuant to Section 3.02(a)
above, and if Tenant shall commit and Act of Default by
failing to make such payments, then Landlord may pay same
and such amounts shall be immediately payable upon demand,
along with an administrative charge of Fifty and No/100ths
Dollars ($50.00).
7.02. Landlord's Expenses. It is acknowledged by both parties that
Tenant shall be responsible for all utility charges
associated with the provision of utility services to the
Premises during the Term, and Landlord shall have no
expenses associated therewith. Additionally, except as set
forth in Section 12.06 below, Landlord is not responsible
for any interruptions or curtailment in utility services
unless caused by the act of Landlord's agents or employees
and if so caused, Landlord shall use prompt and reasonable
efforts to restore said utility.
8. ENVIRONMENTAL MATTERS.
8.01. Definitions. For purposes of this Section 8:
(a) "Claim(s)" means all demands, liabilities (including
strict liability), losses, expenses and damages of
every kind, contingent or otherwise, matured or
unmatured, known or unknown, foreseeable or
unforeseeable, made, suffered, brought or imposed,
regardless of when they occur.
(b) "Contamination" means the uncontained presence, release,
or threatened release of Hazardous Substances (defined
below) on the Premises or on any adjacent property.
(c) "Environmental Law" means any federal, state or local
law, statute, ordinance, code, rule, regulation,
license, authorization, decision,
<PAGE>
order, injunction, decree, or rule of common law, and
any judicial interpretation of any of the above which
pertains to health, safety, any Hazardous Substance
(defined below), or the environment.
(d) "Hazardous Substance(s)" means:
(i) any substance which is listed, defined or
regulated as a "hazardous substance,"
"hazardous waste," "hazardous constituent,"
"medical waste" or "solid waste," or
otherwise classified as a hazardous, toxic or
regulated substance, in or pursuant to any
Environmental Law; or
(ii) any substance which is or contains asbestos,
radon, infectious waste, any polychlorinated
biphenyl, urea formaldehyde foam insulation,
explosive or radioactive material; or
(iii) any substance which causes or threatens to
cause a hazard to the environment or to the
health or safety of persons.
8.02. Tenant represents that its activities on the Premises will
be conducted in compliance with Environmental Law.
Accordingly, Tenant represents the following to Tenant's
knowledge:
(a) Tenant is currently in compliance with all applicable
Environmental Laws.
(b) Tenant shall make all notifications, certifications,
and registrations required by any Environmental Law.
(c) Tenant has obtained or shall obtain all permits,
licenses or approvals necessary under Environmental
Laws for the operation of Tenant's business.
(d) Tenant shall comply with the terms and conditions of
all permits, licenses, approvals, notifications,
certifications and registrations obtained.
8.03. Tenant shall not cause any Hazardous Substances to be
brought upon, stored, generated, or disposed on the Premises
except in compliance with all applicable Environmental Law.
8.04. Tenant shall not cause the release or threatened release of
any Hazardous Substances by Tenant or its agents,
contractors, employees or invitees on the Premises in any
manner that violates any Environmental Law or causes
Contamination.
8.05. With regard to any Contamination on the Premises caused by
Tenant after the date hereof, Tenant shall promptly at
Tenant's sole risk and expense:
(a) take all steps reasonably necessary to contain the
release or threatened
<PAGE>
release and any associated Contamination;
(b) take all steps reasonably necessary to remediate the
Contamination in compliance with all applicable
Environmental Law;
(c) remediate, remove, treat and dispose of the Hazardous
Substance as directed by the governmental authorities
having jurisdiction over the remediation;
(d) take whatever action is required by any Environmental
Law, in addition to taking any action necessary to have
the full use and benefit of the Premises;
(e) notify and keep Landlord reasonably informed of the
release and response to it;
(f) obtain and deliver to Landlord a report in a form
satisfactory to Landlord that all remedial action
stated above has been taken.
8.06. Tenant shall indemnify and hold Landlord harmless from and
against all Claims, (except claims arising from Landlord's
own negligence or willful act), related to any Contamination
caused by Tenant or its agents, contractors, employees or
invitees, or related to Tenant's breach of any provision in
this Section. Landlord shall indemnify and hold Tenant
harmless from and against all Claims, (except claims arising
from Tenant's own negligence or willful act), related to any
Contamination caused by Landlord or its agents, contractors,
employees or invitees, or related to Landlord's breach of
any provision in this Section.
8.07. Claims which are subject to these indemnification provisions
shall include the following:
(a) all expenses incurred in complying with any
Environmental Law;
(b) all costs incurred in studying or remedying any
Contamination at, arising from, or related to the
Premises or adjacent property;
(c) all costs incurred in removing, disposing or otherwise
addressing any Contamination or Hazardous Substances;
(d) all fines, penalties or other sanctions assessed by
reason of the failure to comply with any Environmental
Law; and
(e) all legal and professional fees (including engineering
fees) and costs incurred in connection with the above.
This indemnity shall survive the termination or expiration
of this Lease.
8.08. Regardless of any consent granted by Landlord, Tenant shall
not cause any activity on the Premises which would cause
either:
<PAGE>
(a) the Tenant, the Landlord, or the Premises to become
subject to regulation as a generator of Hazardous
Substances, or
(b) the Premises to become subject to regulation as a
hazardous waste treatment or disposal facility.
8.09. Regardless of any consent granted by Landlord, Tenant shall
not discharge Hazardous Substances into the sanitary or
storm sewer system, nor shall the Tenant install any
underground storage tank or underground piping on the
Premises.
8.10. Tenant shall not perform any testing of soil, groundwater or
surface water at the Premises without the written consent of
Landlord. The results of any testing shall be given in
writing to Landlord and Tenant shall keep such requests
confidential unless disclosure is required by law.
8.11. Landlord may inspect the Premises at any time and audit
Tenant's records or procedures related to Hazardous
Substances in order to determine if Tenant is in compliance
with such laws, rules and regulations, provided such
inspections and audits are not disruptive to Tenant's
business. Landlord shall not be required to disclose any
inspection or audit results to Tenant. Landlord shall have
no liability for failure to inspect or audit or for failing
to discover any noncompliance with laws, rules and
regulations.
9. DEFAULT.
9.01. Default by Tenant. Each of the following shall be "Acts of
Default":
(a) If, after 10 days' prior written notice of non-payment
when due, Tenant fails to pay any Base Monthly Rent due
under this Lease; or
(b) If, after 10 days' prior written notice of non-payment
when due, Tenant fails to pay any any other payment due
under this Lease; or
(c) If, after 10 days' written notice of non-performance,
Tenant fails to perform any other term or obligation of
this Lease (other than its non-payment of monetary
obligations) which is to be observed or performed by
Tenant; or, if Tenant's such term or obligation cannot
reasonably be performed within 10 days, no Act of
Default shall exist unless Tenant fails within said
10-day period to begin and thereafter to diligently and
continually pursue its performance of that term or
obligation; or
(d) The failure by Tenant to cease any conduct prohibited
by this Lease within fifteen (15) days after receipt of
written notice from Landlord requesting cessation
thereof; or
(e) If Tenant becomes bankrupt, insolvent, or Tenant admits
in any pleading (whether filed in the bankruptcy court
or other court)
<PAGE>
the inability of Tenant to pay its debts as they become
due; or
(f) If Tenant files any debtor relief proceedings; or
(g) If Tenant voluntarily files in any court pursuant to
any statute (either of the United States or of any
other state) a petition in bankruptcy or insolvency, or
for reorganization, or for the appointment of a
receiver or trustee of all or a portion of Tenant's
property or for any other form of debt relief, whether
temporary or permanent; or
(h) If an action is brought to appoint a receiver or
trustee over Tenant, or over Tenant's possessions, or
to otherwise protect the interests of any creditor of
Tenant, which action is not dismissed within 180 days
of its filing; or
(i) If Tenant makes an assignment for the benefit of
creditors; or
(j) If Tenant petitions for, or enters into, an arrangement
of any kind concerning its creditors, or suffers this
Lease (or the leasehold hereunder) to be taken under
any writ of execution or attachment; or
(k) The failure of Tenant to cease any conduct or eliminate
any condition which poses an immanent danger to person
or property within twenty four (24) hours of receipt of
written notice from Landlord requesting cessation of
such conduct or elimination of such conditions; or
(l) If this Lease or any rights hereunder shall be
transferred or the Premises sublet in violation of
Section 12.01 and such violation is not cured within
ten (10) days after Tenant's receipt of written notice
of default from Landlord.
In any one or more of such events, Landlord shall, subject
to the terms and restrictions of Section 12.29, have the
rights specified below in this Article 9.02.
9.02. Landlord's Rights on Default. If Tenant shall not have cured
any Act of Default in the manner provided in Paragraph 9.01,
Landlord may at its option elect to pursue any one, but not
more than one, of the following remedies while any Act of
Default remains outstanding and uncured:
(a) Landlord, with or without terminating this Lease, may
perform, correct or repair any condition which shall
constitute a failure on Tenant's part to keep, observe,
perform or satisfy, and take, on behalf of Tenant,
whatever steps Landlord deems necessary to cure such
default, and Landlord may reenter the Premises for such
purposes, and Tenant shall fully reimburse and
compensate Landlord on demand for all costs and
expenses incurred by Landlord in such performance,
<PAGE>
correction or repair, including, within limitation,
accrued interest from the date of demand until date of
payment at the rate specified in Paragraph 3.06 hereof.
(b) Begin arbitration proceedings under Section 12.29
below, with or without the termination of this Lease,
and without releasing Tenant from any of its
obligations hereunder.
(c) Terminate Tenant's right to possession without
termination of the Agreement. In such a case, Landlord
may (at its option) enter onto the Premises, remove
Tenant's signs and other evidences of tenancy, and take
and hold possession of the Premises. This can be done
without such entry and possession terminating this
Lease or releasing Tenant from any obligation, in whole
or in part, including Tenant's obligation to pay Rent
due hereunder for the full Term. To this end, if and
when Landlord so elects, Tenant shall pay to Landlord a
sum equal to the discounted then-present value of the
Base Monthly Rent to be paid by Tenant for the
remainder of the Lease Term, computed at a discount
rate of eight percent (8%) per annum. The payment of
this amount shall constitute payment of Rent in advance
for the remainder of the Term. Upon the receipt from
Tenant of the sum required to be paid pursuant to this
subsection, Landlord shall use reasonable efforts to
relet the Premises. Thereafter, as Landlord receives
monthly rent from any tenants or occupants of the
Premises, and after Landlord has received reimbursement
for of any sums expended by Landlord on account of the
cost of repairs, alterations, additions, redecorating,
and Landlord's expenses of reletting and collection of
the rent accruing therefrom (including attorney's fees
and broker's commissions), Tenant shall receive from
Landlord all rent received by Landlord from other
tenants or occupants on account of the Premises during
the Lease Term hereof (other than reimbursement for
operating expenses and taxes), provided that the
amounts to which Tenant shall become so entitled shall
in no event exceed the entire amount actually paid by
Tenant to Landlord under this paragraph.
(d) Begin arbitration proceedings against Tenant under
Section 12.29 below for all amounts owed by Tenant to
Landlord, whether as Base Rent, Additional Rent,
reasonable damages.
(e) End the Lease Term, in which event Tenant shall
immediately surrender the Premises to Landlord. Tenant
agrees to pay on demand the amount of all reasonable
loss and damage which Landlord may suffer by reason of
the end of the Term under this section or otherwise,
which loss and damage shall include, without
limitation, an amount which, at the date of the
Default, represents the present value, as computed
using an eight percent (8%) discount rate, of the
excess,
<PAGE>
if any, of (A) the Base Monthly Rent payable under this
Lease during the remainder of the Term over (B) the
aggregate reasonable rental value of the Premises for
the same period.
(f) Upon any termination of Tenant's right to possession
only, and without termination of the Lease, Landlord
may (at its option) enter into the Premises, remove
Tenant's signs and other evidences of tenancy, and take
and hold possession as provided below, without such
entry and possession terminating the Lease or releasing
the Tenant, in whole or in part, from any obligation,
including Tenant's obligation to pay Rent, for the full
Lease Term. In any such case, Landlord may relet the
Premises on behalf of the Tenant and receive directly
the Rent by reason of the reletting. Tenant agrees to
pay Landlord on demand any deficiency that may arise by
reason of reletting of the Premises; further, Tenant
agrees to reimburse Landlord upon demand for any
expenditures made by it for remodeling or repairing in
order to relet the Premises and for all other expenses
incurred in connection with such reletting (including,
without limitation, attorney's fees and brokerage
commissions).
(g) Enter upon and take possession of the Premises, without
being liable for prosecution of any claim for damages
or for trespass or other tort.
(h) Do or cause to be done whatever Tenant is obligated to
do under the terms of this Lease, in which case Tenant
agrees to reimburse Landlord on demand for any and all
costs or expenses which Landlord may thereby incur.
Tenant agrees that Landlord shall not be liable for any
damages resulting to Tenant from effecting compliance
with Tenant's obligations under this section, whether
caused by the negligence of Landlord or otherwise.
(i) Enforce the performance of Tenant's obligations
hereunder by arbitartion in accordance with Section
12.29 below (which remedy may be exercised upon any Act
of Default committed with respect to Tenant's
obligations hereunder).
(j) Invoke in the Section 12.29 arbitration proceeding any
remedy allowed at law or in equity to enforce re-entry
and other remedies not herein provided.
9.03. Reentry by Landlord. If Landlord reenters the Premises or
terminates this Lease pursuant to any of the provisions of
this Lease, Tenant hereby waives all claims for damages
which may be caused by such reentry or termination by
Landlord. No reentry or taking possession of the Premises
by Landlord or any other action taken by or on behalf of
Landlord shall be construed to be an acceptance of a
surrender of this Lease or an election by Landlord to
terminate this Lease.
<PAGE>
9.04. General. No course of dealing between Landlord and Tenant or
any failure or delay on the part of Tenant or Landlord in
exercising any of their rights (including, without
limitation, Landlord's rights under Paragraph
9.02 hereof) under any provisions of this Lease shall
operate as a waiver of any rights of Tenant or Landlord
hereunder, at law or in equity or under any other provisions
of this Lease, nor shall any waiver of a default on one
occasion operate as a waiver of any subsequent default or of
any other default. No express waiver shall affect any
condition, covenant, rule, or regulation other than the one
specified in such waiver and that one only for the time and
in the manner specifically stated. The exercise by Tenant or
Landlord of any one or more of the rights and remedies
provided in this Lease shall not prevent the subsequent
exercise by Tenant or Landlord of any one or more of the
other rights and remedies herein provided. All remedies
provided for in this Lease may, at the election of Landlord,
be exercised alternatively, and are in addition to any other
rights provided for or allowed by law or in equity.
9.05. Bankruptcy. If Landlord cannot terminate this Lease or
Tenant's right of possession because of the application of
bankruptcy or similar laws, then Tenant, as a debtor in
possession or on behalf of any trustee for Tenant, shall:
(i) within the statutory time, assume or reject this Lease
and (ii) not seek or request any extension or adjournment of
any application to assume or reject this Lease by Landlord.
In such event, Tenant or any trustee for Tenant may only
assume this Lease if (a) it cures or provides adequate
assurance that it will promptly cure any default hereunder,
(b) it compensates or provides adequate assurance that
Tenant will promptly compensate Landlord for any actual
pecuniary loss to landlord resulting from Tenant's defaults,
including without limitation accrued interest as set forth
in Paragraph 3.06 and attorneys fees as a result of such
default, and (c) it provides adequate assurance of
performance during the Lease Term of all of the terms,
covenants and provisions of this Lease to be performed by
Tenant. In no event after the assumption of this Lease shall
any then-existing default remain uncured for a period in
excess of the earlier of ten (10) days or the time period
set forth herein. Adequate assurance of performance shall
include, without limitation, adequate assurance: (1) of the
source of payment of Rent reserved hereunder, (2) that any
Percentage Rent due hereunder will not decline from the
levels anticipated, and (3) that the assumption of this
Lease will not breach any provision under this Lease.
<PAGE>
10. ADDITIONAL OBLIGATIONS.
10.1. Tenant shall obtain and maintain in full force during the
Lease Term the following insurance coverages (all of which
shall show Landlord as an "Additional Insured" to the extent
of its interest):
(a) Commercial general liability insurance, with
contractual liability, broad form general liability
endorsement, insuring Tenant against any and all
liability for injury to or death of a person or persons
and for damage to property occasioned by or arising out
of any construction work being done on the Premises, or
arising out of the condition, use, or occupancy of the
Premises, or in any way occasioned by or arising out of
the activities of Tenant, its agents, contractors,
employees, guests, invitees or licensees in the
Premises, the limits of such policy or policies to be
in amount not less than
- One Million Dollars ($1,000,000.00) for each
occurrence,
- One Million Dollars ($1,000,000.00) for each
separate injury, One Million Dollars
($1,000,000.00) for property damage; and
- Twenty Million Dollars ($20,000,000.00) umbrella
policy.
Such insurance shall, in addition, extend to any
liability of Tenant arising out of the indemnities
provided for in this Lease.
(b) All-risk property insurance in an amount adequate to
cover loss of the replacement value of all personal
property, decorations, trade fixtures, furnishings,
equipment, and all other contents owned by Tenant and
located or placed in the building on the Premises by
Tenant.
(c) Business Interruption Insurance in an amount sufficient
to replace one year's lost gross earnings, such
earnings being defined as the difference between Gross
Sales and the cost of goods sold.
(d) Plate glass insurance covering the full replacement
value of the plate glass in the Premises.
(e) Workers' Compensation Insurance covering all persons
employed by Tenant, as required by laws of the State
where the Premises are located or of the United States.
(f) Boiler or Machinery Insurance covering all pressure
vessels, boilers, air conditioning equipment, or
similar equipment, if any, in, on, above or beneath the
Premises, in the amount of Five Hundred Thousand
Dollars ($500,000.00).
<PAGE>
(g) All of the aforesaid insurance, except the Workers'
Compensation Insurance required by subparagraph (e)
above, shall name Landlord (and any mortgagee or
manager of the Premises designated by Landlord in a
written notice to Tenant) as an additional insured, and
shall be written by one or more responsible insurance
companies reasonably satisfactory to Landlord; all such
insurance may be carried under a blanket policy
covering the Premises and any other location of Tenant
provided such blanket policies meet the requirements of
this Section 11; all such insurance shall contain
endorsements as follows: Such insurance may not be
canceled or amended with respect to Landlord or its
designees or the Premises except upon thirty (30) days
prior written notice by the insurance company to
Landlord and any such designees; Tenant shall be solely
responsible for payment of premiums and Landlord or its
designees shall not be required to pay any premium for
such insurance. The minimum limits of the commercial
general liability policy herein set forth shall in no
way limit or diminish Tenant's liability hereunder.
Tenant shall deliver to Landlord within fifteen (15)
days after written notice from Landlord to Tenant
requesting same, a certificate of insurance evidencing
the maintenance of all policies procured by Tenant in
compliance with its obligations hereunder, together
with evidence satisfactory to Landlord of the payment
of the premiums therefor. If Tenant commits and Act of
Default by failing to obtain and provide any or all of
the aforesaid insurance, then Landlord may, but shall
not be required to, purchase such insurance on behalf
of Tenant and add the reasonable cost of such insurance
as Additional Rent payable with the next due
installment of Base Monthly Rent.
10.02. The minimum limits of the commercial general liability
policy of insurance required by this Section shall be
subject to increase at any time, and from time to time, if
Landlord shall reasonably deem it necessary for adequate
protection, but in no event shall such limits exceed the
amounts of liability coverage typically required by
landlords of comparable buildings, leasing space comparable
to the Premises, in the same locale. Within thirty (30)
days after demand therefor by Landlord, Tenant shall furnish
Landlord with evidence of Tenant's compliance with such
demand.
10.03. Tenant agrees, at its own expense, to comply with rules and
regulations of the Fire Insurance Rating Organization having
jurisdiction of the Premises and to comply with all
requirements imposed by Landlord's insurance carrier, if
any.
10.04. Tenant shall not keep, use, sell or offer for sale in or
upon the Premises any article or service which is prohibited
by any local, state or federal agency.
10.05. Casualty Insurance on Building. Tenant agrees to obtain and
maintain at all time during the Term, standard fire and
extended coverage insurance, with "All Risk" endorsement,
insuring the full replacement cost of the buildings and
<PAGE>
improvements (including, without limitation, the tenant
improvements installed in the building, whether installed by
or at the cost of Landlord or Tenant) and loss of rental
income on the Premises. Tenant shall pay the premium cost
of such coveages directly to the insurance carrier providing
the coverage. In the event of a casualty, Tenant shall
remain responsible for the cost of any deductible amount,
unless the claim was caused by Landlord or Landlord's
agents or employees. Provided, that the foregoing coverage
may be provided under a blanket policy maintained by Tenant.
Tenant shall deliver to Landlord within fifteen (15) days
after written notice from Landlord to Tenant requesting
same, a certificate of insurance evidencing the maintenance
of all policies procured by Tenant in compliance with its
obligations hereunder, together with evidence satisfactory
to Landlord of the payment of the premiums therefor. The
casualty insurance policies covering the building shall
provide that all claim proceeds paid under the policies are
to be paid jointly to Landlord and Tenant, and the parties
agree that such proceeds shall be used and applied to repair
and restore the building, improvements and Premises.
10.06. Mutual Release and Waiver of Subrogation. Notwithstanding
any other term or provision of this Lease to the contrary,
Landlord and Tenant hereby mutually release each other from
any perils and damages insurable against under the property
and casualty insurance each of the parties is required to
maintain under this Lease or the insurance actually
maintained by the injured party, whichever is greater,
whether or not such insurance was actually in force at the
time of the casualty, and notwithstanding the fact that such
damage may have been caused by the negligence of the other
party or their agents or employees. Additionally, Landlord
and Tenant hereby grant to each other on behalf of any
insurer providing insurance to either Landlord or Tenant as
required by this Lease covering the Premises, improvements
therein or contents thereof, a waiver of any right of
subrogation any such insurer of one party may acquire
against the other by virtue of payment of any loss under
such insurance, and, to that end, Landlord and Tenant shall
cause such insurance to be written so that the insurer
waives any such right of subrogation, it being the intent of
the parties that the damaged party shall be required to
look to his own casualty insurance which it is required to
maintain to recover for any property damage, and not to the
other party.
10.07. Waiver.
(a) Landlord and Tenant agree that the other party shall
not, at any time or to any extent whatsoever, be liable
for, and each hereby waives all claims they may have
against the other for damage to property resulting
from:
(i) any injury or damage to property or business
caused by, or arising out of, the condition
of the Premises; or
(ii) the condition or operation of, or defects in,
any equipment,
<PAGE>
machinery or mechanical systems (including
the electrical, plumbing and H.V.A.C. systems
and fixtures) located inside of the Premises;
or
(iii) the act or omission of any person or persons;
or
(iv) the theft, mysterious disappearance, or loss
of any property from the Premises.
(b) It is further agreed that the happening of any one or
more of the events described in Paragraph 10.07(a)
shall not be an actual or constructive eviction of
Tenant.
(c) Except as set forth in Section 12.06 below, nothing
contained herein shall render Landlord liable, or any
way accountable, for any loss, damage or injury
(whether direct or indirect, and whether to person or
property) suffered or incurred by Tenant because of
Landlord's failure or inability to furnish utilities to
the Premises for reasons not caused in whole or in part
by Landlord, its agents or employees. Tenant hereby
waives all claims of Tenant, its employees, agents,
licensees and invitees against Landlord for such
failure or inability.
10.08. Indemnification. Except for damages which arise from the
negligence or intentional, willful action or inaction of
Landlord or Landlord's agents or employees, Tenant agrees to
indemnify and hold harmless Landlord against and from any
and all claims, liabilities, actions, expenses, losses or
damages whatsoever on account of (or in connection with) any
loss, injury, death or damage to persons or property or
business arising out of, or caused by, Tenant's use of the
Premises, or Tenant's negligence or wilful misconduct in the
use and occupation of the Premises. This includes (without
limitation) the condition of the Premises, and any negligent
or wilful misconduct of Tenant, its agents, employees,
licensees, guests or invitees. Tenant shall further
indemnify and hold Landlord harmless:
(a) against any Act of Default in the performance of any
covenant or agreement on the Tenant's part to be
performed pursuant to the terms of this Lease, and
(b) against any negligence or wilful misconduct of the
Tenant's contractors or subcontractors, and
(c) against all cost, counsel fees, expenses and
liabilities incurred in any such claim or action or
proceeding brought thereon, or in any way connected
therewith.
Except for damages which arise from the negligence or
intentional, willful action or inaction of Tenant or
Tenant's agents or employees, Landlord agrees to indemnify
and hold harmless Tenant against and from any and all
claims,
<PAGE>
liabilities, actions, expenses, losses or damages whatsoever
on account of (or in connection with) any loss, injury,
death or damage to persons or property or business arising
out of, or caused by or in connection with, Landlord's
ownership, maintenance and/or management of the Premises, or
Landlord's negligence or wilful misconduct in the ownership
and/or operation of the Premises. This includes (without
limitation) the condition of the Premises, and any negligent
or wilful misconduct of Landlord, its agents, employees,
licensees, guests or invitees. Landlord shall further
indemnify and hold Tenant harmless:
(a) against any default in the performance of any covenant
or agreement on the Landlord's part to be performed
pursuant to the terms of this Lease, and
(b) against any negligence or wilful misconduct of the
Landlord's contractors or subcontractors, and
(c) inst all cost, counsel fees, expenses and liabilities
incurred in any such claim or action or proceeding
brought thereon, or in any way connected therewith.
10.09. Tenant's Taxes. Tenant shall pay before delinquency all
taxes, assessments and public charges (whether now in effect
or subsequently enacted) during the Term of this Lease which
are levied, assessed or imposed upon the Tenant's business
or upon Tenant's fixtures, furniture, appliances or personal
property installed or located in the Premises, or which
constitute a lien against any of the foregoing.
11. DAMAGE, DESTRUCTION, CONDEMNATION.
11.01. Damage or Destruction. Tenant shall endeavor to give notice
to Landlord of any damage to the Premises. If all or any
part of the Premises are damaged or destroyed by fire or
other casualty, this Lease shall continue in full force and
effect, unless terminated as hereinafter provided.
(a) If at any time during the Term the Premises are damaged
by a fire or other casualty, Tenant and Landlord agree
to cooperate with each other and mutually agree in
writing, within 30 days after such damage, as to the
amount of time reasonably required to restore the
Premises. If the restoration time is estimated to
exceed the lesser of (i) 6 months from the first
payment of insurance proceeds, or (ii) 9 months from
the date of the damage (the shorter period being
hereinafter referred to as the "Restoration Period"),
then Tenant may elect to terminate this Lease upon
notice to Landlord given no later than 30 days after
Landlord and Tenant agree in writing upon the time
period required to restore the Premises. If Tenant does
not elect to terminate, or if Landlord and
<PAGE>
Tenant estimate and agree that restoration will be
completed on or before the last day of the Restoration
Period, then Landlord and Tenant shall promptly restore
the Premises at Landlord's sole cost and expense,
including, without limitation, restoring the tenant
improvements installed in the building, whether
installed by or at the cost of Landlord or Tenant,
subject to delays from Force Majeure (as hereinafter
defined) events not to exceed a total of 30 days.
Landlord shall repair, restore or rebuild the Premises
to its condition at the time of the occurrence of the
loss, and Landlord agrees to diligently and
continuously pursue to completion any such repairs.
Landlord shall be obligated to begin and complete such
repairs, restoration or rebuilding whether or not
insurance proceeds are received by Landlord; and
Landlord's obligation to rebuild and restore the
Premises shall not be limited (i) to the proceeds
Landlord actually receives under any insurance
policies, or (ii) by any amounts that Landlord's
lenders may require to be applied towards the reduction
of any indebtedness secured by a deed to secure debt
covering the Premises or any portion of it.
Notwithstanding the foregoing, either party may
terminate this Lease if the Premises are damaged during
the last year of the Term and Landlord and Tenant
reasonably estimate that the time period needed to
restore the Premises will exceed the lesser of (i) 2
months from the first payment of insurance proceeds, or
(ii) 4 months from the date of the damage, provided,
however, that Landlord will not be entitled to
terminate this Lease because there is less than one (1)
year on the Lease Term if Tenant has an exercisable
right to extend the Term of the Lease and Tenant,
within fifteen (15) days after receipt of Landlord's
notice of termination, exercises such extension right.
Additionally, if the restoration has not substantially
completed with in the restoration period originally
estimated and agreed upon in writing by Landlord and
Tenant, which period shall be extended for a period of
not more than 30 days due to Force Majeure events, then
Tenant shall have the right to terminate this Lease by
irrevocable written notice of termination given by
Tenant to Landlord at any time prior to the date on
which the repair and restoration of the Premises is
substantially completed.
(b) Tenant covenants and agrees to reopen for business in
the Premises within 60 days after the Premises have
been restored and are ready for reoccupancy. In this
regard, Tenant shall repair, restore and refixture all
parts of the Premises. This shall be done in a manner,
and to a condition, comparable to that existing prior
to its destruction.
(c) Base Monthly Rent, Operating Expenses and Taxes shall
be equitably abated for the period of repair and
restoration in the proportion which the area of the
Premises, if any, which is not usable by Tenant bears
to the total area of the Premises, taking into account
the nature and extent of the actual interference with
Tenant's ability to use the Premises for
<PAGE>
the herein permitted uses.
(d) Notwithstanding anything to the contrary contained in
this Section 11.01 or elsewhere in this Lease, Landlord
at its option may terminate this Lease on 30 days
notice to Tenant if the Premises shall be damaged or
destroyed as a result of an occurrence which is not
covered by the insurance Tenant is required to maintain
hereunder or Landlord's actual insurance coverage,
whichever is greater.
(e) If the Premises shall be damaged or destroyed and in
the event that neither Landlord nor Tenant has elected
to terminate this Lease, Landlord and Tenant shall
resume their respective obligations (other than those
specified in this Paragraph 11.01 as continuing under
this Section 11) as soon as is reasonably possible, and
then prosecute the same to completion with all due
diligence.
(f) Tenant shall endeavor to give to Landlord prompt
written notice of any damage to or destruction of any
portion of the Premises resulting from fire or other
casualty.
11.02. Condemnation. If the whole of the Premises shall be taken
under the power of condemnation, this Lease shall end as of
the date possession shall be so taken by the governmental
authority.
(a) If part of the Premises shall be taken in condemnation
or by any transfer in lieu of condemnation, such that
Tenant shall be prevented from conducting Tenant's
normal business operations at the Premises as had been
conducted prior to said partial condemnation, then
Tenant shall have the right and option to terminate the
lease as of the date of such taking by giving Landlord
written notice of such termination within thirty (30)
days after said taking or conveyance, and the parties
thereupon shall be released from any further liability
under this Lease, except for obligations existing as of
and on the effective date of such termination.
(b) Anything in this Lease to the contrary notwithstanding,
if:
- more than 30% of the Premises shall be taken, or
- more than 25% of the then-existing paved parking
spaces shall be taken, or
- the provision of utilities to the Premises or
access to the Premises is denied as a result of
such taking, and the taking, in Tenant's
reasonable judgment, would interfere with or
impair Tenant's operations at the Premises,
then Tenant shall have the right to cancel and
terminate this Lease as of
<PAGE>
the date of such taking or conveyance, upon giving
notice to Landlord of such election within thirty days
after the date of such taking or conveyance. The
parties thereupon shall be released from any further
liability under this Lease, except for obligations
existing as of and on the effective date of such
termination. Provided, if more than 25% of the
then-existing paved parking spaces of the Premises
shall be appropriated or taken and the loss of such
parking is the sole reason for Tenant exercising its
termination option hereunder, Landlord may (at its
option) nullify and vacate Tenant's right to cancel
this Lease as herein above provided, by giving Tenant
notice within thirty days after the date of such taking
that Landlord will provide substitute parking on (or
adjacent to) the building on the Premises sufficient to
cause the total number of paid parking spaces remaining
after such substitution to be equal the number of
spaces prior to such taking, and such parking is in
fact provided. If Landlord provides such parking then,
this Lease shall remain in full force and effect.
(c) If part of the Premises shall be taken, and this Lease
is not terminated as provided above, the Base Monthly
Rent, Operating Expenses and Taxes payable hereunder
during the unexpired Lease Term shall be reduced to
such extent as may be fair and reasonable under the
circumstances, taking into account the nature and
extent of the actual interference with Tenant's ability
to use the Premises for the herein permitted uses.
(d) All compensation awarded or paid upon such a total or
partial taking of the Premises shall belong to and be
the property of Landlord, without any participation by
Tenant, except that Tenant shall, however, receive out
of any award to Landlord in such condemnation
proceeding the value of any damage to Tenant's
property, the cost of any tenant improvements,
alterations and/or fixtures paid for by Tenant, and
Tenant's relocation costs, that Tenant proves have been
suffered or incurred by Tenant. To the extent that the
Tenant has a claim in condemnation proceedings, as
aforesaid, Tenant may claim from condemners, directly.
12. ADDITIONAL AGREEMENTS.
12.01. Assignment and Subletting.
(a) Without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned
or delayed, Tenant may not assign, mortgage or encumber
this Lease or any interest hereunder, or sublet
Premises or any part thereof, or permit the use of
Premises whether voluntarily or by operation of law by
any party other than Tenant. Landlord's consent shall
not be required in connection with any assignment,
subletting or other transfer to an Affiliate (as
<PAGE>
hereinafter defined) of Tenant. Consent by Landlord to
any one assignment or sublease shall not destroy or
waive this provision, and all later assignments and
subleases shall likewise be made only with the prior
written consent of Landlord. Sublessees or assignees
shall become liable directly to Landlord for all
obligations of the Tenant hereunder (including, without
limitation being subject to the terms and conditions of
this Section 12.01 in connection with any further
assignment of the Lease or underletting of the
Premises) without relieving Tenant's liability.
Landlord shall not unreasonably withhold such consent
if Tenant complies with Paragraph 12.02(b) below.
(b) Conditions for Landlord's Consent to Assign or
Sublease. The granting of consent by Landlord shall be
preconditioned upon the fulfillment of the following
requirements:
(i) Landlord shall be provided with at least ten
(10) days written notice prior to any
proposed assignment or subletting;
(ii) Tenant shall remain primarily liable
under this Lease;
(iii) Any proposed assignee or sublessee shall
assume, in a written instrument
acceptable to Landlord, all of the
obligations of Tenant in the case of an
assignment of the Lease, and with
respect to the subleased space, in the
case of a sublease;
(iv) No use shall be employed in connection
with the Premises other than the
Permitted Use set forth in this Lease;
(v) No alterations shall be made to the
Premises except in accordance with the
terms of this Lease;
(vi) In Landlord's reasonable judgment the
successor is solvent and financially
capable of fulfilling its obligation;
(vii) In Landlord's reasonable judgment any
use of the Premises permitted hereunder
by the proposed sublessee/assignee will
not violate any laws; and
(viii) Tenant shall pay all reasonable attorney's
fees or other costs paid or incurred
by Landlord in connection with
Landlord's review and approval of a
prospective assignee or sublessee, not
to exceed $750.00.
(c) For purposes of this Lease an "Affiliate" is (i) any
person or entity that controls, is controlled by or
under common control with the Tenant, (ii) any entity
resulting from a merger, consolidation or other
business combination with Tenant, or (iii) any person
or entity that acquires all or substantially all of the
assets of the business of Tenant which is conducted at
the Premises. For purposes of this Lease the term
<PAGE>
"control" means the holding of 20% or more of the
voting control of the subject entity.
(d) Assignment in Violation of Article. No occupancy by any
party other than Tenant or collection of Rent by
Landlord will be deemed (i) a waiver of the provisions
of this Article; or (ii) the acceptance of the
assignee, subtenant or occupant as tenant, or (iii) a
release of Tenant from the further performance by
Tenant of covenants on the part of Tenant contained in
this Lease. The consent by Landlord to an assignment or
sublease shall not relieve Tenant from obtaining
Landlord's prior written consent in writing to any
further assignment or sublease. No permitted subtenant
shall assign or encumber its sublease or further
sublease all or any portion of its subleased space
except in compliance with the terms of this Section 12.
12.02 [Intentionally Deleted].
12.03. Entry by Landlord. Landlord and its employees, agents and
licensees shall have the right to enter the Premises at any
time during the Term of this Lease at reasonable times:
(a) to inspect the condition of the Premises or the
compliance by Tenant with this Lease, although no such
inspection or failure to inspect shall waive any rights
of Landlord with respect to any default by Tenant,
whether or not such default was or should have been
discovered;
(b) to exhibit the Premises to prospective Tenants during
the last 180 days of the Term;
(c) to repair, improve, restore, alter or make additions to
the Premises (it being understood that this provision
does not obligate Landlord to take any such action);
and
(d) to bring and store materials necessary for any repairs,
etc.
Except for emergency repairs, Landlord shall exercise the
rights granted to Landlord in (b) and (c) above only after
reasonable notice to Tenant, and Landlord shall use its best
efforts to accomplish the above promptly, with minimum
interference with Tenant; provided, however, that the
liability of Landlord arising out of such entry shall be
limited as set forth elsewhere in this Lease as this
paragraph creates no further liability of Landlord.
12.04. Holding Over. Tenant may not remain within the Premises
after the day of Lease expiration without Landlord's written
approval. In the event Tenant holds possession of the
Premises after the expiration of the Term set forth herein,
with or without the consent of Landlord, then this lease and
the Term hereof shall be deemed to be extended on a
month-to-month basis upon all the terms and conditions
herein set forth, except that:
<PAGE>
(a) such tenancy may be terminated upon not less than
thirty (30) days written notice by Landlord or Tenant;
and
(b) Tenant shall pay to Landlord monthly rent, in advance
on the first day of such extension period and on the
first calendar day of each calendar month thereafter
during such extension period, an amount equal to one
hundred fifty (150%) percent of the Base Monthly Rent
payable in the last full calendar month preceding the
first day of such extension period.
12.05. Act of God. Neither Landlord nor Tenant shall not be
required to perform any covenant or obligation under this
Lease, or be liable in damages to the other party, or their
invitees, licensees or other visitors to the Premises, so
long as the performance or nonperformance of the covenant or
obligation is delayed, caused or prevented by an Act of God,
strikes, shortages, war, insurrection, acts of the other
party, or other similar cause beyond the reasonable control
of a party (collectively a "Force Majeure").
12.06. Tenant's Remedies. If Landlord shall fail to keep or
perform any of its obligations under the Lease with respect
to the making of any payment to Tenant or the performance of
any other Lease obligations, and upon the continuance of
such failure on Landlord's part for thirty (30) days after
the giving to Landlord of written notice of default from
Tenant (or, in the case of any such non-monetary failure
which cannot reasonably be cured within thirty (30) days,
within such additional period, if any, as may be reasonably
required by Landlord to cure such failure with due
diligence), and without waiving or releasing Landlord from
any obligation, then Tenant may (but is under no obligation
to) (i) terminate the Lease without incurring any
termination fee if Landlord's failure adversely affects
Tenant's use or occupancy of the Premises, or (ii) make such
payment or perform such obligation, and all sums actually
paid or incurred by Tenant and all necessary and incidental
costs and expenses, including reasonable attorney's fees and
expenses paid to legal counsel, incurred by Tenant in making
such payment or performing such obligation, together with
interest thereon at twelve percent (12%) per annum, but not
to exceed the maximum rate permitted by law, from the date
of payment by Tenant, date payment was received from
Landlord or date a cost was incurred, shall be paid by
Landlord to Tenant within ten (10) days after demand, and if
such sum is not so paid by Landlord, Tenant shall have the
right and option to offset such payment or failure to make
payment against any Base Monthly Rental, Additional Rent or
any other amounts thereafter payable under the Lease, or
(iii) Tenant may pursue any other remedies available to
Tenant at law or in equity to collect payment and/or cause
Landlord to cure such failure.
12.07. Entire Agreement - No Waiver: This Lease contains the
entire agreement of the parties. No representations,
inducements, promises or agreements, oral or otherwise,
between the parties shall be of any force or effect unless
written herein. The failure of either party to insist in any
instance on strict performance of any term or condition in
this Lease, or to exercise any option herein contained,
<PAGE>
shall not waive such term, condition or option in that
circumstance, or in any other instance. This Lease cannot be
changed or terminated orally, as any modification or
alteration of this Lease's terms can only be made in writing
signed by all parties hereto.
12.08. Headings. The headings in this Lease are included for
convenience only and shall not be taken into consideration
in any construction or interpretation of this Lease or any
of its provisions.
12.09. Notices and Services.
(a) Any notice required or permitted under this Lease shall
be valid only if in writing and shall be deemed to be
given only if delivered personally, sent by guranteed
overnight courier (e.g. UPS Next Day Air) or sent by
registered or certified United States mail return
receipt requested, addressed
(i) if to Tenant, at:
SED International, Inc.
4916 N. Royal Atlanta Drive
Tucker, Georgia 30085-5044
Attention: President and Chief Executive Officer
Plus a copy to:
Leonard Silverstein, Esq.
Long Adridge & Norman
Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
(ii) if to Landlord, Diamond Chip Group, L.L.C., c/o
George M. Fox, Esquire, 4788 Long Island Drive,
N.W., Atlanta, Georgia 30342,
or at such other addresses for either party as that
party may designate by thirty (30) days prior notice to
the other party given in accordance herewith. Notice
shall be deemed given if delivered personally upon its
personal delivery, one (1) day after deposit with a
guaranteed overnight courier service, or five (5) days
after being mailed in accordance herewith.
12.10. Authority to Act. If Tenant is a corporation, the
individual(s) executing this Lease warrants that he/she has
full authority to execute and to bind the Tenant to its
terms and conditions pursuant to a current resolution of the
Tenant's Board of Directors, which resolution shall be
promptly provided upon request. These individuals further
warrant that Tenant is a fully authorized and existing
<PAGE>
corporation, that Tenant is qualified to do business in the
State of Georgia, and that the corporation has full
authority to enter into this Lease. In the event any
representation or warranty is false, all persons signing
this Lease shall be individually liable, as Tenant. The
person executing this Lease on behalf of Landlord represents
and warrants that he has full authority to execute and to
bind the Landlord to its terms and conditions pursuant to a
current resolution of the members and managers of Landlord,
which resolution shall be promptly provided upon request.
These individuals further warrant that Landlord is a fully
authorized and existing as a Geogia limited liability
company, that Landlord is qualified to do business in the
State of Georgia, and that Landlord has full authority to
enter into this Lease. In the event any representation or
warranty is false, all persons signing this Lease shall be
individually liable, as Landlord.
12.11. Heirs and Assigns. The provisions of this Lease shall bind
and inure to the benefit of the Landlord and Tenant, and
their respective successors, heirs, legal representatives
and assigns.
12.12. Release of Landlord by Sale. In the event of any sale or
lease of the Property or Premises or any assignment of this
Lease, the Landlord shall be entirely freed and relieved of
all covenants and obligations of the Landlord hereunder
which accrue thereafter (but not before); and further, it
shall be deemed without further agreement that the
purchaser, sub-tenant or assignee as the case may be, has
assumed and agreed to carry out any and all covenants and
obligations of the Landlord hereunder during the period such
secondary party has title to or possession of the Premises.
Should the land and the Premises be severed as to ownership
by sale or lease, then the owner of the entire Premises that
has the right to lease the space in the Premises to tenants
shall be deemed the Landlord. In the event of any such
sale or lease of the land or Premises, during the term of
this Lease, Tenant hereunder agrees to continue to be bound
by all the terms, covenants, and conditions of this Lease
and further agrees to execute any attornment agreement not
in conflict with the terms and provisions of this Lease at
the request of any such succeeding Landlord who, prior to
such time, has assumed all of Landlord's obligations under
this Lease in a binding written agreement delivered to
Tenant.
12.13. Unenforceability. The remainder of this Lease shall be
enforceable if any Section, paragraph, or clause is found
invalid or unenforceable.
12.14. Continuing Obligations. Any obligation which by its nature
is due after this Lease expires, shall survive the Lease's
termination.
12.15. Gender, Number, etc. The terms "Landlord," and "Tenant," and
the pronouns relating to each, shall include the male,
female and neuter, the singular and plural, corporation,
partnership, limited liability company or individual as may
fit the particular parties.
<PAGE>
12.16. The Captions. The use of captions at the start of certain
paragraphs is for illustration only; thus, no caption has
any effect on any text in the paragraph which follows.
12.17. Attorney Fees. If any Rent or other obligations of Landlord
or Tenant owing under this lease are collected by or through
an arbitration proceeding under Section 12.29 below, and the
prevailing party recovers all or substantially all of the
relief originally sought by such party in the arbitration,
then the prevailing party shall be entitled to also recover
the reasonable and actual attorneys' fees incurred by such
prevailing party.
12.18. No Estate. Tenant has only a usufruct under this agreement,
not subject to levy or sale; no estate shall pass out of
Landlord.
12.19. Relationship. Landlord and Tenant are not partners or joint
venturers.
12.20. Performance. The acceptance of some act in violation of the
terms of this Lease shall not prevent the non-violating
party, from insisting upon the strict performance of that
term at any other time.
12.21. Time of Essence. Time is of the essence of this Lease.
12.22. Attornment to Mortgages and Other Documents. Landlord
represents and warrants to Tenant that (i) Landlord alone
owns fee simple title to the Pemises, and (ii) no deed to
secure debt, security deed, mortgage, deed of trust,
security agreement, ground lease or other similar
encumbrance (herein collectively and individually referred
to as a "Mortgage", the holder thereof being referred to as
a "Mortgagee") (except for the lien for real estate taxes
which are not yet due and payable) presently affecting the
Premises which is senior or superior to this Lease and which
could result in the termination of this Lease if enforced or
terminated. Tenant agrees to execute such reasonable
documents as may be reasonably required by Landlord to
evidence Tenant's attornment to any Mortgagee relative to
the Premises, or to confirm terms hereunder, provided that,
if Tenant is required to agree that this Lease is to be
subordinate to any such Mortgage, Tenant shall be entitled
to require that such Mortgagee agree (i) not disturb Tenant's
quiet use, enjoyment, possession and occupancy of the
Premises so long as no Act of Default by Tenant remains
outstanding and uncured under the Lease and (ii) not to make
Tenant a party to any foreclosure proceeding.
12.23. LIMITATION OF WARRANTIES. 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 FROM THIS LEASE;
AND
<PAGE>
- THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE
EXPRESSLY SET FORTH IN THIS AGREEMENT.
12.24. Quiet Enjoyment. So long as no Act of Default by Tenant
shall remain outstanding and uncured, Tenant shall, subject
to the terms of this Lease, at all times during the Lease
Term, have peaceful and quiet use, possession and enjoyment
of the Premises against any person claiming by, through
orunder Landlord, or otherwise.
12.25. Extension Options. Landlord grants to Tenant one (1)
extension option, to extend the Term of the Lease for three
(3) year (herein referred to as the "Extension Term") upon
the same terms and conditions as stated herein, except that
the Base Monthly Rent payable during each Lease year of the
three (3) year Extension Term shall be adjusted as follows:
(a) The Base Monthly Rent payable during the first Lease
Year of the Extension Term shall be adjusted to an
amount equal to the product of multiplying the Base
Monthly Rent paid during the last month of the initial
Term by a fraction, the numerator of which shall be the
Index (as hereinafter defined) published for October,
2006, and the denominator shall be the Index for
October, 2005, but in no event less than a three
percent (3%) increase over Base Monthly Rent paid
during the last month of the initial Term;
(b) The Base Monthly Rent payable during the second Lease
Year of the Extension Term shall be adjusted to an
amount equal to the product of multiplying the Base
Monthly Rent paid during the last month of the prior
Lease Year by a fraction, the numerator of which shall
be the Index (as hereinafter defined) published for
October, 2007, and the denominator shall be the Index
for October, 2006, but in no event less than a three
percent (3%) increase over Base Monthly Rent paid
during the last month of the prior Lease Year; and
(c) The Base Monthly Rent payable during the Third Lease
Year of the Extension Term shall be adjusted to an
amount equal to the product of multiplying the Base
Monthly Rent paid during the last month of the prior
Lease Year by a fraction, the numerator of which shall
be the Index (as hereinafter defined) published for
October, 2008, and the denominator shall be the Index
for October, 2007, but in no event less than a three
percent (3%) increase over Base Monthly Rent paid
during the last month of the prior Lease Year.
<PAGE>
Tenant must exercise this option by delivering written
notice to Landlord no later than 180 days prior to the end
of the initial Term. The word "Term" as used in this Lease
shall mean and include the initial Term and the Extension
Term if exercised by Tenant. For purposes of this Lease the
term "Index" shall mean the Consumer Price Index for United
States All Urban Consumers, All Items (Base Year 1982 - 1984
= 100), published by the United States Department of Labor,
Bureau of Labor Statistics. If the Index is modified so
that the Base Year differs from the Base Year 1982 - 1984 =
100, the Index shall be converted in accordance with the
conversion factor published by the United States Department
of Labor. Should the increase made hereby not be calculable
due to delay in publishing of the Index, Tenant shall
continue to pay the Base Monthly Rent payable during the
immediately preceding portion of the Term of the Lease until
the Base Monthly Rent adjustment is determined hereunder, at
which time Tenant shall commence payment of the adjusted
Base Monthly Rent and shall pay to Landlord a lump-sum
retroactive adjustment.
12.26. Right of First Refusal to Purchase Premises. Landlord
hereby grants to Tenant the continuing right of first
refusal, throughout the Term of the Lease, to purchase the
Premises pursuant to the terms of this Section 12.26. If at
any time during the Term Landlord enters into a bona fide
agreement to sell all or any part of the Premises (the
"Offer"), Landlord shall submit written notice thereof to
Tenant (together with a copy of such Offer). Upon receipt
of the aforesaid notice and a copy of such Offer from
Landlord, Tenant shall have the right (the "Right of First
Refusal") exercisable at any time within ten (10) business
days from the date of receipt of such notice and Offer, to
purchase the Premises, or portion thereof, which is the
subject of the Offer upon the same terms and conditions set
forth in the Offer, except that the dates for Tenant's
performance under the Offer shall be adjusted to afford
Tenant the same time periods for performance as were
afforded the original purchaser under the Offer, with
Tenant's time periods for performance to run from the dateof
Tenant's exercise of the Right of First Refusal. If Tenant
elects to exercise the Right of First Refusal, it shall,
prior to the end to said ten (10) day period, deliver
written notice of such exercise to Landlord. In the event
Tenant fails to timely exercise the Right of First Refusal,
Tenant shall be deemed to have waived such right in that
instance only, except that if the closing pursuant to the
original Offer does not take place within thirty (30) days
after the date set forth in the Offer for closing, this
Right of First Refusal shall again be deemed applicable to
the transaction in the Offer. It is further understood
that, in the event Tenant does not exercise this Right of
First Refusal, this provision shall nevertheless be
applicable to any further and future transfers of the
Premises, or any part thereof, by
<PAGE>
any successor to Landlord. Landlord represents and warrants
that no person or entity holds any right of refusal on the
Premises, option to purchase, or other right, to acquire all
or any part of the Premises, which is prior to or superior
to the Right of First Refusal granted to Tenant hereunder.
Notwithstanding the terms of this Section 12.26, Tenant's
Right of First Refusal shall not apply to any gift or
transfer of the Premises for less than the Premises' fair
market value to (i) a charity as a tax deductible charitable
contribution, (ii) Gerald Diamond, Jean Diamond, their
heirs, and/or Nathan Diamond (Gerald Diamond's father),
(iii) to a trust having as the only beneficiaries Gerald
Diamond, Jean Diamond, their heirs and/or Nathan Diamond
(Gerald Diamond's father),or (iv) any family limited
partnership, limited liability company, corporation or other
entity whose partners, members, stockholders or holders of
similar ownership rights are held entirely by Gerald
Diamond, Jean Diamond, their heirs and/or Nathan Diamond
(Gerald Diamond's father) (each individually referred to as
a "Charity/Family Transferee"). It is further understood
that, in the event Landlord does sell, gift or otherwise
transfer the Premises to one or more Charity/Family
Transferees, this provision shall nevertheless be
applicable to any further and future transfers of the
Premises, or any part thereof, by any Charity/Family
Transferee and/or their heirs, executors, administrators,
personal representatives, successors or assigns. In the
case of a transfer to a Charity/Family Transferee meeting
the requirements of the foregoing exception, Tenant agrees
that upon notice and request from Landlord, Tenant will
execute and deliver to Landlord a written acknowledgment of
the compliance with such exception.
12.27. Memorandum of Lease. Landlord and Tenant agree to execute
and deliver, simultaneously with the execution and delivery
of this Lease, a Short Form of Lease Agreement in recordable
form for purposes of publicly recording this Lease, the
Term, the existence of the Extension Options and the Right
of First Refusal.
12.28 January 1, 1991 Lease Superseded. Effective as of April 1,
1999, the terms and provisions of this Lease supersede and
replace the terms and provisions of that certain lease
originally between Tenant's predecessor in interest,
Southern Electronics Distributors, Inc., a Delaware
corporation, as tenant, and Landlord's predecessor in title
and interest, Royal Park Company, a Georgia general
partnership, as landlord, dated January 1, 1991, and all
amendments thereto (collectively the "Original Lease").
From and after April 1, 1999, the terms and provisions of
the Original Lease shall be deemed amended, restated, recast
and superseded by the
<PAGE>
terms and provisions of this Lease, and the terms and
provisions of the Original Lease shall be deemed of no
further force or effect; provided, however, that the terms
and provisions of the Original Lease shall remain in effect
with respect to matters accruing or arising prior to April
1, 1999. This Lease results from a newly negotiated lease
amendment between Landlord and Tenant, and does not result
from, or represent an exercise of, any extension or renewal
option.
12.29 Controversies and Arbitration. All disputes arising under
this Lease shall be settled by binding arbitration by the
American Arbitration Association (the "AAA") in Atlanta,
Georgia, pursuant to the Commercial Arbitration Rules of
AAA, except to the extent amended by the following terms of
this Section 12.29:
(a) In the event that (i) any Act of Default on behalf of
Tenant or (ii) any default of Landlord which is not
cured within the applicable cure period, is not
resolved by the parties within ten (10) days after
either party gives notice to the other party of its
desire to arbitrate the dispute, then within two (2)
business days after the expiration of such ten (10) day
period, each party shall submit a final written offer
to the other party specifying what they think the
resolution of the dispute should be and what they would
accept as a resolution (the "Last Offers").
(b) Thereafter, either party can start the arbitration by
giving a further notice to the other party, demanding
arbitration, specifying the issue(s) to be decided, and
naming that party's arbitrator.
(c) Within ten (10) business days of receiving that notice,
the other party must name a second arbitrator, in a
notice back to the first party and the first
arbitrator.
(d) Thereafter, the first arbitrator shall contact the
second arbitrator, and the two shall choose a third
arbitrator within ten (10) business days after the
notice identifying the second arbitrator is received by
the first arbitrator. They shall also notify both
parties of the third arbitrator, and a date, between 14
and 30 days following the appointment of the third
arbitrator, for the arbitration hearing.(This timetable
can be postponed only by agreement of both parties or
all three arbitrators, or to allow for any court
proceeding involving this arbitration to be resolved
before the hearing takes place.) The hearing will be at
the Premises, unless the parties (or all the
arbitrators, on their own initiative) agree otherwise.
(e) If a party initiates this process, and the other party
does not respond by
<PAGE>
naming a second arbitrator; or afterward, if the second
arbitrator fails or refuses to participate in naming
the third arbitrator; then the third arbitrator shall
be selected by AAA, failing which the third arbitrator
shall be selected by a presiding judge of the Dekalb
County Superior Court.
(f) Unless the arbitrators agree unanimously otherwise,
each side will pay the cost of the arbitrator named by
it, and if the prevailing party recovers all or
substantially all of the relief sought by the
prevailing party, then the losing party shall pay the
cost of the third arbitrator. If the prevailing party
does not recover all or substantially all of the relief
sought by the prevailing party, then the arbitrators
shall determine who shall pay the cost of the third
arbitrator or whether the cost of the third arbitrator
shall be apportioned between the parties.
(g) The arbitrators shall have no power to change the Lease
provisions. The Last Offers of the parties shall be
delivered to the arbitrators prior to the arbitration
hearing. All decisions of the arbitrators shall be by
majority vote of the arbitrators, and no decision of
the arbitrators shall grant any relief to a party
beyond the relief specified by a party in the Last
Offer of that party. The arbitrators shall at the time
of issuing their determination, shall also issue a
written report containing their findings of fact and
conclusions of law.
(h) All arbitrators selected by the parties shall have been
actively engaged in the development and leasing of real
property similar to the Premises, in Dekalb County, for
a period of not less than 15 years. Additionally, the
third arbitrator must be a real estate attorney
actively engaged in the practice of real estate law in
Atlanta, Georgia for at least 15 years.
(i) The arbitrators' result will be submitted to the
Superior Court of DeKalb County, Georgia for
enforcement under O.C.G.A. Section 9-9-1, et seq.
Arbitration.
IN WITNESS WHEREOF, the parties have signed this Lease as of the day
and year first above written and caused their seals to be hereto
affixed.
TENANT: LANDLORD:
SED International, Inc. Diamond Chip Group, L.L.C.
<PAGE>
By_______________________________ By_______________________________
President Manager
<PAGE>
EXHIBIT "A"
ALL that tract or parcel of land lying and being in Land Lot 223, 18th
District, DeKalb County, Georgia, and being more particularly
described as follows:
BEGINNING at an iron pin found at the corner formed by the
intersection of the southeasterly side of Mountain Industrial
Boulevard (100-foot right of way) with the northeasterly side of North
Royal Atlanta Drive (60-foot right of way); run thence northeasterly
along the southeasterly arc of Mountain Industrial Boulevard (which
arc is subtended by a chord line running north 15 degrees 24 minutes
46 seconds east 365.50 feet) 367.02 feet to an iron pin found; run
thence north 89 degrees 17 minutes 20 seconds east 233.19 feet to an
iron pin found; run thence south 18 degrees 35 minutes 00 seconds east
194.20 feet to an iron pin set; run thence south 16 degrees 01 minutes
15 seconds west 112.55 feet to an iron pin set; run thence north 73
degrees 58 minutes 45 seconds west 65.00 feet to an iron pin set; run
thence south 16 degrees 01 minutes 15 seconds west 196.36 feet to an
iron pin set on the northeasterly side of North Royal Atlanta Drive;
run thence northwesterly along the northeasterly arc of North Royal
Atlanta Drive (which arc is subtended by a chord line running north 67
degrees 23 minutes 15 seconds west 170.96 feet) 171.06 feet to an iron
pin found; run thence north 64 degrees 06 minutes 10 seconds west
along the northeasterly side of North Royal Atlanta Drive 96.32 feet
to the southeasterly side of Mountain Industrial Boulevard and the
point of beginning, containing 2.730 acres and being improved property
having a 1-story masonry building thereon as more particularly shown
on Boundary Survey for Royal Park Company, Southern Electronics
Distributors, Inc., First National Bank of Atlanta, and Lawyers Title
Insurance Company prepared by Venable & Associates, bearing
certification of Alan L. Venable, Jr., Georgia Registered Land
Surveyor #1761, dated April 3, 1984, revised July 11, 1984.
