<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
[ ] 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 0-16284
NATIONAL TECHTEAM, INC.
-----------------------------
(Name of issuer in its charter)
DELAWARE 38-2774613
-------- -------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
835 Mason Street, Suite 200, Dearborn, MI 48124
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 277-2277
---------------
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.
[X] Yes [ ] No
The number of shares of the registrant's only class of common stock
outstanding at May 14, 1998 was 14,824,394.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SERCURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS COULD
DIFFER FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS DESCRIBED HEREIN INCLUDING THOSE SET FORTH UNDER "FACTORS
AFFECTING FUTURE RESULTS" UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN, OR
INCORPORATED BY REFERENCE INTO, THIS REPORT.
1
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NATIONAL TECHTEAM, INC.
FORM 10-Q
INDEX
- --------------------------------------------------------------------------------
PAGE
INDEX NUMBER
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1.
Consolidated Statements of Operations 3
Three Months Ended
March 31, 1998 and 1997
Consolidated Statements of Financial Position 4 - 5
March 31, 1998 and December 31, 1997
Consolidated Statements of Cash Flows 6
Three Months Ended
March 31, 1998 and 1997
Notes to the Consolidated Financial Statements - March 31, 1998
(Unaudited) 7 - 9
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 18
PART II - OTHER INFORMATION
ITEM 2.
Changes in Securities 19
ITEM 6.
Exhibits and Reports on Form 8-K 19
Signatures 19
- --------------------------------------------------------------------------------
2
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PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Call Center Services ................................ $ 12,311,512 $ 9,074,422
------------ ------------
Corporate Computer Services
Technical staffing ............................... 6,626,107 5,686,186
Systems integration .............................. 2,983,555 2,372,788
Training programs ................................ 2,426,767 1,443,196
------------ ------------
Total Corporate Computer Services ................... 12,036,429 9,502,170
------------ ------------
Leasing and Related Activities ...................... 2,109,146 --
------------ ------------
TOTAL REVENUES .......................................... 26,457,087 18,576,592
COST OF SERVICES DELIVERED .............................. 22,543,994 16,041,284
------------ ------------
GROSS PROFIT ............................................ 3,913,093 2,535,308
------------ ------------
OTHER EXPENSES/(INCOME)
Selling, general and administrative ................. 3,746,649 3,574,769
Interest expense .................................... 336,072 15,000
Interest income ..................................... (614,087) (723,598)
------------ ------------
3,468,634 2,866,171
------------ ------------
INCOME BEFORE TAX PROVISIONS ............................ 444,459 (330,863)
TAX PROVISIONS .......................................... 303,400 33,500
------------ ------------
NET INCOME .............................................. $ 141,059 $ (364,363)
============ ============
BASIC EARNINGS PER SHARE ................................ $ 0.01 $ (0.02)
============ ============
DILUTED EARNINGS PER SHARE .............................. $ 0.01 $ (0.02)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING
Basic ............................................. 15,423,402 15,557,821
Net effect of dilutive stock options -- based on the
treasury stock method using average market price.. 212,277 349,419
------------ ------------
Diluted ............................................. 15,635,679 15,907,240
============ ============
</TABLE>
See accompanying notes.
3
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NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
ASSETS MARCH 31, 1998 DECEMBER 31,1997
- --------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................. $ 17,796,143 $ 24,927,348
Securities available-for-sale ............................. 36,075,337 39,094,615
Accounts receivable (less allowances of $833,024 at ....... 32,387,354 26,479,816
March 31, 1998 and $787,175 at December 31, 1997)
Refundable income tax ..................................... 788,630 2,466,777
Equipment leased to others ................................ 15,957,455 --
Net investment in deferred financing leases ............... 5,968,778 --
Net investment in residuals ............................... 977,238 --
Inventories ............................................... 977,088 218,622
Prepaid expenses and other ................................ 1,917,194 2,781,777
Deferred income tax ....................................... 338,532 338,532
------------ ------------
113,183,749 96,307,487
------------ ------------
PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE
Office furniture and equipment ............................ 19,547,670 18,428,968
Purchased software ........................................ 3,546,292 2,997,919
Leasehold improvements .................................... 1,985,355 1,600,133
Transportation equipment .................................. 371,134 297,154
------------ ------------
25,450,451 23,324,174
Less-- Accumulated depreciation and amortization .......... 12,053,058 9,599,982
------------ ------------
13,397,393 13,724,192
------------ ------------
OTHER ASSETS
Intangibles (less accumulated amortization of $3,683,609 at
March 31, 1998 and $3,035, 071 at December 31, 1997) ... 9,577,312 7,324,064
Advance to Capricorn Capital Group, Inc. .................. -- 604,002
Deferred income tax ....................................... 1,689,334 1,689,334
Other ..................................................... 1,983,245 1,639,582
------------ ------------
13,249,891 11,256,982
============ ============
TOTAL ASSETS .................................................. $139,831,033 $121,288,661
============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY MARCH 31, 1998 DECEMBER 31,1997
- --------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable .......................................... $ 3,792,092 $ 3,707,985
Accrued payroll, related taxes and withholdings ........... 4,079,475 4,350,863
Deferred income tax ....................................... 102,480 466,880
Deferred revenues and unapplied receipts .................. 1,293,634 1,353,398
Accrued expenses and taxes ................................ 959,605 533,391
Other ..................................................... 674,722 147,036
------------- -------------
10,902,008 10,559,553
------------- -------------
LONG-TERM LIABILITIES
Long-term debt ............................................ 17,543,192 -
Deferred Foundation Platform license fees ................. 707,418 813,205
Deferred income tax ....................................... 1,824,175 195,941
Other long-term liabilities ............................... - 119,765
------------- -------------
20,074,785 1,128,911
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01
Authorized -- 5,000,000 shares
None issued
Common stock, par value $.01
Authorized -- 45,000,000 shares
Issued:
16,543,300 shares at March 31, 1998 ................. 165,433
16,037,700 shares at December 31, 1997 .............. 160,377
Additional paid-in capital ................................ 110,583,252 105,586,223
Retained earnings ......................................... 4,650,078 4,509,019
Other ..................................................... (103,996) (84,652)
------------- -------------
Total ..................................................... 115,294,767 110,170,967
Less-- Treasury stock (723,482 shares at March 31, 1998 and
124,474 shares at December 31, 1997) ................... 6,440,527 570,770
------------- -------------
Total shareholders' equity ................................ 108,854,240 109,600,197
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... $ 139,831,033 $ 121,288,661
============= =============
</TABLE>
See accompanying notes.
5
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NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1998 1997
------------ ---------------
<S> <C> <C>
OPERATING ACTIVITIES ..........................................
Net income ................................................ $ 141,059 $ (364,363)
Adjustments to reconcile net income to net cash ...........
Cumulative effect of change in acctg principle
Depreciation and amortization ....................... 1,220,051 1,647,544
Provision for uncollectible accounts receivable ..... 45,849 87,253
Provision for deferred income taxes ................. - (1,260,200)
Deferred Foundation Platform license fees ........... (105,787) 3,485,990
Long-term accounts receivable from customer ......... - ( 1,977,566)
Treasury stock contributed to 401(k) plan ........... 183,626 31,094
Unrealized gain/(loss) on investments................ (19,910) -
Minority interest in net loss of subsidiary ......... - (27,924)
Changes in current assets and liabilities:
Accounts receivable ............................. (4,011,954) (531,221)
Inventories ..................................... 102,852 (43,416)
Equipment leased to others....................... 6,841,919 -
Interest receivable.............................. 7,171 -
Advance to vendors .............................. - (1,800,000)
Other current assets ............................ 1,723,832 235,518
Accounts payable ................................ (9,559,917) (385,162)
Accrued payroll, related taxes and withholdings (271,388) (1,300,807)
Federal income tax .............................. 1,428,147 1,054,400
Deferred revenues and unapplied receipts ........ (123,392) 552,476
Accrued expenses and taxes ...................... 337,087 (165,786)
Other current liabilities ....................... (146,000) (141,072)
------------ ------------
Net cash (used in)/provided by operating activities.. (2,206,553) (903,242)
------------ ------------
INVESTING ACTIVITIES
Purchases of property, equipment and software ............. (640,644) (1,713,243)
Purchase of Capricorn Capital Group, Inc. 278,666 -
Development of training manuals ........................... - (246,547)
Proceeds from sales of securities available-for-sale ...... 3,019,278 3,859,950
Cash paid in conjunction with purchase of WebCentric,
net of cash acquired ................................... - (1,445,086)
Other ..................................................... (343,663) 17,614
------------ ------------
Net cash provided by/(used in) investing activities .... 2,313,637 472,688
------------ ------------
FINANCING ACTIVITIES
Proceeds from long-term borrowings ........................ (1,311,790) 55,000
Purchase of Company stock.................................. (5,950,940) -
Proceeds from issuance of common stock .................... 24,440 431,606
Payments on long-term borrowings .......................... - (16,000)
------------ ------------
Net cash provided by financing activities .............. (7,238,290) 470,606
------------ ------------
Increase/(decrease) in cash and cash equivalents ....... (7,131,206) 40,052
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............. 24,927,349 46,812,397
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 17,796,143 $ 46,852,449
============ ============
</TABLE>
See accompanying notes.
6
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NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 1998
(UNAUDITED)
The Annual Report of the Company on Form 10-K for the year ended December 31,
1997 ("The 1997 Form 10-K") contains additional information and should be read
in conjunction with this report.
The consolidated financial statements included herein have been prepared by
National TechTeam, Inc. ("TechTeam" or "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations.
The information provided in this report reflects all adjustments consisting of
normal recurring accruals which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. The results of
operations for these periods are not necessarily indicative of the results
expected for the full year.
NOTE A -- EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares and common share equivalents outstanding. Common share equivalents
consist of stock options and are calculated using the treasury stock method.
NOTE B -- REVENUES FROM MAJOR CLIENTS
Revenues from major clients were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------
1998 1997
------------------------------ --------------------------------
AMOUNT PERCENT OF TOTAL AMOUNT PERCENT OF TOTAL
---------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
GE TechTeam, L.P. ................ $4,839,938 18.3% $ -- --
Chrysler Corporation ............. 4,758,157 18.0% 2,136,844 11.5%
Ford Motor Company ............... 3,760,338 14.2% 3,760,760 20.2%
Hewlett-Packard Company .......... 3,533,826 13.4% 5,096,036 27.4%
International provider of shipping
services ......................... 1,571,860 5.9% 1,336,317 7.2%
</TABLE>
7
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NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 1998 (continued)
(UNAUDITED)
NOTE C -- LEGAL PROCEEDINGS
Commencing in August 1997, four putative class action complaints were filed
against the Company and two of its officers in the United States District Court
for the Eastern District of Michigan. On April 13, 1998, a Consolidated Class
Action Complaint, consolidating the claims asserted in those cases was filed.
Plaintiffs purport to represent a class of persons who purchased shares of the
Company's common stock between September 27, 1996 and November 14, 1997. The
Complaint alleges that the Company and the individual defendants engaged in a
scheme to artificially inflate the price of the Company's common stock by
improperly accelerating the recognition of revenue from the licensing of the
Company's proprietary software. Plaintiffs assert claims against all defendants
for alleged violations of Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder, as well as claims against the individual
defendants for alleged "controlling person" liability under Section 20(a) of the
Securities Exchange Act. The Company and the individual defendants believe that
they have meritorious defenses to plaintiffs' claims, and they intend to defend
the action vigorously. However, because of the early stage of this litigation,
it is impossible to predict the outcome of the litigation or a range of possible
recovery, if any, by the plaintiffs. Accordingly, no provision for any such
liability or the costs of defense has been made in the accompanying financial
statements. The Company believes that these costs will be covered, at least in
part, by insurance.
In addition, the Company is the subject of a related investigation initiated on
September 9, 1997 by the United States Securities and Exchange Commission
("SEC"). The SEC has stated that the purpose of the investigation is to
determine whether the Company may have violated certain provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934 in connection
with its recognition of revenue from the licensing of its proprietary software.
This investigation is ongoing and the outcome cannot be predicted at this time,
although the Company believes it has complied fully with all applicable
provisions of the federal securities laws.
The Company is subject to various other legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, management does
not believe that the outcome of any these legal matters will have a material
adverse effect on the Company's consolidated results of operations or
consolidated financial position.
NOTE D -- RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information." This
statement established standards for reporting financial and descriptive
information about operating segments. Under Statement No. 131, information
pertaining to the Company's operating segments will be reported on the basis
that is used internally for evaluating segment performance and making resource
allocation determinations. The Company intends to provide financial and
descriptive information about its reportable operating segments to conform to
the requirements in its annual financial statements for 1998 and quarterly
thereafter.
Note E -- Stock Repurchases
In February 1998, the Company announced a stock repurchase program to purchase
up to 1,500,000 shares of common stock during the period ending August 15, 1998,
unless extended. During the first quarter of 1998, the Company repurchased
567,400 shares for $5,950,940.
8
<PAGE> 9
NOTE F -- COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported as a separate
component of shareholders' equity, to be included in other comprehensive income.
Comprehensive income, net of related estimated tax, amounted to $121,714 and
$(364,363) for the quarters ended March 31, 1998 and 1997, respectively. There
were no comprehensive income adjustments for the quarter ended March 31, 1997.
NOTE G -- ACQUISITION OF CAPRICORN CAPITAL GROUP, INC.
In January 1998, TechTeam acquired all of the capital stock of Capricorn Capital
Group, Inc. ("Capricorn") in exchange for a base consideration consisting of
350,000 unrestricted and 150,000 restricted shares of TechTeam common stock plus
a contingent payment based upon Capricorn's earnings performance in the
three-year period following the acquisition. The base consideration was valued
at $4,875,000. The purchase method of accounting will be used to record the
transaction and goodwill will be recorded.
Unaudited pro forma results of operations for the quarter ended March 31, 1997,
assuming the transaction took place on January 1, 1996 are as follows:
<TABLE>
<S> <C>
Net revenues........................ $24,736,437
Gross profit........................ 3,387,136
Net loss............................ (392,531)
Net income per common share......... (0.02)
</TABLE>
The pro forma results are not necessarily indicative of the actual results if
the transactions had been in effect for the entire period presented. In
addition, they are not intended to be a projection of future results and do not
reflect, among other things, and synergies that might have been achieved from
combined operations.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains trend analysis and a number of forward-looking statements.
These statements are based on current expectations and actual results may differ
materially. Among the factors that could cause actual results to vary are those
described in the subsection of this Item 7 entitled "Factors Affecting Future
Results."
RESULTS OF OPERATIONS
OVERVIEW
The Company originally commenced operations as a value added reseller of
computer hardware and software that also provided training for its computer
products. During the late 1980's the Company added IT staffing and systems
integration services as a complement to its existing training business. In 1993,
as a result of the Company's growing expertise in providing IT staffing of
on-site help desks, TechTeam entered the call center industry. Today, the
Company's IT outsourcing services cover a broad range of IT, including planning,
design, implementation and support. Although the Company's services are
complementary, TechTeam has divided its service offerings into three divisions,
Call Center Services, Corporate Computer Services (technical staffing, systems
integration and training programs) and Leasing and Related Services. Revenues
from all service offerings are recognized as services are performed.
Call Center Services consist of international telephone support for end-users of
computer hardware, software products and services. Call Center Services are
billed on a fee per call, fee per time spent on calls or per agent basis, each
as negotiated with clients. The Company licenses customers to use its Foundation
Platform, a software product developed by the Company's wholly-owned subsidiary,
WebCentric Communications, Inc. Revenues from these licenses are recognized
either: (1) on a usage basis, when the licenses are granted in connection with
on-going services; (2) as the expenses of the transaction are recognized in
those instances where the license was granted in connection with a
contemporaneous purchase; or (3) as lump sum fees when the client acquires the
rights to use and is allowed access to the Foundation Platform without any
on-going service obligation by the Company.
Technical staffing includes a variety of technical services, including the
placement of computer personnel at client sites to support end-user applications
through on-site help desks, as well as selected programming and consulting
services. Systems integration consists of database design, computer product
sales and networking services. Contracts for technical staffing and systems
integration are generally negotiated on an hourly rate basis or are priced on a
project basis. Training programs consist of instructor-led, computer-based
training for word processing, spreadsheets, graphics, data bases, desktop
publishing, operating systems, and systems administration for NetWare, JAVA, NT,
Windows, OS/2 and UNIX and mainframe operating systems. For training programs,
clients pay a fee per student trained or a fee for classes offered, in some
cases with an advance payment for the cost of the necessary training materials.
Leasing and Related Services include services offered by Capricorn Capital
Group, Inc. and its affiliate, Capricorn Integrated Technologies Group ("CITG").
Since 1980, Capricorn Capital Group has been providing financing for high
technology and capital equipment in the United States and Canada. CITG provides
all major brands of computers, peripherals, and components for the corporate
environment, as well as custom configurations, installation, component level
repair, monitor repair, and remarketing services.
Cost of services delivered consists of direct personnel compensation, statutory
and other benefits associated with such personnel, facility and computer
equipment costs, and other direct costs associated with providing services to
clients. Selling, general and administrative costs consist of sales, marketing
and administrative personnel compensation, statutory and other benefits
associated with such personnel, facility and equipment costs and other indirect
costs associated with the sales, marketing and administrative functions of the
Company.
10
<PAGE> 11
The following table sets forth the percentage relationship to revenues of
certain items in the Company's Consolidated Statements of Operations:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------------ --------------
REVENUES
<S> <C> <C>
Call Center Services .............. 46.5% 48.8%
--------- --------
Corporate Computer Services
Technical staffing ............. 25.0 30.6
Systems integration ............ 11.3 12.8
Training programs .............. 9.2 7.8
--------- --------
Total Corporate Computer Services . 45.5 51.2
--------- --------
Leasing and Related Activities .... 8.0 -
--------- --------
TOTAL REVENUES ........................ 100.0 100.0
COST OF SERVICES DELIVERED ............ 85.2 86.4
--------- --------
GROSS PROFIT .......................... 14.8 13.6
--------- --------
OTHER EXPENSES/(INCOME)
Selling, general and
administrative.................. 14.2 19.2
Interest expense .................. 1.3 0.1
Interest income ................... (2.3) (3.9)
--------- --------
13.1 15.4
--------- --------
INCOME BEFORE TAX PROVISIONS .......... 1.7 (1.8)
TAX PROVISIONS ........................ 1.1 0.2
--------- --------
NET INCOME/(LOSS) ..................... 0.5% (2.0)%
========= ========
</TABLE>
Between 1994 and 1997, TechTeam's revenues increased at a compound annual rate
of 33.4%. The Company believes that its growth has benefited from the trend
among large corporations to outsource much of their information technology needs
and TechTeam's ability to provide services that address a broad range of those
needs. The Company believes that the outsourcing trend will continue and will
provide continuing opportunities for both of its service lines. TechTeam further
believes that its service offerings are influenced substantially by its clients'
desires to focus on their core businesses and to leave information technology
needs to the Company for which information technology is its core business.
TechTeam's training programs have encountered cyclical enrollment trends,
influenced by the timing and extent to which clients are upgrading desk top
software.
TechTeam's business is based on client relationships with major corporations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors Affecting Future Results -- Impact of Business with Major
Clients."
COMPARATIVE PERFORMANCE -- FIRST QUARTER 1998 VERSUS 1997
TechTeam earned a net income of $141,059 or $0.01 per share, for the First
Quarter 1998 as compared to a net loss of $364,353, or $0.02 per share, for the
First Quarter 1997.
REVENUES
TechTeam's total revenues increased by $7,880,495 in 1998 to $26,457,087, a
42.4% increase over revenues in 1997. Changes in revenues resulted from the
following:
11
<PAGE> 12
Call Center Services
Revenues from Call Center Services increased by $3,237,090 in 1998. This was a
35.7 % increase over Call Center Services revenues in 1997. The increase was
primarily driven by revenues for services provided to the Company's joint
venture with General Electric Appliances ("GEA") which aggregated $4,839,938 for
the first quarter 1998. On March 31, 1998, the Company sold its OEM call center
business, consisting of its remaining unexpired contract with Hewlett-Packard
Corporation and its contracts with 3Com Corporation, to GEA for $1.4 million.
GEA then contributed those contracts to the GE TechTeam joint venture for an
agreed value of $1.4 million and an agreement that GEA shall receive all of the
joint venture's earnings until GEA has recovered the $1.4 million. First quarter
1998 earnings reflect no amounts related to this sale. TechTeam will recognize
the earnings related to this sale as the joint venture records those earnings.
The Company believes that the sale of the OEM call center business is consistent
with TechTeam's strategic direction to concentrate on corporate help desk
solutions. This sale is not expected to result in a significant reduction of
present revenues from Call Center Services due to revenues from new contracts
recently received by TechTeam. It also allows TechTeam to participate in the
consumer and OEM call center business through its joint venture with GE. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors Affecting Future Results -- Impact of Business with Major
Clients" and "Exhibits."
Technical Staffing
Revenues from technical staffing increased by $939,921 in 1998. This was a 16.5%
increase over technical staffing revenues in 1997. This increase was due to
continued client demand for TechTeam's help desk and computer services personnel
at major accounts.
Systems Integration
Revenues from systems integration increased by $610,767 in 1998. This was a
25.7% increase over systems integration revenues in 1997. This increase was due
to increased hardware sales and related services.
Training Programs
Revenues from training programs increased by $983,571 in 1998. This was a 68.2%
increase over training revenues in 1997. This increase was due to increased
enrollments in the Company's training programs, and increased technical training
with Chrysler and FCNBD.
Leasing and Related Services
In January 1998, TechTeam acquired Capricorn Capital Group, Inc. The revenues
since acquisition are reported in this category.
COST OF SERVICES DELIVERED
The cost of services delivered increased by $6,502,710 in 1998. This was a 40.5%
increase over the cost of services delivered in 1997. The increase was due
principally to compensation costs for an increased number of technical
personnel, statutory and other benefits associated with such personnel, facility
and computer equipment costs, and other direct costs associated with providing
an increased volume of services to clients. These costs were 85.2% and 86.4% of
revenues in 1998 and 1997, respectively.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by $171,880 in 1998. This
was a 4.8% increase over selling, general and administrative expenses in 1997.
The increase was due principally to compensation costs for an increased number
of sales and administrative personnel, statutory and other benefits associated
with such personnel, facility and equipment costs, and other indirect costs
needed to support the growth of the Company. These expenses were 14.2% of
revenues in 1998 compared with 19.2% of revenues in 1997. This decrease was due
primarily to growth in revenues without a corresponding expansion of TechTeam's
administrative infrastructure.
12
<PAGE> 13
INTEREST EXPENSE
In January 1998, TechTeam acquired Capricorn Capital Group, Inc. which finances
its leasing activities through use of various forms of long-term and short-term
debt. The interest costs of this debt are reported in this category.
INTEREST INCOME
Commencing in October 1996, TechTeam began earning significant amounts of
interest income on cash generated by the 1996 public stock offering. For 1998,
interest income was $614,087 compared to $723,598 in 1997. The decline in
interest income between 1997 and 1998 results from use of cash for operations
and repurchase of Company's shares.
(See Liquidity and Capital Resources.)
TAX PROVISIONS
TechTeam recognized $74,600 of Federal income tax in 1998, resulting in
an effective tax rate of 34.6% compared to an effective tax rate of 23.9% for
1997. The 1998 and 1997 effective tax rates differ due to changing amounts of
permanent book/tax differences, primarily goodwill and tax exempt interest. The
Michigan single business tax and state income taxes in 1998 were $228,800, with
an effective tax rate of 51.5% compared to an effective rate of (44.7)% in
1997. These taxes are tied more closely to factors other than pre-tax income
which inflate the effective tax rate when income is lower, or negative as in
1997.
LIQUIDITY AND CAPITAL RESOURCES
Over the three year period commencing January 1, 1995, the Company's business
has been financed by cash provided by operations, shares issued throughout the
period under stock option plans and $77,851,500 from a public offering in 1996.
Indicators of the Company's financial strength are summarized below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Working capital ............................ $ 102,281,741 $ 85,747,934
Current ratio .............................. 10.4 9.1
Debt as a percentage of total
capitalization............................ 16.2% 0.1%
Shareholders' equity ....................... $ 108,854,240 $ 109,600,197
</TABLE>
The Company's working capital was $102,281,741 at March 31, 1998, an increase of
19.3% from December 31, 1997. Available cash will be used for general corporate
purposes, including domestic and international call center expansion, capital
expenditures, working capital, acquisitions and stock repurchases under the
Company's stock repurchase program.
Early in 1998, TechTeam acquired Capricorn Capital Group, Inc. Currently, the
Company has no arrangements or understandings with respect to any acquisitions,
although it continually monitors acquisition opportunities.
13
<PAGE> 14
In February 1998, the Board of Directors of the Company authorized a stock
repurchase program. The program provides for the open market and other purchase
of up to 1,500,000 shares of the Company's stock. Unless earlier curtailed or
extended, the program will be in effect until August 1998 and accordingly will
reduce the total shares outstanding and cash and cash equivalents. During the
first quarter of 1998, the Company repurchased 567,400 shares for $5,950,940.
TechTeam has line-of-credit agreements with NBD Bank and Chase Manhattan Bank
which provide for short-term borrowings of up to $25,000,000 and $310,000,
respectively; both lines-of-credit are unsecured. NBD Bank borrowings are at the
prime rate and Chase Manhattan Bank borrowings are at prime plus 1.5%. There
were no borrowings under these lines at March 31,1998.
FACTORS AFFECTING FUTURE RESULTS
RESTATEMENT OF FINANCIAL STATEMENTS:
In November 1997, the Company announced that it was restating its results of
operations for the fourth quarter of 1996 and for the first two quarters of
1997, reflecting significant reductions in reported revenues and earnings and
resulting in reporting a net loss in each of the first two quarters of 1997 and
a significant reduction in net income for 1996. The cumulative effect of the
restatement negatively impacts the Company's December 31, 1997 financial
condition. See Notes to the Consolidated Financial Statements -- Note A,
Restatement of Previously Issued Financial Statements in The 1997 Form 10-K. In
addition, the Company's restated first quarter and second quarter 1997 revenues
and operating results were not favorable when compared to the same 1996
quarters. The Company believes that there may continue to be negative impact on
the Company from the restatement.
LITIGATION:
Commencing in August 1997, four putative class action complaints were filed
against the Company and two of its officers in the United States District Court
for the Eastern District of Michigan. On April 13, 1998, a Consolidated Class
Action Complaint, consolidating the claims asserted in those cases was filed.
Plaintiffs purport to represent a class of persons who purchased shares of the
Company's common stock between September 27, 1996 and November 14, 1997. The
Complaint alleges that the Company and the individual defendants engaged in a
scheme to artificially inflate the price of the Company's common stock by
improperly accelerating the recognition of revenue from the licensing of the
Company's proprietary software. Plaintiffs assert claims against all defendants
for alleged violations of Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder, as well as claims against the individual
defendants for alleged "controlling person" liability under Section 20(a) of the
Securities Exchange Act. While Management believes that meritorious defenses
exist to plaintiffs' claims, the disposition of this litigation could have
material adverse effect on the Company's financial condition, results of
operations and cash flows.
In addition, the Company is the subject of a related investigation initiated on
September 9, 1997 by the United States Securities and Exchange Commission
("SEC"). The SEC has stated that the purpose of the investigation is to
determine whether the Company may have violated certain provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934 in connection
with its recognition of revenue from the licensing of its proprietary software.
This investigation is ongoing and the outcome cannot be predicted at this time,
although the Company believes it has complied fully with all applicable
provisions of the federal securities laws.
14
<PAGE> 15
IMPACT OF BUSINESS WITH MAJOR CLIENTS:
Historically, TechTeam has been heavily dependent upon major clients for a
substantial portion of its revenues. Any loss of (or failure to retain a
significant amount of business with) its key clients could have a material
adverse impact on the Company. Until 1996, Ford Motor Company ("Ford") was
TechTeam's largest client. Ford accounted for 33.1%, 22.6% and 21.3% of the
Company's revenue for the years ended December 31, 1995, 1996 and 1997,
respectively. Ford represented significantly higher proportions of TechTeam's
revenues in earlier years. In 1996, Hewlett-Packard became TechTeam's largest
client, representing 26.7% of TechTeam's revenues in that year. In 1997,
Hewlett-Packard accounted for 21.3% of the Company's revenues. In the past
several years, Chrysler Corporation ("Chrysler") has also become a major client,
representing between 5 and 10% of the Company's total revenues. In 1997, the
percentage of total revenues derived from Chrysler increased to 14.6%, and an
international provider of shipping services became a significant client
generating 6.5% of total revenues. Ford, Chrysler, and the international
provider of shipping services are expected to continue to constitute a high
percentage of TechTeam's revenues for the foreseeable future. As of March 31,
1998, the OEM call center business conducted by TechTeam was terminated as a
result of 1) the scheduled expiration of the two largest of the Company's
contracts with Hewlett-Packard and 2) the sale to GEA and GEA's subsequent
contribution to the GE TechTeam joint venture of the remaining unexpired
contracts with Hewlett-Packard and the contract with 3Com Corporation. The
Company believes that the sale of the OEM call center business is consistent
with TechTeam's strategic direction to concentrate on corporate help desk
solutions. This sale is not expected to result in a significant reduction of
present revenues from Call Center Services due to revenues from new contracts
recently received by TechTeam. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Exhibits."
Management recognizes the need to diversify its client base from both a client
and industry perspective. TechTeam's services are not specific to any single
industry and can be beneficial to most large corporations. TechTeam's technical
staffing and training programs cover most of the popular software applications
and can be customized to improve the productivity of microcomputer users in most
companies.
MANAGEMENT OF GROWTH:
The Company's revenues have grown from $34.3 million in 1994 to $47.1 million in
1995, $72.2 million in 1996 and $81.3 million in 1997. The Company intends to
pursue the continued growth of its business; however, there can be no assurance
that such growth will be achieved. The Company's future operating results will
depend in part on management's ability to manage any future growth and control
expenses. An unexpected decline in revenues without a corresponding and timely
reduction in staffing and other expenses, or a staffing increase that is not
accompanied by a corresponding increase in revenues, could have a material
adverse effect on the Company's operating results.
Although the market in which the Company participates has experienced
significant growth in recent years, continued growth in the industry may be
adversely impacted by, among other things, recessionary pressures or a slowdown
in the rate of technological advances. A slowdown or reversal of industry growth
could impact the Company's ability to grow.
COMPETITION:
The Company faces intense competition in both the call center and corporate
computer services markets. In the call center market, the Company competes with
other call center companies, some of which have substantially greater resources
including more call center locations, greater financial resources, a larger
client base and more name recognition. In the corporate computer services
market, the Company competes with many entities including systems implementation
firms, application software firms, staffing firms, large accounting firms,
facilities management firms and computer consulting firms. Many of these firms
have far greater resources, clients and name recognition than the Company.
The Company also faces significant competition in both markets from its own
clients and potential clients whose internal resources represent a fixed cost to
the client. Such competition may impose additional pricing pressures on the
Company. There can be no assurance that the Company will compete successfully
with its existing competitors or with any new competitors.
15
<PAGE> 16
CONTRACT RISKS:
The great majority of the Company's contracts are terminable without cause on
short notice, often upon 90 days notice. Other of the Company's contracts expire
on set dates and may not be renewed or replaced. Terminations and non-renewals
of major contracts can have a significant impact upon the Company's revenues and
operating results.
RELIANCE ON KEY EXECUTIVES:
The success of the Company is highly dependent upon the efforts and abilities of
its executive officers, particularly William F. Coyro, Jr., the Company's
founder, Chairman and Chief Executive Officer. Other than Harry A. Lewis,
President and Chief Operating Officer, none of the Company's key executives are
subject to employment contracts, and the Company does not maintain key-man
insurance on its executives. The loss of the services of any of these key
executives for any reason could have a material adverse effect on the Company's
business, operating results and financial condition.
ATTRACTION AND RETENTION OF EMPLOYEES:
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability to
attract, develop, motivate and retain highly skilled technical employees.
Qualified technical employees are in great demand and are likely to remain a
limited resource for the foreseeable future. There can be no assurance that the
Company will be able to attract and retain sufficient numbers of highly skilled
technical employees in the future. The loss of technical personnel could have a
material adverse effect on the Company's business, operating results and
financial condition, including its ability to secure and complete engagements.
PROJECT RISKS:
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. The Company's failure or inability to meet a client's expectations
in the performance of its services could result in a material adverse change to
the client's operations and therefore could give rise to claims against the
Company or damage the Company's reputation, adversely affecting its relationship
with its client, its business, operating results and financial condition.
VARIABILITY OF QUARTERLY OPERATING RESULTS:
Variations in the Company's revenue and operating results occur from time to
time as a result of a number of factors, such as the significance of client
engagements commenced and completed during a quarter, the number of business
days in a quarter and employee hiring and utilization rates. The timing of
revenues is difficult to forecast because the Company's sales cycle can be
relatively long and may depend on factors such as the size and scope of
assignments and general economic conditions. Because a high percentage of the
Company's expenses are relatively fixed, a variation in the number of clients,
assignments or the timing of the initiation or the completion of client
assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from quarter to quarter and could
result in losses to the Company. In addition, the Company's engagements
generally are terminable by the client without penalty.
16
<PAGE> 17
VOLATILITY OF STOCK PRICE:
The market price of the Company's stock has fluctuated over a wide range during
the past several years and may continue to do so in the future. The market price
of the common stock could be subject to significant fluctuations in response to
various factors or events, including among other things, the depth and liquidity
of the trading market of the common stock, quarterly variations and actual
anticipated operating results, growth rates, changes in estimates by analysts,
market conditions in the industry in which the Company competes, announcements
by competitors, regulatory actions, litigation including class action litigation
and general economic conditions. In addition, the stock market has from time to
time experienced significant price and volume fluctuations, which have
particularly affected the market prices of the stocks of high technology
companies. As result of the foregoing, the Company's operating results and
prospects from time to time may be below the expectations of public market
analysts and investors. Any such event would likely result in a material adverse
effect on the price of the common stock.
CYCLICALITY:
Certain of the Company's clients and potential clients are in industries, such
as the automobile and financial services industries, that experience cyclical
variations in profitability, which may in turn affect their willingness or
ability to fund systems projects such as those for which the Company may be
engaged. The Company's experience indicates, however, that competitive pressures
in cyclical industries could compel businesses to undertake projects even during
periods of losses or reduced profitability.
INTERRUPTION OF TELECOMMUNICATIONS SERVICES:
The Company's operations are dependent on its ability to protect its call
centers against damage from fire, power loss, telecommunications failure or
similar event. The Company has taken precautions to protect itself from events
that could interrupt its operations, including off-site storage of back-up data,
contractual arrangements for back-up facilities with a leading disaster recovery
services company and Halon fire suppression systems in the data centers (which
are designed to extinguish a fire without damaging computer equipment). No
assurance can be given that such precautions will be adequate, and operations
may still be interrupted, even for extended periods. In addition, the on-line
services provided by the Company are dependent on telecommunications links to
the regional Bell operating companies for which the Company currently has no
back-up. Any damage to call centers or any failure of the Company's
telecommunication links that cause interruptions in the Company's operations
could have a material adverse effect on the Company's business, operating
results or financial condition. The Company's property and business interruption
insurance with current limits of $2 million may not be adequate to compensate
the Company for all losses that may occur.
GROWTH THROUGH ACQUISITIONS AND NEW PRODUCTS:
The Company's business strategy includes growth through acquisitions of
businesses and technology sources complementary to the Company's business. The
Company has acquired several significantly smaller companies in the past and
believes that it has been successful in integrating the acquired assets and
businesses into the Company's operations. There can be no assurance, however,
that future acquisitions will be consummated on acceptable terms or that any
acquired assets or business will be successfully integrated into the Company's
operations. Further, acquisitions may involve special risks such as diversion of
management's attention, unanticipated events, legal liabilities and amortization
of intangibles, any of which could have an adverse effect on the Company's
operations and earnings.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS:
Certain risks are inherent in the Company's business strategy which includes
plans for the global expansion of its operations. Among other things, the
Company may encounter difficulties in marketing, selling and delivering its
services due to differences in cultures, languages, labor and employment
policies and differing political and social systems. In addition, the Company
may encounter significant effects on its operations and financial condition as a
result of currency fluctuations and differing tax laws.
17
<PAGE> 18
RAPID TECHNOLOGICAL CHANGES; DEPENDENCE ON NEW SOLUTIONS:
The Company's success will depend in part on its ability to develop IT solutions
that keep pace with continuing changes in IT, evolving industry standards and
changing client preferences. There can be no assurance that the Company will be
successful in adequately addressing these developments on a timely basis or
that, if these developments are addressed, the Company will be successful in the
marketplace. In addition, there can be no assurance that products or
technologies developed by others will not render the Company's services
uncompetitive or obsolete. The Company's failure to address these developments
could have a material adverse effect on the Company's business, operating
results and financial condition.
INTELLECTUAL PROPERTY RIGHTS:
The Company's success is dependent upon certain methodologies it utilizes in
designing, installing and integrating computer software and information systems
and other proprietary intellectual property rights. The Company's business
includes the development of custom software in connection with specific client
engagements. Ownership of such software is generally assigned to the client. The
Company also develops certain foundation and application software products, or
software "tools," which remain the property of the Company.
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company enters into confidentiality
agreements with its employees and limits distribution of proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.
Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of litigation alleging infringement of third-party
intellectual property rights. Any such claims could require the Company to spend
significant sums in litigation, pay damages, develop non-infringing intellectual
property or acquire licenses of the intellectual property which is the subject
of asserted infringement.
18
<PAGE> 19
PART II -- OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES
On January 30, 1998, the Company issued an aggregate of 500,000 shares of its
common stock to the sole stockholder of Capricorn Capital Group, Inc.
("Capricorn") as consideration for the sale to the Company of all of the
outstanding capital stock of Capricorn. The shares were issued without
registration in reliance upon the exemption from registration for transactions
not involving any public offering provided by Section 4(2) of the Securities Act
of 1993, as amended, because the sale was made to one person, there was no
general solicitation and there were restrictions placed upon disposition of the
shares.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.4 (a) Amendment No. 1 to limited Partnership Agreement of Support
Central, L.P.
10.13 Asset Purchase Agreement between General Electric Company and
National TechTeam, Inc. dated March 31, 1998 relating to the sale
and transfer by TechTeam of its OEM call center contracts with
Hewlett-Packard Corporation and 3Com Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K: Form 8-Ks were filed by the Company on February 13,
1998 and April 14, 1998 covering the Company's acquisition of Capricorn
Capital Group, Inc.
ITEMS 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED
SIGNATURES
Pursuant to the requirements 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.
National TechTeam, Inc.
-----------------------
(Registrant)
Date: May 15, 1998 By: /s/William F. Coyro Jr.
-----------------------
William F. Coyro Jr.
Chairman of the Board and
Chief Executive Officer
Date: May 15, 1998 By: /s/Lawrence A. Mills
--------------------
Lawrence A. Mills
Vice President,
Chief Financial Officer, Treasurer
and Secretary
19
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ---------- -----------
2.4 (a) Amendment No. 1 to limited Partnership Agreement of Support
Central, L.P.
10.13 Asset Purchase Agreement between General Electric Company
and National TechTeam, Inc. dated March 31, 1998 relating
to the sale and transfer by TechTeam of its OEM call center
contracts with Hewlett-Packard Corporation and 3Com
Corporation.
27 Financial Data Schedule
<PAGE> 1
AMENDMENT NO. 1
TO
LIMITED PARTNERSHIP AGREEMENT
OF
SUPPORT CENTRAL, L.P.
This is Amendment No. 1 dated as March 31, 1998, among Support
Central, LLC, GE Subsidiary, Inc. 61A ("GE") and National TechTeam, Inc.
("NTT") as an amendment to the Limited Partnership Agreement of Support
Central, L.P., dated as of October 1, 1997, among Support Central, LLC, GE and
NTT.
The Limited Partnership Agreement of Support Central, L.P. is hereby
amended as follows:
1. Pursuant to Article 8.2, GE hereby contributes to the limited
partnership, the assets set forth on Exhibit A to this Amendment No.1. This
contribution shall be valued at One Million Four Hundred Thousand Dollars
($1,400,000).
2. Pursuant to Article 9, Distributors, and Article 10, Allocation
of Profits and Losses for Tax Purposes, in consideration for the contribution
which GE is making to the limited partnership in 1 above, all of the net income,
profits and losses of the limited partnership shall be assigned and distributed
to GE until such time as GE has received in distributions and/or allocation of
profits and losses One Million Four Hundred Thousand Dollars ($1,400,000),
3. NTT shall service the assets contributed to the limited
partnership and set forth on Exhibit A in the same manner and at the same costs
to the limited partnership as were in place at NTT before the date of this
Amendment No. 1 and as set forth in Exhibit B hereto.
IN WITNESS WHEREOF the parties have caused this Amendment No. 1 to be
executed and delivered by their duly authorized representatives as of the date
and year first above written.
SUPPORT CENTRAL, LLC
By: /s/ Russell A. Evans
--------------------------
Title:
-----------------------
<PAGE> 1
ASSETS PURCHASE AGREEMENT
-------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
this 31st day of March, 1998, by and between GENERAL ELECTRIC COMPANY, a New
York corporation, acting through its GE Appliances business component, with a
mailing address of Appliance Park, Louisville, Kentucky 40225, ("GE Appliances"
or "Buyer"), and NATIONAL TECHTEAM, INC., a Delaware corporation, with a mailing
address of 835 Mason Street, Suite 200, Dearborn, MI 48124 ("Seller").
W I T N E S S T H:
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain
assets employed by Seller in the operation of its call-taking center business
(the "Business"), in accordance with and subject to the terms and provisions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations and warranties herein contained, and intending to be
legally bound, Seller and Buyer agree as follows:
1. Purchase and Sale of Assets
On and subject to the terms and conditions of this Agreement,
Buyer agrees to purchase from Seller and Seller agrees to sell, assign,
transfer, convey, and deliver to Buyer, all of the Seller's right, title and
interest in the contracts set forth on Exhibit A hereto ("Contracts") or (the
"Purchased Assets"), subject to the liabilities specified in Section 2 of this
Agreement.
2. No Assumption of Liabilities
Buyer will not assume and become responsible for any liability
or obligation of Seller other than those specifically assumed in connection
with the Purchased Assets as set forth in Exhibit B.
3. Purchase Price
The purchase price for the Purchased Assets shall be One
Million Four Hundred Thousand Dollars ($1,400,000) ("Purchase Price"). The
Purchase Price shall be allocated among the Purchased Assets in the manner set
forth in Exhibit C to this Agreement. The parties agree to allocate the
Purchase Price (and all other costs capable of being capitalized) among the
Purchased Assets for all purposes (including financial, accounting and tax
purposes) in accordance with Exhibit C. The Purchase Price shall be paid by
Buyer to Seller in immediately available funds at the Closing. Buyer shall not
pay, perform, assume, or discharge any liabilities of Seller other than
Seller's performance obligations under Contracts being assigned to Buyer
pursuant to the terms and provisions of the Assignment and Assumption
Agreement attached hereto as Exhibit D.
<PAGE> 2
Exhibit D.
- ----------
4. Closing; Best Efforts
The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place in Louisville, Kentucky, at the offices of
Legal Operations, GE Appliances, Appliance Park, AP2 - 225, on March 31, 1998,
at 10:00 a.m. E.S.T., or at such other time, date, or place upon which Buyer
and Seller shall agree in writing (the "Closing Date"). Seller and Buyer
covenant and agree that each of them shall use their best good faith efforts to
consummate the transactions contemplated by this Agreement on the Closing Date.
5. Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer as follows:
A. Corporate Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing in all jurisdictions in which the
nature of its business or the ownership or leasing of its properties makes such
qualifications necessary.
B. Power and Authority of Seller; Authorization. Seller has
all requisite power and authority, corporate or otherwise to enter into and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Seller. This Agreement has been duly executed and delivered by Seller and
constitutes legal, valid and binding obligation of Seller enforceable against it
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting the
enforcement of creditor's rights generally and by general principles of equity
relating to enforceability.
C. No Conflict. Except as set forth on Schedule 5.C., the
execution and delivery of this Agreement by Seller does not, and the
consummation by Seller of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation or a lien, pledge, security interest,
charge or other encumbrance on any of the Purchased Assets (any such conflict,
violation, default, right of termination, cancellation of acceleration, loss or
creation, a "Violation") pursuant to, any provision of the Articles of
Incorporation or Bylaws of Seller, or result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan (as defined in
Section 5.J) or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to
-2-
<PAGE> 3
Seller or its properties or assets.
D. Consents. Except as set forth on Schedule 5.D., no
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required
by or with respect to Seller in connection with the execution and delivery
of this Agreement, or the consummation by Seller of the transactions
contemplated hereby.
E. Financials. Seller has delivered to Buyer prior to the
date hereof, the financials in Schedule 5.E. setting forth the projected
financial performance of the Purchased Assets.
F. Title to Purchased Assets. Seller has good, clear, valid
and marketable title to all the Purchased Assets. Except for Permitted Liens
(as hereinafter defined), or as described in Schedule 5.F., Seller owns such
Purchased Assets free and clear of all liens, restrictions, claims, charges,
security interests, or other encumbrances of any nature whatsoever. "Permitted
Liens" shall mean (i) liens for taxes not yet due and payable and (ii)
statutory liens of landlords and liens of carriers, warehousemen, mechanics,
materialmen and repairmen incurred in the ordinary course of business for sums
not yet delinquent, none of which, individually or in the aggregate, (a) have
more than an immaterial effect on the value thereof or its present use, or (b)
would impair the ability of Seller to sell such property for its present use.
G. Leases. Schedule 5.G. contains a complete and accurate
list of all leases (including any capital leases) and lease-purchase
arrangements pursuant to which Seller leases personal or real property from
others used in regards to the Purchased Assets. To Seller's knowledge, all
such leases are valid, binding and enforceable in accordance with their terms
except as enforceability may be limited by applicable bankruptcy, insolvency or
other similar laws affecting the enforcement of creditor's rights generally and
by general principles of equity relating to enforceability and are in full
force and effect; Seller does not know of any existing defaults with respect
thereto by any party thereto; and no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default thereunder by Seller or, to Seller's
knowledge, by any other party thereto. Buyer will acquire no interest in the
leases listed in Schedule 5.G. under this Agreement, but rather is being
assured that Seller's leases are as herein represented and warranted to satisfy
Buyer that Seller will continue to have its leased property available to use.
H. Legal Proceedings. Except as set forth in Schedule 5.H.,
there are no claims of any kind or any actions, suits, proceedings,
arbitrations or investigations pending or, to the knowledge of Seller,
threatened against or materially affecting the Purchased Assets. Further,
there are no outstanding judgments, orders, injunctions, decrees, stipulations
or awards (whether rendered by court, administrative agency, or by arbitration,
pursuant to a grievance or other procedure) against or relating to any of the
Purchased Assets.
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I. Licenses and Permits; Compliance with Laws. Seller holds
all permits, licenses, variances, exemptions, orders and approvals of all
governmental entities which are material to the operation and use of the
Purchased Assets and are in compliance with the terms thereof.
J. Labor Relations. Except to the extent set forth in
Schedule 5.J., there are no controversies pending between Seller and any of its
employees, which controversies may reasonably be expected to affect materially
and adversely the Purchased Assets or consummation of the transactions
contemplated hereby.
K. Material Contracts. Except as set forth in Schedule 5.K.
Seller is not a party to:
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[1] any agreement for the lease of personal property to or
from any person providing for lease payments in excess of $5,000 per annum
solely relating to the Purchased Assets;
[2] any agreement for the purchase or sale of raw
materials, supplies, products, or other personal property, or the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year, result in a loss to Seller or involve
consideration in excess of $5,000 relating solely to the Purchased Assets;
[3] any agreement concerning a partnership or joint venture
relating to the Purchased Assets;
[4] any agreement under which the consequences of a default
or termination would have an adverse effect on the Purchased Assets; and
[5] any agreement, contract or commitment containing any
covenant materially limiting the freedom of Seller to engage in any line of
business related to the Purchased Assets in any geographic area or to compete
with any person in such business.
L. Good Standing of Contracts. No event or condition has
occurred or exists, or, to the knowledge of Seller is alleged by any of the
other parties thereto to have occurred or existed, which constitutes, or with
lapse of time or giving of notice or both might constitute, a default or breach
under any of the leases, contracts or agreements to which Seller is a party
which are related to the Purchased Assets, which default is reasonably likely
to result in a material adverse change in the financial condition, results of
operation or business of Seller relating to the Purchased Assets.
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M. Product and Service Warranties. Except as set forth in
Schedule 5.M. Seller has not made any express warranties or guaranties on its
own behalf as to goods sold or services provided by it relating to the
Purchased Assets, and there is no pending or, to the knowledge of Seller,
threatened claim alleging any breach of any such warranty or guaranty.
N. Insurance. Schedule 5.N. sets forth all insurance
policies, including property, casualty, liability and other insurance
maintained with respect to the Purchased Assets by Seller.
O. Brokers and Finders' Fees. Neither Seller nor any of
its respective officers, directors or employees, has employed any broker,
finder or financial advisor or incurred any liability for fees or commissions
payable to any broker, finder or financial advisor in connection with the
negotiations relating to or the transactions contemplated by this Agreement.
P. Substantially all of Seller's Assets. The Purchased
Assets do not constitute "all or substantially all" of the assets of Seller as
such term is defined and understood under the Delaware General Corporation Law.
Q. Purchased Assets. Each Contract listed on Exhibit A
is in full force and effect as of the date hereof and there are no breaches or
violations pending for which Seller has knowledge or should have knowledge, nor
has Seller received notice of any breach or violation of any of the terms and
provisions of any such Contract or the termination thereof.
R. Operation of the Business. Seller shall continue to
operate its business after the Closing as conducted on the date of this
Agreement and shall operate the Purchased Assets for the joint venture,
Support Central, L.P., pursuant to the terms of that certain Limited
Partnership Agreement dated October 1, 1997, among Support Central, LLC, GE
Subsidiary, Inc. 61A and Seller.
S. Environmental and Worker Health and Safety Matters.
Except as otherwise disclosed in Schedule 5.S.:
[1] The Seller has duly complied with, and its business,
operations, assets, equipment, leaseholds and facilities, including, without
limitation all real property, are in full compliance with all Environmental
Laws and all Worker Health and Safety Laws including, without limitation, all
laws and regulations with respect to reporting releases of Hazardous Materials
to the environment and the registration, testing and maintenance of underground
storage tanks.
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[2] The Seller has been issued, has maintained to the
Closing Date and will maintain thereafter, all required national, state,
territorial, and local permits, licenses, certificates and approvals relating
to (1) air emissions; (2) discharges to surface water or ground water; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use, generation,
storage, transportation or disposal of Hazardous Materials; and (6) other
environmental, health or safety matters, and the Seller operates its facilities
consistently in compliance with all terms, conditions and limitations contained
in all such permits, licenses, certificates or approvals is set forth on
Schedule 5.U.
[3] Seller has not received notice of, or knows of or
suspects any fact(s) which might constitute violations of any Environmental
Laws, Worker Health and Safety Laws or any other laws which relate to the use,
ownership or occupancy of any of its real property, and Seller is not in
violation of any covenants, conditions, easements, rights of way or
restrictions affecting any of its real property or any rights appurtenant
thereto.
<PAGE> 8
[4] Terms used in this section shall have the following
definitions -
[a] "Environmental Laws" shall mean any national,
state or local code or ordinance, now existing or hereafter in effect, all
rules, regulations, and standards promulgated thereunder enacted for purposes
of protecting public health and the environment from the deleterious effects
which can result from the use, storage, treatment, disposal, release, discharge
or other management of Hazardous Materials,as hereinafter defined.
[b] "Hazardous Materials" shall mean any substance,
compound or mixture (including , without limitation, asbestos,
polychlorinated biphenyls (PCBs) and petroleum) which is designated or defined
(either by inclusion in a list of materials or by reference to exhibited
characteristics) as hazardous, toxic, or dangerous, or as a pollutant or
contaminant, in, or that is otherwise regulated under, any Environmental Laws
or Worker Health and Safety Laws.
[c] "Worker Health and Safety Laws" shall mean any
national, state or local law, code or ordinance now existing or hereinafter in
effect, and
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all rules, regulations and standards promulgated thereunder, enacted for
purposes of reducing, minimizing or otherwise protecting workers from hazards
or dangers in their workplace, including hazards or dangers of occupational
illness or disease, or of requiring employers to inform employees of such
hazards or dangers.
T. Full Disclosure. No representation or warranty of Seller
contained in this Agreement and no statement contained in this Agreement or in
any certificate or other instrument furnished or to be furnished to Buyer
hereunder contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
contained herein or therein not misleading.
6. Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
A. Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has all requisite power and authority, corporate or otherwise, to carry on
and conduct its business as it is now being conducted and to own and operate
the Purchased Assets.
B. Authorization. This Agreement and its execution, delivery
and performance have been duly authorized by all necessary corporate action
on the part of Buyer and is within its corporate powers. This Agreement has
been duly executed and delivered by Buyer, and constitutes the legal, valid and
binding agreement of Buyer enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting the enforcement of creditor's rights generally and by
general principles of equity relating to enforceability.
C. No Conflict. Neither the execution and delivery of this
Agreement nor the performance of the transactions contemplated herein by Buyer
will violate or conflict with any of the provisions of any charter instrument or
bylaw of Buyer or violate or conflict with or constitute a default under any
mortgage, indenture, contract, agreement, license, permit, instrument or trust
or any order or ruling of any governmental authority to which Buyer is a party
or by which Buyer is bound, or violate any provision of law, statute, rule or
regulation to which Buyer is subject.
D. Brokers' and Finders' Fees. Neither Buyer nor any of its
officers, directors or employees has employed any broker, finder, or financial
advisor or incurred any liability for fees or commissions payable to any
broker, finder or financial advisor in connection with the negotiations
relating to or the transactions contemplated by this Agreement.
E. Contribution of Purchased Assets. Buyer shall on the
Closing Date contribute the Purchased Assets to the joint venture Support
Central, L.P.
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F. Employees. Buyer shall have no obligation to continue or
assume the employment of any of Seller's employees after the Closing.
G. Full Disclosure. No representation or warranty of Buyer
contained in this Agreement and no statement contained in this Agreement
or in any certificate or other instrument furnished or to be furnished to
Seller hereunder contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
7. Special Post-Closing Covenant
A. Seller guarantees that the net income realized from the
Purchased Assets during the 12-month period immediately following the Closing
Date shall exceed $1.4 Million.
B. For purposes of this Section 7:
[1] "Net income" means net income determined in accordance
with generally accepted accounting principles consistently applied.
[2] The determination by KPMG Peat Marwick LLP of the net
income realized from the Purchased Assets during the 12-month period
immediately following the Closing Date shall be final, conclusive, and binding
on Seller, Buyer and their successors in interest.
8. Closing Deliveries
A. Seller's Obligations. At the Closing, Seller shall deliver
to Buyer the following:
[1] The Chief Executive Officer of Seller shall have
delivered a certificate to Buyer dated the Closing Date stating the following -
[a] Representations and Warranties. The
representations and warranties of Seller contained in Section 5 of this
Agreement are true and correct in all material respects on the Closing Date as
made on the Closing Date.
[b] Performance of this Agreement. Seller has
performed and observed in all material respects its covenants and obligations
as set forth in the Agreement.
[c] Consents. Seller has procured all of the third
party consents necessary for Buyer or an entity designated by it to own and
conduct business with the Purchased Assets as it was conducted by Seller.
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[d] Litigation. No action, suit, or proceeding is
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (i) prevent consummation of any of the transactions contemplated
by this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (iii) affect adversely the
right of Buyer to own the Purchased Assets. No such injunction, judgment, order,
decree, ruling, or charge shall be in effect.
[e] Condition of Assets. A material portion of the
Purchased Assets has not been damaged or terminated which is not covered by
Seller's insurance.
[f] Material Claims. No material claim against the
Purchased Assets exist or has arisen, of which Seller is aware, that is not
adequately covered by insurance policies maintained by Seller.
[g] Material Changes. There have not been any material
and adverse change in the financial condition of the Purchased Assets, from the
Closing Date.
[2] Copies of resolutions of the Board of Directors
authorizing the execution and delivery by Seller and performance by Seller of
this Agreement and the transactions contemplated hereby, certified as to the due
adoption and continuing effect by the Secretary of Seller;
[3] Bills of sale and assignments, duly executed by
Seller, in form and substance reasonably satisfactory to Buyer and, such other
documents as Buyer may reasonably request in order to accomplish the sale of the
Purchased Assets to Buyer;
[4] Legal opinion of Counsel to Seller to the affect that:
[a] Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
Seller has all requisite power and authority to enter into and consummate the
transactions contemplated by this Agreement;
[b] This Agreement has been duly executed and
delivered by Seller and constitutes the legal, valid and binding obligation of
Seller enforceable against it in accordance with its terms, except as
enforceability may be limited or otherwise affected by bankruptcy, insolvency or
other similar laws affecting the enforceability of creditors' rights generally;
[c] To the best of counsel's knowledge after due
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<PAGE> 12
inquiry, neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with, or
result in a breach of, or accelerate the performance required by, any terms of,
or otherwise adversely affect the Purchased Assets, any agreement to which
Seller is now a party or constitute a default thereunder, or result in the
creation of any lien, charge or encumbrance upon the Purchased Assets or any of
the property or assets of Seller; and
[d] The instruments of conveyance and assignment
delivered to Buyer at the closing of this Agreement have been executed and
delivered, constitute the legal, valid and binding obligations of Seller
enforceable against it in accordance with their terms, and are in form and
substance effective to accomplish their intended purpose.
[5] Such other documents as are reasonably requested by
counsel for Buyer.
B. Buyer's Obligations. At the Closing, Buyer shall deliver
to Seller the following:
[1] The Purchase Price in the manner described in Section 3
hereof;
[2] An Officer of Buyer shall have delivered a certificate
to Seller dated the Closing Date stating the following:
[a] Representations and Warranties. The representations
and warranties of Buyer contained in Section 6 of this Agreement are true and
correct in all material respects as of the Closing Date as made on the Closing
Date.
[b] Performance of this Agreement. Buyer has performed
and observed in all material respects its covenants and obligations as set forth
in the Agreement.
[c] Litigation. There is no injunction, decree, or
order issued by any court, governmental agency, or authority, or any litigation
instituted by any governmental agency or authority, challenging or seeking to
prohibit or enjoin any of the transactions contemplated by this Agreement.
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[3] An assumption agreement reasonably satisfactory to
Seller; and
[4] Such other documents as are reasonably requested by
counsel for Seller.
9. Tax Returns
Seller and Buyer agree to file all federal, state, and local tax
returns, and to pay all taxes, interest, and penalties in a manner consistent
with the allocation of the Purchase Price set forth in Exhibit C to this
Agreement.
10. Transfer Tax
Seller shall pay all applicable sales, use and transfer taxes, if any,
related to the consummation of the transactions contemplated hereby becoming
due and payable
11. Survival of Representations and Warranties
Except as may be otherwise provided herein, the representations and
warranties of Seller contained in this Agreement shall be effective from the
date of execution of the Agreement and shall survive for a period of three (3)
years after the Closing Date and the representation and warranties of Buyer
shall be effective from the date of execution of the Agreement and shall
survive for a period of one year after the Closing Date.
12. Indemnification
A. Remedies.
[1] Except as otherwise limited by this Section 12, Seller
shall indemnify and reimburse Buyer for any and all claims, losses, liabilities,
damages (including, without limitation, fines, penalties, and criminal or civil
judgments and settlements), costs (including, without limitation, court costs)
and expenses (including, without limitation, reasonable attorneys' and
accountants' fees) (hereinafter "Loss" or "Losses") suffered or actually
incurred by Buyer, any successors or assigns thereto (the "Protected Parties")
as a result of, or with respect to:
[a] Any breach of or noncompliance by Seller with any
covenant, representation, warrant or agreement of Seller contained in this
Agreement which survives the Closing Date;
[b] Any act or omission of Seller or its employees,
agents or representatives, or of Seller's predecessors in interest, occurring
prior to the Closing Date and that is alleged to violate an
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<PAGE> 14
Environmental Law or Worker Health and Safety Law, or the ownership, use
control or operation by Seller or its predecessors in interest of any of the
current or former properties of Seller or any condition that is a breach of
Seller's representations and warranties set forth in Section 5.S. of this
Agreement;
[c] the operation of the Purchased Assets prior to the
Closing;
[d] any liability of Seller, whether or not relating
to the business or the Purchased Assets, that is not expressly assumed by Buyer
under this Agreement;
[e] any liability of Buyer arising by operation of law
(including any bulk transfer law of any jurisdiction or under any common law of
de facto merger or successor liability);
[f] any liability of Buyer for the unpaid taxes of any
person as a transferee or successor, by contract or otherwise;
[g] any and all actions, suits, proceedings, claims,
demands, assessments and judgments incident to any of the foregoing; and
[h] any termination or modification in a negative
manner as to price or margin of any contract constituting part of the Purchased
Assets within the 12 month period following the Closing Date.
[2] Except as otherwise limited by this Section 12, Buyer
shall indemnify and reimburse Seller for any and all claims, losses,
liabilities, damages (including, without limitation, fines, penalties, and
criminal or civil judgments and settlements), costs (including, without
limitation, court costs) and expenses (including, without limitation, reasonable
attorneys' and accountants' fees) (hereinafter "Loss" or "Losses") suffered or
actually incurred by Seller or any successors or assigns thereto as a result of,
or with respect to:
[a] Any breach of or noncompliance by Buyer with any
covenant or agreement of Buyer contained in this Agreement which survives the
Closing Date;
[b] the operation and use of the Purchased Assets
after the Closing Date; and
[c] Any and all actions, suits, proceedings, claims,
demands, assessments and judgments incident to any of the foregoing.
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B. Third Party Claims. A party seeking indemnification (the
"Indemnitee") shall use all reasonable efforts to minimize any liabilities,
damages, deficiencies, claims, judgments, assessments, costs, and expenses
(including without limitation taxes and attorney fees) in respect of which
indemnity may be sought under this Agreement. The Indemnitee shall give prompt
written notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification but in no event
later than (a) 15 days after service of process in the event litigation is
commenced against the Indemnitee by a third party, or (b) 15 days after the
Indemnitee becomes aware of circumstances, not involving the commencement of
litigation by a third party, which may give rise to a claim for
indemnification. No such notice of assertion of a claim shall satisfy the
requirements of this Section 12.B. unless it describes in reasonable detail and
in good faith the facts and circumstances upon which the asserted claim for
indemnification is made, to the extent known. The Indemnitee shall consult with
the Indemnitor with respect to the payment, settlement, or defense of any
claim, action, suit, proceeding, or demand. If any action or proceeding shall
be brought against the Indemnitee in connection with any liability or claim to
be indemnified hereunder, the Indemnitee shall provide the Indemnitor a period
of 30 days to decide whether to defend such liability or claim. During such
period the Indemnitee shall take all reasonable steps to protect the interests
of itself and the Indemnitor, including the filing of necessary responsive
pleadings, the seeking of emergency relief, or other action necessary to
maintain the status quo, subject to reimbursement from the Indemnitor of its
expenses in doing so. If the Indemnitor determines that it shall defend such
action or proceeding, the Indemnitor shall defend such action or proceeding at
its expense, using counsel selected by any insurance company insuring against
any such claim and undertaking to defend such claim, or by other counsel
selected by the Indemnitor and approved by the Indemnitee, which approval shall
not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times as to the status of the defense and
shall consult with the Indemnitee prior to settlement of any indemnified
matter. In the event the Indemnitee has a claim or claims against any third
party growing out of or connected with the indemnified matter, then upon
receipt of indemnification, the Indemnitee shall fully assign to the Indemnitor
the entire claim or claims and the Indemnitor shall thereupon be subrogated with
respect to such claim or claims of the Indemnitee. The parties hereto
acknowledge and agree that the terms and conditions of this Section 12.B. shall
not alter, negate or otherwise affect the terms and conditions of any
applicable insurance policy.
C. Limitations on Indemnification. Seller's indemnification
obligations under this Agreement shall be limited to losses, damages, costs and
expenses (including reasonable attorneys' fees) actually incurred by Buyer
which exceed $1,000 in amount for any single event giving rise to such liability
("Material Losses"), and which when aggregated with other Material Losses,
exceed $5,000; provided, however, that upon Buyer's successful assertion of a
claim against Seller for at least $5,000 in aggregated Material Losses, Buyer
shall be entitled to recover the full amount of its claim for such aggregated
Material Losses in excess of the $5,000 base amount.
13. Records.
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After the Closing, Seller and Buyer shall make available to the other
on reasonable request such books and records of that party related to the
Purchased Assets as may be appropriate for use in connection with their
respective tax returns, including any review thereof, and for any other
reasonable purpose. Such books and records shall be retained for a period of 6
years; provided, however, that after 3 years any portion of such books and
records may be destroyed in whole or in part, by the party in possession
thereof upon 30 days' notice to the other party, unless the party to whom such
notice is given shall object, in which event the objecting party shall be given
such records in lieu of destruction thereof.
14. Public Statements
Neither Seller nor Buyer shall, without the prior written approval of
the other party, make any press release or other public announcement concerning
the transactions contemplated by this Agreement. Provided, however, that (a)
such approval shall not be unreasonably delayed or withheld, and (b) such
review and approval shall not be required of a release or releases by either
party if in either party's judgment (exercised in consultation with counsel to
such party) it would prevent the dissemination of information in such time as
may be necessary to comply with applicable law or rules of any stock exchange
on which the shares of such party are listed (in which case, however, the text
of the announcement, if written, or a written summary thereof, if oral, shall
be promptly provided to the other party). Buyer and Seller may disclose
information with respect to the transaction contemplated hereby to their
respective employees, agents, consultants and third parties only to the extent
such persons have a need to know such information and the other party is given
prior notice of any planned disclosure.
15. Confidentiality
A. Prior to Closing. Unless and until the Closing of the
transactions contemplated by this Agreement shall have occurred, and except as
may be otherwise required by applicable law, Buyer shall, and shall cause its
affiliates, employees, agents, and representatives to, maintain in confidence
and not otherwise use information, documents, and data furnished to it, or to
any person or entity on its behalf, by Seller in connection herewith.
B. Failure to Close. If the Closing of the transactions
contemplated by this Agreement does not occur on the Closing Date, Buyer shall
return all written information, documents, and data furnished to Buyer or to
any person or entity on its behalf and all copies thereof. Notwithstanding
anything else in this Agreement to the contrary, if the transactions
contemplated by this Agreement are not closed, Buyer's agreement to maintain in
confidence all information received by it and none of such information shall be
used by Buyer, its employees, agents, representative or affiliates in the
business operations of any such person other than in the joint venture between
the parties known as Support Central, L.P., except to the extent that such
information was: (i) possessed by Buyer prior to the disclosure thereof by
Seller; (ii) disclosed to Buyer by an
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independent third party without a violation of any obligation of
confidentiality on the part of such third party to Seller; or (iii)
ascertainable from public or published information or trade sources.
16. Notices
All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be sent by facsimile, mailed by first
class, registered, or certified mail, postage prepaid, or sent via overnight
courier service, or delivered personally:
If to Buyer, to: Copy to:
GENERAL ELECTRIC COMPANY General Counsel
GE Appliances GE Appliances
Appliance Park AP2-225
Louisville, KY 40225 Louisville, KY 40225
Attn: General Manager, Service Fax: (502) 452-0347
Management
Fax: (502) 452-0602
If to Seller, to: Copy to:
National Tech Team, Inc. Robert A. Hudson
835 Mason Street Berry Moorman P.C.
Suite 200 600 Woodbridge Place
Dearborn, MI 48124 Detroit, MI 48226
Attn: William Popp Fax: (313) 567-1001
Fax: (313) 277-3197
or to such other address of which the addressee shall have notified the sender
in writing.
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Notices mailed in accordance with this section shall be deemed given on the
transmission date when faxed, on the third day following deposit in the mail,
when mailed, and notices sent by overnight courier service shall be deemed
given the day on which delivery is guaranteed by a representative of such
service.
17. Third Party Rights
It is the intention of the parties that nothing in this Agreement
shall be deemed to create any right with respect to any person or entity not a
party to this Agreement.
18. Parties in Interest; Assignment
All covenants and agreements contained in this Agreement by or on
behalf of any of the parties to this Agreement shall bind and inure to the
benefit of their respective heirs, executors, successors, and permitted
assigns, whether so expressed or not. No party to this Agreement may assign its
rights or delegate its obligations under this Agreement to any other person or
entity without the express prior written consent of the other party, except
that Buyer may assign its rights and delegate its obligations to a subsidiary
or affiliated corporation of Buyer, provided that such assignment and delegation
shall not relieve Buyer of its obligations under this Agreement.
19. Construction; Governing Law
The section headings contained in this Agreement are inserted as a
matter of convenience and shall not affect in any way the construction of the
terms of this Agreement. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Kentucky.
20. Submission to Jurisdiction
Each of the parties submits solely to the jurisdiction of any state
or federal court sitting in Louisville, Kentucky in any action or proceeding
arising out of or relating to this Agreement and agrees that all claims in
respect of the action or proceeding may be heard and determined in any such
court. Each party also agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the parties waives
any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that may
be required of any other party with respect thereto.
21. Entire Agreement; Amendment and Waiver
This Agreement, including the Schedules and Exhibits hereto,
constitutes and contains the entire Agreement between the parties hereto with
respect to the transactions contemplated hereby and supersede any prior writing
by the parties. The parties may, by mutual agreement in writing, amend this
Agreement in any respect, and
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any party, as to such party, may in writing (1) extend the time for the
performance of any obligations of any other party; (2) waive any inaccuracies
in representations and warranties by any other party; (3) waive performance of
any obligations by any other party; and (4) waive the fulfillment of any
condition that is precedent to the performance by such party of any of its
obligations hereunder. No such waiver shall be deemed to constitute the waiver
of any other breach of the same or of any other term or condition of this
Agreement. Any such amendment or waiver must be signed by an officer of the
parties or party to such amendment or waiver.
22. Severability
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the remaining provisions.
23. Counterparts
This Agreement may be executed in one or more counterparts, any one
of which need not contain the signatures of more than one party but all of
which taken together shall constitute one and the same Agreement.
24. Expenses
Each party to this Agreement shall pay any and all fees and expenses
that such party may incur in connection with the negotiation, execution, or
closing of this Agreement and the other transactions contemplated by this
Agreement.
25. Further Assurances
At and after the Closing, Buyer and Seller will, without further
consideration, execute and deliver such other instruments and documents and
do all other acts and things as the other party or parties may reasonably
request in order to effect or confirm the transactions contemplated by this
Agreement.
26. Schedules and Exhibits
The Schedules and Exhibits attached to this Agreement constitute a
part of this Agreement and are incorporated herein by reference in their
entirety as if fully set forth in this Agreement at the point where first
mentioned.
27. Time of Essence
Time is of the essence to the performance of the obligations set
forth in this Agreement.
28. Termination
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Anything contained in this Agreement to the contrary notwithstanding, this
Agreement may be terminated at any time prior to the Closing Date:
A. By the mutual written consent to Seller and Buyer;
B. By either party to this Agreement if any other party to this Agreement
shall have breached any of the representations and warranties of such other
party set forth in this Agreement and such other party shall have failed to
cure such breach within 30 days after receipt of written notice of such breach.
C. By Buyer by giving written notice to Seller on or before the 30th day
following the date of the Agreement if Buyer is not satisfied with the results
of its continuing business, legal, and accounting due diligence regarding
Seller.
D. By Buyer or Seller if the Closing shall not have occurred on or before
April 15, 1998.
IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
"BUYER"
GENERAL ELECTRIC COMPANY
GE Appliances
By:
---------------------------
David M. Cote
President & CEO
"SELLER"
NATIONAL TECHTEAM, INC.
By: William F. Capo, Jr.
-----------------------
Title: CEO & CHAIRMAN
--------------------
-20-
<PAGE> 21
IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
"BUYER"
GENERAL ELECTRIC COMPANY
GE Appliances
By: David M. Cote
------------------------------
David M. Cote
President & CEO
"SELLER"
NATIONAL TECHTEAM, INC.
By: William F. Capo, Jr.
------------------------------
Title: CEO & Chairman
-18-
<PAGE> 22
EXHIBIT A
---------
Contracts
---------
<TABLE>
<CAPTION>
AGREEMENT DATE PARTIES TERM SERVICES OTHER
--------- ---- ------- ---- -------- -----
<S> <C> <C> <C> <C> <C>
1. Master Agreement April 23, 1996 National TechTeam, April 1, 1996- Call Center Activity Terminable on 60 days
Inc. ("NTT"); Hewlett- March 31, 1998 notice. Assignment
Packard Company requires HP's consent
("HP")
- ------------------------------------------------------------------------------------------------------------------------------------
2. Program Specification November 18, NTT and HP November 1, 1997- Technical phone Terminable on 30 days
Document - Sales- 1997 October 31, 1998 support for Sales- notice. Subject to
BUILDER for Windows BUILDER for Windows Master Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
3. Contract Authorization November 7, HP and NTT November 1, 1997- Technical and pre- Subject to Master
Program Document- 1997 December 31, 1998 sales phone support Agreement
Computer Organization for HP's Advantage
Sales Services Center and telephony
Advantage Center infrastructure
services and support
for Sales Services
- ------------------------------------------------------------------------------------------------------------------------------------
4. Channel Partners October 11, HP and NTT October 1, 1996- Technical and pre- Subject to Master
Foundation-Program 1996 October 31, 1997 sales phone support Agreement
Specification Document for HP Partnership
Program
- ------------------------------------------------------------------------------------------------------------------------------------
5. Program Specification June 10, 1997 HP and NTT July 1, 1997- Technical and phone Subject to Master
Document - HP CPO June 30, 1998 support for direct Agreement
Pre-Sales Product and marketing
Referral Information
Support
- ------------------------------------------------------------------------------------------------------------------------------------
6. U.S. Robotics & February 20, U.S. Robotics Access One year. Support USR Can cancel on 60 days
National TechTeam, 1997 Corp. ("USR") and Automatic standards with product notice
Inc. Support Agreement NTT renewals information, technical
support, customer
service and/or repair
- ------------------------------------------------------------------------------------------------------------------------------------
6.a. May 5, 1997, letter May 5, 1997 Implemented new Amended February
from NTT to USR pricing for one year 20, 1997 Support
referring to from May 20, 1997 Agreement
February 20, 1997
Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
AGREEMENT DATE PARTIES TERM SERVICES OTHER
--------- ---- ------- ---- -------- -----
<S> <C> <C> <C> <C> <C>
7. Agreement for Customer May 6, 1997 USR and NTT One year. Customer support Can cancel on 60 days
Support Services Automatic services related to notice. With cause
renewals incoming calls and can terminate on 10
e-mails for Personal days notice
Communication Division
- ------------------------------------------------------------------------------------------------------------------------------------
8. November 3, 1997 letter November 3 Adding new services
from 3Com to NTT 1997 FOR PCMCIA
- ------------------------------------------------------------------------------------------------------------------------------------
9. July 30, 1997, Letter July 30, 1997 Request NTT to
from 3Com to Jim support new ramp up
- ------------------------------------------------------------------------------------------------------------------------------------
10.January 14, 1997, January 14, Change prices in an
Letter from 3Com 1997 agreement not identified
</TABLE>
<PAGE> 24
EXHIBIT B
Liabilities Assumed
None other than the performance obligations under the contracts in
Exhibit A.
<PAGE> 25
EXHIBIT C
Allocation of Purchase Price.
All $1.4 million is being allocated to the contracts.
<PAGE> 26
EXHIBIT D
Assignment and Assumption Agreement
<PAGE> 27
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUATION CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, NATIONAL TECHTEAM, INC., a Michigan corporation (the
"Assignor"), does hereby irrevocably and unconditionally sell, transfer,
bargain, convey, assign, and set over to GENERAL ELECTRIC COMPANY, a New York
corporation, acting through its GE Appliances business component ("Assignee"),
the following Assets:
All rights and interests of Assignor under the agreements listed in
Exhibit A on and after the date hereof including all pertinent books
and records relating to such agreements and the associated
liabilities.
Assignee hereby accepts the foregoing assignment of the Assets and assumes
and agrees to perform, observe and discharge all of the duties, obligations and
undertakings of Assignor which may arise and accrue thereunder from and after
the date hereof except for those duties and obligations occurring prior to the
date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed and delivered by their duly authorized
representatives this 31st day of March, 1998.
"ASSIGNOR"
NATIONAL TECHTEAM, INC.,
a Delaware corporation
By: WILLIAM F. CAPO, JR.
------------------------------------------
Title: CEO & CHAIRMAN
---------------------------------------
"ASSIGNEE"
GENERAL ELECTRIC COMPANY,
a New York corporation
GE Appliances
By: David M. Cob
------------------------------------------
Title:
---------------------------------------
<PAGE> 28
SCHEDULE 5.C.
Conflicts of Seller
None.
<PAGE> 29
SCHEDULE 5.D.
Consents Needed by Seller
<PAGE> 30
March 31, 1998
Ms. Aurora Custodia
Hewlett-Packard Company
Software Provider Program
19111 Pruneridge Avenue, MS 44 L14
Cupertino, CA 95014-0795
Dear Aurora:
This letter is to confirm your verbal approval on March 30th, 1998, that the
joint venture between National TechTeam and General Electric (GE TechTeam LP)
has purchased TechTeam's remaining OEM business, including our contract with
Hewlett-Packard's Software Provider Program.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
Sherry L. Williams
Client Services Director
Approved:
- --------------------
<PAGE> 31
[NATIONAL TECHTEAM, INC. LETTERHEAD]
March 31, 1998
Mr. Dan Bell
3COM Corporation
7770 N. Frontage Rd.
Skokie, Il 60077
Dear Dan:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with 3COM.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
BILL POPP
Bill Popp
Vice President Sales
<PAGE> 32
[TECHTEAM LETTERHEAD]
March 31, 1998
Mr. Jason Duncan
Hewlett-Packard Company
Direct Marketing Organization
19310 Pruneridge Avenue, MS 49AU25
Cupertino, CA 95014-0707
Dear Jason:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Direct Marketing
Organization.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 33
[TECHTEAM LETTERHEAD]
March 31, 1998
Ms. Teresa Streit
Hewlett-Packard Company
Direct Marketing Organization
19310 Pruneridge Avenue, MS 49AU25
Cupertino, CA 95014-0707
Dear Teresa:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Direct Marketing
Organization.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 34
[TECHTEAM LETTERHEAD]
March 31, 1998
Ms. Holly Tanner
Hewlett-Packard Company
Customer Advantage Center
19310 Pruneridge Avenue, MS 49A L2
Cupertino, CA 95014-0707
Dear Holly:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Customer Advantage
Center.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 35
[TECHTEAM LETTERHEAD]
March 31, 1998
Mr. Bill Turk
Hewlett-Packard Company
Direct Marketing Organization
19310 Pruneridge Avenue, MS 49AU25
Cupertino, CA 95014-0707
Dear Bill:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Direct Marketing
Organization.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 36
[TECHTEAM LETTERHEAD]
March 31, 1998
Mr. Michael DiTore
Hewlett-Packard Company
Enterprise Accounts Organization
19111 Pruneridge Avenue, MS 46 L5
Cupertino, CA 95014
Dear Michael:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Enterprise Accounts
Organization.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 37
[TECHTEAM LETTERHEAD]
March 31, 1998
Mr. Bob Strevens
Hewlett-Packard Company
11575 Great Oaks Way
Suite 100
Alpharetta, CA 30020
Dear Bob:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's SalesBUILDER for
Windows Program.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
/s/ SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 38
[TECHTEAM LETTERHEAD]
March 31, 1998
Ms. Aurora Custodia
Hewlett-Packard Company
Software Provider Program
19111 Pruneridge Avenue, MS 44 L 14
Cupertino, CA 95014-0795
Dear Aurora:
This letter is sent to inform you that the joint venture between National
TechTeam and General Electric (GE TechTeam) has purchased TechTeam's remaining
OEM business, including our contract with Hewlett-Packard's Software Provider
Program.
Other than some cosmetic differences in the invoice, all operational
components, including current management and employees, remain unchanged. So,
too, does the commitment to provide unparalleled service at competitive rates.
We are very excited about our partnership with GE and its long-term beneficial
effect on your business.
Sincerely,
SHERRY L. WILLIAMS
Sherry L. Williams
Client Services Director
<PAGE> 39
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3. Article Addressed to:
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Hewlett Packard Co.
Customer Advantage Center
19310 Pruneridge Ave. MS49AL2
Cupertino, CA 95014-0707
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Z-126-805-206
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4-3
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PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
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not permit.
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I also wish to receive the following services (for an extra fee):
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Consult postmaster for fee.
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3. Article Addressed to:
Mr. Jason Duncan
Hewlett Packard Company
Direct Marketing Organization
19310 Pruneridge Ave. MS49AV25
Cupertino, CA 95014-0707
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4a. Article Number
Z-126-857808
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4b. Service Type
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[SIG]
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6. Signature: (Addressee or Agent)
X
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7. Date of Delivery
4-6
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PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
- --------------------------------------------------------------------------------
SENDER:
*Complete items 1 and/or 2 for additional services.
*Complete items 3, 4a, and 4b.
*Print your name and address on the reverse of this form so that we can return
this card to you.
*Attach this form to the front of the mailpiece, or on the back if space does
not permit.
*Write "Return Receipt Requested" on the mailpiece below the article number.
*The Return Receipt will show to whom the article was delivered and the date
delivered.
- --------------------------------------------------------------------------------
I also wish to receive the following services (for an extra fee):
1. / / Addressee's Address
2. / / Restricted Delivery
Consult postmaster for fee.
- --------------------------------------------------------------------------------
3. Article Addressed to:
Bill Turk
Hewlett Packard Co.
Direct Marketing Organization
19310 Pruneridge Ave. MS49AU25
Cupertino, CA 95014-0707
- --------------------------------------------------------------------------------
4a. Article Number
Z-126-805-707
- --------------------------------------------------------------------------------
4b. Service Type
/ / Registered /X/ Certified
/ / Express Mail / / Insured
/ / Return Receipt for Merchandise / / COD
- --------------------------------------------------------------------------------
5. Received By: (Print Name)
DANA
- --------------------------------------------------------------------------------
6. Signature: (Addressee or Agent)
X
- --------------------------------------------------------------------------------
7. Date of Delivery
4-6
- --------------------------------------------------------------------------------
8. Addressee's Address (Only if requested and fee is paid)
- --------------------------------------------------------------------------------
PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
<PAGE> 40
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
- --------------------------------------------------------------------------------
SENDER:
*Complete items 1 and/or 2 for additional services.
*Complete items 3, 4a, and 4b.
*Print your name and address on the reverse of this form so that we can return
this card to you.
*Attach this form to the front of the mailpiece, or on the back if space does
not permit.
*Write "Return Receipt Requested" on the mailpiece below the article number.
*The Return Receipt will show to whom the article was delivered and the date
delivered.
- --------------------------------------------------------------------------------
I also wish to receive the following services (for an extra fee):
1. / / Addressee's Address
2. / / Restricted Delivery
Consult postmaster for fee.
- --------------------------------------------------------------------------------
3. Article Addressed to:
Mr. Bob Strevens
Hewlett Packard Co.
11575 Great Oaks Way
Suite 100
Alpharetta, GA 30020
- --------------------------------------------------------------------------------
4a. Article Number
Z-126-837-767
- --------------------------------------------------------------------------------
4b. Service Type
/ / Registered /X/ Certified
/ / Express Mail / / Insured
/ / Return Receipt for Merchandise / / COD
- --------------------------------------------------------------------------------
5. Received By: (Print Name)
- --------------------------------------------------------------------------------
6. Signature: (Addressee or Agent)
X [SIG]
- --------------------------------------------------------------------------------
7. Date of Delivery
4-4
- --------------------------------------------------------------------------------
8. Addressee's Address (Only if requested and fee is paid)
- --------------------------------------------------------------------------------
PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
********************************************************************************
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
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SENDER:
*Complete items 1 and/or 2 for additional services.
*Complete items 3, 4a, and 4b.
*Print your name and address on the reverse of this form so that we can return
this card to you.
*Attach this form to the front of the mailpiece, or on the back if space does
not permit.
*Write "Return Receipt Requested" on the mailpiece below the article number.
*The Return Receipt will show to whom the article was delivered and the date
delivered.
- --------------------------------------------------------------------------------
I also wish to receive the following services (for an extra fee):
1. / / Addressee's Address
2. / / Restricted Delivery
Consult postmaster for fee.
- --------------------------------------------------------------------------------
3. Article Addressed to:
Ms. Teresa Streit
Hewlett Packard Co.
Direct Marketing Org.
19310 Pruneridge Ave. MS 49AU25
Cupertino, CA 95014-0707
- --------------------------------------------------------------------------------
4a. Article Number
Z-126-837-864
- --------------------------------------------------------------------------------
4b. Service Type
/ / Registered /X/ Certified
/ / Express Mail / / Insured
/ / Return Receipt for Merchandise / / COD
- --------------------------------------------------------------------------------
5. Received By: (Print Name)
DANA
- --------------------------------------------------------------------------------
6. Signature: (Addressee or Agent)
X
- --------------------------------------------------------------------------------
7. Date of Delivery
4-3
- --------------------------------------------------------------------------------
8. Addressee's Address (Only if requested and fee is paid)
- --------------------------------------------------------------------------------
PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
********************************************************************************
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
- --------------------------------------------------------------------------------
SENDER:
*Complete items 1 and/or 2 for additional services.
*Complete items 3, 4a, and 4b.
*Print your name and address on the reverse of this form so that we can return
this card to you.
*Attach this form to the front of the mailpiece, or on the back if space does
not permit.
*Write "Return Receipt Requested" on the mailpiece below the article number.
*The Return Receipt will show to whom the article was delivered and the date
delivered.
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I also wish to receive the following services (for an extra fee):
1. / / Addressee's Address
2. / / Restricted Delivery
Consult postmaster for fee.
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3. Article Addressed to:
Mr. Michael DiTore
Hewlett Packard Co.
Enterprise Accts. Organization
19111 Pruneridge Ave. MS 46L5
Cupertino, CA 95014
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4a. Article Number
Z-126-837-801
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4b. Service Type
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/ / Express Mail / / Insured
/ / Return Receipt for Merchandise / / COD
- --------------------------------------------------------------------------------
5. Received By: (Print Name)
- --------------------------------------------------------------------------------
6. Signature: (Addressee or Agent)
X [SIG]
- --------------------------------------------------------------------------------
7. Date of Delivery
4-3
- --------------------------------------------------------------------------------
8. Addressee's Address (Only if requested and fee is paid)
- --------------------------------------------------------------------------------
PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
********************************************************************************
IS YOUR RETURN ADDRESS COMPLETED ON THE REVERSE SIDE?
- --------------------------------------------------------------------------------
SENDER:
*Complete items 1 and/or 2 for additional services.
*Complete items 3, 4a, and 4b.
*Print your name and address on the reverse of this form so that we can return
this card to you.
*Attach this form to the front of the mailpiece, or on the back if space does
not permit.
*Write "Return Receipt Requested" on the mailpiece below the article number.
*The Return Receipt will show to whom the article was delivered and the date
delivered.
- --------------------------------------------------------------------------------
I also wish to receive the following services (for an extra fee):
1. / / Addressee's Address
2. / / Restricted Delivery
Consult postmaster for fee.
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3. Article Addressed to:
Ms. Aurora Custodia
Hewlett Packard Co.
Software Provider Program
19111 Pruneridge Ave. MS 44L14
Cupertino, CA 95014-0795
- --------------------------------------------------------------------------------
4a. Article Number
Z-126-837-863
- --------------------------------------------------------------------------------
4b. Service Type
/ / Registered /X/ Certified
/ / Express Mail / / Insured
/ / Return Receipt for Merchandise / / COD
- --------------------------------------------------------------------------------
5. Received By: (Print Name)
- --------------------------------------------------------------------------------
6. Signature: (Addressee or Agent)
X [SIG]
- --------------------------------------------------------------------------------
7. Date of Delivery
4-3
- --------------------------------------------------------------------------------
8. Addressee's Address (Only if requested and fee is paid)
- --------------------------------------------------------------------------------
PS Form 3811, December 1994 102595-97-B-0179 DOMESTIC RETURN RECEIPT
THANK YOU FOR USING RETURN RECEIPT SERVICE.
<PAGE> 41
SCHEDULE 5.E.
------------
Contracts Financials
--------------------
<PAGE> 42
HP & 3COM CONTRACTS TO BE SOLD TO GE
MONTHLY FINANCIALS
<TABLE>
<CAPTION>
Revenue Direct
Project Headcount Method Volume Rate Total Expenses Service Ln Facility
- ------- --------- ------ ------ ---- ----- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Per Call/Per
3Com - Presales 10 Message 1260 $3.25 $ 40,050 $ 21,057 1023.75 $ 4,511
- ------------------------------------------------------------------------------------------------------------------------
Per Call 1540 $3.25 $ 50,050
Per Message 100 $3.00 $ 300
- ------------------------------------------------------------------------------------------------------------------------
3Com - Level 1 70 Per Call/Tech 735 $8.00 $308,700 $174,647 7717.5 $31,579
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
3Com - Level 2 12 Per Call/Tech 420 $13.25 $ 56,740 $ 37,611 1999.5 $ 5,414
- ------------------------------------------------------------------------------------------------------------------------
Per Call 9900 $13.25
- ------------------------------------------------------------------------------------------------------------------------
3Com - Online 16 Per email/tech 800 $5.50 $ 70,400 $ 41,839 1760 $ 7,218
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
3Com - Megahertz 25 Per Tech/Day 420 $13.25 $139,128 $ 77,382 3478.125 $11,278
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total 3Com 133 $525,955 $362,537 $ 15,448 $80,000
========================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------
HP CSO 14 Per Tech/day $ 86,765 $ 36,613 2144.625 $ 4,741
- ------------------------------------------------------------------------------------------------------------------------
Regular 0 Per Tech/day 21 $280.00 $ 82,820
Technology Per Kaske $ 3,465
- ------------------------------------------------------------------------------------------------------------------------
Per Minute/Per
HP DMO 40 Tech (Saturday) $184,061 $ 92,458 3951.51563 $13,546
- ------------------------------------------------------------------------------------------------------------------------
Under 2000 2000 $0.83 $130,725
2000 - 2500 2350 $0.61 $140,801
2500 - 2750 2750 $0.80 $173,250
4 Per Tech 4 $260.00 $ 4,160
- ------------------------------------------------------------------------------------------------------------------------
HP CPFP 2 Per Tech/Day 21 $280.00 $ 17,640 $ 9,450 441 $ 1,016
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
HP SBW 2 Per Tech/Day 21 $295.00 $ 12,330 $ 6,699 309.75 $ 677
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
HP Field Sales 0 Per Seat/Day 21 $0.50 $ 3,024 $ - 75.6 $ -
- ------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
HP Totals 59 $272,800 $145,221 $ 6,872 $18,880
========================================================================================================================
Total HP and 3Com $691,855 $497,758 $ 22,471 $79,950
========================================================================================================================
<CAPTION>
Allocated Costs
Indirect % SG&A 8% of
---------- ---------- Earnings
Project Technology Total of Rev Sub-Total Cost Cost Total Cost Before Tax EBT %
- ------- ---------- ----- ------ -------------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
3Com - Presales $ 1,638 $ 7,173 17.52% $ 28,230 $ 2,254 $ 30,466 $ 10,462 25.55%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
3Com - Level 1 $12,348 $ 51,644 16.73% $225,292 $18,100 $244,395 $ 64,305 20.88%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3Com - Level 2 $ 2,671 $ 9,754 14.61% $ 47,365 $ 3,781 $ 51,154 $ 15,526 23.40%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3Com - Online $ 2,616 $ 11,794 18.75% $ 53,433 $ 4,291 $ 57,924 $ 12,476 17.72%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3Com - Megahertz $ 5,565 $ 20,371 14.61% $ 97,703 $ 7,816 $105,520 $ 33,605 24.15%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total 3Com $25,038 $100,687 16.08% $453,224 $38,250 $402,002 $136,473 21.80%
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
HP CSO $ 2,427 $ 9,313 10.86% $ 45,925 $ 3,674 $ 49,600 $ 36,105 42.18%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
HP DMO $ 6,936 $ 24,333 15.79% $116,792 $ 9,343 $128,135 $ 27,925 18.13%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
HP CPFP $ 620 $ 1,977 11.21% $ 11,427 $ 914 $ 12,341 $ 5,299 30.04%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
HP SBW $ 347 $ 1,334 10.77% $ 8,023 $ 643 $ 6,575 $ 3,716 29.96%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
HP Field Sales $ - $ 76 2.50% $ 76 $ 6 $ 82 $ 2,942 97.30%
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
HP Totals $10,830 $ 57,032 51.12% $182,253 $14,580 $196,834 $ 76,046 27.87%
====================================================================================================================================
---------
Total HP and 3Com $35,258 $137,720 $ 1 $635,477 $50,838 $686,315 $212,539 23.05%
====================================================================================================================================
Tax $ 85,016
Net Income $127,524
</TABLE>
<PAGE> 43
SCHEDULE 5.F.
-------------
Encumbrances to Clear Ownership
-------------------------------
None.
<PAGE> 44
SCHEDULE 5.G.
-------------
Leases
------
Indenture of Lease between Stonegate Properties, Inc. and National TechTeam,
Inc. dated November 26, 1996, beginning March 1, 1997, and ending February 28,
2000 (and the Addendum thereto).
<PAGE> 45
THIS INDENTURE, made November 25, 1996, Witness:
STONEGATE PROPERTIES INC. , Lessor
- ------------------------------------------------------------------------
hereby leases into
NATIONAL TECH TEAM, INC. , Lessee
- ------------------------------------------------------------------------
and the Lessee lets the PREMISES, known as
NORTHWEST TECH CENTRE Suite #1543,1550,1555
2401 W. HASSELL ROAD ---------------
HOFFMAN ESTATES, ILLINOIS 60195 13,195 S.F.
Cook, Illinois, for the term of: Three (3) years
commencing March 1, 1997, and ending February 28, 2000, unless sooner
terminated as provided herein, to be occupied and used by the Lessee for
office space
In consideration thereof, the Parties Covenant and Agree: 1. Rent, Lessee shall
pay to Lessor, coin or currency which, at the time or times of payment is legal
tender for public and private debts in the United States of America at:
2500 W. Higgins Road, Suite 400, Hoffman Estates, Illinois 60195
or elsewhere as designated from time to time by Lessor's notice, (a) the sum
of: Five hundred fifty eight thousand one hundred eighty two & 98/100 dollars
($558,182.98) in installments as follows:
Twelve (12) equal monthly installments of Fifteen thousand eighty six & 82/100
dollars (15,086.28) each followed by
Twelve (12) equal monthly installments of Fifteen thousand five hundred &
94/100 dollars (15,500.94) each followed by
Twelve (12) equal monthly installments of fifteen thousand nine hundred twenty
eight & 03/100 dollars each.
payable one each in advance promptly, on the first day of every calendar month
of the term and at the current rate for fractions of a month if the term shall
be terminated on any day other than the last day of any month, (b) all other
sums payable hereunder within ten days after Lessor renders statements of
account therefor, and (c) interest at 2% per week from the date of each
obligation until paid; all of which sums and the interest thereon constitute
Rent accruing hereunder. Interest shall only accrue commencing ten (10) days
after Lessee's receipt of written notice to that effect from Lessor.
2. LESSOR'S TITLE: Lessor's title is and always shall be paramount to the title
of Lessee; and nothing herein contained shall empower Lessee to do any act
which can, shall or may encumber the title of Lessor.
3. CERTAIN RIGHTS RESERVED TO THE LESSOR: The Lessor reserves the following
rights: (a) during the last ninety days of the term or any part thereof, if
during or prior to that time the Lessee vacates the premises, to decorate,
remodel, repair, alter or otherwise prepare the premises for reoccupancy; (b)
during the 60 days prior to the termination of this Lease and upon at least 24
hours prior notice, to exhibit the premises to others and to display "For Rent"
signs on the premises; (c) to take any and all measures, including inspections,
repairs, alterations, additions, and improvements to the premises or to the
Building, as may be necessary or desirable for the safety, protection or
preservation of the premises or the Building or the Lessor's interest, or as may
be necessary or desirable in the operation of the Building.
The Lessor may after giving Lessee at least 24 hours prior notice, enter
upon the premises and may exercise any and all of the foregoing rights hereby
reserved without being deemed guilty of an eviction or disturbance of the
Lessee's possession and without being liable in any manner to the Lessee.
4. WAIVER OF CLAIMS: To the extent permitted by law, the Lessee releases the
Lessor and the Lessor's agents and servants from and waives all claims for
damage to person or property sustained by the Lessee or any occupant of the
Building or premises resulting from the Building or premises or any part of
either or any equipment or appurtenance becoming out of repair, or resulting
from any accident in or about the Building, or resulting directly or indirectly
from any act or neglect of any tenant or occupant of the Building or of any
other person, including the Lessor's agents and servants. This Section 4 shall
apply especially, but not exclusively, to broken glass, sewage, gas, odors or
noise, or the bursting or leaking of pipes or plumbing fixtures, and shall
apply equally whether any such damage results from the act or neglect of the
Lessee or of other tenants, occupants or servants in the Building or of any
other person, and whether such damage be caused or result from any thing or
circumstances above mentioned or referred to, or any other circumstances
whether of a like nature or of a wholly different nature. If any such damage,
whether to the demised premises or to the Building or any part thereof, or
whether to the Lessor or to other tenants in the Building, result from any act
or neglect of the Lessee, the Lessor may, at the Lessor's option repair such
damage and the Lessee shall, upon demand by the Lessor, reimburse the Lessor
forthwith for the total cost of such repairs. Any other provision of this Lease
notwithstanding, Lessee does not waive its claims against Lessor, if said
claims arise out of Lessor's breach of or failure to perform an obligation
under this Lease.
The Lessee shall not be liable for any damages caused by its act or neglect
if the Lessor or a tenant has recovered the full amount of the damages from
insurance and the insurance company has waived in writing its right of
subrogation against the Lessee. All property belonging to the Lessee or any
occupant of the premises that is in the Building or the premises shall be there
at the risk of the Lessee or other person only and the Lessor shall not be
liable for damage thereto or theft or misappropriation thereof.
5. HOLDING OVER: If the Lessee retains possession of the premises or any part
thereof after the termination of the term by lapse of time or otherwise, and
provide that not less than 30 days have expired from Lessee's receipt of
written notice from the provision of paragraph 5 will be enforced, then the
Lessee shall pay the Lessor rent at double the rate specified in Section 1 for
the time the Lessee remains in possession, and in addition thereto, shall pay
the Lessor all damages sustained by reason of the Lessee's retention of
possession. If the Lessee remains in possession of the premises or any part
thereof, after the termination of the term by lapse of time or otherwise, such
holding over shall, at the election of the Lessor expressed in a written notice
to the Lessee and not otherwise, constitute a renewal of this lease for one
year [the same as stated in paragraph 1] at a rental rate equal to ten percent
(10%) over the current rental rate per year. The provisions of this Section do
not waive the Lessor's rights of reentry or any other right hereunder.
6. ASSIGNMENT AND SUBLETTING: Lessee shall not (a) assign or convey this lease
or any interest under it; (b) allow any transfer hereof or any lien upon
Lessee's interest by operation of law; (c) sublet the premises or any part
thereof, or (d) permit the use or occupancy of the premises or any part thereof
by any one other than Lessee, except that the Lessee may sublease after
obtaining the approval of the Lessor in writing, which approval shall not be
unreasonably withheld. Lessor acknowledges that a portion of Lessor's business
includes providing certain customers on a fee basis with space and equipment
so that said customer can carry on a portion of their respective business
operations. Any other provisions of this Lease notwithstanding, including the
provisions regarding Lessee's obligation relating to the assignment or
subleasing of all or a portion of the premises. Lessor agrees such use of the
premised is permitted without Lessor's further consent.
7. CONDITION OF PREMISES: Lessee's taking possession shall be conclusive
evidence as against Lessee that the premises were in good order and satisfactory
condition when Lessee took possession. No promise of Lessor to alter, remodel
or improve the premises of the Building and no representation respecting the
condition of the premises or the Building have been made by Lessor to Lessee,
unless the same is contained herein or made a part thereof. At the termination
of this Lease by lapse of time or otherwise, Lessee shall return the premises
<PAGE> 46
(a) If any voluntary or involuntary petition or similar pleading under any
section or sections of any of any bankruptcy act shall be filed by or against
the Lessee, or any voluntary proceedings in any court or tribunal shall be
instituted to declare the Lessee insolvent or unable to pay the Lessee's debts,
and in the case of an involuntary petition or proceeding, the petition or
proceeding is not dismissed within twenty days from the date it is filed, the
Lessor may elect, but is not required, and with or without notice of such
election, and, with or without entry or other action by the Lessor, to
forthwith terminate this lease, and, notwithstanding any other provision of
this lease, the Lessor shall forthwith upon such termination be entitled to
recover damages in an amount equal to the then present value of the rent
specified in Section 1 of this lease for the residue of the stated term hereof,
less the fair rental value of the premises for the residue of the stated term.
(b) If the Lessee defaults in the payment of rent, and the Lessee does not
cure the default within ten days after demand for payment of such rent, or if
the Lessee defaults in the prompt and full performance of any other provision
of this lease, and the Lessee does not cure the default within ten days
(forthwith if the default involves a hazardous condition) after written demand
by the Lessor that the default be cured unless the default involves a hazardous
condition which shall be cured forthwith upon the Lessor's demand, or if the
leasehold interest of the Lessee be levied upon under execution or be attached
by process of law, which is not released within 30 days or if the Lessee makes
an assignment for the benefit of creditors, which is not released within 30
days or if a receiver be appointed for any property of the Lessee, which is not
released within 30 days or if the Lessee abandons the premises, then and in any
such event the Lessor may, if the Lessor so elects but not otherwise, and with
or without notice of such election and with or without demand whatsoever,
either forthwith terminate this lease and the Lessee's right to possession of
the premises or, without terminating this lease, forthwith terminate the
Lessee's right to possession of the premises.
(c) Upon any termination of this lease, whether by lapse of time or
otherwise, or upon any termination of the Lessee's right to possession with
termination of the lease, the Lessee shall surrender possession and vacate
premises immediately, and deliver possession thereof to the Lessor, and hereby
grants to the Lessor full and free license to enter into and upon the premises
in such event with or without process of law and to repossess the Lessee of the
premises as of the Lessor's former estate and to expel or remove the Lessee and
any other who may be occupying or within the premises and to remove any and all
property therefrom, using such forces as may be necessary without being deemed
in any manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Lessor's rights to rent or any other right given to
the Lessor hereunder or by operation of Law.
(d) if Lessee abandons the premises or otherwise entitles Lessor so to
elect, and Lessor elects, to terminate Lessee's right to possession only,
without terminating the lease, Lessor may at Lessor's option enter into the
premises, remove Lessee's signs and other evidences of tenancy, and take and
hold possession thereof as in Paragraph (c) of this Section provided, without
such entry and possession terminating the lease or releasing Lessee, in whole
or in part, from Lessee's obligation to pay the rent hereunder for the full
term, and in any such case Lessee shall pay forthwith to Lessor a sum equal to
the entire amount of the rent reserved under provision (a) of Section 1 of this
lease for the residue of the stated term plus any other sums then due
hereunder. Upon and after entry into possession without termination of the
lease, Lessor may, but need not, relet the premises or any part thereof for the
account of Lessee to any person, firm or corporation other than Lessee for such
rent, for such time and upon such terms as Lessor in Lessor's sole discretion
shall determine; and Lessor shall not be required to accept any tenant offered
by Lessee or to observe any instructions given by Lessee about such reletting.
In any case, Lessor may make repairs, alterations and additions in or to the
premises, and to redecorate the same to the extent deemed by Lessor necessary
or desirable, and Lessee shall, upon demand pay the cost thereof together with
Lessor's expenses of the reletting. If the consideration collected by Lessor
upon any such reletting for Lessee's account is not sufficient to pay monthly
the full amount of the rent reserved in this lease, together with the cost of
repairs, alterations, additions, redecorating and Lessor's expenses. Lessee
shall pay to Lessor the amount of each monthly deficiency upon demand; and if
the consideration so collected from any such reletting is more than sufficient
to pay the full amount of the rent reserved herein, together with the costs and
expenses of Lessor. Lessor at the end of the stated term of the lease, shall
account for the surplus of Lessee.
(e) Any and all property which may be removed from the premises by the
Lessor pursuant to the authority of the Lease or of law, to which the Lessee is
or may be entitled, may be handled, removed or stored by the Lessor at the
risk, cost and expense of the Lessee and the Lessor shall in no event be
responsible for the value, preservation or safekeeping thereof. The Lessee
shall pay to the Lessor, upon demand any and all expenses incurred in such
removal and all storage charges against such property so long as the same shall
be in the Lessor's possession or under Lessor's control. Any such property of
the Lessee not removed from the premises or retaken from storage by the Lessee
within thirty days after the end of the term, however, terminated, shall be
presumed to have been conveyed by the Lessee to the Lessor under this lease as
bill of sale without further payment by the Lessor to the Lessee.
(f) Lessee shall pay upon demand all Lessor's costs, charges and expenses,
including the fees of counsel, agents and others retained by Lessor, incurred
in enforcing Lessee's obligations hereunder or incurred by Lessor in any
litigation, negotiation or transaction in which Lessee causes Lessor, without
Lessor's fault, to become involved or concerned.
15. NOTICES: In every instance where it shall be necessary or desirable for the
Lessor to serve any notice or demand upon the Lessee, it shall be sufficient (a)
to deliver or cause to be delivered to the Lessee a written or printed copy
thereof, or (b) to send a written or printed copy thereof by United States
certified or registered mail, postage prepaid, addressed to the Lessee at the
demised premises, in which event the notice or demand shall be deemed to have
been served at the time the copy is posted, or (c) to leave written or printed
copy thereof with some person above the age of ten years in possession of the
demised premises or to affix the same upon any door leading into the demised
premises, in which event the notice or demand shall be deemed to have been
served at the time the copy is so left or affixed. All notices or demands shall
be signed by or on behalf of the Lessor. Notices to be served upon Lessor by
Lessee shall be in writing, sent by Registered Mail. Return Receipt Requested,
through the U.S. Mail in an envelope properly stamped, sealed to Lessor, c/o
2500 W. Higgins Road. Suite 400, Hoffman Estates, Illinois 60195, or other name
or address which Lessor may in writing from time to time notify Lessee.
16. MISCELLANEOUS: (a) No receipt of money by Lessor from Lessee after the
termination of this lease or after the commencement of any suit or after final
judgement for possession of the premises shall reinstate, continue or extend
the term of this lease or affect any such notice, demand or suit.
(b) No Waiver or any default of Lessee hereunder shall be implied from any
omission by Lessor to take any action on account of such default if such
default persists or be repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent herein stated. The invalidity or unenforceability of any
provision of this lease shall not affect or impair any other provision.
(c) In the absence of fraud, no person, firm or corporation, or the heirs,
legal representatives, successors and assigns, respectively, thereof, executing
this issue as agent, trustee, or in any other representative capacity shall ever
be deemed to be held individually liable hereunder for any reason or cause
whatsoever.
(d) The words "Lessor" and "Lessee" wherever in this lease shall be
construed to mean Lessors and Lessees in all cases where there is more than one
Lessor or Lessee, and the necessary grammatical changes required to make the
provisions hereof apply either to corporations or individuals, men or women,
shall in all cases be assumed as though in each case fully expressed.
(c) Provisions inserted herein or affixed hereto shall not be valid unless
appearing in the duplicate original hereof held by Lessor, in the event of
variation or discrepancy, Lessor's duplicate shall control.
(f) Each provision hereof shall extend to and shall, as the case may
require, bind and insure to the benefit of Lessor and Lessee and their
respective heirs, legal representatives and successors, and assigns in the
event this has been assigned with the express written consent of Lessor.
(g) Submission of this instrument for examination does not constitute a
reservation of or option for the premises. The instrument becomes effective as
a lease upon execution and delivery by both Lessor and Lessee.
(h) Provisions typed on the back of this lease signed by Lessor and Lessee
and all riders attached to this lease and signed by Lessor and
<PAGE> 47
may or shall as the case may be, remove any floor covering laid by Lessee,
provided (a) Lessee also removes all nails, tacks, paper, glue, bases and other
vestiges of the floor covering and restores the floor surface to the condition
existing before such floor covering was laid, or (b) Lessee pays to Lessor, upon
request, the cost of restoring the floor surface to such condition. If Lessee
does not remove Lessee's floor coverings, Venetian blinds, and other like
equipment from the premises prior to the end of the term, Lessee shall be
conclusively presumed to have abandoned the same and title thereto shall
thereby pass to Lessor without payment or credit by Lessor to Lessee.
8. ALTERATIONS: as consented to by Lessor shall be permitted to remain with
premises without removal at end if Lease terms. Lessee shall not make any
alterations in or additions to the premises without the Lessor's advance
written consent in each and every instance. The Lessor's decision to refuse
such consent shall be conclusive, but not unreasonably withheld. If Lessor
consents to such alterations or additions before commencement of the work or
delivery of any materials on the premises or into the Building, Lessee shall
furnish Lessor with plans and specifications, names and addresses of
contractors, copies of contracts, necessary permits and indemnification in form
and amount satisfactory to Lessor and waivers of lien against any and all
claim, costs, damages, liabilities, and expenses which may arise in connection
with the alterations or additions. Whether Lessee furnishes Lessor the
foregoing or not, Lessee hereby agrees to hold Lessor harmless from and all
liabilities of every kind and description which may arise of or to be connected
in any way with said alterations or additions. Before commencing any work in
connection with alterations or additions, Lessee shall furnish Lessor with
certificates of insurance from all contractors performing labor or furnishing
materials insuring Lessor against any and all liabilities which may arise of or
be connected in any way with said additions or alterations. Lessor's decision
to refuse to consent to Lessee's making alterations in or additions to the
premises shall be conclusive, but not unreasonably withheld. Upon completing
any alterations or additions, Lessee shall furnish Lessor with contractor's
affidavits and full and final waivers of lien and receipted bills covering all
labor and materials expended and used. All alterations and additions shall
comply with all insurance requirements and with all ordinances and regulations.
All alterations and additions shall be constructed in good and workmanlike
manner and only good grades of materials shall be used. Lessee shall permit
Lessor to inspect construction operations in connection with alterations and
additions if Lessor requests to do so, but not unreasonably delay or alter
acceptable methods or materials per trade. All additions, hardware, non-trade
fixtures and all improvements, temporary, or permanent, in or upon the
premises, whether placed there by Lessee or Lessor, shall, unless Lessor
requests their removal, become Lessor's property and shall remain upon the
premises at the termination of this lease. If Lessee does not remove Lessee's
furniture, machinery, trade fixtures and all other forms of personal property
of every kind or description from the premises within 10 days from final
occupancy date and Lessee's receipt of written notice from Lessor of its intent
to exercise its rights under this paragraph, whichever last occurs, however
ended, Lessee shall be conclusively presumed to have conveyed the same to
Lessor under this lease as a bill of sale without further payment or credit by
Lessor or Lessee.
9. USE OF PREMISES: (a) The Lessee shall occupy and use the premises during
the term for the purpose above specified and none other. (b) Unless specifically
provided herein and then only upon strict compliance with such provisions,
Lessee shall not manufacture, distribute, store, sell or give away any alcoholic
liquor, as defined in the Illinois Liquor Control Act approved January 31, 1934
as amended, or any other statute of the State of Illinois or ordinance of any
other municipal authority having jurisdiction over the subject premises
regulating the manufacture, distribution, storage, selling or giving away of
alcoholic liquor. (c) The Lessee will not make or permit to be made any use of
the premises which, directly or indirectly is forbidden by public law, ordinance
or governmental regulation or which may be dangerous to life, limb or property,
or which may invalidate or increase the premium cost of any policy of insurance
carried on the Building or covering its operations. (d) Lessee shall not
display, install, inscribe, paint or affix any sign, picture, advertisement
notice inside or outside the premises of the Building except in such place or
places and of such color, size, design, style and material which shall have
advance written approval by Lessor, and, upon expiration of the term, with the
lapse of time or otherwise, Lessee shall remove all such signs, pictures,
advertisements and notices.
At the request of Lessor, Lessee shall remove any and all signs, pictures,
advertisements and notices which Lessor shall consider objectionable or
injurious to the Building or premises, Lessor hereby agrees to install at
Lessor's expense, a sign bearing the name of his firm, made of plastic letters
or similar material, on the glass of the door, or on the glass panel above the
entryway in a manner satisfactory to Lessor. Lessee further agrees that upon
the termination of this lease he will remove this sign and restore the glass to
its former condition. (e) The Lessee shall not advertise the business,
profession or activities of the Lessee conducted in the Building in any manner
which violates the letter or spirit of any code of ethics adopted by any
recognized association or organization pertaining to such business, profession
or activities, and shall not use the name of the Building for any purpose other
than that of business address of the Lessee. (f) The Lessee shall not obstruct,
or use for storage, or for any purpose other than ingress and egress, the
sidewalks, entrances, passages, or courts of the Building. (g) No dog or other
animal or bird shall be brought or permitted to be in the Building or any part
thereof. (h) The Lessee shall not make or permit any noise or odor that is
objectionable to other occupants of the Building to emanate from the premises,
and shall not create or maintain a nuisance thereon, and shall not distribute,
solicit, or canvass any occupant of the Building, and shall not do any act
tending to injure the reputation of the Building. (i) Lessee shall keep the
inside of all windows of the premises clean. (j) The Lessee shall not place or
permit to be placed any article of any kind on the window ledges or on the
exterior walls, and shall not throw or permit to be thrown or dropped any
article from any window of the Building. (k) Lessee shall maintain temperature
in the premises high enough to prevent the freezing of water in plumbing
fixtures and all other damages caused by low temperature, including both damage
to Lessor and to any other tenant of the Building.
10. REPAIRS: Lessee shall, at Lessee's own expense, keep the premises in good
order, condition and repair during the term, including the replacement of all
broken glass, no matter how the same may be broken, with glass of the same size
and quality with signs thereon, under the supervision and with the approval of
Lessor. If Lessee does not make repairs promptly and adequately, Lessor may,
but need not, make repairs and Lessee shall upon Lessor's demand, pay the cost
thereof. At any time or times, Lessor either voluntarily or pursuant to
governmental requirement, may at the Lessor's own expense, make repairs,
alterations or improvements in or to the Building or any part thereof,
including the premises, and, during operations may close entrances, doors, all
without any liability to Lessee by reason of interference, inconvenience or
annoyance. Lessor shall not be liable to Lessee for any expense, injury, loss
or damage resulting from work done in or upon, or the use of, any adjacent or
nearby building, land, street or alley. The Lessee shall pay the Lessor for
overtime and for any other expense incurred in event repairs, alterations,
decorating or other work in the premises are not made during ordinary business
hours at the Lessee's request. Lessee shall comply with the requirements and
recommendations of Fire Department and Building Department.
11. INSURANCE: Lessee shall not permit any use of the premises which may
increase the premium cost of or future policy of insurance carried on the
Building or covering its operation or carried on the premises or any part or
appurtenance thereof or which may increase the premium cost of or invalidate
any present or future policy of insurance carried by any other tenant of the
Building. Lessee agrees to comply with any and all recommendations of any
insurance company or companies concerning the changes in Lessee's use of the
premises which will avoid invalidating or increasing the premium cost of any
policy of insurance written by such company or companies. If the installation
of equipment or devices for health or safety is required to avoid invalidating
or increasing the premium cost of any policy of insurance, Lessor may install
the same in the premises or elsewhere and Lessee shall pay the cost thereof to
Lessor upon demand. Lessee shall, upon demand, pay to Lessor or to any tenant
of the Building as the case may be, the increased premium cost of any policy of
insurance and any all other damages resulting from Lessee's act or neglect in
violation of this section.
The Lessee will not make or permit to be made any use of the premises which,
directly or indirectly, is forbidden by public law, ordinance or governmental
regulation or which may be dangerous to life, limb or property, or which may
invalidate or increase the premium cost of any policy of insurance carried on
the Building or covering its operations.
12. PRIOR OCCUPANCY: If Lessee shall occupy the premises prior to the term of
this lease with Lessor's consent, all the provisions of this lease shall be in
full force and effect as soon as Lessee occupies the premises.
Rent for any period prior to the beginning of the term of this lease shall
be fixed by agreement between the Lessor and the Lessee
<PAGE> 48
(a) If any voluntary or involuntary petition or similar pleading under any
section or sections of any of any bankruptcy act shall be filed by or against
the Lessee, or any voluntary proceedings in any court or tribunal shall be
instituted to declare the Lessee insolvent or unable to pay the Lessee's debts,
and in the case of an involuntary petition or proceeding, the petition or
proceeding is not dismissed within twenty days from the date it is filed, the
Lessor may elect, but is not required, and with or without notice of such
election, and, with or without entry or other action by the Lessor, to
forthwith terminate this lease, and, notwithstanding any other provision of
this lease, the Lessor shall forthwith upon such termination be entitled to
recover damages in an amount equal to the then present value of the rent
specified in Section 1 of this lease for the residue of the stated term hereof,
less the fair rental value of the premises for the residue of the stated term.
(b) If the Lessee defaults in the payment of rent, and the Lessee does not
cure the default within ten days after demand for payment of such rent, or if
the Lessee defaults in the prompt and full performance of any other provision
of this lease, and the Lessee does not cure the default within ten days
(forthwith if the default involves a hazardous condition) after written demand
by the Lessor that the default be cured unless the default involves a hazardous
condition which shall be cured forthwith upon the Lessor's demand, or if the
leasehold interest of the Lessee be levied upon under execution or be attached
by process of law, which is not released within 30 days or if the Lessee makes
an assignment for the benefit of creditors, which is not released within 30
days or if a receiver be appointed for any property of the Lessee, which is not
released within 30 days or if the Lessee abandons the premises, then and in any
such event the Lessor may, if the Lessor so elects but not otherwise, and with
or without notice of such election and with or without demand whatsoever,
either forthwith terminate this lease and the Lessee's right to possession of
the premises or, without terminating this lease, forthwith terminate the
Lessee's right to possession of the premises.
(c) Upon any termination of this lease, whether by lapse of time or
otherwise, or upon any termination of the Lessee's right to possession with
termination of the lease, the Lessee shall surrender possession and vacate
premises immediately, and deliver possession thereof to the Lessor, and hereby
grants to the Lessor full and free license to enter into and upon the premises
in such event with or without process of law and to repossess the Lessee of the
premises as of the Lessor's former estate and to expel or remove the Lessee and
any other who may be occupying or within the premises and to remove any and all
property therefrom, using such forces as may be necessary without being deemed
in any manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Lessor's rights to rent or any other right given to
the Lessor hereunder or by operation of Law.
(d) if Lessee abandons the premises or otherwise entitles Lessor so to
elect, and Lessor elects, to terminate Lessee's right to possession only,
without terminating the lease, Lessor may at Lessor's option enter into the
premises, remove Lessee's signs and other evidences of tenancy, and take and
hold possession thereof as in Paragraph (c) of this Section provided, without
such entry and possession terminating the lease or releasing Lessee, in whole
or in part, from Lessee's obligation to pay the rent hereunder for the full
term, and in any such case Lessee shall pay forthwith to Lessor a sum equal to
the entire amount of the rent reserved under provision (a) of Section 1 of this
lease for the residue of the stated term plus any other sums then due
hereunder. Upon and after entry into possession without termination of the
lease, Lessor may, but need not, relet the premises or any part thereof for the
account of Lessee to any person, firm or corporation other than Lessee for such
rent, for such time and upon such terms as Lessor in Lessor's sole discretion
shall determine; and Lessor shall not be required to accept any tenant offered
by Lessee or to observe any instructions given by Lessee about such reletting.
In any case, Lessor may make repairs, alterations and additions in or to the
premises, and to redecorate the same to the extent deemed by Lessor necessary
or desirable, and Lessee shall, upon demand pay the cost thereof together with
Lessor's expenses of the reletting. If the consideration collected by Lessor
upon any such reletting for Lessee's account is not sufficient to pay monthly
the full amount of the rent reserved in this lease, together with the cost of
repairs, alterations, additions, redecorating and Lessor's expenses. Lessee
shall pay to Lessor the amount of each monthly deficiency upon demand; and if
the consideration so collected from any such reletting is more than sufficient
to pay the full amount of the rent reserved herein, together with the costs and
expenses of Lessor. Lessor at the end of the stated term of the lease, shall
account for the surplus of Lessee.
(e) Any and all property which may be removed from the premises by the
Lessor pursuant to the authority of the Lease or of law, to which the Lessee is
or may be entitled, may be handled, removed or stored by the Lessor at the
risk, cost and expense of the Lessee and the Lessor shall in no event be
responsible for the value, preservation or safekeeping thereof. The Lessee
shall pay to the Lessor, upon demand any and all expenses incurred in such
removal and all storage charges against such property so long as the same shall
be in the Lessor's possession or under Lessor's control. Any such property of
the Lessee not removed from the premises or retaken from storage by the Lessee
within thirty days after the end of the term, however, terminated, shall be
presumed to have been conveyed by the Lessee to the Lessor under this lease as
bill of sale without further payment by the Lessor to the Lessee.
(f) Lessee shall pay upon demand all Lessor's costs, charges and expenses,
including the fees of counsel, agents and others retained by Lessor, incurred
in enforcing Lessee's obligations hereunder or incurred by Lessor in any
litigation, negotiation or transaction in which Lessee causes Lessor, without
Lessor's fault, to become involved or concerned.
15. NOTICES: In every instance where it shall be necessary or desirable for the
Lessor to serve any notice or demand upon the Lessee, it shall be sufficient (a)
to deliver or cause to be delivered to the Lessee a written or printed copy
thereof, or (b) to send a written or printed copy thereof by United States
certified or registered mail, postage prepaid, addressed to the Lessee at the
demised premises, in which event the notice or demand shall be deemed to have
been served at the time the copy is posted, or (c) to leave written or printed
copy thereof with some person above the age of ten years in possession of the
demised premises or to affix the same upon any door leading into the demised
premises, in which event the notice or demand shall be deemed to have been
served at the time the copy is so left or affixed. All notices or demands shall
be signed by or on behalf of the Lessor. Notices to be served upon Lessor by
Lessee shall be in writing, sent by Registered Mail. Return Receipt Requested,
through the U.S. Mail in an envelope properly stamped, sealed to Lessor, c/o
2500 W. Higgins Road. Suite 400, Hoffman Estates, Illinois 60195, or other name
or address which Lessor may in writing from time to time notify Lessee.
16. MISCELLANEOUS: (a) No receipt of money by Lessor from Lessee after the
termination of this lease or after the commencement of any suit or after final
judgement for possession of the premises shall reinstate, continue or extend
the term of this lease or affect any such notice, demand or suit.
(b) No Waiver or any default of Lessee hereunder shall be implied from any
omission by Lessor to take any action on account of such default if such
default persists or be repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent herein stated. The invalidity or unenforceability of any
provision of this lease shall not affect or impair any other provision.
(c) In the absence of fraud, no person, firm or corporation, or the heirs,
legal representatives, successors and assigns, respectively, thereof, executing
this issue as agent, trustee, or in any other representative capacity shall ever
be deemed to be held individually liable hereunder for any reason or cause
whatsoever.
(d) The words "Lessor" and "Lessee" wherever in this lease shall be
construed to mean Lessors and Lessees in all cases where there is more than one
Lessor or Lessee, and the necessary grammatical changes required to make the
provisions hereof apply either to corporations or individuals, men or women,
shall in all cases be assumed as though in each case fully expressed.
(c) Provisions inserted herein or affixed hereto shall not be valid unless
appearing in the duplicate original hereof held by Lessor, in the event of
variation or discrepancy, Lessor's duplicate shall control.
(f) Each provision hereof shall extend to and shall, as the case may
require, bind and insure to the benefit of Lessor and Lessee and their
respective heirs, legal representatives and successors, and assigns in the
event this has been assigned with the express written consent of Lessor.
(g) Submission of this instrument for examination does not constitute a
reservation of or option for the premises. The instrument becomes effective as
a lease upon execution and delivery by both Lessor and Lessee.
(h) Provisions typed on the back of this lease signed by Lessor and Lessee
and all riders attached to this lease and signed by Lessor and
<PAGE> 49
The cost of such services, utilities, maintenance and repair shall be billed
directly to Lessee by the company furnishing the same. Should Lessee fail to
pay all or any part of any such billing Lessor may, at its sole option at
anytime after the same becomes due and owing, pay said billing and the amount
thereof shall be deemed so much additional rental due and owing with the next
rental installment due hereunder or upon demand. In no event shall Lessor be
liable to Lessee for any damage whatsoever by reason of any interruption of any
services aforedescribed for whatsoever reason or cause, nor shall upon
interruption by deemed and eviction or disturbance of Lessee's use and
possession of the premises nor relieve Lessee from performance of any of its
obligations under this lease.
18. Lessee, its employees, agents and invitees, shall have the non-exclusive
right to use in common with Lessor, its agents, employees and invitees, the
Lessees of other premises within the building, their agents, servants,
employees and invitees, and all other persons authorized by Lessor or the
agents of Lessor, any driveways or parking areas which from time to time may be
upon the land upon which the Building is located and be so designed and made
available for such use by Lessor. The use of such driveways and parking areas
shall at all times conform with any and all rules and regulations relative
thereto that Lessor may from time to time establish. Further nothing shall be
done by Lessee, its employees, agents or invitees to obstruct to interfere
with the use of said driveways, parking areas by other authorized persons or
vehicles. Such co-extensive use by Lessee, its employees, agents and invitees
shall automatically cease upon the termination of expiration of this lease or
the Lessee's right to possession of the premises.
Lessee agrees to indemnify and hold harmless Lessor, its agents, servants
and employees, from and against claims for loss or damage of whatsoever nature
and howsoever caused resulting from the use of said driveways and parking areas
by Lessee, its employees, agents, licenses or invitees. Lessee expressly waives
and releases Lessor, its employees, servants and agents from any and all
liability for any loss, damage, injury or claim therefor of whatsoever kind of
nature and howsoever caused, resulting or alleged to have resulted from the use
of the aforesaid driveways or parking areas by any person or persons whose use
thereof was authorized or unauthorized, or by reason of the condition,
maintenance or state of repair of said driveways and parking areas from any
failure or delay in keeping the same in good condition or repair.
19. Any and all references to the Building shall be deemed to also include the
land upon any part of which the Building is situated, including but not limited
to the driveways and parking areas thereon to which co-extensive use has been
granted Lessee hereunder. The provision of Paragraph 10 hereof that Lessor
shall not be liable to Lessee for any expense, injury, loss or damage resulting
from work done in or upon, or the use of, any adjacent or nearby building,
land, street or alley shall be equally applicable to work done in or upon the
use of the Building or land aforedescribed or any part of either.
However, if the untenantability was a result of the negligence of Lessee, its
servants, agents or employees, or of the operation of Lessee's business or its
use of the premises, then Lessee shall not have the right of termination
aforeprovided.
If the lease is terminated as above provided, rental shall be prorated on
a per diem basis to the effective date of the termination. In no event shall
any such termination relieve a party of any liability theretofore accrued or
which by the terms of this lease, shall continue after termination. If the said
Lease is not terminated within the time and in the manner aforedescribed, the
repairs and restoration shall be completed as soon as is reasonably possible
thereafter.
20. EMINENT DOMAIN: If any part of the Building or the land upon which the
Building stands shall be taken or condemned by any competent authority for any
public use or purpose. If such part of the Building or land so taken or
condemned includes all of the premises, the term of this lease shall end upon
and not before the date when possession of the part so taken shall be required
for such use or purpose, and without apportionment of the award. Current rent
shall be apportioned as of the date of such termination.
If any condemnation proceeding shall be instituted in which it is sought
to take or damage any part of the Building or the land on which the Building
stands, Lessor shall have the right to cancel this lease upon not less than
ninety (90) days notice prior to the date of cancellation designated in the
notice. No money or other consideration, other than the consideration provided
by this lease shall be payable by Lessor to Lessee for any election to cancel
as provided in this paragraph and Lessee shall have no right to share in the
condemnation award whether or not Lessor elects to exercise any right to cancel
said lease as aforedescribed or whether or not said lease is so canceled and
terminated. Nothing contained herein shall preclude Lessee from seeking an
award from the condemning authority for loss of its business, the value of any
trade fixtures or personal property of Lessee in the Building or moving
expenses.
21. Lessee covenants and agrees that it will protect, save and keep Lessor
forever harmless and indemnified against and from any penalty, damage, or
charges imposed for any violation of any laws or ordinances, whether occasioned
by Lessee's neglect or those holding under Lessee, and the Lessee will at all
times protect, indemnify, save and keep harmless Lessor against and from any
and all claims, loss, cost, damage, or expense arising out of or from any
accident or other occurrence on or about the demised premises or out of or from
the use of any of the driveways or parking areas by Lessee, its agents,
servants or invitees, or which are claimed to be directly or indirectly the
result of all or any part of the premises or structure thereon, or appurtenances
or equipment thereof, or by reason of the condition, maintenance, use or
operation of any of the foregoing, or the conduct of any business in or upon
said Premises, causing injury to any person whomsoever, including but not
limited to agents and employees of the Lessee or to any property whatsoever,
including but not limited to any loss, cost, damage or expense arising out of
the loss of use of any property, real or personal. Lessee further covenants and
agrees that it will protect, indemnify, save and keep harmless the Lessor
against and from any and all claims against and from any loss, cost, damage or
expense arising out of any failure of Lessee in any respect to comply with and
perform all of the requirements and provisions thereof.
22. The rights and interest of Lessee under this lease shall be subject and
subordinate to any mortgage or trust deed that may be placed upon the Leased
Premises and to any and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements and extensions thereof, if the
mortgagee or trustee named in the rights and interest of Lessee under this
lease to the lien of its mortgage or deed of trust and shall agree to recognize
this Lease of Lessee in the event of foreclosure if Lessee is not in default.
Any mortgagee or trustee may elect to give the rights and interest of Lessee
under this lease priority over the lien of its mortgage or deed of trust. In
the event of either such election and upon notification by such mortgagee or
trustee to Lessee to that effect the rights and interest of Lessee under this
lease shall be deemed to be subordinated to, or to have priority over, as the
case may be, the lien of said mortgage or trust deed, whether this lease is
dated prior to or subsequent to the date of said mortgage or trust deed.
Lessee shall execute and deliver whatever instruments may be required for such
purposes, and in the event Lessee fails to do so within ten (10) days after
demand in writing, Lessee does hereby make, constitute and irrevocably appoint
Lessor as its attorney in fact and in its name, place, and stead so to do.
23. If any mortgagee or committed financier of Lessor should require, as a
condition precedent to the closing of any loan or the disbursal of any money
under the loan, that this Lease be amended or supplemented in any manner.
Lessor shall give written notice thereto to Lessee, which notice shall be
accompanied by a Lease Supplement agreement embodying such amendments and
supplements. Lessee shall, within thirty (30) days after the effective date of
Lessor's notice, either consent to such amendments and supplements (which
consent shall not be reasonably withheld) and execute the tendered Lease
Supplement Agreement, or deliver to Lessor a written statement of its reason or
reasons for refusing to so consent and execute. Failure of Lessee to respond
within said (30) day period shall be a default under this lease without
further notice. If Lessor and Lessee are then unable to agree on a Lease
Supplement Agreement satisfactory to each of them, and to the lender within
thirty (30) days after delivery of Lessee's written statement, Lessor shall
have the right to terminate this lease within sixty (60) days after the end of
the said thirty (30) day period but only if Lessee's refusal to agree to the
amendment is unreasonably withheld. Lessee
<PAGE> 50
part, the result of any of the following: the condition, maintenance, operation
or use of the premises, or any part thereof, or any appurtenances or equipment
thereof, or the use by Lessee or any of its agents, employees or invitees, of
any driveways or parking areas to which Lessee has co-extensive use hereunder;
the conduct of any business of the Premises or by the aforesaid parties on said
driveways or parking areas aforedescribed, or any act, omission or accident in
or about the Premises. Said insurance shall indemnify and protect all of said
parties in the manner aforedescribed whether or not any of the foregoing risks
protected against are due or alleged to be due to any act or neglect of Lessee.
Lessor, and occupant of any portion of the Premises, or of any other premises
in the Building, or any agent, employee or servant of any of the foregoing, or
by reason of any person's property in and upon the Premises. Said insurance
policy or policies shall have a minimum limit of $300,000.00 for bodily injury
per occurrence and a minimum limit of property damage (which includes but it
not limited to, any loss or damages alleged to have resulted from the loss of
any property, real or personal) of $200,000.00.
The policy aforedescribed shall be written by responsible companies
authorized to do business in the State of Illinois, shall be in the usual and
customary form and use in Cook County Illinois, as issued by the insurance
companies covering the hazards hereinabove set forth, shall be subject to
Lessee's approval as to substance and form, and shall not be cancelable or
terminated without reasonable notice to Lessor. A memorandum or duplicate of
each insurance policy or policies required hereunder shall be delivered to
Lessor prior to Lessee's taking possession of the demised premises, and
thereafter, prior to any termination date of any then existing policy or
policies, and are to be held by Lessor or its designee. Should Lessee fail to
procure or maintain in full force and effect as hereinbefore required, any or
all of the insurance obligated to be obtained by Lessee, or fail to timely
deliver a memorandum or duplicate of any such policy to Lessor or its designee.
Lessor may, at its own option, procure such insurance and collect the cost
thereof from Lessee either upon Lessor's demand or in the next ensuing rent
payment date thereafter, in which case the same shall become a part of rent due
and payable. Lessee's agreement to indemnify and hold harmless the Lessor as
provided in this lease, shall not be deemed limited by the amount of coverage
contained in the insurance required to be maintained by Lessee under the
provisions of this paragraph.
25. Whenever (a) any loss, cost, damage or expense resulting from fire,
explosion or any other casualty or occurrence is incurred by either of the
parties to this lease in connection with the leased premises, and (b) such party
is then covered in whole or in part by insurance with respect to such loss,
cost, damage or expense then the party so insured hereby releases the other
party from any liability it may have on account of such loss, cost, damage or
expense to the extent of any amount recovered by reason of such insurance and
waives any right of subrogation which might otherwise exist in or accrue to any
person on account thereof.
26. Whether or not the following is expressly provided in any paragraph of this
lease, it is agreed and understood that all of the Lessee's covenants,
warranties, indemnities and obligations to Lessor and all Lessee's waivers and
releases of damages and liability and all protection and rights of the Lessor
contained in and provided by any of the provisions of this lease shall be deemed
covenants, warranties, indemnities and obligations to, and waivers, releases,
protection and right of, and extending to, the agent executing this lease, the
beneficiaries of Charter Bank & Trust Trust No. 2502, the Trustee thereof in
both its individual and trust capacities, any person or entity who at any time
during the period of this demise, or any extension thereof, holds any beneficial
interest in the aforesaid trust or in any other trust holding legal title to all
or any part of the premises, the Building or the land upon any part of which the
Building is situated, or any subsequent holder of all or any part of the
equitable or legal title to any or all of the foregoing, and to any assignees of
any of the persons or entities aforedescribed.
27. Without otherwise restricting or limiting the obligations of Lessee for
repairs and maintenance of the premises as in the Lease described, Lessor
agrees that it will at its cost and after reasonable written notice from Lessee
make necessary structural repairs to the roof and exterior walls of the
premises as soon as is reasonably practicable after the receipt of written
notice from Lessee that such repairs are necessary, unless the same has been
damaged by any act or neglect of Lessee or of any of Lessee's agents, servants
or employees or in the operation of Lessee's business, in which case Lessee
shall make said repairs at its expense.
For this purpose, any common wall connecting the premises with any other
premises in the Building shall be deemed an exterior wall. However, in no event
shall Lessor have any liability to Lessee by reason of the condition,
structural or otherwise, of the roof or exterior walls or because of any
failure or delay in making any such exterior repairs or for any expense,
injury, loss or damage to Lessee from any such work done by Lessor, and all
provisions of the Lease relative to work done by Lessor shall be equally
applicable to any such work described herein.
28. Lessee agrees that it will not so use the Premises in any such manner as
to interfere with the use of other premises within the Building by occupant or
occupants thereof.
Notwithstanding anything stated herein to the contrary, the premises being
rented are being prepared by Lessor pursuant to specifications requested by
Lessee. The failure of Lessee to occupy said premises shall result in the
forfeiture of the entire security deposit as damages. However, the forfeiture
of security deposit shall not limit the damages that may be recovered pursuant
to the terms of the lease.
29. Lessee has deposited with Lessor upon the execution of this Lease the sum
of $10,000.00 to secure the prompt and faithful performance of each and every
obligation of this Lease, including the prompt payment of rental and any other
damages or loss resulting from a breach of the said Lease by the Lessee. It is
further agreed that no interest shall be due and payable by the Lessor to the
Lessee on said amount so deposited and Lessor shall not be obligated to apply
said security toward the rent for any month or months during the said term, it
being understood and agreed that Lessor may retain said security deposit until
the term of said Lease or any extension or holdover thereof shall have expired.
It is further agreed that the security deposit herein shall continue in
effect and the said deposit retained by the Lessor subsequent to the expiration
or termination of said Lease if for any reason, Lessor anticipates there to be
monies which become due and payable Lessor by virtue of rental adjustments
required pursuant to paragraph 31 and paragraph 38 of this Lease; otherwise,
that said security deposit shall be returned at the expiration of the Lease or
any extension, etc. Lessor may apply said security deposit upon any damage or
loss suffered by any breach of the Lease by Lessee. The remedy contained herein
shall be cumulative with all other remedies herein contained.
30. PARKING: Tenant acknowledges that Tenant's use of the Premises and the
Common Areas will have a substantial impact on the use of the Common Areas by
other tenants in the project. Consequently, Tenant agrees that it shall not
locate within the Premises more than an average of four point seven (4.7)
employees per 1,000 square feet of premises. Tenant shall not, at any one time,
use more than 62 National Tech Team parking spaces. Tenant will cooperate with
Landlord with a list of employees that will either work or visit the premises,
together with a list of the licenses plate numbers of such employees.
31. The following rent adjustment shall be made with respect to each calendar
year of the portion thereof. If ownership Taxes for any calendar year of the
Term (including the calendar year in which this Lease terminates) reflect a tax
in excess of $.80 per square foot of building area for the building of which the
Leased Premises form a part, such excess over $.80 per square foot shall be paid
by Lessee for the number of square feet of area leased hereunder. Lessor shall
deliver to Lessee a statement containing the necessary information with respect
to Ownership Taxes and Lessee's share thereof, if any shall be due, and shall be
paid by Lessee within fifteen (15) days thereafter. The additional taxes for the
fractional year from January 1, 2000 to the termination date shall be computed
on the basis of the Ownership Taxes for the year ending December 31, 2000 and
paid on or before the termination date. In the event that the Ownership Taxes
payable by Lessor exceeds the square foot amount as stipulated above, then the
monthly rent hereunder shall be increased by an amount equal to one-twelfth
(1/12th) of such increases. If after Lessee has made a payment of additional
rent under this paragraph Lessor shall receive a refund of any portion of the
Ownership Taxes payable during any calendar year. Lessee shall be entitled to a
refund. "Ownership Taxes" are defined as the general real estate taxes levied or
assessed against the land and building in which the Leased Premises are located
and the special assessments, if any, levied or assessed against said property
limited, however, to the installment which applies to the calendar year in which
paid. Attorney's fee to reduce the respective property taxes will be shared
proportionately among the Lessee's.
32. The invalidity of unenforceability of any provision of this lease shall
not affect or impair any other provision.
??? and its officers executing this lease upon its behalf, that the Lessee is a
Corporation duly ???
<PAGE> 51
35. Lessee hereby agrees the master key for the space will remain keyed to the
Lessor's at all times.
36. A maximum of $70.00 dollars per month additional due and payable Lessor
for sewer and water charges for the Village of Hoffman Estates.
37. Lessee shall pay to Lessor as Additional Rent for Increased Expenses
Lessee's percentage of the amount by which Operating Costs per square foot of
rentable area in the Office Park exceed $0.35 per year, times the number of
square feet in the Premises as set forth on the Schedule. If any increase shall
be due, it shall be paid by Lessee within fifteen (15) days thereafter. In the
event that the Operating Cost exceed the amount as stipulated above, then the
monthly rent hereunder shall be increased by an amount equal to one-twelfth
(1/12th) of such increases. Operating Costs shall mean all expenses, costs and
disbursements of every kind and nature (other than real estate taxes), incurred
by Lessor with respect to or arising from or in connection with the ownership
management and operation of the Office Park, including, but not limited to,
salaries, wages, employee health, welfare and benefit insurance, management
fee, electricity and water not payable by Lessee or other tenants of the Office
Park pursuant to lease agreements, building repairs, common area maintenance
and repairs, landscaping and scavenger service, but shall not include:
(i) Cost of alterations of Tenant's premises,
(ii) Cost of Capital improvements,
(iii) Depreciation, interest and principal payments on
mortgages or other debt costs, if any, and
(iv) Real Estate broker's leasing commissions or compensation
The Certified Public Accountant normally retained by Lessor shall determine the
Operating Costs for each calendar year on such uniform basis as selected by
Lessor and the amount of Operating Costs so determined shall be binding on
Lessor and Lessee. Lessee shall pay the Additional Rent for Increased Expenses
due hereunder to Lessor promptly upon receipt of notice from Lessor setting
forth the Additional Rent for Increased Expenses due, provided said notice is
accompanied by a compilation from the aforesaid Certified Public Accountant of
the Operating Costs for the year with respect to which Lessor claims Additional
Rent for increased expense is due. Lessor may not charge more than 5% increase
in CAM per year.
38. ESTOPPEL CERTIFICATE: Tenant shall from time to time, upon not less than
10 days' prior written request by Landlord or any mortgagee or ground lessor of
the Building, deliver to Landlord or such mortgagee or ground lessor a
statement in writing certifying:
(i) That this Lease and the Work Agreement are unmodified and in full
force and effect or, if there have been modifications, that this
Lease and the Work Agreement, as modified, are in full force and
effect;
(ii) The amount of Adjusted Monthly Base Rent then payable under this
Lease and the date to which Rent has been paid;
(iii) That Landlord is not in default under this Lease or any work letter
agreement, or, if in default, a detailed description of such
default(s);
(iv) That tenant is or is not in possession of the Premises, as the case
may be; and
(v) Such other information as may be reasonably requested.
<PAGE> 52
In Witness Whereof, the parties hereto have caused this indenture to be
executed under their seals, on the date first above written.
LESSOR LESSEE should sign name in full as
written in the body of this lease.
---------------------------- -----------------------------------(SEAL)
By: Leasing Manager or Agent [SIG]
STONEGATE PROPERTIES, INC. -----------------------------------(SEAL)
Corporate Seal
ASSIGNMENT
For value received, the undersigned Lessee hereby assigns all the Lessee's
rights, title and interest in and to the within lease from and after
- --------------------------------------------------------------------------------
unto
- --------------------------------------------------------------------------------
the premises to be used and occupied for and for no other purpose.
---------------
It is expressly agreed this assignment shall not release or relieve the
undersigned, as Original Lessee, from any liability under the covenants of the
lease.
LESSEE
-----------------------------------(SEAL)
DATED 19
---------------------------- -----------------------------------(SEAL)
================================================================================
ACCEPTANCE OF ASSIGNMENT
In consideration of the above assignment and the written consent of the Lessor
thereto, the undersigned Assignee (binding also the Assignee's heirs, legal
representatives and successors), hereby assumes the obligation of said lease
imposed on the Lessee and promises to make all payments and to keep and
perform all conditions and covenants of the lease by the Lessee to be kept and
performed commencing
---------------------------------------------------------.
ASSIGNEE
-----------------------------------(SEAL)
DATED 19
---------------------------- -----------------------------------(SEAL)
================================================================================
CONSENT TO ASSIGNMENT
Lessor hereby consents to the above assignment upon the express condition that
Original Lessee shall remain liable for prompt payment of the Rent and the
keeping and performance of all conditions and covenants of the Lease by the
Lessee to be kept and performed. The Lessor does not hereby consent to any
further Assignment or to any subletting of the premises.
LESSOR
-----------------------------------(SEAL)
DATED 19
---------------------------- -----------------------------------(SEAL)
================================================================================
GUARANTY
In consideration of the making of the above lease by Lessor with the Lessee at
the request of the undersigned and in reliance on this guaranty, the
undersigned hereby guarantees the payment of the rent to be paid by the Lessee
and the performance by the Lessee of all the terms, conditions covenants and
agreements of the Lease, and the undersigned promises to pay all the Lessor's
expenses, including reasonable attorney's fees, incurred by the Lessor in
enforcing all obligations of the Lessee under the lease or incurred by the
Lessor in enforcing this guaranty. The undersigned further agrees to all terms
and conditions of the confession of judgement against the undersigned to the
extent as set forth in the body of this lease. The Lessor's consents to any
assignment or assignments, and successive assignments by the Lessee and
Lessee's assigns, of this lease, made either with or without notice to the
undersigned, or changed or different use of the demised premises, or Lessor's
forbearance, delays extensions of time or any other reason whether similar to
or different from the foregoing, shall in no wise manner release the
undersigned from liability as guarantor. If this guaranty shall be executed by
more than one party their respective liability to said guaranty shall be joint
and several. WITNESS the hand and seal of the undersigned at the date of the
above lease.
Please Sign: [SIG]
--------------------------------------
Personally and Individually
<PAGE> 53
NEGATE PROPERTIES, INC...................................................(SEAL)
Corporate Seal
ASSIGNMENT
For value received, the undersigned Lessee hereby assigns all the Lessee's
rights, title and interest in and to the within lease from and after...........
...............................................................................
...............unto............................................................
..................................................................
the premises to be used and occupied for.....................and for no other
purpose. It is expressly agreed this assignment shall not release or relieve
the undersigned, as Original Lessee, from any liability under the covenants of
the lease.
LESSEE
....................................(SEAL)
DATED..................19 ....................................(SEAL)
===============================================================================
ACCEPTANCE OF ASSIGNMENT
In consideration of the above assignment and the written consent of the Lessor
thereto, the undersigned Assignee (binding also the Assignee's heirs, legal
representatives and successors), hereby assumes the obligation of said lease
imposed on the Lessee and promises to make all payments and to keep and perform
all conditions and covenants of the lease by the Lessee to be kept and
performed commencing...........................................................
ASSIGNEE
....................................(SEAL)
DATED..................19 ....................................(SEAL)
===============================================================================
CONSENT TO ASSIGNMENT
Lessor hereby consents to the above assignment upon the express condition that
Original Lessee shall remain liable for prompt payment of the Rent and the
keeping and performance of all conditions and covenants of the Lease by the
Lessee to be kept and performed. The Lessor does not hereby consent to any
further Assignment or to any subletting of the premises.
LESSOR
....................................(SEAL)
DATED..................19 ....................................(SEAL)
===============================================================================
GUARANTY
In consideration of the making of the above lease by Lessor with the Lessee at
the request of the undersigned and in reliance on this guaranty, the
undersigned hereby guarantees the payment of the rent to be paid by the Lessee
and the performance by the Lessee of all the terms, conditions, covenants and
agreements of the Lease, and the undersigned promises to pay all the Lessor's
expenses, including reasonable attorney's fees, incurred by the Lessor in
enforcing all obligations of the Lessee under the lease or incurred by the
Lessor in enforcing this guaranty. The undersigned further agrees to all terms
and conditions of the confession of judgement against the undersigned to the
extent as set forth at the body of this lease. The Lessor's consents to any
assignment or assignments, and successive assignments by the Lessee and
Lessee's assigns, of this lease, made either with or without notice to the
undersigned, or changed or different use of the demised premises, or Lessor's
forbearance, delays extensions of time or any other reason whether similar to
or different from the foregoing, shall in no wise manner release the
undersigned from liability as guarantor. If this guaranty shall be executed by
more than one party their respective liability to said guaranty shall be joint
and several. WITNESS the hand and seal of the undersigned at the date of the
above lease.
Please Sign:_______________________________
Personally and individually
_______________________________
Please Print or Type Name
<PAGE> 54
ADDENDUM TO LEASE AGREEMENT
dated
November 25, 1996
between
National Tech Team, Inc.
and
STONEGATE PROPERTIES, INC.
NORTHWEST TECH CENTRE
SUITES 1545,1550,1555
13,195 S.F.
The following is an amendment to the Lease. In the event of a conflict between
this Addendum and the Lease, the provisions of this Addendum shall control.
44. Any other provisions of the Lease notwithstanding, it is hereby agreed
between both parties that the rental payment shall not exceed the following
schedule:
March 1, 1997 - February 28, 1998 12,206.75
March 1, 1998 - February 28, 1999 13,128.20
March 1, 1999 - February 28, 2000 14,095.09
The following rent will be due for the period of:
March 1, 1997 - February 28, 1998
Rent: $12,206.75*
TAXES: $ 3,881.53*
CAM: $ 1,253.53**
WATER: $ 70.00**
----------
TOTAL: $17,411.80 Due Monthly
* This reflects six (6) months NET FREE RENT amortized during the term of the
lease as follows: two & half (2.5) months amortized during year one, two (2)
month amortized during year two, one & half (1.5) months during year three.
** Taxes, CAM and water are subject to change.
45.(a) It is understood and agreed that if the premises are damaged or destroyed
in whole or in part by fire or other casualty during the Term, Lessor, If
there are sufficient insurance proceeds, will repair and restore the same to
good tenantable condition with reasonable dispatch. The rent and all other
charges which are the obligation of Lessee under this Lease will abate for
the period the Premises are untenantable. Lessor shall notify Lessee within
thirty (30) days of occurrence whether the Premises can be rendered
tenantable within a one hundred twenty (120) day period from the occurrence.
If the Premises cannot be made tenantable within one hundred twenty (120)
days from the occurrence, either party may elect to terminate this Lease
without further liability other than for any obligation owed at the time of
the occurrence.
(b) Lessee will have the option, exercisable by written notice to Lessor upon
restoration of the Premises, to extend the original Term of this Lease (or
the extension of the Term during which the damage or destruction occurred, as
the case may be) for a period equal to the period, if any, during which
Lessee was deprived of the use of all or a significant portion
<PAGE> 55
of the Premises by reason of such damage or destruction. Lessee's option
must be exercised within twenty (20) days following completion of the work
of restoration and repair.
AGREED AND ACCEPTED:
[SIG]
- ------------------------------------- ------------------------------------------
National Tech Team, Inc. For: Stonegate Properties, Inc.
Senior Vice President
- ------------------------------------- ------------------------------------------
Title Title
1-16-97
- ------------------------------------- ------------------------------------------
Date Date
<PAGE> 56
SCHEDULE 5.H.
-------------
Legal Proceedings of Seller
---------------------------
None.
<PAGE> 57
SCHEDULE 5.J.
-------------
Labor Relations
---------------
None.
<PAGE> 58
SCHEDULE 5.K.
-------------
Material Contracts
------------------
None other than those listed in Exhibit A and Schedules 5.D. and 5.G.
<PAGE> 59
SCHEDULE 5.M.
-------------
Product and Service Warranties
------------------------------
None.
<PAGE> 60
Schedule N - Insurance
----------------------
Type of Insurance Insurance Company Policy Number
- ----------------- ----------------- -------------
Commercial Coverage Chubb Group of Insurance 3525-60-83
- - Property Companies
- - Business Income 15 Mountain View Road
- - Liability Warren, NJ 07059
- - Electronics Errors or
Omissions
Automobile Chubb Group of Insurance 7314-51-36
Companies
15 Mountain View Road
Warren, NJ 07059
Umbrella Chubb Group of Insurance 7967-19-17
Companies
15 Mountain View Road
Warren, NJ 07059
Crime National Union Fire 485-87-49
Insurance Company of
Pittsburgh, PA
70 Pine Street
New York, NJ 10270-0150
Employment Practices American International 819-56-38
Liability Specialty Lines Insurance
Company
Harborside Financial Center
401 Plaza 3
Jersey City, NJ 07311
Directors & Officers Birmingham Fire Insurance 485-77-00
Company of Pittsburgh, PA
175 Water Street
New York, NY 10270-0150
SchN
<PAGE> 61
SCHEDULE 5.N.
-------------
Insurance or Bond
-----------------
<PAGE> 62
SCHEDULE 5.S.
-------------
Environmental
-------------
None.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,796,143
<SECURITIES> 36,075,337
<RECEIVABLES> 33,220,378
<ALLOWANCES> 833,024
<INVENTORY> 977,088
<CURRENT-ASSETS> 113,183,749
<PP&E> 25,450,451
<DEPRECIATION> 12,053,058
<TOTAL-ASSETS> 139,831,033
<CURRENT-LIABILITIES> 10,902,008
<BONDS> 0
0
0
<COMMON> 165,433
<OTHER-SE> 15,129,334
<TOTAL-LIABILITY-AND-EQUITY> 139,831,033
<SALES> 3,000,000
<TOTAL-REVENUES> 26,457,087
<CGS> 2,800,000
<TOTAL-COSTS> 22,543,994
<OTHER-EXPENSES> 3,468,634
<LOSS-PROVISION> 833,024
<INTEREST-EXPENSE> 336,072
<INCOME-PRETAX> 444,459
<INCOME-TAX> 303,400
<INCOME-CONTINUING> 141,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,059
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
