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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
/X/ Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required):
For the fiscal year ended December 31, 1995
/ / Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required):
For the transition period from _________________ to ________________
Commission file number 0-15929
DATATREND SERVICES, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 11-2726109
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1515 Washington Street, Braintree, MA 02184
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(Address of Principal Executive Offices) (Zip Code)
(617) 691-1200
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the exchange Act:
Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock (par value $.01 per share) NASDAQ
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No ____
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Check if there is no disclosure of delinquent filers in response to item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / /
State issuer's revenues for its most recent fiscal year. $29,299,629
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the exchange Act.)
$13,691,387 as of April 10, 1996
Note. If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes X No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: Common Stock, $0.01par value
4,712,795 shares at April 10, 1996
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated: (1) any annual report to security-holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
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PART I
Item 1. Description of Business
Business Development
Datatrend Services, Inc. (the "Company") was incorporated in New York in
1985 under the name E & C Video Productions, Inc. The Company's name was
changed to Star Classics, Inc. in 1987, and then to Star Mark, Inc. in 1991.
Effective in March of 1993, the Company changed its name to Babystar Inc. and
was reincorporated in the state of Delaware. On November 14, 1995 the
stockholders voted to approve a change of name from Babystar, Inc. to Datatrend
Services, Inc. The Company amended its Certificate of Incorporation in November
1995 effecting this name change in the State of Delaware.
Sale of Significant Asset. The Company was previously engaged in the
business of marketing a juvenile car seat for children through its wholly-owned
subsidiary, Travel Safety Children's Products, Inc. ("Travel"). Due to
engineering challenges with the Company's car seat product, the Company ceased
production and on November 17, 1994 the Company completed the sale of Travel to
Travel Safety Corp. ("Purchaser"). At the closing, Purchaser paid $136,000 to
the Company and Purchaser delivered to the Company a non-negotiable promissory
note (the "Note") in the amount of $640,000 payable over 14 months commencing
December 26, 1994. The Note provided for interest at the annual rate of 8.5%
The Company and Travel also entered into a License Agreement pursuant to which
Travel will have the exclusive right to use car seat patents owned by the
Company. The License Agreement had a term of seven and half years and provided
for royalty payments of $2.00 per product sold, with minimum royalty payments
of $37,500 per calendar quarter commencing July 1, 1995. Effective August 1,
2002, the patents were to be assigned to Travel, provided that all royalty and
other payments required to be made under the License Agreement have been made.
Travel was also granted the option to make designated lump sum payments and
thereby terminate the License Agreement and acquire the patents prior to August
1, 2002. The Purchaser is currently in default pursuant to the terms of the
Note and the License Agreement. The Company has notified the Purchaser that it
has terminated the Purchaser's rights pursuant to the License Agreement. The
Company is currently in the process of instituting legal proceedings against
the Purchaser for the defaults pursuant to the Note and License Agreement.
There is no assurance that any sums will be ultimately recovered under the Note
and/or the License Agreement and due to this uncertainty, there is a bad debt
reserve against all sums due under the Note and no royalties have been accrued
or received under the License Agreement. Purchaser's President served as a
consultant to the Company and is the inventor and designer of Travel's
products.
Acquisition of Datatrend, Inc. Effective on February 1, 1995, the Company
acquired all of the capital stock of Datatrend, Inc. ("DTI") by merging a
wholly owned subsidiary of the Company into DTI. DTI is a Massachusetts
corporation incorporated under the laws of the Commonwealth of Massachusetts in
April 1993. DTI had no predecessor or prior business activity. DTI is engaged
in the wholesale and retail distribution of new, used and refurbished computer
hardware and components. DTI is also engaged in the business of servicing the
returns management
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needs of certain computer manufacturers and resellers. Substantially all of the
Company's business operations are currently conducted by its wholly-owned
subsidiary, DTI. Unless otherwise indicated, all references herein to the
business of the Company include the business of DTI.
Business of Issuer
Principal Products or Services
The Company purchases and sells microcomputers, peripherals, components and
accessories (collectively referred to as "Products"). The Company sells new,
used and refurbished Products. The Company purchases completed new and used
Products from numerous sources, including manufacturers and other re-sellers.
The Products purchased consist of new Products, including end of life models,
excess inventories, close outs and other such items. The Company also purchases
incomplete, defective and returned Products which require refurbishing or
remanufacture in order to be resold. The Company performs limited assembly,
remanufacturing, and refurbishing activities at its Braintree, Massachusetts
facility and through certain other subcontractors. The Company has developed
relationships with certain manufacturers whereby the Company purchases large
quantities of goods returned to the manufacturer by customers. The Company
refurbishes and remanufactures these Products and markets the Products through
its distribution channels. The Company has been able to develop relationships
with several large manufacturers, which has strengthened the Company's ability
to obtain Products. These relationships with manufacturers are not pursuant to
any long term contractual relationship and there is no assurance that they will
continue in the future.
The Company also provides returns management services to manufacturers and
resellers of certain Products. The Company's returns management services
include consulting and services with respect to identifying and analyzing causes
of returns, designing returns limitation programs and designing and instituting
cost effective returns handling programs. The Company provides comprehensive
returns management services, including, but not limited to, inbound audit of
returned products, product reconditioning, product sanitization (retiring serial
no., change model no., etc.), parts recycling and reclamation, and other
services relating to such programs such as data collection, analysis and
reporting to assist in evaluating certain problems and trends in returned
products. As a large part of this returns management service, the Company
provides Product reconditioning services to manufacturers of computer products.
The Products are reconditioned by the Company for manufacturers or other
entities in exchange for service fees. The Company currently conducts its
reconditioning operations at its Braintree, Massachusetts facility and also
conducts certain reconditioning operations at a facility in Memphis, Tennessee.
The Memphis operation commenced in October of 1995 and is located within a
facility leased by Canon Computer Systems ("Canon"), a major manufacturer. The
Company has no long term contract with Canon and currently has no long term
lease obligation with respect to this facility. The Company is in the process
of negotiating and anticipates a lease for a new facility of approximately
50,000 square feet in the Memphis area, which facility would require a long term
lease commitment.
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Distribution Methods
The Company sells its Products through several alternate channels within
and without the United States. On a wholesale basis, the Company sells Products
to mass merchants, catalogue re-sellers, retailers and to value added re-sellers
("VAR"). The Company also channels its Product directly to retail customers
through telemarketing, local advertising and other direct marketing activities.
The Company has relocated from its previous distribution center in Westwood,
Massachusetts, and as a result, closed its retail outlet at that location. The
Company is seeking new retail outlet locations, however the Company has not
opened any significant retail outlet locations and retail outlet sales are not
currently significant to the operations of the Company. The Company supplies
Products to most of its customers through its 77,000 square foot distribution
center in Braintree, Massachusetts. In 1993, its first partial year of
operation, a large volume of the Company's business was distributed through a
large mass merchant, Damark International, Inc. In 1994, however, the Company
expanded its customer base greatly and significantly decreased its dependence on
this relationship as a distribution channel for Product. During 1995, the
Company further reduced this dependency and less than 10% of the Company's sales
were derived from sales to Damark International, Inc. No other single customer
accounted for in excess of 5% of the Company's sales.
Returns Managements Programs and Revenues.
During 1995, the Company began deriving revenues from design and
implementation of returns management programs. During 1995, the Company
generated approximately $560,000 in service revenues. Approximately $471,000
(84%) of these revenues were derived from Canon. The Company currently has no
long term contractual relationship with Canon and there is no assurance that
these service revenues will continue. The Company operates a returns management
facility in Memphis, Tennessee in a building leased by Canon.
Competition
The Company is engaged in a business with numerous competitors, both for
the purchase of the products from manufacturers and the ultimate sale of the
Products to customers. The typical number of product purchases is usually a
relatively small number of transactions of large quantities of product. The
purchases of product on many occasions result from a bid type procedure with the
highest or most "responsible" bidder being awarded the purchase. There are
numerous other companies in competition for this product, both within and
without the United States. Many manufacturers are not only interested in the
price being offered for the Product, but the "responsibility" of the purchaser.
The manufacturers look for "responsible" purchasers in order to insure that
quality control measures, warranty service, distribution methods and channels
and many other factors are properly handled by the purchaser so that it does not
affect the manufacturer's reputation, or its relationship with its primary
distributors. The Company has developed relationships with manufacturers
largely based on its ability to meet these concerns of the manufacturers by
providing quality warranty services, re-channeling the products in a manner not
adversely affecting the manufacturers distributor relationships, and generally
meeting the challenges of each manufacturer with respect to any given
product and the related concerns. There is no assurance that these
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relationships will continue.
The Company's returns management consulting and service efforts are also
designed to not only produce service revenues, but also to yield purchase
opportunities for the reconditioned Product. There is no assurance that these
programs will result in additional sources of Product for the Company.
There are also numerous competitors on the resale side of the Company's
business. Many of the Company's own customers compete with the Company's retail
catalogue and telemarketing business. In addition, there is significant
competition for sales to mass merchant, catalogue re-sellers, VARs and other of
the Company's customer base. The Company believes that it has grown in the face
of this competition due to its ability not only to purchase and offer the
product at the correct pricing, but also due to its ability to meet the unique
needs of its customers, its ability to identify unique cooperative relationships
with vendors or retailers who might be considered competitors, and its ability
to offer the right product at the right time.
Sources of Products and Principal Suppliers
Significant changes and advances have rapidly transformed the microcomputer
industry in the recent past. A market which previously consisted of a
relatively small number of large manufacturers, now consists of numerous large
and small manufacturers. The rapid technological changes in the industry have
resulted in an accelerated rate of product obsolescence, requiring rapid
inventory turnover to avoid product obsolescence. The Company purchases certain
excess inventories of available Product from manufacturers and re-sellers.
In addition, the large number of competing manufacturers has resulted in
the discontinuance of certain products and product lines, as well as the
discontinuance in the operations of certain manufacturers. The Company
purchases certain discontinued Products and close out inventories. The
Company's sources of Product include not only purchases of new and used Products
from numerous original computer and peripheral manufacturers, but also include
purchases of Products and excess inventories of other re-sellers. Due to the
nature of the Company's business, the Company does not have a long term
contractual relationship with any one manufacturer which it considers a
principal supplier. However, the Company has purchased large volumes of product
from many of the major manufacturers in the United States including AT&T, NEC
Technologies, Dell, Okidata, Canon and other such manufacturers. There is no
assurance that the Company's relationship with any of these manufacturers will
continue. The volume of Product available and purchased is largely dependant
upon the manufacturers' needs and actions and the changes in technology, rather
than the typical demand of the Company's market. In fact, the very nature of
the Company's business dictates that many of the Company's purchases result from
manufacturer's discontinuing Products, discontinuing certain operations related
to the Products, or discontinuance of operations as a manufacturer, therefore
these relationships are inherently short term.
The Company's ability to continue to compete effectively for the purchase
of Products is subject to its continuing ability to maximize the resale value of
these Products through its distribution
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channels, as well as its continuing ability to meet the challenges set by the
individual manufacturers with respect to the Company's ability to handle certain
large volumes, provide reconditioning services, warranty service and repair,
re-marketing and resale of the Product. The Company has been able to
successfully meet these challenges to date and is attempting to develop new and
stronger relationships with large manufacturers. There can be no assurance that
these efforts will be successful.
Dependence on Major Customers
During 1993 the Company's largest volume customer was Damark International,
Inc. ("Damark"). Damark is a mass merchant engaged in catalogue sales of
numerous types of electronics equipment, including computer products and
accessories. During 1993, approximately 60% of the Company's revenue was
derived from sales to Damark. During 1994, this volume significantly decreased
as total sales and sales to other customers grew, and only approximately 12% of
the Company's revenues were derived from sales to Damark. During 1994, the
Company also had a substantial sales relationship with Computer City, a large
retail seller of computer equipment and peripheral. Sales to Computer City
accounted for approximately 20% of the Company's revenue during 1994. During
1995, the dependance on these customers decreased further and Damark and
Computer City accounted for less than 11% of the Company's sales.
The Company has significantly broadened and is continuing to expand
customer base through telemarketing, retail sales and other methods to increase
profitability and eliminate dependency on individual large volume accounts.
Although the dollar volume of sales to Damark in relation to the Company's total
revenues was significant during 1993 and somewhat less significant during 1994,
and the dollar volume with Computer City was significant during 1994, the profit
derived from such bulk sales to mass merchants is generally much lower than
profit derived from sales to other re-sellers, VARs, and retail customers. The
Company is still selling Products to both Damark and Computer City. Although
the loss of either of these customers would affect the Company's profitability,
due to the decreasing volume of such sales, the Company does not believe that
the loss of sales to either customer would materially adversely effect the
Company's profitability. Although the Company continues to sell to such large
volume customers, the Company has developed a wholesale and retail customer base
that it believes will support its profitability such that the loss of any one
large customer would not materially adversely effect the Company's
profitability. The Company is continuing to attempt to expand it's own retail
business by opening or expanding new channels of distribution to retail
customers, including the catalogue and retail "outlet" concept. To date, the
Company's efforts in opening and operating retail outlets has achieved only
limited financial success. There is no assurance that these efforts will
ultimately be successful.
The Company's service revenue during 1995 was largely derived from a single
customer, Canon. There is no long term service contract with Canon and there is
no assurance that these service revenues will continue. The Company is
currently providing such returns management and reconditioning services to Canon
and other manufacturers. These returns management programs are usually of
either a fixed duration by number of units of Product, or are of an at-will
nature, terminable by either party on short notice, for any reason.
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Patents, Trademarks, Licenses, Royalties
The Company does not have any patents or trademarks and does not consider
patents or trademarks to be significant to its operations. Travel, the
wholly-owned subsidiary sold by the Company, was granted two patents for its
child car seats. These patents are significant to Travel's business and were
assigned pursuant to the License Agreement with the Purchaser. Based upon the
defaults by the Purchaser under the Note and the License agreement, the Company
does not expect any payments or royalties from Travel, nor does the Company have
any assurance that these patents will have any value to the Company in the event
that the Company is successful in terminating the License Agreement and these
patents revert to the Company. See "Sale of Travel Safety Children's Products,
Inc."
Governmental Approval and Government Regulation
There is no significant government approval or regulation of the products
or business which currently effect the Company.
Research and Development
The Company has not expended any material sums on any research or
development activities in connection with its current business. Prior to the
sale of Travel in November of 1994, the Company expended certain funds on
research and development in connection with Travel's juvenile car seat business,
which the Company now treats as discontinued operations.
Compliance with Environmental Laws
The Company does not incur any material expenses related to compliance with
environmental laws or regulations in the conduct of its business.
Employees
The Company has 62 full time and 1 part time employees at its Braintree
facility. The Company employs 15 full time employees at its Memphis facility.
The Company also engages the services of outside consultants and employs
temporary employees for special projects and to meet short term staffing and
production requirements. The Company believes its present employees are
adequate to meet its current business requirements.
Although the Company has a sales force consisting of approximately 8
employees, Mark A. Hanson, the President, CEO and a Director of the Company has
been responsible in excess of approximately 28% of the dollar volume of sales of
the Company in 1995. In addition, the majority of the Products purchased by the
Company are purchased by Mark A. Hanson and the Company's ability to purchase
Products effectively is largely dependant upon relationships developed and
maintained by Mark A. Hanson. The Company has a five year employment contract
signed in February 1995 with Mark A. Hanson which contains substantial
non-compete provisions, however,
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the loss of Mark A. Hanson would, in the opinion of the Company, significantly
adversely impact the Company's profitability. The Company currently maintains
$4,000,000 in key man life insurance on the life of Mark A. Hanson.
Item 2. Description of Property
The Company's principal offices are located at 1515 Washington Street,
Braintree, Massachusetts in a usable area of approximately 107,000 square
feet(1) of space leased from December 27, 1995 through December 26, 2005 at an
annual rental of $212,382.50 in equal monthly installments of $17,698.54 per
month plus escalations for the first full year. Annual rental for the second
through tenth year of the lease term increases as follows:
Year Annual rent Monthly rent
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2 $274,166.50 $22,847.21
3 $312,781.50 $26,065.13
4 $328,227.50 $27,352.29
5-6 $339,812.00 $28,317.67
7-8 $355,258.00 $29,604.83
9-10 $370,704.00 $30,892.00
The Company vacated its previous 40,000 square foot distribution center in
Westwood, Massachusetts in January 1996. The Westwood facility was of
insufficient size to accomodate the Company's growing returns management and
reconditioning business and the Company's lease on these premises was due to
expire on May 30, 1996. The Company has not executed a formal lease termination
agreement with its landlord, however, the Company moved out early at the request
of the landlord and the premises were occupied by an abutting tenant in January
1996. The Company does not expect to incur any significant liability as a
result of the early termination of this lease.
The Company believes its current facilities are adequate for its current level
of operations and foreseeable needs. However, the Company is in the process of
negotiating a lease for a new 50,000 square foot reconditioning center in
Memphis, Tennessee. No formal lease arrangement has been entered into as of the
date of this submission.
The Company was party to a lease for office premises in New York pursuant
to a lease expiring in July 1997. Since the Company no longer anticipated the
use of these offices and has terminated all employees and business activities at
said premises, the Company accrued the sum of
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(1) The leased premises consist of a building floor area of approximately
77,320 square feet, of which approximately 14,000 square feet is office space
and the remaining 63,000 square feet consists of warehouse and loading dock
area. The warehouse has a separate mezzanine area which provides an additional
usable area of approximately 29,000 square feet and which is accessible by a
lift providing the ability to move and store pallets of inventory and materials
in the additional mezzanine area.
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$72,000 as of December 31, 1994, representing the approximate present value of
all future payments due pursuant to that lease. The Company consummated a
settlement of the entire lease obligation for those premises in consideration of
a final payment of $7,500 and forfeiture of its security deposit and payment of
monthly rent through September 1995. As a result of this transaction, the
Company has eliminated the previously accrued liability for the future lease
payments which is reflected in the Company's financial statement as Income from
Discontinued Operations. The expenses relating to the settlement are included
as expenses from discontinued operations.
Item 3. Legal Proceedings
The Company has filed an action in the United States District Court against a
supplier of computer products, Jabil Circuit, Inc. for breach of contract and
related damages. The action is entitled Datatrend, Inc. v. Jabil Circuit, Inc.
(Civil Action No. 95-11764DPW). The Company is seeking damages in excess of one
half million dollars. Jabil Circuit, Inc. has filed a counterclaim against the
Company alleging breach of contract, quantum meruit and unjust enrichment,
seeking damages in excess 2 million dollars, plus interest and costs.
The Company has also notified the Purchaser of its Travel that it has terminated
its rights pursuant to the Licenses Agreement as a result of Purchaser's failure
to make required payments pursuant to the Note and the License Agreement, for
its failure to properly maintain the patents pursuant to the terms of the
License Agreement, and other related defaults. The Company is in the process of
commencing appropriate legal proceedings against Purchaser to collect sums due
and enforce the Company's rights under the patents, the Note, the License
Agreement.
The Company is not currently involved in any other material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
On November 14, 1995, the Company held its annual Meeting at its offices in
Westwood, Massachusetts. At the annual meeting, the Company submitted the
following proposals to a vote of Security Holders.
Election of Directors. To elect five directors to the Board of Directors
of the Company to serve for a term of one year or until their successors are
duly elected and qualified:
FOR WITHHELD
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Mark A. Hanson 4,426,079 20,970
Yitz Grossman 4,426,079 20,970
John G. Bulman 4,426,079 20,970
Werner Haase 4,426,079 20,970
Kevin Donovan 4,426,079 20,970
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Proposal to Amend the Certificate of Incorporation to Change the Company's
Name to Datatrend Services, Inc.
FOR: 4,430,164 AGAINST: 12,385 ABSTAIN: 4,500
Proposal to Amend the Company's Certificate of Incorporation to Increase
Common Stock Authorized to 30,000,000 Shares.
FOR: 4,294,674 AGAINST: 113,975 ABSTAIN: 38,400
Proposal for Ratification of Appointment of Richard A. Eisner & Company
LLP, independent certified public accountants, as auditors for the Company for
the fiscal year ending December 31, 1995.
FOR: 4,421,314 AGAINST: 14,385 ABSTAIN: 11,350
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The following table sets forth the high and low closing bid and asked
quotations for the Company's Common Stock during recent fiscal years by fiscal
quarters. These quotations have been reported by the National Association of
Securities Dealers, Inc. The prices represent quotations by dealers without
adjustments for retail mark-ups, mark-downs or commissions and may not represent
actual transactions.
1994 High Low
---- ---- ---
Jan 1 through Mar 31 3.95 2.79
Apr 1 through Jun 30 3.75 2.13
Jul 1 through Sep 30 3.38 2.75
Oct 1 through Dec 31 2.75 1.75
1995
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Jan 1 through Mar 31 1.75 0.81
Apr 1 through Jun 30 3.50 1.50
Jul 1 through Sep 30 5.69 2.50
Oct 1 through Dec 31 3.31 1.63
The Company has not paid a cash dividend on its Common Stock. The Company
does not contemplate paying any cash dividends on its Common Stock in the near
future. The holders of the Company's Series A Preferred Stock had the right to
receive cumulative dividends before dividends could be declared on the Common
Stock. In February 1994, the Company negotiated the redemption of all
outstanding shares of the Company's Series A Preferred stock and no cumulative
dividends are due thereon.
As of April 9, 1996, there were 157 holders of record of the Company's
Common Stock. Such number of record owners does not include beneficial owners
of the Company's Common Stock which shares are held in the names of various
security holders, dealers and clearing agencies. The Company believes that the
number of beneficial owners of its Common Stock held by others or in nominee
names exceeds 1300 in number.
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Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the purposes of this discussion and financial reporting purposes, the
merger of Datatrend Services, Inc. (formerly Babystar, Inc.) and Datatrend, Inc.
("DTI") shall be treated as if DTI acquired Datatrend Services, Inc. (the
"Company") effective February 1, 1995. Any references and comparisons made
relating to the operations of the Company in this discussion and in the
accompanying financial statements relates to the business operations of DTI for
the years ended December 31, 1994 (prior to the merger) and for the fiscal year
1995. Such discussions do not include consideration of the operations of the
Company's previously wholly owned subsidiary Travel Safety Children's Products,
Inc. Other than as they are reflected in the Discontinued Operations section of
the financial statements.
Liquidity and Capital Resources.
Substantially all of the Company's assets are included in inventory and
accounts receivable. Inventory values are $6.092,000 and $3,286,000 for the
years ended December 31, 1995 and 1994, respectively. This represents an
increase of $2,806,000 or 85% from 1994 to 1995. This large increase in
Inventory is primarily due to increased inventory purchases from a major
supplier during 1995 combined with the fact that the Company became involved in
more purchases of Inventory requiring reconditioning, including those from the
major supplier referenced herein. These purchases required reconditioning prior
to salability, which increased the time required to turn the Inventory,
resulting in a longer Inventory turnaround. These factors resulted in
significantly increased inventory levels at December 31, 1995. The Company is
attempting to reduce inventory levels through current sales activity and the
inventory levels at December 31, 1995 reflect an actual decrease from higher
inventory levels earlier in the fiscal year. However, the nature of the
purchases by the Company which are largely influenced by availability in the
market, whether of saleable product or product requiring reconditioning, will
continue to affect the inventory levels of the Company.
Accounts receivable were $4,297,000 and $2,073,000 for the years ended
December 31, 1995 and 1994, respectively. This represents an increase in
accounts receivable of $2,224,000 or 108%. Of this increase, $1,300,000 is the
result of a single year end sale to one of the Company's customers made on
December 29, 1995 for which the Company has subsequently collected the funds.
The remainder of the increase is due to a combination of an increase in sales
during the fourth quarter of 1995 as compared to 1994 and an increase in the
number of customers being provided credit terms by the Company.
Other current assets increased $700,000 to $1,194,000 at December 31, 1995
from $494,000 at December 31, 1994. This increase is entirely attributable to
prepayments for inventory in the amount of $771,000 made at the end of December
1995.
Accounts payable for the years ended 1995 and 1994 were $6,873,000 and
$2,727,000, an increase of $4,146,000. The increase in accounts payable is
reflective of the increased purchases and level of inventory.
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The Company maintained a $4,500,000 line of credit facility with the Bank
of Boston, N.A. The outstanding balance on that line of credit was $1,000,000
at December 31, 1995. The Company is in the process of terminating its
relationship with the Bank of Boston and has paid the outstanding principal
balance down to approximately $70,000 as of April 8, 1996. The Company is in
the process of negotiating alternate financing. In addition, subsequent to
December 31, 1995, the Company was able to convert a trade account payable to a
major supplier in the approximate amount of $3,426,000 into an obligation
payable over a twelve month period pursuant to two promissory notes which accrue
interest at the rate of 12% per annum and require 12 monthly of principal and
interest totaling $314,183 commencing as of May 1996. Based upon the
foregoing, the Company does not feel that the termination of its relationship
with the Bank of Boston, N.A. will adversely effect its working capital
position.
At December 31, 1995, the Company had a short term note payable in the
amount of $1,137,500. These funds were borrowed to finance a specific inventory
purchase and the note was repaid in full in January 1996 from proceeds of the
sale of that inventory.
Results of Operations.
Revenues for the years ended December 31, 1995 and 1994 were $29,300,000
and $36,368,000, respectively. This represents a 19% decrease in revenues from
the prior fiscal year. As discussed previously, the Company has decreased its
dependence on sales to large volume/low profit margin accounts such as Damark
International, Inc. This decrease in sales volume is largely a result of the
decrease in sales to those large volume customers. Although the Company's sales
decreased, the Company's gross profit margin on sales increased drastically. In
1995, cost of sales was $23,909,000 on sales of approximately $29,300,000 for a
gross profit of $5,390,000 or 18%. This is compared to a cost of sales of
$32,662,000 in 1994 on sales of approximately $36,368,000 for a gross profit of
$3,706,000 or 10%. This significant increase in gross profit and gross profit
percentage, despite a decrease in sales volume, is largely attributable to the
Company's higher level of activity with respect to purchasing and reconditioning
inventory the decrease in sales to the large volume accounts which typically
yielded significantly lower profit margins. The Company has experienced
significantly increased margins on reconditioned inventory than those margins
achieved on inventory which is purchased for immediate resale. To a lesser
extent, the Company's service revenue also assisted in contributing to a higher
gross profit percentage in 1995.
Operating expenses in 1995 and 1994 were $4,932,000 and $2,843,000
respectively. Operating expenses for 1995 increased during 1995 and were
approximately 17% of sales as compared to approximately 8% of sales during
1994. The increase of $2,089,000 was a result of the Company's increase in
purchasing inventory which required reconditioning. This reconditioning
activity required increased personnel, higher inventory levels, increased costs
for supplies, parts and equipment, as well as increased occupancy costs of a
significantly larger facility. The Company has also increased staffing levels
to accommodate the increase in its service activities.
14
<PAGE>
The Company's net profit for the year ended December 31, 1995 was $243,000
as compared to $608,000, or a decrease of $365,000. As a percentage of sales,
profit fell from 1.7% in 1994 to 0.8% in 1995. There were numerous factors
which contributed to higher costs and ultimately lower profit in 1995. The
Company incurred significant additional expenses primarily as a result of
increased staffing to accomodate the Company's increased level of reconditioning
type projects. The Company also expanded its sales force to decrease its
dependence on Mark A. Hanson. The Company believes that its current
infrastructure will support additional growth in the Company's reconditioning
type projects and that the Company's experience during 1995 should increase its
profitability on such projects in the future. However, there can be no
assurance that there is sufficient reconditioning volume or continuing projects
of such type which will be awarded to the Company to provide such profitability
in the future.
15
<PAGE>
Item 7. Financial Statements
The Financial Statements of the Company are contained in this report
beginning at Page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Officers and Directors
The officers and directors of the Company are as follows:
Name Age Capacity
---- --- --------
Mark A. Hanson (40) President, Chief Executive Officer, and
Director
Yitz Grossman (41) Secretary and Director
John G. Bulman (37) Assistant Secretary and Director
Werner Haase (58) Director
Kevin Donovan (32) Director
The directors serve for a term of one year or until their successors are
duly elected and qualified. There are no standing audit, nominating or other
committees of the Board of Directors. There are no arrangements as to
compensation of its members in such capacity. Officers serve at the pleasure of
the Board of Directors. Kevin Donovan is Mr. Hanson's brother-in-law. There
are no other family relationships among directors of executive officers.
Mr. Hanson also serves as President, Chief Executive Officer, Treasurer and
a director of DTI. Mr. Bulman is Secretary and a director of DTI. Mr. Donovan
is a director of DTI.
Mark A. Hanson Mark A. Hanson was elected President, CEO and Director of
the Company in February 1995. In 1993 he helped found Datatrend, Inc. and has
been the President and a Director of Datatrend, Inc., the Company's wholly owned
subsidiary acquired in February 1995, since its formation in April 1993. Prior
to founding Datatrend, he was President of Bostek, Inc. for approximately four
years, and has been a business consultant specializing in advising manufacturers
and distributors about automation and software customization since 1978.
16
<PAGE>
Yitz Grossman Mr. Grossman was elected as Secretary and a director of the
Company in February 1993. Mr. Grossman has acted as a business consultant to
the Company, with a special emphasis on marketing, since March 1992. In July
1984, Mr. Grossman formed Target Capital Corporation, a New York privately-held
corporation engaged in financial consulting and has been the Chairman and
President of that corporation since that time. Mr. Grossman is a director of
Water-Jel Technologies, Inc., a publicly held company involved in producing a
line of fire blankets and burn dressings, and Mark Solutions, Inc., a publicly
held business which manufactures modular prison cells.
John G. Bulman was elected a director of the Company in February 1995. Mr.
Bulman has been a director of Datatrend, Inc., the Company's wholly-owned
subsidiary, since its formation in April 1993. Mr. Bulman is an attorney
admitted to practice in the Commonwealth of Massachusetts in 1987. Mr. Bulman
has acted as Mr. Hanson's counsel on various business matters since
approximately April of 1987. Mr. Bulman is also a certified public accountant
in the Commonwealth of Massachusetts.
Werner Haase was elected a director of the Company in February 1995. For
more than the past five years, Mr. Haase has been a director, President and
Chief Executive Officer of Journeycraft, Inc., a privately held New York
corporation involved in travel and sales promotion. Mr. Haase is also a
director of Water-Jel Technologies, Inc., Pure Tech International, Inc. Pure
Tech International, Inc., a publicly held Company engaged in plastics recycling
and the production of injected plastic molding, garden hose, specialty plastic
compounds, fabricated precision plastic components and non-woven textiles and
Multi-Media Tutorial Services, Inc., a publicly held corporation which produces
and distributes educational materials on video tape format.
Kevin Donovan was elected as a director of Datatrend, Inc., the Company's
wholly-owned subsidiary in January 1995. Pursuant to the Agreement, Mark A.
Hanson has the right to appoint one additional Director of the Company. Kevin
Donovan was Mr. Hanson's nominee for that directorship. Mr. Donovan is a
certified public accountant in practice in the Commonwealth of Massachusetts.
Mr. Donovan has been in practice as a certified public accountant since 1988,
and is the principal of Kevin Donovan, P.C., a privately held professional
corporation in the Commonwealth of Massachusetts formed by Mr. Donovan in June
1994. Mr. Donovan is Mr. Hanson's brother-in-law. Mr. Donovan was elected at
the Company's annual meeting on November 14, 1995.
Item 10. Executive Compensation
The following table sets forth information with respect to compensation
paid by the Company for services to the Company during the three fiscal years
ended December 31, 1995 of the Company's Chief Executive Officer and its other
officer receiving compensation in excess of $100,000 per year. Information for
Messrs. Hanson and Moskowitz for 1994 reflects compensation received from DTI
prior to its acquisition by the Company. Therefore, the compensation shown for
Messrs. Hanson and Moskowitz prior to acquisition is not reflected in the
Company's financial statements for 1994. Mr. Hanson became President and Chief
Executive Officer of the Company in February 1995. Mr.
17
<PAGE>
Moskowitz left his position with DTI at the time of acquisition of DTI by
the Company and has not assumed any position with the Company.
Summary Compensation Table
-------------------------- All Other
Name and Principal Position Year Salary Bonus Compensation(2)
- --------------------------- ---- ------ ----- ---------------
Mark A. Hanson 1995 $173,019 - $ -
President, Chief 1994 $125,167 - $ 775
Executive Officer 1993 89,000 $40,000 -
and Director
Michael W. Moskowitz 1995 $ 15,500 - -
Former CEO and 1994 $125,167 - -
Director 1993 $ 89,000 - -
Martin Chopp
Former President, CEO 1995 $216,000(3) - $15,592
and Director 1994 $208,000 - $30,765
1993 $176,800 - $27,140
DTI was incorporated in April 1993. Therefore, 1993 salaries and
compensation indicates only partial year salaries. No salaries or compensation
were paid for 1992. Mr. Chopp resigned his position with the Company in
February 1995 and received a $200,000 payment in termination of his employment
contract which is included in the salaries figure above. Subsequent to his
resignation, Mr. Chopp, as a principal of Sun Capital Company, also received
fees in the amount of $15,592 as compensation for providing services with
respect to the collection of sums due from Travel Safety Corp. These fees are
included in All Other Compensation presented above.
Prior to the merger with the Company on February 1, 1995, DTI elected
treatment as a Subchapter S corporation for federal income tax purposes. DTI
paid Mr. Hanson (45% shareholder) and Mr. Moskowitz (45% shareholder) as well as
Mr. Bulman (5% shareholder) and Mr. Steven Kaplan (5% shareholder) distributions
for the tax year ended 1993 in an amount equal to approximately 45.6% of the
Subchapter S earnings of DTI reportable on their personal income tax returns
based upon their respective stock ownership. Pursuant to the Agreement (as
hereinafter defined), the Company paid Mr. Hanson and Mr. Bulman a distribution
for the tax year ending December 31, 1994 totaling $125,000 for payment of their
personal income tax liability for Subchapter S earning reportable on their
personal income tax returns. Mr. Moskowitz is not entitled to any such
distribution and Mr. Kaplan received a distribution for the year ended December
31, 1994 on January 31, 1995.
- ---------------
(2) The Company paid premiums for life insurance policies on the life of Mr.
Chopp. Mr. Chopp was entitled to name the beneficiary on the policy on his
life.
(3) Includes termination payment to Martin Chopp of $200,000 for early
termination of his employment contract as of January 31, 1995.
18
<PAGE>
The aggregate amount of personal benefits, including personal use of two
automobiles provided to officers and used primarily for business purposes,
cannot be specifically or precisely ascertained and do not, in any event, exceed
$50,000 or 10% of compensation as to any person.
The Company offers health insurance to its employees. At the present time,
the Company has established a 401(k) savings plan for its employees and does
not have any other retirement, pension, profit sharing, or other similar
programs or benefits.
The Company has not paid remuneration of any nature for or on account of
services rendered by a director in such capacity.
There were no stock appreciation rights or stock options granted during the
fiscal year ended December 31, 1995 to the above-mentioned officers. The
Company has no pension or long term incentive plans other than the 401(k)
savings plan referenced above. See "Item 12 - Certain Relationships and Related
Transactions" for information regarding certain stock grants to be made to
Messrs. Hanson and Bulman pursuant to the Agreement based upon future earnings
of the Company.
The following table sets forth information with respect to the number and
value of unexercised options held by the above mentioned officers at the end of
1995. There were no stock options exercised by the named officers during the
fiscal year. The Company has not granted any stock appreciation rights.
Aggregated Option Exercises in Last
-----------------------------------
Fiscal Year and Fiscal Year End Option Values
---------------------------------------------
Value of Unexercised
Number of Unexercised In the Money Options
Options at 12/31/95 at 12/31/95
Name Exercisable (#) Exercisable ($)
---- --------------- ---------------
Mark A. Hanson
President and CEO 0 $ 0
Martin Chopp 0 $ 0
Former President
Mr. Chopp is no longer employed by the Company. Any unexercised options
held by Mr. Chopp have expired pursuant to their terms since they were not
exercised within a specified period after the termination of their employment
with the Company. Nether Messrs. Hanson or Moskowitz held any stock options or
stock appreciation rights in either the Company or DTI.
The Company has entered into an employment contract with Mark A. Hanson
dated January 1995 for a term of five years. Mr. Hanson is to serve as the
President, Chief Executive Officer and a director of the Company. Mr. Hanson is
to receive a annual salary of $180,000 plus escalations. Mr. Hanson is also
entitled to a Company provided vehicle, health insurance and other such
benefits.
19
<PAGE>
Mr. Hanson's employment can be terminated by the Board of Directors if the
Company does not meet certain after tax earnings goals specified in the
employment agreement. Mr. Hanson may terminate the employment agreement should
the Company's previous directors come to constitute a majority of the Board of
Directors.
The Company has entered into a consulting agreement with Target Capital
Corp. dated January 1995 for a term of three years. The consulting agreement
automatically renews for a term of an additional three years if Target Capital
Corp. is able to assist the Company in raising certain specified amounts of
equity capital over the initial three year term. Target Capital Corp. is
wholly-owned by Mr. Grossman. Under this Agreement, Target Capital is entitled
to annual consulting fees in the amount of $100,000. The Company has issued to
Mr. Grossman warrants to purchase an aggregate of 342,000 shares. In October
1994, the exercise price of 247,000 of these warrants was adjusted downwards
from $3.26 to $0.62 per share and the exercise price of the remaining 95,000
warrants was adjusted downwards from $0.79 to $0.62 per share. The expiration
date was extended from December 31, 1994 to December 31, 1997 on all 342,000
warrants.
20
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock based upon the most recent information
available to the Company for (i) each person known by the Company to own
beneficially more than five (5%) percent of the Company's outstanding Common
Stock, (ii) each of the Company's officers and directors, and (iii) all officers
and directors of the Company as a group:
Security Ownership of Owners and Management
-------------------------------------------
Name and Address No. of Shares % of Total
- ---------------- ------------- ----------
Mark A. Hanson 1,080,000(8) 22.9%
1515 Washington Street
Braintree, MA 02184
Yitz Grossman 345,800(9) 7.3%
243 Veterans Blvd.
Carlstadt, NJ
John G. Bulman 120,000(10) 2.5%
1515 Washington Street
Braintree, MA 02184
Werner Haase 8,000(11) Less than 1%
488 Madison Avenue
New York, NY
All officers and Directors as 1,553,800 32.9%
a Group (4 persons)
- ----------
(8) Does not include the right to receive and additional 1,080,000 shares of
common stock if certain earnings test are met over the next two years. See "Item
12 - Certain Relationships and Related Transactions."
(9) Consist of 3,800 shares and currently exercisable warrants to purchase
342,000 shares. See "Item 10 - Executive Compensation."
(10) Does not include the right to receive and additional 120,000 shares of
common stock if certain earnings test are met over the next two years. See
"Item 12 - Certain Relationships and Related Transactions."
(11) Includes currently exercisable warrants to purchase 4,000 shares of common
stock.
Item 12. Certain Relationships and Related Transactions.
21
<PAGE>
Acquisition of DTI
On February 1, 1995 the Company acquired DTI. Pursuant to the terms of the
Agreement and Plan of Merger dated January 31, 1995 (the "Agreement"), in
exchange for the merger, the holders of DTI stock received 1,200,000 shares of
the Company's Common Stock as well as the right to receive an aggregate of
1,200,000 additional shares if certain earnings tests are met over a period of
approximately two years. The Company also contributed $2,100,000 to DTI, of
which $1,209,160 was paid to two DTI shareholders immediately prior to the
consummation of the Agreement for their DTI stock and to discharge DTI's
indebtedness to them. The consideration paid by the Company was determined by
arm's length negotiations with DTI's shareholders. The cash portion of the
consideration was funded out of working capital. Prior to this transaction,
there existed no affiliation between the Company and DTI or any of their
respective officers and directors.
The Company received an opinion from A.S. Goldmen & Co., independent
investment bankers, that the amount of stock issued as consideration in the
merger is fair to the Company and its shareholders from a financial point of
view.
The Agreement provides that the Board of Directors of the Company shall
consist of five directors, three of which shall be nominated by DTI. Mark A.
Hanson, the President of DTI, John G. Bulman and Kevin Donovan, directors of
DTI, have been elected as directors of the Company. The Company's prior
management has the right to nominate two persons to the Board of Directors.
Yitz Grossman continued to be a director and Werner Haase was elected as the
second director.
The by-laws of the Company were amended to require, for a period of four
years, the affirmative vote of at least four directors for any stock issuances,
option grants, certain mergers, acquisitions and dispositions, the incurrence of
certain debt obligations, and transactions with affiliates.
Sale of Wholly-Owned Subsidiary
See "Item 1. - Description of Business - Sale of Travel Safety Children's
Products, Inc." for a description of a the sale of the Company's wholly-owned
subsidiary to Travel Safety Corp. Travel Safety Corp.'s president, served as a
consultant to the Company and was the inventor and designer of Travel's
products.
Yitz Grossman - Target Capital Corp.
See "Item 10 - Executive Compensation" for a description of a consulting
agreement between the Company and an affiliate of Mr. Yitz Grossman, who is an
officer and director of the Company, and of certain warrants which have been
issued to Mr. Grossman.
Martin Chopp - Sun Capital Company
Also under the Agreement, Martin Chopp has resigned as a director and
officer of the
22
<PAGE>
Company in consideration of a severance payment of $200,000. The Company
entered into a consulting agreement with Sun Capital Company which has since
been terminated according to its terms. Sun Capital Company is an entity of
which Martin Chopp, the Company's former President and CEO is a principal.
Under this Agreement, in consideration for services in connection with the
collection of sums due from the Purchaser, Sun Capital Company received fees
equal to fifteen percent (15%) of net sums collected pursuant to the Note and
the License Agreement related to the Company's disposition of Travel.
23
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits which are indicated as having been previously filed are
incorporated herein by reference.
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation (incorporated by reference to the
exhibit of the same number filed with the Company's Registration
Statement on Form SB-2, No. 33-58196)
3.2 By-Laws (incorporated by reference to the exhibit of the same
number filed with the Company's Registration Statement on Form
SB-2, No. 33-58196)
10.1 Copy of 1986 Employees' Stock Option Plan of the Company (filed
as Exhibit 28.1 to Company's Form S-18 and incorporated herein
by reference)
10.2 Copy of 1989 Non-Qualified Stock Option Plan (filed as Exhibit
10.6 to Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 and incorporated herein by reference)
10.3 1993 Stock Option Plan (filed as Exhibit 10.4 with the Company's
Registration Statement on Form SB-2, No. 33-58196 and
incorporated herein by reference)
10.4 Form of indemnity agreements with directors (filed as Exhibit
10.5 with the Company's Registration Statement on Form SB-2,
No. 33-58196 and incorporated herein by reference)
10.5 Stock Purchase Agreement dated as of November 17, 1994, by and
among the Company, Travel Safety Children's Products, Inc. And
Travel Safety Corp. (Incorporated by reference from the
Company's report on 8-K filed December 1, 1994)
10.6 License Agreement dated as of November 17, 1994, by and among
the Company, Travel Safety Children's Products, Inc. And
Travel Safety Corp. (Incorporated by reference from the
Company's report on 8-K filed December 1, 1994)
10.7 Promissory Note, dated as of November 17, 1994, by and among
the Company, Travel Safety Children's Products, Inc. And
Travel Safety Corp. (Incorporated by reference from the
Company's report on 8-K filed December 1, 1994)
10.8 Agreement and Plan of Merger dated January 31, 1995, by and
among the Company, DTI, BSI Acquisition Corporation and Mark
Hanson (incorporated herein by reference from the Company's
report on 8-K filed February 14, 1995)
24
<PAGE>
10.9 Employment Agreement, dated January 31, 1995, by and among the
Company and Mark Hanson (incorporated herein by reference from
the Company's report on 8-K filed February 14, 1995)
10.10 Lease dated October 27, 1995, by and among the Company, DTI and
Thomas J. Flatley d/b/a The Flatley Company (attached hereto as
Exhibit 10.10)
21. Subsidiaries of the Company (attached hereto as Exhibit 21)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
25
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATATREND SERVICES, INC.
(Registrant)
By /s/ Mark A. Hanson
----------------------------------------------------------------------------
Mark A. Hanson, President, Chief
Executive Officer, Principal Financial Officer,
Principal Accounting Officer, Director
Date:
---------------------------------------------------------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ Mark A. Hanson
-----------------------------------------------------------------------------
Mark A. Hanson, President, Principal
Executive Officer, Principal Financial Officer,
Principal Accounting Officer and Director
Date: April 11, 1996
By /s/ John G. Bulman
------------------------------------------------------------------------------
John G. Bulman, Asst. Secretary and Director
Date: April 11, 1996
By /s/ Kevin Donovan
-----------------------------------------------------------------------------
Kevin Donovan, Director
Date: April 11, 1996
26
<PAGE>
DATATREND SERVICES INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORTS F 1-2
FINANCIAL STATEMENTS
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 F 3-4
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
1995 AND 1994 F-5
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
1995 AND 1994 F-6
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1995 AND 1994 F 7-8
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31,
1995 AND 1994 F 9-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Datatrend Services Inc.
Braintree, MA 02184
We have audited the accompanying consolidated balance sheet of DataTrend
Services, Inc. and subsidiary as at December 31, 1995, and the related
consolidated statement operations, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principals and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of DataTrend Services,
Inc. and subsidiary as at December 31, 1995, and the consolidated results of
their operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounted principles.
/s/ Richard A. Eisner & Company, LLP
Cambridge, Massachusetts
March 6, 1996
Page F-1
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors and Stockholders
Datatrend, Inc.
Braintree, Massachusetts
We have audited the accompanying balance sheet of Datatrend, Inc. at December
31, 1994 and the related statements of income, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Datatrend, Inc. at December 31,
1994 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Kennedy & Lehan
-------------------
Kennedy & Lehan
Quincy, Massachusetts
March 15, 1995
F-2
<PAGE>
DATATREND SERVICES INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
1995 1994
---- ----
CURRENT ASSETS
Cash $ 374,628 $ 2,015
Accounts Receivable, trade, net of
allowance for doubtful accounts of
$428,950 in 1995, $42,629 in 1994 4,297,413 2,073,213
Inventories 6,092,711 3,286,875
Advances to Vendors 594,216 -
Deferred Tax Asset (Note 2) 100,000 -
Other Current Assets 499,543 493,632
----------- ----------
Total Current Assets 11,958,511 5,855,735
----------- ----------
PROPERTY AND EQUIPMENT, AT COST
Furniture and Fixtures 85,211 58,261
Warehouse Equipment 181,130 50,080
Leasehold Improvements 35,033 20,153
Computer Equipment 30,393 9,879
----------- ----------
331,767 138,373
Less Accumulated Depreciation 128,464 54,072
Property and Equipment, Net 203,303 84,301
----------- ----------
OTHER ASSETS 68,134 11,270
----------- ----------
TOTAL ASSETS $12,229,948 $5,951,306
=========== ==========
The accompanying notes to financial statements are an integral part hereof.
Page F-3
<PAGE>
DATATREND SERVICES INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1995 1994
---- ----
CURRENT LIABILITIES
Note Payable, Bank $1,000,000 $ 416,517
Note payable, Other 1,137,500 -
Accounts Payable 6,873,465 2,727,322
Accrued Expenses and
Other Current Liabilities 410,496 308,455
Capital Leases 40,639 12,382
----------- ----------
Total Current Liabilities 9,462,100 3,464,676
----------- ----------
OTHER LIABILITIES
Capital Lease Obligations - 17,809
Note payable, stockholder - 1,743,567
----------- ----------
Total Other Liabilities - 1,761,376
----------- ----------
STOCKHOLDERS' EQUITY
Common Stock:
$.01 Par value; 30,000,000 shares
authorized, 4,712,795 shares issued
and outstanding at December 31, 1995;
1,000 shares authorized, issued and
outstanding at December 31, 1994. 47,138 10
Additional Paid in Capital 2,343,606 -
Retained Earnings 377,104 725,244
----------- ----------
Total Stockholders' Equity 2,767,848 725,254
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $12,229,948 $5,951,306
=========== ==========
The accompanying notes to financial statements are an integral part hereof.
Page F-4
<PAGE>
DATATREND SERVICES INC.
STATEMENT OF INCOME
FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
1995 1994
---- ----
SALES (NOTE 2) $29,299,629 $36,368,251
COST OF SALES 23,909,156 32,662,221
----------- -----------
GROSS PROFIT 5,390,473 3,706,030
OPERATING EXPENSES 5,032,140 2,843,063
----------- -----------
OPERATING INCOME 358,333 862,967
----------- -----------
OTHER INCOME AND EXPENSE
Rental Income 33,597 13,850
Interest Expense (256,194) (233,352)
----------- -----------
Total Other Income (Expense) (222,597) (219,502)
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 135,736 643,465
PROVISION FOR INCOME TAXES
Deferred tax benefit (100,000) -
Current tax expense 46,580 34,645
----------- -----------
(53,420) 34,645
INCOME FROM CONTINUING OPERATIONS 189,156 608,820
INCOME FROM DISCONTINUED OPERATIONS 54,043 -
----------- -----------
NET INCOME $ 243,199 $ 608,820
=========== ===========
Weighted average Number of Shares 4,320,145
Earnings Per Share
Continuing Operations $ 0.04
Discontinued Operations $ 0.01
-----------
Net $ 0.05
===========
The accompanying notes to financial statements are an integral part hereof.
Page F-5
<PAGE>
DATATREND SERVICES INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock
------------------ Additional
Par Paid In Treasury Retained
Shares Value Capital Stock Earnings Total
------ ----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 1,000 10 344,344 344,354
Net Income for the Year Ended December 31, 1994 608,820 608,820
Distribution to S Corporation Shareholders (227,920) (227,920)
--------- ------ --------- -------- -------- ---------
Balance, December 31, 1994 1,000 10 725,244 725,254
Distribution to S Corporation Shareholders (137,000) (137,000)
Purchase of Treasury Stock (210,000) (210,000)
Retirement of Treasury Stock (500) (5) 210,000 (210,000) (5)
Termination of S Corporation Status 244,339 (244,339) -
Business Acquisition 3,512,295 35,133 2,099,267 2,134,400
Additional Shares issued in Connection With Merger 1,200,000 12,000 12,000
Net Income for the Year Ended December 31, 1995 243,199 243,199
--------- ------ --------- -------- -------- ---------
Balance - December 31, 1995 4,712,795 47,138 2,343,606 - 377,104 2,767,848
========= ====== ========= ======== ======== =========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
Page F-6
<PAGE>
DATATREND SERVICES INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 243,199 $ 608,820
Depreciation and Amortization 83,306 45,797
Change in Working Capital (1,481,979) 1,066,424
----------- -----------
Cash Used in Operating Activities (1,155,474) 1,721,041
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property, Plant &
Equipment (202,308) (71,081)
Other Assets (57,597) (1,000)
----------- -----------
Cash Used in Investing Activities (259,905) (72,081)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Note Payable, Bank 583,483 (1,493,483)
Notes Payable Stockholder (1,743,567) (603,927)
Notes Payable Stockholder 1,137,500
Distributions to S Corporation Shareholders (137,000) (227,920)
Capital Lease Obligations 10,448 (11,362)
Purchase and Retirement of Treasury Stock (210,000)
Proceeds from Business Merger 2,147,128
----------- -----------
Cash Provided (Used in) from
Financing Activities 1,787,992 (2,336,692)
----------- -----------
NET INCREASE (DECREASE) IN CASH 372,613 (687,732)
----------- -----------
CASH, BEGINNING OF PERIOD 2,015 689,747
----------- -----------
CASH, END OF PERIOD $ 374,628 $ 2,015
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
Page F-7
<PAGE>
DATATREND SERVICES INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
Detail of changes in Working Capital
1995 1994
---- ----
Account Receivable $(2,224,200) $(590,235)
Inventory (2,805,836) (102,210)
Other Current Assets (700,127) (411,271)
----------- -----------
(5,730,163) (1,103,716)
Accounts Payable 4,146,143 2,024,194
Accrued Expenses 102,041 145,946
----------- -----------
4,248,184 2,170,140
Net Change in Working Capital $(1,481,979) $ 1,066,424
=========== ===========
Additional disclosures of Cash Flow Information
Cash Paid During the Year for
Interest $ 256,192 $ 234,118
Income taxes $ 42,160 $ 35,191
The accompanying notes to financial statements are an integral part hereof.
Page F-8
<PAGE>
DATATREND SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 & 1995
Note 1 - The Company
Datatrend Inc. was incorporated on April 26, 1993 and commenced operations on
that date. Its principal business activity is the wholesale distribution and
retail sale of new, refurbished and used computer hardware throughout the United
States, Canada and Europe.
In January of 1995, Datatrend Inc., through a reverse acquisition, was merged
with Babystar, Inc., a publicly traded company ("the Merger"). Babystar, Inc.
no longer has any operations. Babystar's net loss for the 11 months ended
December 31, 1995 is included in the Company's results for the Year ended
December 31, 1995.
In November 1995, the combined entity changed its name to Datatrend Services
Inc. References to "the Company" shall apply to Datatrend Services Inc., or,
for the period prior to February 1995, Datatrend Inc. Datatrend Inc. survives
as the sole operating subsidiary of the Company.
In connection with the merger, certain former Datatrend Inc. shareholders
received 1,200,000 shares of the Company's common stock, and may receive up to
an additional 1,200,000 shares if after tax earnings reach certain levels,
starting at $3,000,000, in 1996. If this occurs, the fair value of the shares
will be charged to operations.
The Company also has 4,265,700 stock warrants outstanding, which have exercise
prices between $.5625 and $4.69 per share, with expiration dates between July,
1997 and June, 1998.
Had the merger occurred on January 1, 1994, the pro forma results for the
Company in 1994 would have been:
Revenues$36,368,251
Net Loss $(1,500,180)
Loss Per Share $ (.31)
Page F-9
<PAGE>
DATATREND SERVICES INC. - NOTES TO FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies
Inventories - Inventories, which consist primarily of computer hardware, are
stated at lower of cost or market. Cost is determined on the first-in,
first-out (FIFO) method.
Property and Equipment - Property and equipment is stated at cost. For
financial reporting, depreciation is computed using accelerated methods
calculated to depreciate the cost of the assets over their estimated useful
lives which are as follows:
AssetsYears
------ -----
Furniture and Fixtures3 - 7
Computer Equipment3 - 5
Leasehold Improvements 2 - 10
Warehouse Equipment 5
Earnings per Share - Earnings per share for the year ended December 31, 1995 is
computed using the weighted average number of shares of common stock outstanding
and dilutive common equivalent shares. Earnings per share data for the year
ended December 31, 1994 has not been presented because of the effect of the
reverse acquisition makes such data not meaningful.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principals requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Income Taxes - Prior to February, 1995, the Company had elected S corporation
status for federal income tax purposes. As such, the company had not been
liable for income taxes, but rather the stockholders reported their allocable
share of the Company's income on their individual tax returns. As an S
corporation in the Commonwealth of Massachusetts, The Company had been liable
for Massachusetts State income taxes, taxed a rate of 4.5 %.
In connection with the Merger, the S corporation status was terminated on
January 31, 1995. Effective with the merger, the Company accounts for income
taxes in accordance with Financial accounting Standard No. 109, "Accounting for
Income Taxes." At December 31, 1995, the Company had no deferred tax
liabilities and had the following net deferred tax assets:
Net operating loss carryforwards $1,277,000
Allowance for doubtful accounts 146,000
Warranty reserve 35,000
Other 10,000
----------
Total deferred tax assets 1,468,000
Valuation allowance (1,368,000)
----------
Net deferred tax assets $ 100,000
==========
The net operting loss carryforwards total approximately $3,760,000, of which
$1,850,000 expires in 2008 and $1,910,000 expires in 2009. As a result of a more
than 50% change in ownership, as defined in Section 382 of the Internal Revenue
Code, due to the public offering of the Company's common stock in June of 1993,
utilization of the net operating loss carryforwards of approximately $1,800,000,
relating to the periods prior to the public offering, is limited to
approximately $200,000 per annum, based on management's estimates. The Company
has established a valuation allowance relating to its deferred tax assets based
on its estimate of future utilization of the assets.
The following table reconciles the tax provision per the accompanying statement
of operations for 1995 with the expected provision obtained by applying
statutory rates to the pretax income.
Pretax income $135,000
Expected tax at 34% 46,000
Adjustments due to:
Permanent differences (55,000)
Non deductible expenses 25,000
State income taxes 47,000
Net decrease in valuation reserve (116,000)
--------
Tax provision per financial
statements (rounded) $(53,000)
========
Non-deductible expenses relate to costs incurred in connection with the
Company's merger (Note 1).
<PAGE>
DATATREND SERVICES INC. - NOTES TO FINANCIAL STATEMENTS
Revenue Recognition - The Company recognizes revenue when its products are
shipped to its customers. Service revenue is recognized when services are
provided to customers. Service revenue totaled $560,000 for the year ended
December 31, 1995.
Note 3 - Discontinued Operations
Babystar, Inc. had previously been engaged in the business of marketing a child
car seat through its wholly owned subsidiary, Travel Safety Children's
Products, Inc. (Travel). On November 17, 1994, Babystar, Inc. completed the
sale of Travel to Travel Safety Corp. (Purchaser). At the closing, Purchaser
paid $136,000 to Babystar, Inc. and delivered to Babystar a promissory note in
the amount of $640,000 payable over 14 months commencing December 26, 1994.
Miscellaneous items remaining from Babystar's sale of Travel survive as a
discontinued operation of the Company. The Company has fully reserved for the
note receivable from the Purchaser. Net income from discontinued operations
for 1995 was $54,043.
Note 4 - Related Party Transactions
At December 31, 1994, the Company had a note payable to a stockholder of
$1,743,567 which was paid in January, 1995. Interest expense paid in connection
with this note in 1994 amounted to $122,310.
The Company entered into a consulting agreement with Target Capital Corp., a
company wholly owned by Mr. Yitz Grossman, a director of the Company. Under
this agreement, which commenced in January, 1995 and expires in January 1998,
Target Capital is entitled to annual consulting fees of $100,000. The Company
has also issued warrants to Mr. Grossman to purchase an aggregate of 342,000
shares of the Company's common stock, at an exercise price of $0.62 per share
Page F-11
<PAGE>
Note 5. - Transactions with Significant Customers
During the year ended December 31, 1994, the Company's sales to its largest two
customers accounted for 20% and 12% of its total sales. Sales in 1995 to these
same two customers accounted for 1% and 10%, respectively, of total sales. No
other customer accounted for more than 5% of the Company's total sales in 1995.
During early 1995, the Company entered into an agreement with one of the above
customers to exchange certain product that was originally sold in 1994 for
different product. The exchange had no material impact on the financial
statements for either 1994 or 1995.
Mark A. Hanson, President , CEO and a Director of the Company has been
responsible for approximately 28% of the dollar volume of sales of the Company
in 1995.
DATATREND SERVICES INC. - NOTES TO FINANCIAL STATEMENTS
Note 6 - Note Payable, Bank
During the year ended December 31, 1994, the Company maintained a line of credit
with a bank which permitted borrowings of up to $5,000,000, and was
collateralized by substantially all of the assets of the Company.
In June of 1995, the Company entered into a similar loan arrangement with
another bank. At December 31, 1995, the Company was in the process of closing
this line of credit. Amounts outstanding on the line of credit are $416,517 and
$1,000,000 at December 31, 1994 and 1995.
The Company does not believe it will be adversely affected by the closing of the
line of credit. The Company is currently in the process of pursuing alternative
financing from financial institutions more accustomed to dealing with the unique
risk characteristics of the industry in which the Company competes. The Company
currently has at least one firm commitment from a financial institution to
provide financing that will convert approximately $3,600,000 of accounts payable
into a term note payable. This note, in conjunction with other available
financing vehicles, should allow the Company to adequately meet its financing
needs for the foreseeable future.
Note 7 - Note Payable, Other
At December 31, 1995, the Company had a short term note payable in the amount of
$1,137,500. These funds were borrowed to finance an inventory purchase. The
note was repaid in full in January 1996.
Note 8 - Employment Agreements
The company has a five year employment contract with Mark A. Hanson, President,
CEO and a Director of the Company in the amount of $180,000 per year plus
escalations.
Page F-12
<PAGE>
DATATREND SERVICES INC. - NOTES TO FINANCIAL STATEMENTS
Note 9 - Lease Commitments
In 1995 and 1994, the Company leased office and warehouse space under an
operating lease that was to expire in May of 1996. Total rent expense for
facilities amounted to $217,014 and $174,098 for 1995 and 1994, respectively.
The Company vacated these premises in January, 1996 in favor of more expansive
premises to accommodate the Company's growth. The Company has not executed a
formal lease termination agreement with its landlord. However, the company
moved out early at the request of the landlord so the premises could be occupied
by a new tenant. The Company does not expect to incur any significant liability
as a result of the early termination of the lease.
During 1995, the Company entered into an operating lease for a larger facility.
The facility has been leased for the period of December 1995 through December,
2005. Annual rent for the first year of the lease is $212,382 payable in
monthly installments of $17,698. Annual and monthly rent for the second through
the tenth year of the lease are as follows:
YearAnnual RentMonthly Rent
---- ----------- ------------
2 $274,167 $22,847
3 $312,782 $26,065
4 $328,228 $27,352
5 - 6 $339,812 $28,318
7 - 8 $355,258 $29,605
9 - 10 $370,704 $30,892
The Company is also responsible for its pro rata share of real estate tax
expenses.
The Company leases motor vehicles under operating lease agreements which have
various expiration dates through 1997. Total rent expense under the lease
agreements amounted to $14,165 and $11,842 for the years ended December 31, 1995
and 1994, respectively.
At December 31, 1995, future minimal rental commitments under the motor vehicle
leases are as follows:
Year Amount
---- ------
1996$12,393
1997$ 2,948
Page F-13
<PAGE>
DATATREND SERVICES INC. - NOTES TO FINANCIAL STATEMENTS
The Company is the lessee of office and warehouse equipment under capital leases
expiring at various times through 1998. The assets under capital leases are
recorded at inception at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are depreciated over the
lesser of their lease terms or their estimated productive lives.
The following is a summary of property held under capital leases at December 31,
1995 and 1994:
1995 1994
---- ----
Warehouse Equipment $49,491 $20,121
Furniture & Fixtures $26,544 $26,544
------- -------
Total $76,035 $46,665
Less: Accumulated Depreciation $44,799 $30,255
------- -------
Net Value $31,236 $16,410
------- -------
At December 31, 1995, future minimum lease payments under capital lease payments
are as follows:
Year Amount
---- ------
1996 $22,346
1997 $15,300
1998 $ 8,740
-------
Total minimum lease payments $46,386
Less amounts representing interest $ 5,747
-------
Present value, minimum lease payments $40,639
-------
Note 10 - Contingencies
The Company has filed an action in United States District Court against a
supplier of computer products, Jabil Circuit, Inc. for breach of contract and
related damages. The Company is seeking damages in excess of one half million
dollars. Jabil Circuit Inc. has filed a counterclaim against the Company
seeking damages in excess of 2 million dollars. The Company believes it will
not be materially affected by the outcome of these lawsuits.
Page F-14
<PAGE>
THE FLATLEY COMPANY
STANDARD FORM OF INDUSTRIAL LEASE
SUBMISSION NOT AN OPTION
THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND NEGOTIATION
DOES NOT CONSTITUTE AN OFFER TO LEASE, A RESERVATION OF, OR
OPTION FOR THE PREMISES AND SHALL VEST NO RIGHT IN ANY PARTY.
TENANT OR ANYONE CLAIMING UNDER OR THROUGH TENANT SHALL HAVE
THE RIGHTS TO THE PREMISES AS SET FORTH HEREIN AND THIS LEASE
BECOMES EFFECTIVE AS A LEASE ONLY UPON EXECUTION,
ACKNOWLEDGEMENT AND DELIVERY THEREOF BY LANDLORD AND TENANT,
REGARDLESS OF ANY WRITTEN OR VERBAL REPRESENTATION OF ANY
AGENT, MANAGER OR EMPLOYEE OF LANDLORD TO THE CONTRARY.
Revision Date: 10/85
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Incorporation of Basic Data . . . . . . . . . . . 1
2. Premises . . . . . . . . . . . . . . . . . . . . 3
3. Term . . . . . . . . . . . . . . . . . . . . . . 3
3A. Option to Extend. . . . . . . . . . . . . . . . . 4
4. Security Deposit. . . . . . . . . . . . . . . . . 4
5. Annual Rent . . . . . . . . . . . . . . . . . . . 5
6. Additional Rent
(a) Taxes . . . . . . . . . . . . . . . . . . 5
(b) Tax Payments. . . . . . . . . . . . . . . 6
(c) Common Areas. . . . . . . . . . . . . . . 6
(d) Charges for Common Areas. . . . . . . . . 7
7. Utilities . . . . . . . . . . . . . . . . . . . . 7
8. Tenant's Use of Premises and
Miscellaneous Covenants. . . . . . . . . . . . . 8
9. Repairs to and Maintenance of Premises by Tenant. 9
10. Subletting and Assignment . . . . . . . . . . . . 10
11. Alterations . . . . . . . . . . . . . . . . . . . 11
12. Trash Removal . . . . . . . . . . . . . . . . . . 11
13. Mechanic's Liens. . . . . . . . . . . . . . . . . 12
14. Access to Premises. . . . . . . . . . . . . . . . 12
15. Removal of Improvements . . . . . . . . . . . . . 13
16. Tenant's Insurance Obligations. . . . . . . . . . 13
17. Repairs by Landlord . . . . . . . . . . . . . . . 13
18. Damage or Destruction by Eminent Domain,
Fire or Casualty. . . . . . . . . . . . . . . . . 14
19. Tenant's Default
(a) Events of Default . . . . . . . . . . . . 15
(b) Landlord's Remedies . . . . . . . . . . . 15
(i) Termination of Lease . . . . . . . . 16
(ii) Suit for Possession. . . . . . . . . 16
(iii)Reletting of Premises. . . . . . . . 16
(iv) Acceleration of Payment. . . . . . . 16
(v) Monetary Damages . . . . . . . . . . 17
(vi) Anticipatory Breach;
Cumulative Remedies. . . . . . . . . 17
(c) Waiver . . . . . . . . . . . . . . . . . . 17
(d) Right of Landlord to Cure Tenant's Default 18
(e) Late Payment . . . . . . . . . . . . . . . 18
(f) Lien on Personal Property. . . . . . . . . 18
20. Liability of Landlord; Indemnification. . . . . . 19
21. Lease Not to be Recorded. . . . . . . . . . . . . 20
22. Severability. . . . . . . . . . . . . . . . . . . 20
23. Delays. . . . . . . . . . . . . . . . . . . . . . 21
24. Estoppel Certificates . . . . . . . . . . . . . . 21
25. Waiver of Subrogation . . . . . . . . . . . . . . 21
26. Waiver. . . . . . . . . . . . . . . . . . . . . . 21
27. Surrender and Holding Over. . . . . . . . . . . . 22
28. Lease Inures to Benefit of Successors and Assigns 22
29. Quiet Enjoyment . . . . . . . . . . . . . . . . . 22
30. No Partnership. . . . . . . . . . . . . . . . . . 22
31. Notices . . . . . . . . . . . . . . . . . . . . . 22
32. Interpretation. . . . . . . . . . . . . . . . . . 23
33. Paragraph Headings. . . . . . . . . . . . . . . . 23
34. Broker's Commissions. . . . . . . . . . . . . . . 23
35. Interruption of Services. . . . . . . . . . . . . 23
36. Subordination . . . . . . . . . . . . . . . . . . 23
37. Modification. . . . . . . . . . . . . . . . . . . 23
38. Multiple Parties. . . . . . . . . . . . . . . . . 24
39. Submission Not an Option. . . . . . . . . . . . . 24
40. Financial Information . . . . . . . . . . . . . . 24
41. Tenant's Right to Terminate . . . . . . . . . . . 24
42. Guaranty. . . . . . . . . . . . . . . . . . . . . 24
43. Traffic Officer . . . . . . . . . . . . . . . . . 25
44. Entire Agreement. . . . . . . . . . . . . . . . . 25
Exhibit "A" . . . . . . . . . . . . . . . . . . . 28
Exhibit "B" . . . . . . . . . . . . . . . . . . . 29
<PAGE>
LEASE AGREEMENT
(Standard Industrial Form)
This Lease is made as of this 27th day of October,
1995, by and between the party named as landlord in the "Basic
Data" set forth below (hereinafter "Landlord") and the party
named as tenant in the "Basic Data" set forth below (hereinafter
"Tenant"). In consideration of the mutual covenants herein set
forth, the parties agree as follows:
1. Incorporation of Basic Data. All capitalized terms in
this Lease shall have the meanings as described to them in the
Basic Data set forth below unless otherwise defined herein.
BASIC DATA
Landlord: shall mean Thomas J. Flatley d/b/a The Flatley
Company, having a principal place of business and
current mailing address at 50 Braintree Hill Office
Park, Braintree, MA 02184.
Tenant: shall mean DataTrend, Inc., having a principal place
of business and current mailing address at 165
University Avenue, Westwood MA 02090.
Premises: shall mean 77,230 square feet, being the approximate
size of the Premises and the basis on which Annual
Rent and Additional Rent shall be paid by Tenant to
Landlord, in the building located at South Braintree
Park, 1515 Washington Street, Braintree MA 02184
(the "Building"), which Building is located on a lot
(the "Lot"), all as such Premises, Building and Lot
are described and/or outlined in Exhibit A.
Term: shall mean the period of ten (10) years with two (2)
successive five (5) year options to extend as
hereinafter defined in Paragraph 3A, commencing upon
the Commencement Date.
Adjustment
of Term: If the Commencement Date is other than the first day
of a calendar month, this Lease shall continue in
full force and effect for a period of ten (10) years
from the first day of the calendar month next
succeeding the Commencement Date.
Security
Deposit: shall mean the sum of SEVENTEEN THOUSAND SIX HUNDRED
NINETY-EIGHT AND 54/100 ($17,698.54) Dollars paid
this day by Tenant to Landlord, to be held by
Landlord pursuant to the terms of Paragraph 4 of
this Lease.
Annual
Rent: shall mean the annual sum of TWO HUNDRED TWELVE
THOUSAND THREE HUNDRED EIGHTY-TWO AND 50/100
($212,382.50) Dollars annually, payable in equal
monthly installments of SEVENTEEN THOUSAND SIX
HUNDRED NINETY-EIGHT AND 54/100 ($17,698.54)
Dollars, for the first (1st) full year of the Lease
Term, and TWO HUNDRED SEVENTY-FOUR THOUSAND ONE
HUNDRED SIXTY-SIX AND 50/100 ($274,166.50) Dollars
annually, payable in equal monthly installments of
TWENTY-TWO THOUSAND EIGHT HUNDRED FORTY-SEVEN AND
21/100 ($22,847.21) Dollars, for the second (2nd)
full year of the Lease Term, and THREE HUNDRED
TWELVE THOUSAND SEVEN HUNDRED EIGHTY-ONE AND 50/100
($312,781.50) Dollars annually, payable in equal
monthly installments of TWENTY-SIX THOUSAND SIXTY-
FIVE AND 13/100 ($26,065.13) Dollars, for the third
1
<PAGE>
(3rd) full year of the Lease Term, and THREE HUNDRED
TWENTY-EIGHT THOUSAND TWO HUNDRED TWENTY-SEVEN AND
50/100 ($328,227.50) Dollars annually, payable in
equal monthly installments of TWENTY-SEVEN THOUSAND
THREE HUNDRED FIFTY-TWO AND 29/100 ($27,352.29)
Dollars, for the fourth (4th) full year of the Lease
Term, and THREE HUNDRED THIRTY-NINE THOUSAND EIGHT
HUNDRED TWELVE AND 00/100 ($339,812.00) Dollars
annually, payable in equal monthly installments of
TWENTY-EIGHT THOUSAND THREE HUNDRED SEVENTEEN AND
67/100 ($28,317.67) Dollars, for the fifth (5th)
continuing through and including the sixth (6th)
full year of the Lease Term, and THREE HUNDRED
FIFTY-FIVE THOUSAND TWO HUNDRED FIFTY-EIGHT AND
00/100 ($355,258.00) Dollars annually, payable in
equal monthly installments of TWENTY-NINE THOUSAND
SIX HUNDRED FOUR AND 83/100 ($29,604.83) Dollars,
for the seventh (7th) continuing through and
including the eighth (8th) full year of the Lease
Term, and THREE HUNDRED SEVENTY THOUSAND SEVEN
HUNDRED FOUR AND 00/100 ($370,704.00) Dollars
annually, payable in equal monthly installments of
THIRTY THOUSAND EIGHT HUNDRED NINETY-TWO AND 00/100
($30,892.00) Dollars, for the ninth (9th) continuing
through and including the tenth (10th) full year of
the Lease Term, all payable in accordance with
Paragraph 5 of this Lease plus all other charges,
amounts, reimbursements or other sums (collectively
"Additional Rent") to be paid by Tenant to Landlord
in accordance with Paragraph 6 and any other terms
of this Lease calling for the payment of money by
Tenant to Landlord.
Use: shall mean general business offices and the repair
and resale of computers, and all other uses
permitted in accordance with applicable zoning and
other such by-laws, rules or ordinances, and no
other use or purpose whatsoever.
Commence-
ment Date: shall mean sixty (60) days following the later to
occur of (i) the date of Lease execution by both
parties or (ii) the date of plan approval by both
parties. Notwithstanding the foregoing, if Tenant's
personnel shall occupy all or any part of the
Premises for the conduct of its business prior to
the Commencement Date as determined herein, such
date of occupancy shall, for all intents and
purposes of this Lease, be the Commencement Date.
Landlord hereby agrees that Tenant shall have
reasonable access to the Premises prior to the
Commencement Date for purposes of painting and
cleaning and construction/alteration of the office
area and to commence delivery of inventory and
equipment setting up production, shipping and other
business uses, provided such painting, cleaning,
construction/alteration, delivery and setting up
does not interfere with Landlord's work.
Landlord and Tenant agree to execute a Supplemental
Agreement setting forth the actual Occupancy and
Term Dates, once the same have been established.
2
<PAGE>
Tenant's
Pro Rata
Share: shall be based on the fraction:
Square Footage of TENANT's Premises = 77,230
-------------------------------------------- -------
Aggregate of All the Rentable Square Footage 271,035
(whether or not rented or improved within the entire Building)
Tenant's
Insurance
Require-
ments: Public Liability: ONE MILLION AND 00/100
($1,000,000.00) Dollars for injury to one person,
ONE MILLION AND 00/100 ($1,000,000.00) Dollars for
injury to more than one person, per incident.
Property Damage: ONE MILLION AND 00/100
($1,000,000.00) Dollars per incident.
2. Premises. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, subject to and with the benefit
of the terms, covenants, conditions and provisions of this
Lease, the Premises, but reserving and excepting to Landlord
the use of the exterior walls, the roof and the right to
install, maintain, use, repair and replace pipes, ducts,
conduits, wires and appurtenant fixtures leading through the
Premises and serving other parts of the Building or Lot in
locations which will not materially interfere with Tenant's
use thereof. Exhibit A is intended only to show the location
of the Premises in relation to the Building and/or Lot and the
initial size of such Building and Lot, and other data thereon
is to be disregarded and in no event deemed or construed to be
a representation that the Building or buildings, parking areas
or other improvements shown thereon will be constructed and/or
maintained as indicated thereon, or that additions to, or
reductions from, the Building or Lot may not be made by the
Landlord during the Term of this Lease, but rather the
Landlord shall have the right to do so and any such addition
or reduction shall take effect upon Landlord's giving notice
to Tenant to that effect. Landlord reserves the right to
construct or sell any free-standing buildings on any portion
of the Lot.
3. Term. The Term of this Lease shall commence upon the
Commencement Date, which shall be the date set forth in the
Basic Data, subject to Paragraph 23 concerning unavoidable
delays. The Premises shall be deemed ready for occupancy
under the terms of this Lease and Landlord's obligation to
deliver the Premises to Tenant as of the Commencement Date
shall be deemed fulfilled if Landlord's construction within
the Premises as required herein is substantially completed
with the exception of minor items which can be fully
completed within thirty (30) days without material
interference with Tenant's occupancy of the Premises. The
use by Tenant of the Premises for business shall be deemed
conclusive that the Premises were substantially completed,
with the exception of the mezzanine freight lift, and that
Tenant accepted delivery of the Premises as substantially
completed. Landlord's construction and other work shall be
as set forth in Exhibit B hereto.
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3A. Option to Extend. In the event TENANT is not then in
default of any of the terms, conditions and covenants of
this Lease Agreement and any Amendments made hereto during
the Term hereof, LANDLORD shall grant to TENANT two (2)
successive five (5) year options to extend the Term of this
Lease for an additional period of five (5) years each
(hereinafter referred to as the "Option Period"), subject to
the following terms and conditions:
1. The Premises shall be offered to TENANT for each
Option Period at the then current market rent rate
and terms, but in no event shall such rental be
less than the last rent paid by TENANT.
2. TENANT must exercise each Option Period separately
no earlier than nine (9) calendar months but no
later than six (6) calendar months prior to the
termination date of the preceding term by sending
written notice (hereinafter referred to as "Notice
of Exercise") to LANDLORD by registered or
certified mail. LANDLORD must notify TENANT nine
(9) calendar months prior to the termination date
of each term specifying the applicable rental
rate.
Such extended term shall begin respectively upon the
expiration of the term of this Lease or of this Lease as
extended, upon all the same terms and conditions of this
Lease and any Amendments made thereto with the exception of
the annual rent stipulated hereinabove.
TENANT'S exercise of each Option Period shall be null and
void unless LANDLORD receives (i) simultaneously with the
notice of each exercise and (ii) thirty (30) days before the
commencement of each Option Period, TENANT'S certified
financial statements for the immediately preceding three (3)
year period. In the event the net worth of TENANT is not
sufficient in LANDLORD'S sole discretion to assure the
future performance of TENANT'S obligations under the Lease
during each Option Period, LANDLORD may nullify TENANT'S
exercise of the Option Period. Notwithstanding the
foregoing, if TENANT'S net worth is at least equal to one
hundred twenty percent (120%) of it's current net worth,
LANDLORD may not nullify such exercise.
4. Security Deposit. Tenant has deposited with Landlord the
Security Deposit as security for the faithful performance and
observance by Tenant of the terms, provisions and conditions
of this Lease. It is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of
this Lease, Landlord may use, apply or retain the whole or any
part of the Security Deposit to the extent required for
payment of any Annual Rent, Additional Rent, or any other sum
as to which Tenant is in default or for any sum which Landlord
may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, covenants and
conditions of this Lease, including but not limited to any
damage or deficiency accrued before or after summary
proceedings or other reentry by Landlord, including the costs
of such proceeding or reentry and further including, without
limitation, reasonable attorney's fees. It is agreed that
Landlord shall always have the right to apply the Security
Deposit, or any part thereof, as aforesaid, without notice and
without prejudice to any other remedy or remedies which
Landlord may have, or Landlord may pursue any other such
remedy or remedies in lieu of applying the Security Deposit or
any part thereof. No interest shall be payable on the
Security Deposit. If Landlord shall apply the Security
Deposit in whole or in part, Tenant shall upon
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demand pay to Landlord the amount so applied to restore the
Security Deposit to its original amount. In the event that
Tenant shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of this Lease, the
Security Deposit shall be returned to Tenant within ninety
(90) days after the date fixed as the end of the Lease and
after delivery of entire possession of the Premises to
Landlord in accordance with the terms of this Lease. In the
event of a sale or other transfer of the Building, or leasing
of the entire Building including the Premises subject to
Tenant's tenancy hereunder, Landlord shall transfer the
Security Deposit then remaining to the vendee or lessee and
Landlord shall thereupon be released from all liability for
the return of such Security Deposit to Tenant, to the extent
of money actually transferred; and Tenant agrees to look
solely to the new Landlord for the return of said Security
Deposit, to the extent of money actually transferred, then
remaining. The holder of any mortgage upon the Building or
Lot shall never be responsible to Tenant for the Security
Deposit or its application or return unless the Security
Deposit shall actually have been received in hand by such
holder. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the Security Deposit
and that neither Landlord nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance.
5. Annual Rent. Tenant hereby covenants and agrees to pay to
Landlord, at the place to which notices to Landlord are
required to be sent or such other person or place as Landlord
may from time to time designate, as Annual Rent for the
Premises in lawful money of the United States, without demand,
setoff or deduction, during the Term of this Lease, the sum
set forth in Basic Data, payable in equal monthly installments
as set forth there, in advance on the first day of each and
every calendar month during said Term. Annual Rent for any
fraction of a month at the commencement or expiration of said
Term shall be prorated on a per diem basis.
6. Additional Rent.
(a) Taxes. Tenant covenants and agrees to pay, as
Additional Rent, with respect to each calendar or other tax
year beginning or ending during the Term hereof, an amount
equal to Tenant's Pro Rata Share, as set forth in the Basic
Data, of the real estate taxes (including betterments and
other special assessments) allocated to the Building and Lot
for such tax year. If there shall be more than one taxing
authority, the real estate taxes for any period shall be the
sum of the real estate taxes for said period attributable to
each taxing authority. Tenant's Pro Rata Share of the real
estate taxes shall be adjusted for and with respect to any
partial tax years on a per diem basis. The expression "real
estate taxes" shall include all general and special
assessments, so-called, rent taxes and other governmental
charges which may be charged, assessed or imposed upon the
Building and Lot or Landlord. If at any time during the
term hereof the present system of ad valorem taxation of
real property shall be changed so that in lieu of the ad
valorem tax on real property in whole or in part, or in
addition thereto, there shall be assessed on Landlord a
capital levy or other tax on, but not limited to, the Annual
Rent and/or any Additional Rent ("Gross Rents") received
with respect to the Building and Lot, or a federal, state,
county, municipal or other local income, franchise, excise
or similar tax, assessment, levy or charge (distinct from
any method of taxation prevailing at the commencement of the
Term hereof) measured by or based, in whole or in part, upon
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any such Gross Rents, then any and all of such taxes,
assessments, levies or charges, to the extent that the same
would be payable if the Building and Lot were the only
property of Landlord subject to them, and if the income from
the Building and Lot were the only taxable income of
Landlord during the year in question, shall be deemed to be
included within the term "real estate taxes".
Notwithstanding anything to the contrary contained herein,
"real estate taxes" shall not include Landlord's Federal or
State income taxes as presently imposed.
(b) Tax Payments. Payment of Tenant's Pro Rata Share of
the real estate taxes allocated to the Building and Lot shall
be paid, as Additional Rent, monthly, and at the times and in
the fashion herein provided for the payment of Annual Rent.
For an initial period from the Commencement Date until the end
of the first full tax year in which the Building and/or Lot
containing the Premises shall be assessed as a completed
improvement, as distinguished from inprocess construction
("the full assessment year"), the amount so to be paid shall
be the initial monthly payment reasonably fixed by Landlord on
or about the Commencement Date. Promptly after the
determination by any taxing authority of real estate taxes
upon the Building and Lot for each tax year, Landlord shall
make a determination of the Tenant's Pro Rata Share of the
real estate taxes and if the aforesaid payments theretofore
made for such tax year by Tenant exceed Tenant's Pro Rata
Share of the real estate taxes such overpayment shall be
credited against the payments thereafter to be made by Tenant
pursuant to this paragraph; and if the real estate taxes for
such tax year are greater than such payments theretofore made
on account for such tax year, Tenant shall pay such deficiency
to Landlord within ten (10) days of demand therefor. Copies
of tax bills submitted by Landlord with any such statement
shall be conclusive evidence of the amount of real estate
taxes charged, assessed or imposed. After the full assessment
year, the initial monthly payment on account of the Tenant's
Pro Rata Share of the real estate taxes shall be replaced each
year by a payment which is one-twelfth (1-12th) of the
Tenant's Pro Rata Share of the real estate taxes for the
immediately preceding tax year. An equitable adjustment shall
be made in the event of any change in the method or system of
taxation from that which is now applicable, including without
limitation any change in the dates and periods for which such
taxes were levied. Tenant shall pay all taxes upon its signs
and other property in or upon the Premises and Tenant
covenants and agrees to pay promptly when due all municipal,
county, state and federal taxes assessed against Tenant's
leasehold interest and Tenant's fixtures, furnishing,
equipment, stock-in-trade, and other personal property of any
kind owned, installed or existing in the Premises. For the
purpose of this paragraph such taxes shall not be included
within real estate taxes upon the Building and Lot.
(c) Common Areas. Tenant and its officers, employees,
agents, customers and invitees shall have the right, in
common with Landlord and all others to whom Landlord may
from time to time grant rights, to use the common areas of
the Building and Lot for their intended purposes subject to
such reasonable rules and regulations as Landlord may from
time to time impose, including the designation of specific
areas in which cars owned or operated by Tenant, its
officers, employees and agents must be parked. Tenant
agrees after notice thereof to abide by such rules and
regulations and to cause its officers, employees, agents,
customers and invitees to conform thereto. Landlord shall
at all times have full control, management and direction of
the common areas and the right to put the common areas to
such use as the Landlord may determine in its sole
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discretion. Landlord shall have the right at any time and
from time to time to change the layout of the common areas
including, but without limitation, the right to add to or
subtract from their shape and size and to alter their
location; provided, however, Landlord shall always maintain
such amount of parking in the common areas as may be
required by local zoning law or ordinance at the time of
such parking area's original construction.
(d) Charges for Common Areas. Tenant shall pay its Pro
Rata Share of the Common Areas Maintenance Costs during the
Term of this Lease as Additional Rent and in the manner
hereafter provided. "Common Areas Maintenance Costs" as used
herein shall mean the total cost and expenses incurred by
Landlord, its agents, contractors and/or designees for
operating, maintaining, insuring (or, if Landlord elects to
self insure, an amount equal to the cost of insurance if it
were to be provided by a third party of Landlord's choosing),
managing, repairing and/or replacing all or any part of the
common areas and any installations therein, thereon,
thereunder or thereover. Payment on account of Tenant's Pro
Rata Share of the Common Areas Maintenance Costs shall be paid
as Additional Rent, monthly, and at the times and in the
fashion herein provided for the payment of Annual Rent based
initially on Landlord's reasonable estimate. Promptly after
the end of the partial calendar year during which the Term
begins and promptly after the end of each year thereafter,
Landlord shall make a determination of Tenant's Pro Rata Share
of the Common Areas Maintenance Costs. If the aforesaid
payments theretofore made for such period by Tenant exceed
Tenant's Pro Rata Share, such overpayment shall be credited
against the payments thereafter to be made by Tenant pursuant
to this paragraph; and if Tenant's Pro Rata Share is greater
than such payments theretofore made on account for such
period, Tenant shall pay such deficiency to Landlord within
ten (10) days of demand therefore. The initial monthly
payment on account of the Common Areas Maintenance Costs shall
be replaced after Landlord's determination of Tenant's Pro
Rata Share thereof for the preceding accounting period by a
payment which is one-twelfth (1/12th) of Tenant's actual Pro
Rata Share thereof for the immediately preceding accounting
period, with adjustments as appropriate where such preceding
period is less than a full twelve-month period. Appropriate
adjustments shall be made for any partial month at the
commencement of the Term and for any partial month or year at
the end of the Term.
With a thirty (30) day prior written notice to LANDLORD,
TENANT shall have the right to audit the LANDLORD'S records,
at LANDLORD'S main office during normal business hours, as
they relate to the charges as contained under this Section
6, namely Additional Rent. Any adjustment to the original
billing as a result of such audit, shall be made to the next
regular Rent payment hereunder. This right to audit does
not extend TENANT the right to withhold payment of such Real
Estate Taxes or Operating Expenses.
7. Utilities. Tenant agrees to pay or cause to be paid, as
Additional Rent, directly to the authority or party charged
with the collection thereof, all charges for gas, electricity,
light, heat, power, water, sewerage, telephone or other
service used, rendered or supplied to or for the Tenant upon
or in connection with the Premises throughout the Term of this
Lease, and to indemnify Landlord and save it harmless against
any liability or damages on such account. Tenant shall also
at its sole cost and expense procure any and all necessary
permits, licenses or other authorizations required for the
lawful and proper maintenance and use upon the Premises of
wires, pipes, conduits, tubes and other equipment and
appliances for use
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in supplying any such services to and upon the Premises except
such permits, licenses and authorizations which shall be
required in connection with original construction of the
Premises, which shall be obtained by Landlord. It is
understood and agreed that Landlord shall be under no
obligation to furnish any utilities to the Premises and shall
not be liable for any interruption or failure in the supply of
any such utilities to the Premises. If a charge shall be made
from time to time by the public authority having jurisdiction
of the Premises for the use of the sanitary sewer system,
Tenant shall pay the share thereof equitably apportionable to
the Premises. Tenant shall also pay for any sprinkler standby
service charge equitably apportionable to the Premises. If
the Premises are not separately metered, Tenant shall pay to
Landlord, as billed and as additional Rent, its share of water
and/or sewer bills. In case any such water and sewer charges
are not paid by Tenant at the time when the same are payable,
if to municipal officials, Landlord may nevertheless pay the
same to such officials and charge Tenant the cost thereof,
which charge shall become payable on the first day of the
following month as Additional Rent.
8. Tenant's Use of Premises and Miscellaneous Covenants.
During the Term of this Lease Tenant shall use the Premises
solely for the purposes listed in the Basic Data. Tenant
agrees that it will not use, or permit or suffer the use of,
the Premises or any part thereof for any other business or
purpose. Tenant shall use and occupy the Premises in a
careful, safe and proper manner and shall keep the Premises in
a clean and safe condition in accordance with all applicable
laws, ordinances and government regulations. Tenant agrees
that it will not do or suffer to be done, or keep or suffer to
be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage
by fire or other hazards, or which will prevent Landlord from
procuring such policies from companies acceptable to Landlord.
During the Term of this Lease, Tenant further covenants and
agrees as follows:
(a) Not to use the Premises for any use involving the
emission of objectionable odors, fumes, noise or vibration,
or, except to the extent previously consented to by Landlord
in writing, involving the use, storage or disposition of toxic
or hazardous substances or materials. Tenant covenants and
agrees that it shall advise Landlord in writing of any
materials or substances it deals with in any way on the
Premises that may be deemed to be hazardous or toxic prior to
such substances or materials being brought upon the Premises
or Lot. In any event, Tenant shall strictly comply with all
state, federal and municipal laws, regulations, guidelines and
ordinances concerning the use, storage, handling and
disposition of any substance or material that is or may be
deemed to be toxic or hazardous and Tenant agrees to indemnify
Landlord against any liability, including attorneys fees and
costs, in connection therewith. At Landlord's request, Tenant
shall provide Landlord with reasonable assurances that Tenant
can and will comply with the foregoing and, if Landlord so
requests, Tenant shall obtain insurance of such type and in
such amount as Landlord may reasonably specify, such policy to
name Landlord as an insured party and be obtained at Tenant's
sole cost prior to such substances or materials being brought
upon the Premises or Lot. Any such policy shall provide that
it may not be cancelled or amended without thirty (30) days
prior notice to Landlord, and shall be issued by a company or
companies reasonably satisfactory to Landlord. Failure of
Tenant to provide Landlord with such reasonable assurances or
evidence of any reasonably
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requested insurance in connection with the bringing of such
materials or substances upon the Premises or Lot shall be
reasonable cause for Landlord to prohibit such substances or
materials from being brought upon the Premises or Lot or, at
Landlord's election, a default under this Lease.
(b) Not to permit the use of the Premises for trucking of a
character or volume greater than that customarily employed
by other occupants of the Building or Lot or any use
permitted under this Lease for which trucking of such
character and volume is customary.
(c) Not to place on the Premises or Building any placard or
sign of advertising that the Premises or any part thereof
may be sublet, nor to place any other sign or placard on the
Premises or Building which is visible from the exterior of
the Premises or Building without the written consent of
Landlord, such consent shall not be unreasonably withheld,
provided such sign or placard conforms with the park
standards.
(d) Not to injure, overload, deface or permit to be
injured, overloaded, or defaced, the Premises or Building,
and not to permit any holes to be made in the exterior of
the building; and not to make, allow or suffer any waste or
any unlawful, improper or offensive use of the Premises that
shall be injurious to any person or property or invalidate
any insurance on the Premises, Building or Lot or increase
the premium thereof.
(e) To conform to and comply with all state and municipal
laws and with all requirements of any public body or officers
having jurisdiction of the Premises and with the requirements
or regulations of any Board of Fire Underwriters or insurance
company insuring the Premises at the time with respect to the
care, maintenance, use and nonstructural alteration of the
Premises, all at Tenant's sole expense.
9. Repairs to and Maintenance of Premises by Tenant. Tenant
shall keep the Premises, including without limitation, both
the inside and outside of all doors and windows therein, in
the same order and repair as they are in on the Commencement
Date, reasonable wear and tear and damage by fire or other
casualty normally insured under a so-called "extended coverage
endorsement" only excepted; and to keep all fixtures and
equipment on the Premises including, without limitation, all
heating, plumbing, electrical, air-conditioning, ventilation
and mechanical fixtures and equipment serving only the
Premises in the same order and repair as they are in on the
Commencement Date, reasonable wear and tear, damage by fire or
other casualty normally insured under an "extended coverage
endorsement" only excepted. Tenant shall, at it sole cost and
expense, during the entire Term of this Lease, maintain in
force a service contract providing for the repair and annual
service and maintenance of all heating, ventilating and air
conditioning equipment serving the Premises, such contract to
be with a party reasonably acceptable to Landlord or, if
Landlord should so elect, with a responsible party designated
by Landlord, provided that the cost shall not exceed sales of
other responsible contractors. Tenant shall make all repairs
and replacements and do all other work necessary for the
foregoing purposes. It is further agreed that the exception
of reasonable wear and tear shall not apply so as to permit
Tenant to keep the Premises in anything less than suitable,
tenantlike, efficient and usable condition considering the
nature of the Premises and the use reasonably made thereof, or
in less than good and tenantlike repair, and that except in
case of fire or other casualty normally insured under an
"extended coverage endorsement"
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there is no exception to the rule that all glass must be kept
good and whole by Tenant. Tenant shall also be responsible
for the cost of all repairs to the Building (including,
without limitation, the structure and roof thereon and common
areas therein) and the Lot if the same are occasioned by
Tenant's or its employees', agents' or invitees' improper or
negligent use thereof.
10. Subletting and Assignment.
(a) Tenant covenants and agrees not to assign, sell,
mortgage, pledge or in any manner transfer this Lease or any
interest therein or sublet in excess of thirty-five percent
(35%) the Premises or any part thereof, or grant any
concession or license or otherwise permit occupancy of all
or any part thereof by another person or entity without the
prior written consent of Landlord, which consent shall not
be unreasonably withheld provided all the provisions of this
Paragraph 10 are complied with and subject to Landlord's
right to terminate this Lease as set forth in this Paragraph
10. Any such consent by Landlord shall be held to apply
only to the specific transaction thereby authorized. Such
consent shall not be construed as a waiver of the obligation
of Tenant to obtain from Landlord consent to any other or
subsequent assignment or subletting period. The collection
of rent by Landlord from any assignee, subtenant or other
occupant shall not be deemed an acceptance of the assignee,
subtenant or occupant as tenant or release of Tenant from
its obligation under this Lease.
(b) Notwithstanding the provisions of Paragraph 10(a),
above, any proposed assignee or sublessee submitted to the
Landlord for approval must have the same or greater financial
strength as Tenant and if such is not the case, Landlord's
withholding of consent shall be reasonable. If Tenant shall
request permission to assign this Lease or sublet the Premises
or any part thereof Tenant shall, together with such request
for consent thereto, inform Landlord of the rental and any
other amounts to be paid by such assignee or subtenant in
connection with such subletting or assignment regardless of
the nomenclature such payment may take, the term of any
subletting, and any financial information required or
requested by Landlord to make the determination required by
the first sentence of this Paragraph 10(b). Landlord shall
have the right to terminate this Lease in lieu of consenting
or reasonably withholding its consent to the proposed
subletting or assignment, provided that Landlord shall
exercise such right within forty-five (45) days of its receipt
of Tenant's request for such consent and provided, further,
that Tenant shall have the right to withdraw its request for
such consent within fifteen (15) days after its receipt of
such notice from Landlord, in which event such notice of
termination shall become null and void. If this Lease shall
be terminated pursuant to the provisions of the immediately
preceding sentence, such termination shall become effective
upon the last day of the calendar month next following
Landlord's giving said notice of termination.
(c) If Landlord consents in writing to an assignment or
subletting, such consent shall be deemed conditioned upon
Tenant's compliance with the following provisions and the
failure to so comply shall be deemed to give Landlord
reasonable cause for withholding or withdrawing its consent:
(1) The assignment or subletting must be,
respectively, of all Tenant's leasehold interest or of
the entire Premises and, in the case of an assignment,
shall also transfer to the assignee all of Tenant's
rights in and interests under this Lease, including but
without limitation, the Security Deposit hereunder.
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(2) At the time of such assignment or subletting, this
Lease must be in full force and effect without any
breach or default hereunder on the part of Tenant.
(3) The assignee or sublessee shall assume, by written
recordable instrument, in form and content satisfactory
to Landlord, the due performance of all Tenant's
obligations under this Lease, including any accrued
obligations at the time of the assignment or
subletting.
(4) A copy of the assignment or sublease and the
original assumption agreement (both in form and content
satisfactory to Landlord) fully executed and acknowledged
by the assignee or sublessee, together with a certified
copy of a properly executed corporate resolution
authorizing such assumption agreement, shall be received
by Landlord within ten (10) days from the effective date
of such assignment or subletting.
(5) Such assignment or subletting shall be upon and
subject to all the provisions, terms, covenants and
conditions of this Lease including but without limitation
the use permitted hereby and Tenant (and any assignee(s),
subtenant(s) and guarantor(s) of this Lease) shall
continue to be and remain primarily and unconditionally
liable hereunder.
(6) Tenant shall reimburse Landlord for Landlord's
attorneys' fees for examination of and/or preparation of
any documents in connection with such assignment or
subletting.
(7) Any rent, sum or other consideration to be paid or
given in connection with such sublease or assignment,
either initially or over time, in excess of the Annual
Rent and/or Additional Rent and/or other charges to be
paid under this Lease shall be paid directly to
Landlord as if such amount were originally called for
by the terms of this Lease as Additional Rent and
Tenant shall be liable to Landlord for all such
amounts.
(d) Subject to the enumerated conditions of the preceding
Paragraph 10(c), Landlord hereby consents to the assignment or
subletting of the entire Premises to a corporation which is a
wholly owned subsidiary of Tenant, or to a company that owns
one hundred percent (100%) of all the issued and outstanding
capital stock of Tenant. Notwithstanding any such assignment
or subletting as provided in this Paragraph 10(d), such
assignment or subletting shall be upon and subject to all the
provisions, terms, covenants and conditions of this Lease and
Tenant (and any assignee(s), subtenant(s) and guarantor(s) of
this Lease) shall continue to be and remain liable hereunder.
11. Alterations. Tenant shall not modify the leasehold
improvements or make any alterations to the Premises without
first obtaining Landlord's prior written approval of such
modifications and alterations; provided, however, Landlord
shall not unreasonably withhold its consent to nonstructural
alterations of the Premises.
12. Trash Removal. Tenant shall be responsible for the removal
of its own trash, rubbish, garbage and refuse removal, at
its sole cost and expense. Tenant shall not permit the
accumulation of rubbish, trash, garbage and other refuse in
and around the Premises. No rubbish, trash, garbage or
other refuse shall be burned by Tenant in the Premises or
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elsewhere in the Building or Lot and all of the same shall
be kept in suitable containers in the interior of the
Premises (or in locations outside the Premises as Landlord
may permit by notice in writing) until the same is picked up
from the Premises and the Building and/or Lot. The removal
agency selected by Tenant shall be subject to Landlord's
reasonable approval. In the event Tenant fails to remove
any accumulation of rubbish within twenty-four (24) hours
after notice from Landlord to remove the same, Landlord
shall have the right (but not the obligation) to remove the
same, in which event the cost thereof shall be paid by
Tenant as Additional Rent immediately upon demand.
13. Mechanic's Liens. Tenant will not permit to be created or
to remain undischarged any lien, encumbrance or charge arising
out of any work of any contractor, mechanic, laborer or
materialman or any mortgage, conditional sale, security
agreement or chattel mortgage, or otherwise which might be or
become a lien or encumbrance or charge upon the Premises or
any part thereof or the income therefrom, and Tenant will not
suffer any other matter or thing whereby the estate, rights
and interest of Landlord in the Premises or any part thereof
might be impaired. If any lien on account of an alleged debt
of Tenant or any notice of contract by a party engaged by
Tenant or Tenant's contractor to work on the Premises shall be
filed against the Premises, Building or Lot, or any part
thereof, within ten (10) days after notice of the filing
thereof Tenant shall cause the same to be discharged of record
by payment or bond. If Tenant shall fail to cause such lien
to be discharged within the period aforesaid then, in addition
to any other right or remedy, Landlord may, but shall not be
obligated to, discharge the same either by paying the amounts
claimed to be due or by procuring the discharge of such lien
by deposit or by bonding proceedings, and in any such event
Landlord shall be entitled to compel the prosecution of an
action for the foreclosure of such lien by the lienor or to
pay the amount of the judgment in favor of the lienor with
interest, costs and allowances. Any amount so paid by
Landlord and all costs and expenses, including without
limitation reasonable attorneys fees, incurred by Landlord in
connection therewith, together with interest thereon at the
rate specified in Paragraph 19(d) from the respective dates of
Landlord's making of the payment or incurring of the cost and
expense, shall constitute Additional Rent payable by Tenant
under this Lease and shall be paid by Tenant to Landlord
immediately upon demand.
14. Access to Premises. Landlord shall have free access to the
Premises at all reasonable time (and in case of emergency at
any time) for the purpose of examining the same or making
such repairs, alterations, additions or improvements to the
Premises, or the Building of which the Premises are a part,
that Landlord may deem necessary or which Tenant has failed
to do (but nothing in this Paragraph shall obligate Landlord
to make any such repairs, alterations, additions or
improvements) and also for the purpose of exhibiting the
Premises and putting up notices "To Rent," or "For Sale",
which notices shall not be removed, obliterated or hidden by
Tenant. No forcible entry shall be made by Landlord unless
such entry shall be reasonably necessary to prevent injury,
loss or damage to persons or property, and Landlord shall
repair any damage to property occasioned thereby. Landlord
shall repair any damage to property of Tenant or anyone
claiming under Tenant caused by or resulting from Landlord's
making any such repairs, alterations, additions or
improvements except only such damage as shall result from
the entry to the Premises and/or the making of such repairs,
alterations, additions or improvements which Landlord shall
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make as a result of an emergency or the default, negligence,
fault or willful misconduct of Tenant or anyone claiming
under or through Tenant. No action of Landlord pursuant to
this Paragraph shall be deemed an eviction or disturbance of
Tenant nor shall Tenant be allowed any abatement of rent or
damages for any injury or inconvenience occasioned thereby.
15. Removal of Improvements. Except as otherwise hereinafter
provided, all trade fixtures, furniture, furnishings and signs
installed in the Premises by Tenant and paid for by it shall
remain the property of Tenant and shall be removed by Tenant
upon the expiration of the Term of this Lease or its earlier
termination, provided (a) that any of such items as are
affixed to the Premises and require severance may be removed
only if Tenant shall repair any damage caused by such removal,
(b) that Tenant shall have fully performed all of the
covenants and agreements to be performed by it under the
provisions of this Lease, and (c) that Tenant shall comply
with the last sentence of this Paragraph. If the Tenant fails
to remove such items from the Premises prior to the expiration
of this Lease or earlier termination hereof, all such trade
fixtures, furniture, furnishings and signs shall become the
property of the Landlord. All lighting fixtures, heating and
cooling equipment and all other installations, alterations,
additions and improvements of a fixed nature to the Premises
shall be and remain the property of Landlord on the ending of
the Term hereof or any earlier termination of this Lease and
shall not be removed from the Premises.
16. Tenant's Insurance Obligation. Tenant shall carry public
liability insurance in a company or companies licensed to do
business in the state in which the Premises are located and
reasonably approved by Landlord. Said insurance shall be in
minimum amounts reasonably required by Landlord from time to
time by notice to Tenant and shall name Landlord as an
additional insured, as its interests may appear, and Tenant
shall provide Landlord with evidence, when requested, that
such insurance is in full force and effect. Tenant shall
carry property damage insurance for all of its equipment and
for all leasehold improvements above the building standard
which are made by Landlord or Tenant in and to the Premises,
which policies shall name Landlord as an additional insured.
If required by Landlord, receipts evidencing payment for said
insurance shall be delivered to Landlord at least annually by
Tenant and each policy shall contain an endorsement that will
prohibit its cancellation or amendment prior to the expiration
of thirty (30) days after notice of such proposed cancellation
or amendment to Landlord. Tenant shall carry insurance in the
initial amounts listed in the Basic Data and shall provide
Landlord with certificates of such Tenant Insurance
Requirements on or prior to the Commencement Date.
17. Repairs by Landlord. Landlord agrees to make all necessary
repairs or alterations to the foundation, roof and
structural parts of the exterior walls of the Premises.
Notwithstanding the foregoing, if any of said repairs or
alterations shall be made necessary by reason of repairs,
installations, alterations, additions or improvements made
by Tenant or anyone claiming under or through Tenant, by
reason of the default, negligence, fault, or willful
misconduct of such party, or by reason of a default in the
performance or observance of any agreements, conditions or
other provisions on the part of Tenant to be performed or
observed, or by reason of any special use to which the
Premises may be put, Tenant shall be liable for the cost of
all such repairs or alterations as may be necessary.
Landlord shall not be deemed to have committed a breach of
any obligation to make repairs or alterations or perform any
other act unless (a) it shall have made such repairs or
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alterations or performed such other act negligently, or (b)
it shall have received notice from Tenant designating the
particular repairs or alterations needed or the other act of
which there has been failure of performance and Landlord
shall have failed to make such repairs or alterations or
performed such other act within a reasonable time after the
receipt of such notice; and in the latter event Landlord's
liability shall be limited to the cost of making such
repairs or alterations or performing such other act. As
used in this Lease, the expression "exterior walls of the
Premises" does not include glass, windows, doors or door
frames, or window sashes or frames. Landlord shall make all
necessary repairs to the common areas and shall maintain
such common areas (except sidewalks abutting the Premises)
reasonably clear of litter and shall perform snow handling
to the extent required for business operations of the
Building. The provisions of this Paragraph shall not apply
in the case of damage or destruction by fire or other
casualty or by eminent domain, in which events the
obligations of Landlord shall be controlled by Paragraph 18
hereof.
18. Damage or Destruction by Eminent Domain, Fire or Casualty.
(a) In the event that the Premises and/or Building and/or
Lot, or any material part thereof, shall be taken by any
public authority or for any public use, or shall be destroyed
or damaged by fire or casualty, or by the action of any public
authority, then this Lease may be terminated at the election
of Landlord. Such election shall be made by the giving of
written notice by Landlord to Tenant within thirty (30) days
after the right of election accrues. If by such taking Tenant
is deprived of the use of more than thirty percent (30%) of
the Square Footage of the Premises, or if by such fire or
other casualty more than thirty percent (30%) of the Square
Footage of the Premises shall be rendered untenable, and if
Landlord does not within a reasonable time after notice from
Tenant commence and diligently pursue to rebuild or repair,
Tenant may at its option terminate this Lease by notice in
writing to Landlord within thirty (30) days after the date of
such damage or destruction, or within thirty (30) days after
it has received notice of such taking, as the case may be. If
either Landlord or Tenant exercises such option, this Lease
shall terminate on the date designated in its notice of
termination, which shall be not less than thirty (30) nor more
than forty-five (45) days after the date of such notice.
(b) If this Lease is not terminated pursuant to the
provisions of Paragraph 18(a) above, this Lease shall
continue in full force and effect and a just proportion of
the Annual Rent shall be suspended or abated until the
Premises shall be put by Landlord in proper condition for
use, which Landlord covenants to do with reasonable
diligence and to the extent permitted by the net proceeds of
insurance recovered or damages awarded for such destruction
or taking, and subject to zoning and building laws then in
existence. "Net proceeds of insurance recovered or damaged
awarded" refers to the gross amount of such insurance or
award less the reasonable expenses of Landlord in connection
with the collection of same, including without limitations,
reasonable fees and expenses for legal and appraisal
services. In the case of a taking which permanently reduces
the Square Footage of the Premises, the rent shall be abated
for the remainder of the Term in proportion to the amount by
which the Square Footage has been reduced.
(c) Irrespective of the form in which recovery may be had
by law, all rights to damages or compensation shall belong to
Landlord in all cases, except for damages to Tenant's
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fixtures, property or equipment, and for damages, if any,
separately awarded for relocation expenses and business
interruption, provided that none of the same shall reduce the
damages or compensation which Landlord would otherwise
recover.
19. Tenant's Default.
(a) Events of Default. The following shall be "Events of
Default" under this Lease:
(i) If Tenant shall fail to pay any monthly
installment of Annual Rent or Additional Rent when due,
and such default shall continue for ten (10) days after
written notice from Landlord; provided that no such
notice shall be required if Tenant has received a
similar notice within three hundred sixty-five (365)
days prior to such violation or failure;
(ii) If Tenant shall fail to timely make any other
payment required under this Lease and such default shall
continue for ten (10) days after written notice from
Landlord; provided that no such notice shall be required
if Tenant has received a similar notice within three
hundred sixty-five (365) days prior to such violation or
failure;
(iii) If Tenant shall violate or fail to perform any
of the other terms, conditions, covenants or agreements
herein made by Tenant, if such violation or failure
continues for a period of thirty (30) days after
Landlord's written notice thereof to Tenant; provided
that no such notice shall be required if Tenant has
received a notice concerning the same matter within three
hundred sixty-five (365) days prior to such violation or
failure;
(iv) Tenant's becoming insolvent, as that term is
defined in Title 11 of the United States Code, entitled
Bankruptcy, 11 U.S.C. Section 101 et. seq. (the
"Bankruptcy Code"), or under the insolvency laws of any
State, District, Commonwealth or Territory of the United
States (the "Insolvency Laws");
(v) the appointment of a receiver or custodian for all
or a substantial portion of Tenant's property or
assets, or the institution of a foreclosure action upon
all or a substantial portion of Tenant's real or
personal property;
(vi) the filing of a voluntary petition under the
provisions of the Bankruptcy Code or Insolvency Laws;
(vii) the filing of an involuntary petition against
Tenant as the subject debtor under the Bankruptcy Code or
Insolvency Laws, which is either not dismissed within
sixty (60) days of filing, or results in the issuance of
an order for relief against the debtor, whichever is
earlier;
(viii) Tenant's making or consenting to an assignment
for the benefit of creditors or a common law
composition of creditors; or
(ix) Tenant's interest in this Lease being taken on
execution in any action against the Tenant.
(b) Landlord's Remedies. Should an Event of Default occur
under this Lease, Landlord may pursue any or all of the
following remedies:
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(i) Termination of Lease. Landlord may terminate this
Lease by giving written notice of such termination to
Tenant whereupon the mailing of such notice of
termination addressed to Tenant, with or without notice
or demand, this Lease shall automatically cease and
terminate and Tenant shall be immediately obligated to
quit the Premises. Termination by notice as provided
herein shall be effective and complete upon the mailing
of notice and shall require no further action on the
part of Landlord including, without limitation, resort
to legal process under applicable law. Any other
notice to quit or notice of Landlord's intention to
reenter the Premises is hereby expressly waived. If
Landlord elects to terminate this Lease, everything
contained in this Lease on the part of Landlord to be
done and performed shall cease without prejudice,
subject, however, to the right of Landlord to recover
from Tenant all Annual Rent and Additional Rent and any
other sums accrued up to the time of termination or
recovery of possession by Landlord, whichever is later.
(ii) Suit for Possession. Landlord may proceed to
recover possession of the Premises under and by virtue of
the provisions of the laws of the state in which the
Premises are located or by such other proceedings,
including reentry and possession, as may be applicable.
(iii) Reletting of Premises. Should this Lease be
terminated before the expiration of the Term of this
Lease by reason of Tenant's default as hereinabove
provided, or if Tenant shall abandon or vacate the
Premises before the expiration or termination of the Term
of this Lease without having paid the full rental for the
remainder of such Term, Landlord shall have the option,
but not the obligation, to relet the Premises for such
rent and upon such terms as are not unreasonable under
the circumstances and, if the full Annual Rent and
Additional Rent reserved under this Lease (and any of the
costs, expenses or damages indicated below) shall not be
realized by Landlord, Tenant shall be liable for all
damages sustained by Landlord, including, without
limitation, deficiency in rent, reasonable attorneys'
fees, brokerage fees and expenses of placing the Premises
equal to that of the time of Lease execution. Landlord,
in putting the Premises in good order or preparing the
same for rerental may, at Landlord's option, make such
alterations, repairs or replacements in the Premises as
Landlord, in its sole judgment, considers advisable and
necessary for the purpose of reletting the Premises, and
the making of such alterations, repairs, or replacements
shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no
event be liable in any way whatsoever for failure to
relet the Premises, or in the event that the Premises are
relet, for failure to collect the rent under such
reletting, and in no event shall Tenant be entitled to
receive the excess, if any, of such net rent collected
over the sums payable by Tenant to Landlord hereunder.
(iv) Acceleration of Payment. If Tenant shall fail to
pay any monthly installment of Annual Rent and/or
Additional Rent pursuant to the terms of this Lease,
within ten (10) days of the date when each such payment
is due, for three (3) consecutive months, or three (3)
times in any period of twelve (12) consecutive months,
then Landlord may, by giving written notice to Tenant,
exercise any of the following options: (A) declare the
rent reserved under this Lease for the next six (6)
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months (or at Landlord's option for a lesser period) to
be due and payable within ten (10) days of such notice;
or (B) require an additional security deposit to be
paid to Landlord within ten (10) days of such notice in
an amount not to exceed six (6) months rent. Landlord
may invoke any of the options provided for herein at
any time during which an Event of Default remains
uncured.
(v) Monetary Damages. Any damage or loss of rent
sustained by Landlord may be recovered by Landlord, at
Landlord's option, at the time of the reletting, or in
separate actions, from time to time, as said damage shall
have been made more easily ascertainable by successive
relettings, or at Landlord's option in a single
proceeding deferred until the expiration of the Term of
this Lease (in which event Tenant hereby agrees that the
cause of action shall not be deemed to have accrued until
the date of expiration of said Term) or in a single
proceeding prior to either the time or reletting or the
expiration of the Term of this Lease. In addition,
should it be necessary for Landlord to employ legal
counsel to enforce any of the provisions herein
contained, Tenant agrees to pay all attorney's fees and
court costs reasonably incurred.
(vi) Anticipatory Breach; Cumulative Remedies.
Nothing contained herein shall prevent the enforcement
of any claim Landlord may have against Tenant for
anticipatory breach of the unexpired Term of this
Lease. In the event of a breach or anticipatory breach
by Tenant of any of the covenants or provisions hereof,
Landlord shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity
as if reentry, summary proceedings and other remedies
were not provided for herein. Mention in this Lease of
any particular remedy shall not preclude Landlord from
any other remedy, in law or in equity, whether or not
mentioned herein. Landlord's election to pursue one or
more remedies, whether as set forth herein or
otherwise, shall not bar Landlord from seeking any
other or additional remedies at any time and in no
event shall Landlord ever be deemed to have elected one
or more remedies to the exclusion of any other remedy
or remedies. Any and all rights and remedies that
Landlord may have under this Lease, and at law and in
equity, shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of
all such rights and remedies may be exercised at the
same time insofar as permitted by law. Tenant hereby
expressly waives any and all rights of redemption
granted by or under any present or future laws in the
event of Tenant being evicted or dispossessed for any
cause, or in the event of Landlord obtaining possession
of the Premises, by reason of the violation by Tenant
of any of the covenants and conditions of this Lease,
or otherwise.
(c) Waiver. If, under the provisions hereof, Landlord
shall institute proceedings against Tenant and a compromise or
settlement thereof shall be made, the same shall not
constitute a waiver of any other covenant, condition or
agreement herein contained, nor of any of Landlord's rights
hereunder. No waiver by Landlord of any breach of any
covenant, condition or agreement herein contained shall
operate as a waiver of such covenant, condition, or agreement
itself, or of any subsequent breach thereof. No payment by
Tenant or receipt by Landlord of a lesser amount than the
monthly installments of rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated rent,
nor shall any endorsement or statement on
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any check or letter accompanying a check for payment of Annual
Rent, Additional Rent or any other sum be deemed an accord and
satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance
of such Annual Rent, Additional Rent or any other sum or so
pursue any other remedy provided in this Lease. No reentry by
Landlord, and no acceptance by Landlord of keys from Tenant,
shall be considered an acceptance of a surrender of the Lease
or Premises.
(d) Right of Landlord to Cure Tenant's Default. If Tenant
defaults in the making of any payment or in the doing of any
act herein required to be made or done by Tenant, then
Landlord may, but shall not be required to, make such
payment or do such act, and charge the amount of the expense
thereof, if made or done by Landlord, with interest thereon
at the rate per annum which is four percent (4%) greater
than the "base lending rate" then in effect at The First
National Bank of Boston, Boston, Massachusetts, or the
highest rate permitted by law, whichever may be less; with
it being the express intent of the parties that nothing
herein contained shall be construed or implemented in such a
manner as to allow Landlord to charge or receive interest in
excess of the maximum legal rate then allowed by law. Such
payment and interest shall constitute Additional Rent
hereunder due and payable with the next monthly installment
of Annual Rent; but the making of such payment or the taking
of such action by Landlord shall not operate to cure such
default or to stop Landlord from the pursuit of any remedy
to which Landlord would otherwise be entitled.
(e) Late Payment. If Tenant fails to pay any installment
of Annual Rent and/or Additional Rent within ten (10) days
after the first (1st) day of the calendar month when such
installment becomes due and payable, Tenant shall pay to
Landlord a late charge of five percent (5%) of the amount of
such installment, and, in addition, such unpaid installment
shall bear interest at the rate per annum which is four
percent (4%) greater than the "base lending rate" then in
effect at The First National Bank of Boston, Boston,
Massachusetts, or the highest rate permitted by law, whichever
may be less; with it being the express intent of the parties
that nothing herein contained shall be construed or
implemented in such manner as to allow Landlord to charge or
receive interest in excess of the maximum legal rate then
allowed by law. Such late charge and interest shall
constitute Additional Rent hereunder due and payable with the
next monthly installment of Annual Rent due, or if payments
have been accelerated pursuant to this Paragraph 19, due and
payable immediately.
(f) Lien on Personal Property. Landlord shall have a lien
upon all the personal property of Tenant moved into the
Premises, as and for security for the Annual Rent,
Additional Rent and other obligations of Tenant herein
provided. In order to perfect and enforce said lien,
Landlord may, at any time after default by Tenant in the
payment of Annual Rent, Additional Rent or default of other
obligations to be performed or complied with by Tenant under
this Lease, seize and take possession of any and all
personal property belonging to Tenant that may be found in
and upon the Premises. If Tenant fails to redeem the
property so seized, by payment of whatever sum may be due
Landlord under and by virtue of the provisions of this
Lease, then and in that event, Landlord shall have the
right, after twenty (20) days written notice to Tenant of
its intention to do so, to sell such personal property so
seized at public or private sale and upon such terms and
conditions as to Landlord may appear advantageous, and after
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the payment of all proper charges incident to such sale,
apply the proceeds thereof to the payment of any balance due
to Landlord on account of Annual Rent, Additional Rent or
other obligations of Tenant pursuant to this Lease. In the
event there shall then remain in the hands of Landlord any
balance realized from the sale of said personal property as
aforesaid, the same shall be held by Landlord as additional
Security Deposit. The exercise of the foregoing remedy by
Landlord shall not relieve or discharge Tenant from any
deficiency owed to Landlord which Landlord has the right to
enforce pursuant to any other provisions of this Lease.
20. Liability of Landlord; Indemnification.
(a) Landlord shall not be liable to Tenant, its employees,
agents, contractors, business invitees, licensees,
customers, clients, family members or guests for any damage,
compensation or claim arising from (i) the necessity of
repairing any portion of the Premises, Building or Lot, (ii)
the interruption in the use of the Premises, (iii) accident
or damage to persons or property resulting from the use or
operation (by Landlord, Tenant, or any other person or
persons whatsoever) of the Premises or of any elevators or
heating, cooling, electrical or plumbing equipment or
apparatus in the Premises or Building, (iv) the termination
of this Lease by reason of the destruction of the Premises,
(v) any fire, robbery, theft, mysterious disappearance
and/or any other casualty, (vi) any leakage in any part or
portion of the Premises or the Building, or from water, rain
or snow that may leak into, or flow from, any part of the
Premises or the Building, or from drains, pipes or plumbing
work in the Building, or from any other cause whatsoever, or
(vii) for any personal injury arising from the use,
occupancy and condition of the Premises, unless such
personal injury is caused by the gross negligence of
Landlord, or a willful act or failure to act on the part of
Landlord. Tenant shall not be entitled to any abatement or
diminution of rent as a result of any of the foregoing
occurrences, nor shall the same release Tenant from its
obligations hereunder or constitute an eviction. Any goods,
property or personal effects of Tenant, its employees,
agents, contractors, business invitees, licensees,
customers, clients, family members or guests, stored or
placed in or about the Premises, Building or Lot shall be at
their risk, and the Landlord shall not in any manner be held
responsible therefor. The employees of the Landlord are
prohibited from receiving any packages or other articles
delivered to the Building by Tenant. Tenant acknowledges
that Landlord will not carry insurance on Tenant's
furniture, furnishings, fixtures, equipment and/or
improvements in or to the Premises and Tenant shall have
full responsibility therefor and shall bear the full risk of
loss thereto. It is expressly understood and agreed that
Tenant shall look to its business interruption and property
damage insurance policies, and not to Landlord or its agents
or employees, for reimbursement for any damages or losses
incurred as a result of any of the foregoing occurrences,
other than clause (a)(vii) above, and that said policies
shall contain waiver of subrogation clauses.
(b) If Landlord shall fail to perform any covenant, term or
condition of this Lease upon Landlord's part to be performed
or be guilty of negligence with regard to any party claiming
by, under or through Tenant and, as a consequence of such
default or negligence, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out
of the proceeds of sale received upon execution of such
judgment and levy thereof against the right, title and
interest of Landlord in the Premises, Building and Lot, and
neither Landlord nor any of the partners designated herein
as Landlord comprising any partnership designated herein as
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Landlord or any trustees or beneficiaries designated herein
as Landlord shall be personally liable for any judgment
rendered against Landlord or any deficiency thereunder,
except as provided below. It is agreed that in no event
shall Tenant have any right to levy execution against any
property of Landlord other than its interest in the
Premises, Building and Lot and the rents or other income
therefrom as hereinbefore expressly provided, except as
provided below. In the event of sale or other transfer of
Landlord's right, title and interest in the Premises,
Building and Lot, or in the event that Landlord's interest
in the Premises is worth less than One Million and 00/100
($1,000,000.00) Dollars then Landlord shall be liable to the
Tenant for a sum not to exceed One Million and 00/100
($1,000,000.00) Dollars and, Landlord shall be released from
all liability and obligations hereunder in excess thereof.
If all or any part of Landlord's interest in this Lease
shall be held by a trust, no trustee, shareholder or
beneficiary of such trust shall be personally liable for any
of the covenants or agreements, expressed or implied,
hereunder. IN NO EVENT SHALL LANDLORD EVER BE PERSONALLY
LIABLE TO TENANT OR ANYONE CLAIMING BY, UNDER OR THROUGH
TENANT FOR CONSEQUENTIAL DAMAGES, SUCH DAMAGES OR CLAIMS
THEREFOR BEING HEREBY EXPRESSLY WAIVED BY TENANT.
(c) Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any cost, damage, claim, liability
or expense (including attorney's fees) incurred by or claimed
against Landlord, directly or indirectly, which is occasioned
by or results from any default hereunder or any willful or
negligent act or omission on the part of Tenant, its agents,
employees, contractors, invitees, licensees, customers,
clients, family members and guests, or as a result of or in
any way arising from Tenant's use and occupancy of the
Premises, Building and/or Lot or in any other manner which
relates to the business of Tenant. Any such cost, damage,
claim, liability or expense incurred by Landlord for which
Tenant is obligated to reimburse Landlord shall be deemed
Additional Rent due and payable as Additional Rent upon demand
by Landlord. It is expressly understood and agreed that
Tenant's liability under this Lease extends to the acts and
omissions of any subtenant or assignee and any agent,
employee, contractor, invitee, licensee, customer, client,
family member and guest of any subtenant or assignee.
21. Lease Not to be Recorded. Tenant agrees that it will not
record this Lease. Both parties shall, upon the request of
either, execute and deliver a notice or short form of this
Lease in such form, if any, as may be permitted by applicable
statute. If this Lease is terminated before the Term expires,
the parties shall execute, deliver and record an instrument
acknowledging such fact and the actual date of termination of
this Lease, and Tenant hereby appoints Landlord its
attorney-in-fact in its name and on its behalf to execute and
record such instrument, such appointment being coupled with an
interest and irrevocable.
22. Severability. It is agreed that if any provision of this
Lease shall be determined to be void by any court of competent
jurisdiction, then such determination shall not affect any
other provisions of this Lease, all of which other provisions
shall remain in full force and effect; and it is the intention
of the parties that if a provision of this Lease is capable of
two constructions, one of which would render the provision
void and the other of which would render the provision valid,
then the provision shall have the meaning which renders it
valid.
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23. Delays. In any case where either party hereto is required
to do any act, other than the payment of money including
without limitation Annual Rent and Additional Rent, and is
delayed in so doing by reason of or resulting from an Act of
God, war, civil commotion, fire or other casualty, labor
difficulties, shortages of labor, materials or equipment,
government regulations or other causes beyond such party's
reasonable control, such period of time shall not be counted
in determining the time during which such work or act shall be
completed, whether such time shall be designated by a fixed
date, a fixed time or "a reasonable time".
24. Estoppel Certificates. Tenant and Landlord each agree from
time to time, upon not less than fifteen (15) days prior
written request, to execute, acknowledge and deliver to the
other a statement in writing certifying that this Lease is
unmodified and in full force and effect, or if modified,
stating the modifications; that the requested party has no
defenses, offsets or counterclaims against its obligations
under this Lease (including Tenant's obligation to pay
Annual Rent and Additional Rent) or, if there are any
defenses, offsets, or counterclaims, setting them forth in
reasonable detail; and setting forth the dates to which the
Annual Rent and Additional Rent and other charges have been
paid. Any such statement delivered pursuant to this
paragraph may be relied upon by any prospective purchaser or
mortgagee of the Premises, Building and/or Lot, or any
prospective assignee of any such mortgage, or any
prospective assignee of this Lease, or any other similarly
interested party.
25. Waiver of Subrogation. Tenant and Landlord each hereby
release the other to the extent of their respective insurance
coverage, from any and all liability for any loss or damage
caused by fire or any of the extended coverage casualties or
any other casualty insured against, even if such fire or other
casualty shall be brought about by the fault or negligence of
Tenant, Landlord or their agents. Tenant and Landlord agree
that their respective policies covering such loss or damage
shall contain a clause to the effect that this release shall
not affect said policies or the right of Tenant or Landlord,
as the case may be, to recover thereunder and otherwise
acknowledging this mutual waiver of subrogation.
26. Waiver. No waiver of any condition or legal right or remedy
shall be implied by the failure of Landlord to declare a
forfeiture, or any other reasons, and no waiver of any
condition or covenant shall be valid unless it be in writing
signed by Landlord. No waiver by Landlord in respect to one
tenant of the Building or Lot shall constitute a waiver in
favor of any other tenant, nor shall the waiver or a breach
of any condition or covenant be claimed or pleaded to excuse
a future breach of the same condition or covenant. The
mention in this Lease of any specific right or remedy shall
not preclude Landlord from exercising any other right or
from having any other remedy or from maintaining any action
to which it may be otherwise entitled either at law or in
equity; and for the purpose of any suit by Landlord brought
or based on this Lease, this Lease shall be construed to be
a divisible contract, to the end that successive actions may
be maintained as successive periodic sums shall mature under
this Lease. It is further agreed that failure to include in
any suit or action any sum or sums then matured shall not be
a bar to the maintenance of any suit or action for the
recovering of said sum or sums so omitted at a later time.
21
<PAGE>
27. Surrender and Holding Over. Tenant shall deliver up and
surrender to Landlord possession of the Premises upon the
expiration of the Term of this Lease or its earlier
termination in any way, broom clean and in as good condition
and repair as the same shall be at the commencement of said
Term (damage by fire and other perils covered by standard fire
and extended coverage insurance and ordinary wear and tear,
subject to Paragraph 9 of this Lease, only excepted), and
shall deliver the keys at the office of Landlord or Landlord's
agent. Should Tenant or any party claiming under Tenant
remain in possession of the Premises, or any part thereof,
after any termination of this Lease, no tenancy or interest in
the Premises shall result therefrom but such holding over
shall be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal, and Tenant shall
upon demand pay to Landlord, as liquidated damages, a sum
equal to double the Annual Rent, Additional Rent and any other
sums to be paid as specified herein for any period during
which Tenant shall hold the Premises after the stipulated Term
of this Lease may be terminated or have expired.
28. Lease Inures to Benefit of Successors and Assigns. Subject
to the provisions hereof, this Lease and all the terms,
covenants, provisions and conditions herein contained shall
inure to the benefit of and be binding upon their respective
successors and assigns including, without limitation, their
heirs, personal representative, debtor in possession,
trustee, custodian, receiver, or any similar functionary
serving in proceedings brought by or against Landlord or
Tenant (or their respective successors and assigns) under
the Bankruptcy Code (as now or hereafter in effect),
Insolvency Laws, or any similar laws relating to bankruptcy,
insolvency or the adjustment of debts, provided, however,
that no subletting or assignment by, from, through or under
Tenant in violation of the provisions hereof shall vest in
the subletees or assigns any right, title or interest
whatever.
29. Quiet Enjoyment. Landlord hereby covenants and agrees that
if Tenant shall perform all the covenants, agreements and
other provisions herein stipulated to be performed or
observed on Tenant's part, Tenant shall at all time during
the continuance hereof have the peaceable and quiet
enjoyment and possession of the Premises without any manner
of molestation or hindrance from Landlord or any person or
persons lawfully claiming under Landlord, subject, however,
to the terms of this Lease and any instruments having a
prior lien. The rights granted by this Paragraph are in
lieu of any other rights Tenant may have by statute or at
law. LANDLORD shall use its best efforts to obtain a Non-
Disturbance agreement from LANDLORD'S existing mortgagee.
30. No Partnership. Landlord does not, in any way or for any
purpose, become a partner of Tenant in the conduct of its
business, or otherwise, or joint venturer or a member of a
joint enterprise with Tenant.
31. Notices. Any notice or consent required to be given by or
on behalf of either party to the other shall be in writing and
shall be given by mailing such notice or consent by registered
or certified mail, return receipt requested, postage prepaid,
addressed, if to Landlord, at the address hereinabove
specified, and, if to Tenant, at the address hereinabove
specified if prior to the Commencement Date and thereafter to
the Premises, or at such other address as may be specified
from time to time in writing sent to the other party by like
notice. Notices so given shall be deemed to be given and
effective at the time they are received or three (3) days
after deposit with the United States Postal Service, whichever
is earlier.
22
<PAGE>
32. Interpretation. Wherever either the word "Landlord" or
"Tenant" is used in this Lease, it shall be considered as
meaning the parties respectively, wherever the context permits
or requires, and when the singular and/or neuter pronouns are
used herein, the same shall be construed as including all
persons and corporations designated respectively as Landlord
or Tenant in this instrument wherever the context requires.
33. Paragraph Headings. The paragraph headings are inserted
only as a matter of convenience and for reference and in no
way define, limit or describe the scope or intent of this
Lease nor in any way affect this Lease.
34. Broker's Commissions. Tenant warrants that other than
Robert Conrad of The Conrad Group, there are no claims for
broker's commission or finder's fees in connection with its
execution of this Lease or the tenancy hereby created and
agrees to indemnify and save Landlord harmless from any
liability that may arise from such claim, including
reasonable attorneys fees.
35. Interruption of Services. With respect to any services
furnished by Landlord to Tenant, Landlord shall in no event be
liable for failure to furnish the same when prevented from
doing so by strike, lockout, breakdown, accident, order or
regulation of or by any governmental authority, or failure of
supply, or inability by the exercise of reasonable diligence
to obtain supplies, parts or employees necessary to furnish
such services, or because of war or other emergency, or for
any cause beyond Landlord's reasonable control, or for any
cause due to any act or neglect of Tenant or its servants,
agents, employees, licensees or any person claiming by,
through or under Tenant, and in no event shall Landlord ever
be liable to Tenant for any indirect or consequential damages.
36. Subordination. Upon the written request of Landlord, Tenant
shall enter into a recordable agreement with the holder of
any present or future mortgage of the Premises, Building or
Lot which shall provide that (i) this Lease shall be
subordinated to such mortgage, (ii) in the event of
foreclosure of said mortgage or any other action thereunder
by the mortgagee, the mortgagee (and its successors in
interest) and Tenant shall be directly bound to each other
to perform the respective undischarged obligations of
Landlord and Tenant hereunder (in the case of Landlord
accruing after such foreclosure or other action and in the
case of Tenant whether accruing before or after such
foreclosure or other action), (iii) this Lease shall
continue in full force and effect, and (iv) Tenant's rights
hereunder shall not be disturbed, except as in this Lease
provided. The word "mortgage" as used herein includes
mortgages, deeds of trust and all similar instruments, all
modifications, extensions, renewals and replacements
thereof, and any and all assignments of the Landlord's
interest in this Lease given as collateral security for any
obligation of Landlord.
37. Modification. In the event that any holder or prospective
holder of any mortgage, as hereinbefore defined, which
includes the Premises as part of the mortgaged Premises, shall
request any modification of any of the provisions of this
Lease, other than a provision directly related to the Annual
Rent, Additional Rent or other sums payable hereunder, the
duration of the Term hereof, or the size, use or location of
the Premises, Tenant agrees that Tenant will enter into a
written agreement in recordable form with such holder or
prospective holder which shall effect such modification and
provide that such modification shall become effective and
binding upon Tenant and shall have the same
23
<PAGE>
force and effect as an amendment to this Lease in the event of
foreclosure or other similar action taken by such holder or
prospective holder or by anyone claiming by, through or under
such holder or prospective holder.
38. Multiple Parties. If Tenant shall consist of more than one
person or if there shall be a guarantor of Tenant's
obligations, then the liability of all such persons,
including the guarantor, if any, shall be joint and several.
39. Submission Not an Option. The submission of this Lease for
examination and negotiation does not constitute an offer to
lease, a reservation of, or option for the Premises and
shall vest no right in any party. Tenant or anyone claiming
under or through Tenant shall have the rights to the
Premises as set forth herein and this Lease becomes
effective as a Lease only upon execution, acknowledgement
and delivery thereof by Landlord and Tenant, regardless of
any written or verbal representation of any agent, manager
or employee of Landlord to the contrary.
40. Financial Information. It is hereby understood and agreed
that TENANT will supply to the LANDLORD, on a quarterly basis,
a copy of TENANT'S 10Q report within forty-five (45) days
following TENANT'S quarter end and on an annual basis, a copy
of TENANT'S 10K report within ninety (90) days following
TENANT'S year end. Any information obtained by LANDLORD
pursuant to the provisions of this Paragraph shall be treated
as confidential, except that LANDLORD may disclose such
information to its lenders.
41. Tenant's Right to Terminate. In the event Tenant is not in
material default of any of the terms, conditions and
covenants of this Lease and any Amendments made hereto,
during the Term hereof, beyond the expiration of any
applicable notice and grace periods ("material" for the
purpose of this Section 41 shall mean a failure at any one
time to pay two (2) months of Rent), Tenant shall have the
right to terminate this Lease after the fifth (5th) full
year of the Lease Term, subject to the following terms and
conditions:
(i) Tenant shall provide on or before the end of the forty-
fifth (45th) full month of the Lease Term written notice by
certified or registered mail exercising said termination
right (hereinafter known as "Termination Notice"); and (ii)
said Termination Notice shall be accompanied with a non-
refundable certified check in the amount of FIFTY THOUSAND
AND 00/100 Dollars, as payment for this early termination.
Notwithstanding the foregoing, in the event the Tenant
exercises the aforementioned termination right, Rent,
Additional Rent, and all other charges will be due and
payable until the later of (i) the date Tenant fully vacates
the Premises or (ii) the sixtieth (60th) full month of the
Lease Term.
42. Guaranty. One (1) Corporate Guaranty is attached hereto and
made a part hereof.
24
<PAGE>
43. Traffic Officer. Tenant shall pay to Landlord, in advance
of the first day of each month, Tenant's proportionate share
of the cost to Landlord, calculated in the same manner as
Tenant's proportionate share of the operating expenses, for
a traffic control police officer located at the entrance to
South Braintree Park, between the hours of 3:00 p.m. and
7:00 p.m., Monday through Friday (holidays excluded).
44. Entire Agreement. This Lease and the exhibits and any rider
attached hereto, set forth all the covenants, promises,
agreements conditions, representations and understandings
between Landlord and Tenant concerning the Premises and
there are no covenants, promises, agreements, conditions,
representations or understandings, either oral or written
between them other than those herein set forth and this
Lease expressly supersedes any proposals or other written
documents relating hereto. Except as herein otherwise
provided, no subsequent alteration, amendment, change or
addition to this Lease shall be binding upon Landlord and
Tenant unless reduced to writing and signed by them. Tenant
agrees that Landlord and its agents have made no
representations or promises with respect to the Premises, or
the Building of which the Premises are a part, or the Lot,
except as herein expressly set forth.
IN WITNESS WHEREOF, the Landlord and Tenant have caused this
Lease to be signed in triplicate, under seal, as of the day and
year first above written, one copy for Tenant and two copies to
Landlord.
Witness as to Landlord: Landlord: Thomas J. Flatley d/b/a
The Flatley Company
/s/ Mary P. XXXXXXX /s/ Thomas J. Flatley
- --------------------- -----------------------
By Thomas J. Flatley
Its President
Witness as to Tenant: Tenant: DataTrend, Inc.
/s/ Kerry A. Fazzina /s/ Mark A. Hanson
- --------------------- -----------------------
By
Its President
Duly Authorized
25
<PAGE>
GUARANTY
IN CONSIDERATION of the execution and delivery of the within
Lease dated the 27 day of October, 1995, by and between Thomas J.
Flatley d/b/a The Flatley Company, as Landlord, and DataTrend, Inc.,
as Tenant, the undersigned, Babystar, Inc., having its place of
business at 165 University Ave., Westwood, MA 02070, does hereby
guarantee, jointly and severally, to the Landlord, its successors and
assigns, in the event of a default by the Tenant in the within Lease,
the payment of rental reserved in the within Lease and the performance
by the Tenant of its covenants and agreements therein contained. This
Guaranty and the limits set forth herein, shall not limit the rights
of the Landlord as contained in the Lease in the event of any defaults
by Tenant.
The undersigned hereby expressly waives notice of all
defaults and agrees that the waiver of any rights by the Landlord
against the Tenant, arising out of defaults by the Tenant or
otherwise, shall not in any way modify or release the obligations
of the undersigned.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty
to be executed at Westwood, MA, this 27 day of
October, 1995.
Babystar, Inc.
/s/ Kerry A. Fazzina /s/ Mark A. Hanson
- ----------------------- ---------------------
Witness By:
Its: President
STATE OF Mass )
) SS.
COUNTY OF Norfolk )
October 27, 1995.
Then personally appeared Mark A. Hanson to me known
to be the individual who acknowledged himself to be the
President of Babystar, Inc., and that he, as such, being
authorized to do so, executed the foregoing instrument and
acknowledged the execution thereof to be his free act and deed
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal
at Norfolk County, Westwood, Mass, this 27 day of October, l995.
/s/ Helen M. Vess
---------------------------
Notary Public
My commission expires: April 29, 1999
26
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
October 27, 1995.
Then personally appeared Thomas J. Flatley to me known to be
the individual who acknowledged himself to be the President of
The Flatley Company, Landlord, and that he, as such, being
authorized to do so, executed the foregoing instrument and
acknowledged the execution thereof to be his free act and deed
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal
at Norfolk County, Braintree, Massachusetts, this 27th
day of October, l995.
/s/ Mary P. XXXXXXXXX
------------------------
Notary Public
My commission expires: August 29, 1997
STATE OF Mass )
) SS.
COUNTY OF Norfolk )
October 27, 1995.
Then personally appeared Mark A. Hanson to me known
to be the individual who acknowledged himself to be the President
of DataTrend, Inc., Tenant, and that he, as such, being authorized to
do so, executed the foregoing instrument and acknowledged the
execution thereof to be his free act and deed for the purposes therein
contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal
at Norfolk County, Westwood, Mass, this 27 day of October, l995.
/s/ Helen M. Vess
------------------------
Notary Public
My commission expires: April 29, 1999
27
<PAGE>
Exhibit "A"
Floor Plans
28
<PAGE>
Exhibit "B"
Landlord's Work
LANDLORD shall construct TENANT'S Premises in accordance with a
mutually agreed upon floor plan.
1. LANDLORD to supply and install a freight lift to access the
20' high mezzanine. The platform size to be of sufficient size
to accommodate two pallets and a weight load of 2,000 lbs. The
lift is to be enclosed with electrically interlocked gates on
both levels for safety. On the lower level the platform will be
recessed so as to allow level access to the platform.
2. LANDLORD to supply and install one (1) 2' x 6' ground sign
identifying the TENANT and to install the company's name on the
park directory.
3. LANDLORD to power wash and seal all the concrete flooring in
the warehouse.
29
<PAGE>
Exhibit No. 21.
Subsidiaries of the Company
Name State of Incorporation
- ---- ----------------------
Datatrend, Inc. Massachusetts
1515 Washington Street
Braintree, MA 02184
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 374,628
<SECURITIES> 0
<RECEIVABLES> 4,297,413
<ALLOWANCES> 0
<INVENTORY> 6,092,711
<CURRENT-ASSETS> 11,958,511
<PP&E> 331,767
<DEPRECIATION> 128,464
<TOTAL-ASSETS> 12,229,948
<CURRENT-LIABILITIES> 9,462,100
<BONDS> 0
0
0
<COMMON> 47,138
<OTHER-SE> 2,720,710
<TOTAL-LIABILITY-AND-EQUITY> 2,767,848
<SALES> 29,299,629
<TOTAL-REVENUES> 29,299,629
<CGS> 23,909,156
<TOTAL-COSTS> 4,932,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,194
<INCOME-PRETAX> 235,736
<INCOME-TAX> 46,580
<INCOME-CONTINUING> 189,156
<DISCONTINUED> 54,043
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 243,199
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
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