<PAGE> U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended: June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from:----------
Commission File No. 0-26288
CONTOUR MEDICAL, INC.
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(Exact Name of Registrant as Specified in its Charter)
NEVADA 77-0163521
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(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
6025 Shiloh Road, Alpharetta, Georgia 30005
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(Address of Principal Executive Offices, Including Zip Code)
Registrant's telephone number, including area code: (770) 886-2600
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
As of October 3, 1997, 8,215,543 shares of common stock were outstanding. The
aggregate market value of the common stock of the Registrant held by
nonaffiliates on that date was approximately $20,245,000.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
<PAGE>
PART I
ITEM 1. BUSINESS.
THE COMPANY
Contour Medical, Inc. and its subsidiaries (the "Company") distributes a
full line of disposable medical products, primarily for use by skilled nursing
facilities, home health agencies, sub-acute care hospitals, as well as by
other participants in the long-term and alternate care markets. The Company
carries out its business through six distribution centers located primarily
throughout the southeastern United States. The Company does operate one
distribution center in Portland, Oregon.
The Company also operates a subsidiary that provides Medicare Part B
billing services for clients, both under its own Medicare provider number and,
optionally, under its customer's provider number. Services for the latter are
done so on a fee-for-service basis. As a part of these billing services, the
Company provides Medicare reimbursable wound care products, enteral (tube-
feeding/nutritional) products, ostomy, colostomy and urological products, etc.
for qualified patients in its customers' skilled nursing facilities.
In 1994, the Company began manufacturing and marketing its "REDI NURSE
SYSTEM[TM]" product line, which provides custom packaged procedural trays for
use in clinics and nursing homes as well as by home health care nurses. The
Company also designs and fabricates disposable medical products for sports
medicine applications.
Beginning in 1995, the Company commenced distribution of medical supply
products to nursing home and retirement facilities owned, leased or managed by
Retirement Care Associates, Inc., the Company's majority shareholder. The
Company has now expanded this activity to other nursing home operators and
other health care providers.
In March 1996, the Company acquired AmeriDyne Corporation ("AmeriDyne"),
a bulk medical supply company based in Jackson, Tennessee. AmeriDyne
distributes supplies to hospitals, clinics, physicians, pharmacies, nursing
homes and other health care providers in Tennessee, Arkansas, Mississippi,
Alabama, Illinois, Texas, Kentucky, Missouri and Virginia.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. ("Atlantic Medical"), a distributor of
disposable medical supplies and a provider of third-party billing services to
the nursing home and home health care market in North Carolina, South
Carolina, Georgia, Florida and Alabama. At the time of this acquisition,
Atlantic Medical owned 80% of the outstanding shares of Facility Supply, Inc.
("Facility Supply"). Shortly after the acquisition of Atlantic Medical, the
Company acquired the remaining outstanding shares of Facility Supply not
previously owned by Atlantic Medical. These acquisitions were made effective
retroactively to July 1, 1996.
Until June 1997, the Company manufactured a full line of orthopedic care
and rehabilitation products in addition to a full line of disposable surgical
products. The orthopedic and rehabilitative products included pads and
positioning aids for x-rays, CAT scans, mammograms and MRI's; braces for
reconstructive rehabilitation after surgery; and finger spreaders, leg
spreaders and leg positioning devices to prevent atrophy and speed recovery
from surgery. Sterile and non-sterile products such as sponges, swabs,
instrument holders,
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equipment covers and drapes made up the Company's disposable product line. In
June 1997, the Company sold all the assets of its manufacturing operations
located in Grand Blanc, Michigan and St. Petersburg, Florida.
In August 1997, the Company's principal executive offices were moved to
6025 Shiloh Road, Alpharetta, Georgia 30005, and its new telephone number is
(770) 886-2600.
BACKGROUND
The Company was organized in the State of Nevada under the name Master
Acquisitions, Inc. in April 1987. Its name was changed to Best Acquisitions,
Inc. in March 1988, and in 1989, the Company conducted an initial public
offering as a "blank check" company seeking business opportunities. In 1991,
the Company's name was again changed to Associated Healthcare Industries, Inc.
("AHII"). The Company was a development stage company operating in the health
care industry prior to the acquisition of all of the issued and outstanding
stock of Contour Fabricators, Inc. and Contour Fabricators of Florida, Inc.
(The "Michigan and Florida Subsidiaries") in May 1993, as discussed below. In
connection with the acquisition of the stock of the Michigan and Florida
Subsidiaries, the Company's name was changed to Contour Medical, Inc. on June
30, 1993.
On May 14, 1993, effective as of January 1, 1993, the Company acquired
all of the issued and outstanding stock of the Michigan and Florida
Subsidiaries in exchange for the issuance of (I) 1,000,000 shares of the
Company's Class D Redeemable Preferred Stock and 666,666 Class D Warrants
(valued by the parties at $6,000,000); and (ii) 666,669 shares of the
Company's Class C Convertible Preferred Stock (valued by the parties at
$2,000,000). In April 1994, all Class D Redeemable Preferred Stock and Class
D Warrants were exchanged for shares of Class One Convertible Preferred Stock
and Common Stock.
On September 30, 1994, Retirement Care Associates, Inc. ("Retirement
Care") acquired 889,003 shares of the Company's outstanding Common Stock and
all 2,000,000 shares of the Company's Class One Convertible Preferred Stock
from three persons who were Officers and Directors of the Company.
Subsequently, Retirement Care converted the Class One Convertible Preferred
Stock into 2,100,000 shares of Common Stock. The Common Stock acquired by
Retirement Care in these transactions represented approximately 63% of the
Company's Common Stock outstanding after the completion of these transactions.
Retirement Care's beneficial ownership is currently 64.4%.
Retirement Care acquired the stock from William D. Gabriele, Rudolph J.
Dallessandro and Howard E. Hagon in exchange for shares of Retirement Care's
common and preferred stock. In connection with the exchange of shares,
Messrs. Gabriele, Dallessandro and Hagon each resigned as Officers and
Directors of the Company, and each resigned as employees within 90 days of the
closing. Following these resignations, three new Directors of the Company
selected by Retirement Care were elected. These three persons also serve as
directors of Retirement Care.
Retirement Care is a publicly-held company (listed on the New York Stock
Exchange) which is engaged in the management and operation of retirement care
and long-term nursing home facilities in the Southeastern United States.
Although Retirement Care now has three representatives on the Board of
Directors, it does not intend to take an active role in the day-to-day
management of the Company.
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<PAGE>
Beginning in 1995, the Company commenced distribution of medical supply
products to nursing home and retirement facilities owned, leased or managed by
Retirement Care. The Company has now expanded this activity to other nursing
home operators and other health care providers.
On March 1, 1996, the Company acquired AmeriDyne Corporation
("AmeriDyne") through a merger with a newly formed, wholly-owned subsidiary of
the Company. The Company issued 369,619 shares of its Common Stock and paid
$250,000 to Scott F. Lochridge, the sole shareholder of AmeriDyne, for his
shares of AmeriDyne in the merger. AmeriDyne is a bulk medical supply company
based in Jackson, Tennessee with annual sales of approximately $10 million at
the time of acquisition. Scott F. Lochridge has continued his employment with
the Company in various positions. The shares issued to Mr. Lochridge in the
merger represent approximately 7.1% of the shares of the Company's Common
Stock outstanding after the transaction.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. ("Atlantic Medical"), a distributor of
disposable medical supplies and a provider of third-party billing services to
the nursing home and home health care markets. The acquisition was made
effective retroactively to July 1, 1996. The Company paid $1,400,000 in cash
and promissory notes totaling (the "Atlantic Notes") totaling $10,500,000 for
the stock of Atlantic Medical. The Atlantic Notes bore interest at 7% per
annum and were due in full on January 10, 1997. In the event of a default in
the payment of the Atlantic Notes, such notes were convertible into shares of
common stock of Retirement Care.
In addition, on August 9, 1996, the Company acquired the remaining
minority interest of Facility Supply, Inc., a majority owned subsidiary of
Atlantic Medical. The acquisition was made effective retroactively to July 1,
1996. The Company paid $50,000 in cash and $350,000 in promissory notes (the
"Facility Note") for the remaining outstanding stock of Facility Supply, Inc.
The Facility Notes bore interest at 7% per annum and were due in full on
January 10, 1997. In the event of a default in the payment of the Facility
Notes, they were convertible into shares of common stock of Retirement Care.
The cash for these transactions came from a $5 million debenture
placement that was completed on July 12, 1996. These debentures bear interest
at 9% per annum and are to be repaid in monthly installments beginning on July
1, 1999, with full payment due by July 1, 2003. The debentures are
convertible into shares of the Company's Common Stock. The two debentures,
each in the amount of $2.5 million, were purchased by Renaissance U.S. Growth
and Income Trust, P.C., a fund listed on the London Stock Exchange, and by
Renaissance Capital Growth & Income Fund III, Inc., a closed-end, publicly
traded fund that invests in emerging growth companies. Renaissance Capital
Group, Inc., of Dallas, Texas manages both of these investment funds.
In return for Retirement Care's guarantee of the Atlantic and Facility
Notes, without which the Company could not have completed the Atlantic
acquisition, the Company agreed to compensate Retirement Care $500,000, such
amount to be satisfied by the issuance of 100,000 shares of the Company's
Common Stock valued at $5.00 per share. The Company believes this valuation
represents market value and approximates the average trading price of its
Common Stock during the time the Atlantic acquisition was negotiated. The
issuance of the Company's Common Stock is recorded as an expense of financing
the Atlantic Medical acquisition in the Company's 1997 financial statements.
On January 10, 1997, Retirement Care loaned the Company $9,750,000 in
exchange for a convertible promissory note. Retirement Care immediately
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exercised its conversion rights under the convertible promissory note in full,
and received 1,950,000 shares of the Company's Common Stock. The $9,750,000
received by the Company in this transaction was used toward the repayment of
the Atlantic and Facility Notes.
On February 17, 1997, the Company entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") by and among Sun Healthcare
Group, Inc. ("Sun"), Nectarine Acquisition Corporation, a wholly-owned
subsidiary of Sun, and the Company, pursuant to which the subsidiary of Sun
would be merged with and into the Company. The Merger Agreement was
subsequently amended on August 21, 1997.
Subject to the terms and condition of the Merger Agreement (including,
without limitation, approval by the stockholders of the Company), upon the
effective time of the Merger, Sun will pay $8.50 in cash and/or Sun common
stock, at Sun's election, for each outstanding share of the Common Stock of
the Company not presently owned by Retirement Care (other than shares of
Common Stock held in the treasury of the Company, owned by Sun or its
subsidiary or held by persons who exercise their dissenters' rights under
Nevada law). As a result of the Merger, the Company will become a
wholly-owned
subsidiary of Sun.
In connection with the Merger Agreement, Retirement Care, which owns
5,222,003 shares of the Company's Common Stock and 89,250 shares of the
Company's Series A Preferred Stock also entered into a Stockholder Stock
Option and Proxy Agreement (the "Option Agreement") between Sun and Retirement
Care. Pursuant to the Option Agreement, Retirement Care granted to Sun an
irrevocable option to purchase Retirement Care held Stock at a price per share
of Common Stock equal to $8.50 and a price per share of Series A Preferred
equal to $4.00 under certain circumstances. In addition, Retirement Care
agreed to vote, and granted to Sun in favor of approval of the Merger
Agreement and the Merger and against any merger, consolidation, sale of
assets, reorganization or recapitalization of the Company with any party other
than Sun and its affiliates and against any liquidation or winding up of the
Company.
The Merger is subject to approval by the shareholders of Sun and the
stockholders of the Company and will be considered at separate meetings now
anticipated to occur in the fourth quarter of 1997. The Merger remains
subject to other customary conditions. The Merger will be effective promptly
following approval by the Sun shareholders and the Company's stockholders,
assuming satisfaction of the other conditions to the Merger.
On June 27, 1997, the Company sold all of its manufacturing assets,
including equipment, accounts receivable, customer lists, prepaid assets,
deposits, inventory and other assets. These assets were sold for $3,350,000
in cash to RawCar, L.L.P., a limited liability partnership formed by a former
general manager of the Company's Michigan Subsidiary. The Company retained
all liabilities related to the assets sold. Upon the completion of this sale,
the Company ceased all manufacturing activity.
The Company continues to assemble procedural kits and trays under its
REDI NURSE and other private labels.
In July 1993 the Company effected a 1 for 13 reverse stock split and in
March 1996 the Company effected a 1.05 for 1 forward stock split. All
financial information and share data in this report gives retroactive effect
to these stock splits.
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<PAGE>
PRODUCTS
The Company's bulk medical supply distribution operations involves the
purchase of large quantities of medical supplies from manufacturers and
distributing such supplies to nursing homes, home health agencies, hospitals,
clinics and other health care providers. The Company offers a wide range of
over 6,000 products, including medical/surgical supplies, enteral
(nutritional) feeding supplies, personal care items, incontinent supplies,
over-the-counter drugs, and respiratory therapy and ostomy supplies. Revenues
from the sale of bulk medical supplies accounted for approximately 67% and 90%
of the Company's sales revenue during the year ended June 30, 1996 and 1997,
respectively.
During March-April 1994, the Company introduced a new product line named
the REDI NURSE SYSTEM[TM] following the grant of four new 510(K) applications
by the U.S. Food and Drug Administration. This product line consists of
custom packaged procedural trays that can be used for specified applications.
The applications for which these products are available include wound care,
catheter irrigation, catheter insertion, IV therapy and precautionary
procedures.
During 1996, the Company began assembling preparatory procedural trays
for use in imaging applications. The U.S. Food and Drug Administration
granted the Company ten new 510(K) applications for these trays. Imaging
applications in which these trays are utilized include amniocentesis,
arthroscopy, biopsy, mammography and angiography.
The Company presently does not sterilize its products.
Suppliers for the products distributed by the Company are plentiful and
typically are some of the largest manufacturers in the healthcare industry.
The Company purchases supplies only from companies with proven consistent
quality. The Company's largest suppliers during the year ended June 30, 1997
were Inbrand, Novartis, Ross Labs, Kendall Healthcare Products Company,
Steriltx and Allegiance Healthcare.
SALES, MARKETING AND MARKETS
During the years ended June 30, 1997, and June 30, 1996, the Company
sold approximately $7,848,000 and $5,456,000, respectively, in products
(primarily bulk medical supplies) to facilities owned, leased or managed by
Retirement Care Associates, Inc. ("Retirement Care"), the Company's majority
shareholder. Such sales represented 14% of total sales for the year ended
June 30, 1997, and 37% of total sales for the year ended June 30, 1996. No
other individual customer represented more than 10% of total sales during the
periods. For the year ended June 30, 1997, after excluding the revenues
generated by sales to Retirement Care, the next nine largest customers
cumulatively represented approximately 15% of total revenues.
During the six months ended June 30, 1995, Retirement Care accounted for
40% of total sales. No other individual customer represented more than 10% of
total sales during this period. During the years ended December 31, 1994 and
1993, only one customer each year accounted for more than 10% of the Company's
combined revenues. Sales to Baxter Medical accounted for approximately 23%
and 13.8% in 1994 and 1993, respectively.
The Company sells bulk medical supplies primarily to nursing homes and
other health care providers. The following table reflects the ratio of
distribution revenues generated by category for the year ended June 30, 1997:
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Customer Type Percent of Revenues
------------------ -------------------
Nursing Home 77%
Home Health Agency 19%
Hospital and Other 4%
Twenty-three full-time permanent sales associates and five nurse
clinicians, all of whom are employed by the Company, carry out the Company's
sales effort. The Company has historically marketed its products throughout
the southeastern United States through its sales associates, its four regional
sales managers and its senior management staff. The following table reflects
the geographic dispersion of the Company's distribution revenues:
Revenues
States (Millions) Percent of Revenues
---------------- ---------- -------------------
Georgia $14.5 30.2%
Tennessee $14.0 29.2%
Florida $10.4 21.7%
North Carolina $ 4.7 9.8%
South Carolina $ 3.0 6.2%
All other states $ 1.4 2.9%
The Company does not utilize its sales staff in selling products to
Retirement Care.
MARKET EXPANSION
Nursing homes, adult congregate living facilities and home health care
markets are currently expanding markets with expected high growth in the next
ten years. The Federal home care budget was $12.5 billion for 1992. The
November 18, 1992, issue of "Home Health Line," the home care industry's
national independent newsletter, reports conservative estimates for growth at
an annual rate of 15-20% or more. The continuing emphasis on cost containment
and the continuing AIDS epidemic are two reasons for this projected growth.
Additional factors and trends reported as fostering this growth include: the
boom in medical technology; care rendered in the patient's home is far less
expensive than that delivered in hospitals; the increasing age of our
population; patients prefer home care, resulting in faster recovery from
illness and injury; and home care offers emotional advantages to people who
benefit from the support of family members and the comfort of a familiar
environment.
The Company is introducing new products and product lines, such as its
REDI NURSE SYSTEM[TM], which combine service benefits as well as product
benefits and have a wide range of applications in the nursing home and home
health care markets. Special procedure trays, positioning aids, foam
products, are all used within these environments. Special order products,
such as procedure trays for use within the home and the nursing home markets,
offer ease-of-help, which enable a non-skilled home helper to assist with the
health care process after simple instruction. With the changing demographics
of the population base moving toward an over sixty-five majority, the Company
expects the market for products which can be used by non-skilled home helpers
to increase.
ACQUISITIONS
AMERIDYNE CORPORATION
In March 1996, the Company acquired AmeriDyne Corporation ("AmeriDyne")
through a merger of that company with a newly-formed wholly-owned subsidiary
of
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the Company. AmeriDyne is a bulk medical supply company based in Jackson,
Tennessee, which distributes supplies to hospitals, clinics, physicians,
pharmacies, nursing homes and other health care providers in Tennessee,
Arkansas, Mississippi, Alabama, Illinois, Texas, Kentucky, Missouri and
Virginia.
AmeriDyne's product line includes approximately 3,500 items maintained
in stock and over 150,000 additional items available from over 200
manufacturers. AmeriDyne's sales efforts have emphasized supplies for home
health care such as gloves, urological products, wound care products, sponges,
etc. However, AmeriDyne's wide range of products also includes medical
furniture and equipment such as examination tables, cabinets and carts;
diagnostic equipment such as vision and hearing testing equipment,
stethoscopes and blood pressure testing equipment; laboratory testing
equipment such as microscopes, incubators, blood chemistry analysis and
centrifuges; surgical products such as scissors, forceps, scalpels and lasers;
and physical therapy and convalescent care equipment such as crutches,
walkers, wheelchairs and bathroom safety aids.
AmeriDyne had only one customer that represented over 10% of its sales
during the three years prior to its acquisition by the Company. Sales to
Jackson - Madison County General Hospital represented 16%, 17% and 28% of
AmeriDyne's sales during the ten months ended February 29, 1996 and its fiscal
years ended April 30, 1995 and 1994, respectively.
ATLANTIC MEDICAL SUPPLY COMPANY, INC.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. ("Atlantic Medical"), a distributor of
disposable medical supplies and a provider of third-party billing services to
the nursing home and home health care markets. The acquisition was made
effective retroactively to July 1, 1996.
Atlantic Medical was previously based in Grovetown, Georgia (a suburb of
Augusta), and also has facilities in St. Petersburg, Florida, Miami, Florida,
and Fayetteville, North Carolina.
Atlantic Medical's product line includes approximately 4,100 items
maintained in stock and over 150,000 additional items available from over 200
manufacturers. Atlantic Medical's sales focus has been on supplies for
long-term care providers, including skilled nursing and assisted living
facilities. These supplies include such items as latex and vinyl examination
gloves, nutritional and personal care products, urological products, wound
care products, adult diapers, etc. Atlantic Medical also offers its customers
a wide array of durable medical equipment, including wheelchairs, walkers,
medical monitoring devices, including stethoscopes and blood pressure testing
equipment, surgical products, etc. Sales of medical supplies to long-term
care facilities accounted for 81% of Atlantic Medical's revenues during the
six months ended June 30, 1996.
Atlantic Medical also operates a subsidiary that provides Medicare Part
B billing services for clients, both under its own Medicare provider number
and, optionally, under its customer's provider number. Services for the
latter are done so on a fee-for-service basis. As a part of these billing
services, Atlantic Medical provides Medicare reimbursable wound care products,
enteral (tube-feeding/nutritional) products, ostomy, colostomy and urological
products, etc. for qualified patients in its customers skilled nursing
facilities. Sales of Medicare Part B billing services and related products
accounted for 19% of Atlantic Medical's revenues during the six months ended
June 30, 1996.
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Atlantic Medical did not have any one customer that represented over 10%
of its sales during the three years prior to its acquisition by the Company.
COMPETITION
The Company competes with a number of large medical products
distributors. In the home healthcare market, its primary competitors include
Gulf South, National Medical and Southland. In this market, the Company
competes by offering customized ordering programs and other specialized
services not offered by larger competitors. In the distribution of medical
supplies to long-term care providers, its primary competitors include Gulf
South Medical Supply, Redline Medical, General Medical and Bergen Brunswig
Medical Supplies. In addition, there are a number of smaller, regional
competitors. The Company competes by offering an extremely high level of
customer service, as well as customized ordering and inventory control
programs and other more specialized services, some of which are not offered by
its competitors.
In the provisions of third party billing services, the Company competes
with several small regional service providers, including Spectrum Health
Services, Appalachian and Grove Medical. The Company competes effectively in
this category by offering superior customer service and a variety of programs
from which its customers can choose, including fee-for-service billing under
the customer's own Medicare provider number.
PATENTS AND TRADEMARKS
In December 1994, the Company received trademark registration for the
REDI NURSE SYSTEM[TM] mark. The Company believes the trademark will
contribute to product identification with the Company.
EMPLOYEES
As of October 3, 1997, the Company had approximately 170 full-time
employees, including management, and does not currently employ any part-time
employees. None of the Company's employees are represented by unions.
Management considers its employee labor relations to be good.
ITEM 2. PROPERTIES.
The Company's corporate offices are maintained in leased space
contiguous to its regional distribution center in Alpharetta, Georgia. At
this location the Company leases approximately 69,500 square feet of space,
including approximately 29,500 square feet of office space, under a lease from
an unaffiliated lessor, for which it currently pays approximately $29,500 per
month. Approximately 15,000 square feet of this space, including 10,000
square feet of office space, is sub-leased to an unaffiliated third party, for
which the Company receives approximately $9,700 per month. Beginning on July
1, 1998, and on July 1 each year thereafter, the rent will increase by 2%
annually. The payments to the Company by the sub-lessor will also increase 2%
annually. The lease expires on June 30, 2002, but entitles the Company to
extend the term of the lease with two three-year options. The Company
believes these facilities are adequate for the Company's present and planned
operations.
The Company maintains distribution facilities located in Jackson,
Tennessee. It leases approximately 38,000 square feet of space at this
location, including approximately 4,500 square feet of office space, for which
it pays a base rent of approximately $9,900 per month. The lease expires on
March 31, 1999, but the Company has an option to extend this lease an
additional two years at a rental rate adjusted for changes in the Consumer
Price Index.
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The Company maintains distribution facilities in Fayetteville, North
Carolina. At this location, it leases approximately 38,500 square feet of
space, including approximately 4,000 square feet of office space, for which it
pays a base rent of approximately $7,100 per month. This lease expires on
March 31, 1998, but the Company has one one-year renewal option at which time
the base rent can be increased by up to 3%.
The Company maintains distribution facilities in St. Petersburg,
Florida. At this location, it leases approximately 65,000 square feet of
space from an unaffiliated entity, for which it currently pays a base rent of
approximately $25,000 per month. This lease expires on June 30, 2000. The
Company currently uses approximately 32,000 square feet of this space,
including approximately 2,500 square feet of office space. The Company
subleases the remaining space to the company which purchased the Company's
manufacturing operations, and receives approximately $13,000 per month for
this space.
The Company maintains distribution facilities in Ft. Lauderdale,
Florida. At this location, it leases approximately 26,000 square feet of
space, including approximately 3,000 square feet of office space, for which it
pays a base rent of approximately $9,125 per month. This lease expires on
June 30, 2002, but the Company has one five-year renewal option.
The Company maintains distribution facilities in Portland, Oregon. At
this location, it leases approximately 39,500 square feet of space, including
approximately 6,000 square feet of office space, for which it pays $12,469 per
month. Approximately 3,500 square feet of office space is sub-leased to an
unaffiliated third party, for which the Company receives approximately $1,100
per month. This lease expires on September 30, 2002, but the Company has one
five-year renewal option.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings, and the Company is not aware of
any threatened legal proceedings to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) MARKET INFORMATION. The Company's Common Stock is traded in the
over-the-counter market, and since September 21, 1995, has been traded on the
Nasdaq Small-Cap Market under the symbol "CTMI."
The following table sets forth the closing high and low prices of the
Company's Common Stock as reported on the NASDAQ Small-Cap Market since
September 21, 1995, and by the OTC Bulletin Board prior to that date. These
prices are believed to be representative inter-dealer quotations, without
retail markup, markdown or commissions, and may not represent prices at which
actual transactions occurred.
<TABLE>
<CAPTION>
Quarter Ended High<FN1> Low<FN1>
<S> <C> <C>
September 30, 1995 . . . . . . . . . . . $7.62 $4.17
December 31, 1995. . . . . . . . . . . . $6.19 $3.93
March 31, 1996 . . . . . . . . . . . . . $6.50 $4.17
June 30, 1996. . . . . . . . . . . . . . $6.13 $4.25
September 30, 1996 . . . . . . . . . . . $6.13 $5.00
December 31, 1996 . . . . . . . . . . . $5.50 $4.00
March 31, 1997 . . . . . . . . . . . . . $8.13 $4.38
June 30, 1997 . . . . . . . . . . . . . $7.88 $7.63
___________________
<FN>
<FN1>
As restated to give retroactive affect to a 1.05 for 1 forward stock split
which occurred in March 1996.
</FN>
</TABLE>
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK. The number of
record holders of the Company's $.001 par value common stock at October 8,
1997, was 103. Based on security position listings, the Company believe that
it has in excess of 700 shareholders which hold stock in street name at broker
dealers.
(c) DIVIDENDS. No cash dividends have been declared or paid by the
Company since inception and none is contemplated at any time in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain selected financial data with
respect to the Company, and is qualified by reference to the financial
statements and notes thereto filed herewith:
<TABLE>
<CAPTION>
-11-
<PAGE>
BALANCE SHEET DATA:
AT JUNE 30, AT DECEMBER 31,
----------------------------------
- --------------------------------
1997 1996 1995 1994 1993
1992
----------- ----------- ---------- ---------- ----------
- ----------
<S> <C> <C> <C> <C> <C>
Current Assets $20,172,348 $ 8,324,557 $4,351,326 $1,129,398 $1,224,496
$1,054,020
Total Assets 32,521,176 11,258,268 5,176,426 1,484,568 1,878,465
1,375,726
Current
Liabilities 10,647,418 4,228,561 1,377,578 410,162 829,200
601,727
Working Capital 9,524,930 4,095,996 2,973,748 719,236 395,296
452,293
Long-Term Debt 5,473,841 1,352,937 907,711 554,323 -0-
480,000
Shareholders'
Equity 16,399,917 5,676,770 2,891,137 520,083 648,765
293,999
</TABLE>
STATEMENT OF INCOME DATA:
For The Years For the Six Months
Ended June 30, Ended June 30,
1997 1996 1995 1994
----------- ----------- ---------- ----------
Sales $53,349,137 $14,542,421 $3,568,459 $1,929,200
Net Income (Loss) (259,644) 527,034 111,373 (478,798)
Net Income (Loss)
per Common Share $ (.05) $ .09 $ .02 $ (.20)
Weighted Average Shares
and Share Equivalents
Outstanding 6,115,127 4,804,292 4,786,126 2,341,996
Cash Dividends Per Share -0- -0- -0- -0-
STATEMENT OF INCOME DATA:
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
---------- ---------- ----------
Sales $3,945,745 $3,618,359 $3,440,701
Net Income (Loss) (529,182) (73,536) 79,126
Net Income (Loss)
Per Common Share $ (0.20) $ (0.05) $ 0.07
Weighted Average Shares
and Share Equivalents
Outstanding 2,688,927 1,434,466 1,180,407
Cash Dividends Per Share -0- -0- -0-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
sales for the periods indicated:
-12-
<PAGE>
SIX MONTHS ENDED
YEARS ENDED DECEM- YEARS ENDED
JUNE 30, JUNE 30, BER 31, DECEMBER 31,
--------------- ------ ------ ---------------
1997 1996 1995 1994 1994 1993
------ ------ ------ ------ ------ ------
Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales 74.4% 72.1% 71.3% 73.8% 64.5% 57.0%
Gross Profit 25.6% 27.9% 28.7% 26.2% 35.5% 43.0%
Operating Expenses 24.3% 23.1% 23.6% 34.1% 40.1% 44.9%
Other Income
(Expense) (2.0%)
Net Income (Loss)
Before Income
Taxes (Benefit) (0.7%) 5.8% 4.6% (24.8%) (13.4%) (3.5%)
Income Taxes
(Benefit) (0.2%) 2.1% 1.5% -- -- (1.4%)
Net Income (Loss) (0.5%) 3.6% 3.1% (24.8%) (13.4%) (2.0%)
YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996
As a result of the factors discussed below, for the year ended June 30,
1997, the Company had a net loss of $259,644 compared to a net profit of
$527,034 for the year ended June 30, 1996.
Sales increased by $38,900,848 for the year ended June 30, 1997 as
compared to the year ended June 30, 1996. Approximately $8,848,000 of the
increase resulted from sales of bulk medical supplies by AmeriDyne and
approximately $26,757,000 from sales of bulk medical supplies by Atlantic.
Approximately $2,392,000 of the increase resulted from the sales of bulk
medical supplies to the Company's majority shareholder. The balance of the
increase, or approximately $903,000, resulted from sales of the Company's
manufactured products.
Gross profit for the year ended June 30, 1997, was $13,667,978 or 25.6%
of sales, as compared to $4,051,318 or 27.9% of sales, for the year ended June
30, 1996. The decrease in gross profit as a percentage of sales is primarily
the result of lower gross profit margins typically earned on the distribution
of bulk medical supplies as compared to the gross profit margins historically
earned by the Company's manufacturing enterprise.
Operating expenses for the year ended June 30, 1997, were $12,973,675 as
compared to $3,185,620 for the year ended June 30, 1996. The operating
expenses increased approximately 407% as the result of the acquisitions,
although as a percent of sales the increase represented a 2.4% increase. The
increase of $9,788,056 in operating expenses is directly related to the
increase of $38,901,000 in revenues. The largest components of operating
expenses are indirect labor (including sales salaries and commissions),
occupancy expense, depreciation and amortization, and insurance. In
particular, prior to the acquisitions of AmeriDyne and Atlantic, the Company
did not have a direct sales force and therefore incurred minimal selling
expenses as a percentage of sales. Selling expenses as a percentage of sales
now represents approximately 5% of total sales.
Indirect labor, including sales salaries and commissions increased by
$4,541,291 compared to the same period last year, to approximately $5,792,383.
Occupancy expense, depreciation and amortization and insurance costs increased
by $2,009,873 compared to the same period last year, to approximately
$3,071,917.
-13-
<PAGE>
Other income and expenses are made up of interest expense, debts
recovered that were previously written off, service charge income, and gains
and losses on the disposition of assets. Interest expense for the year ended
June 30, 1997 was $1,295,557 compared to $170,951 for the same period last
year. Interest expense has increased primarily as a result of (1) the
$5,000,000 convertible debentures issued on July 12, 1997, bearing interest at
9% per annum; (2) the Atlantic and Facility Notes issued for the purchase of
Atlantic Medical Supply Company, Inc. and Facility Supply, Inc.; and (3) the
increased usage of the Company's line of credit supporting sales growth
throughout the year.
Gains from the sale of assets for the year ended June 30, 1997 were
approximately $600,000 compared to no such gains for the prior year. These
gains resulted from the sale of the Company's manufacturing assets.
The Company also incurred an expense of $500,000 in financing costs
associated with the guarantee fee paid to the Company's Parent for its
guarantee of the Atlantic and Facility Notes.
YEAR ENDED JUNE 30, 1996 COMPARED TO THE TWELVE MONTHS ENDED JUNE 30, 1995
As a result of the factors discussed below, the Company had net income of
$527,034 for the year ended June 30, 1996, as compared to a net loss of $9,997
for the twelve months ended June 30, 1995.
Sales for the year ended June 30, 1996 increased to $14,542,421 as
compared to $5,585,004 for the twelve months ended June 30, 1995, due to
growth in sales volume of the existing product lines and the addition of the
Company's new product line, bulk medical supplies. Approximately $4,844,000
of the sales increase is attributable to sales of bulk medical supplies and
prepacked kits to nursing homes managed or operated by the Company's majority
shareholder; the AmeriDyne acquisition on March 1, 1996, resulted in
additional sales of bulk medical supplies of approximately $3,617,000. The
balance of the sales increase, or approximately $496,000, resulted from
increased sales of manufactured foam products and polyethylene bags.
Gross profit for the year ended June 30, 1996, was $4,051,318 or 27.8%
of sales as compared to $1,739,553 or 31.1% of sales for the twelve months
ended June 30, 1995. The gross profit percentage decreased in 1996 as
compared to the comparable period in 1995 because the sales mix for 1996 was
substantially higher in bulk medical supplies, which have a lower gross profit
than the manufactured products. Approximately $980,000 of the increase in
gross profit for the period ended June 30, 1996, was the result of the
additional sales generated from the AmeriDyne acquisition.
Operating expenses for the year ended June 30, 1996, increased to
$3,185,620 as compared to $1,632,015 for the same period in 1995. Total
operating expenses increased approximately $1,553,000 as a result of the
increased volumes, but as a percentage of sales they decreased to
approximately 23% of sales in 1996 versus 29% of sales in the same period in
1995. The AmeriDyne acquisition increased operating expenses by $635,000 for
the year ended June 30, 1996. The largest components of operating expenses
are indirect labor (including sales salaries and commissions), occupancy
expense, depreciation and amortization, and insurance. Operating expenses
decreased as a percentage of sales due to the Company's addition of bulk
medical supplies to its product line. While the distribution of these
products produces lower gross margins, this enterprise requires lower
operating expenses to support revenues than the Company's manufacturing
business. As revenues from the sales of bulk medical supplies have increased
at a significantly faster rate than manufacturing (593% growth in distribution
revenues during the twelve months ended June 30, 1996
-14-
<PAGE>
compared to the twelve months ended June 30, 1995 versus 12% growth in
manufacturing revenues during the same period), operating expenses as a
percentage of total revenues consequently has declined.
Other income and expenses are made up of interest expense, debts
recovered that were previously written off, service charge income, and gains
and losses on the disposition of assets. Interest expense for the year ended
June 30, 1996 was approximately $171,000 compared to $39,000 for the same
period in the previous year. Interest expense increased primarily as a result
of the AmeriDyne acquisition and an increase in the Company's line of credit
during the year from $250,000 to $500,000. Service charge income and
recoveries of bad debts were approximately $144,000 in the year ended June 30,
1996 compared to $22,000 in the same period the previous year. These
increases were primarily due to the acquisition of AmeriDyne.
For fiscal year ended June 30, 1996, the Company recorded an allowance
for bad debts of $410,000 when there had been no such allowance recorded in
prior periods primarily as a result of the AmeriDyne acquisition on March 1,
1996. AmeriDyne maintained an allowance for bad debts of $400,000 at the time
AmeriDyne was acquired by the Company.
Net income before taxes for the year ended June 30, 1996, was $839,200
as compared to $44,721 for the twelve months ended June 30, 1995. The
AmeriDyne acquisition contributed approximately $295,000 to net income before
taxes for the year ended June 30, 1996.
SIX MONTHS ENDED JUNE 30, 1995, COMPARED TO SIX MONTHS ENDED JUNE 30, 1994
As a result of the factors discussed below, the Company had net income
of $111,373 for the six months ended June 30, 1995, as compared to a net loss
of $478,798 for the six months ended June 30, 1994.
Sales for the six months ended June 30, 1995, increased to $3,568,459 as
compared to $1,929,200 during the same period in 1994, due to growth in sales
volume of the existing product lines and the addition of bulk medical supply
sales. Approximately $1,426,000 of the sales increase was attributable to
sales of bulk medical supplies and pre-packaged kits to nursing homes managed
or operated by the Company's parent. These sales, which started during April
1995 represent a new market for the Company. Approximately $175,000 of these
nursing home sales represents sales of the Company's prepackaged kits and the
remainder of the nursing home sales represents sales of bulk medical supplies.
The remaining $213,000 of the overall sales increase was due to an increased
demand for the Company's existing product line.
Gross profit for the six months ended June 30, 1995, was $1,024,083 or
28.7% of sales as compared to $505,500 or 26.2% of sales for the six months
ended June 30, 1994. The gross profit percentage remained relatively constant
in 1995 as compared to the comparable period in 1994 because the product mix
in both periods included about the same percentage of REDI NURSE kits which
have a lower gross profit than the manufactured products. The 1995 period
included approximately $1,251,000 in sales of bulk medical supplies which also
have a lower gross profit, and the 1994 period margin was reduced due to the
costs of developing and shipping numerous prototype kits for customer
evaluation and introduction prior to FDA approvals. In prior years, the
Company had higher gross profit margins because most of the Company's sales
were of products manufactured by the Company.
Operating expenses for the six months ended June 30, 1995, increased to
$841,275 as compared to $657,199 for the same period in 1994. Total operating
expenses increased approximately $184,000 as a result of the increased
staffing
-15-
<PAGE>
necessary to service the increased volumes, but as a percentage of sales they
decreased to approximately 24% of sales in 1995 versus 34% of sales in the
same period in 1994.
Net income before taxes for the six months ended June 30, 1995, was
$166,091 as compared to a net loss before income taxes for the six months
ended June 30, 1994, of $478,798, after deducting offering costs of $305,731.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $9,524,930 of working capital as
compared to working capital of $3,931,948 at June 30, 1996. The increase in
working capital was primarily due to the acquisition of Atlantic Medical
Supply Company, Inc. ("Atlantic Medical") which was completed during August
1996.
Operating activities for the year ended June 30, 1997 utilized cash of
$4,407,477 as compared to operating activities during the year ended June 30,
1996, which utilized cash of $124,047. Inventories increased by approximately
$2,602,000 from June 30, 1996 as a result of increased inventory levels needed
to serve the growing nursing home market, and approximately $2,280,000 of the
increase resulted from the Atlantic Medical acquisition. Cash utilized by the
increase in accounts receivable was approximately $5,343,000, primarily
related to the acquisition of Atlantic Medical, as well as growth in sales
generally.
Cash flows from investing activities used cash of $69,183 for the year
ended June 30, 1997 as a result of a loan of $354,267 from the Company's
parent, $1,415,744 used for the acquisition of or deposits on additional
equipment and $1,452,597 used for the Atlantic Medical acquisition. These
amounts were offset by $3,350,000 in proceeds from the sale of the Company's
manufacturing business.
Cash flow of $4,642,098 was provided from financing activities for the
year ended June 30, 1997 versus $695,487 for the year ended June 30, 1996.
For the year ended June 30, 1997, $3,909,307 was provided from net bank
borrowings, $211,846 was provided by the exercise of stock options and
$609,465 was provided by the exercise of various classes of the Company's
common stock warrants.
Operating activities for the year ended June 30, 1996 utilized cash of
$124,047 as compared to operating activities during the six months ended June
30, 1995, which utilized cash of $1,030,398.
Inventories increased by approximately $1,579,000 from June 30, 1995 as
a result of increased inventory levels needed to serve the growing nursing
home market, and approximately $1,240,000 of the increase resulted form the
AmeriDyne acquisition. Accounts receivable and accounts payable have
increased due to the increased level of sales and inventories.
Cash flows from investing activities used cash of $521,456 for the year
ended June 30, 1996 as a result of the repayment of $550,004 from the
Company's parent which was offset by the use of $749,163 for the acquisition
of additional equipment and $322,297 for the AmeriDyne acquisition.
Operating activities for the six month period ended June 30, 1995,
utilized cash of $1,030,398 as compared to $120,699 for the same period in
1994. The increased utilization of cash resulted primarily from higher
receivable and inventory levels, net of increased accounts payable, necessary
to support the increase in sales. Operating activities for the years ended
December 31, 1994, and 1993 utilized cash of $28,133 and $209,284,
respectively.
-16-
<PAGE>
Investing activities for the six months ended June 30, 1995, utilized
$1,701,945 of cash, of which $533,054 was for the acquisition of equipment and
$1,168,901 was advanced to the Company's majority shareholder as compared to
$6,597 of cash used during the six months ended June 30, 1994, which was
expended for equipment. The cash flows for the years ended December 31, 1994
and 1993, were used substantially for the acquisition of additional equipment
as needed.
Cash flow of $2,689,372 was provided from financing activities for the
six months ended June 30, 1995, as compared to cash utilized during the six
months ended June 30, 1994, of $17,468. During the six months ended June 30,
1995, cash of $2,216,447 was provided from the issuance of preferred stock and
exercise of stock options, and $482,622 was provided from equipment financing
at favorable long-term rates, utilization of credit line funds of $189,671,
all of which was reduced by repayments on bank loans and advances to the
Company's majority shareholder totaling of $199,328. For the year ended
December 31, 1994, cash flow of $62,833 was provided from financing
activities, whereas in 1993 cash flow of $448,944 was provided due to the sale
of preferred stock of $430,500.
At September 30, 1996, the Company replaced all of its existing lines of
credit with a $7,000,000 revolving line of credit with Barnett Bank, secured
by inventory and accounts receivable and bearing interest at the 30-day LIBOR
rate plus 2%. In May 1997 this revolving line of credit was increased to
$10,000,000. As of June 30, 1997, $5,886,545 had been borrowed against this
line of credit. Management believes that the Company's working capital,
together with anticipated net income from operations and unused lines of
credit, will be adequate to meet the Company's needs for liquidity for at
least the next twelve months. If additional short-term capital is needed,
management believes that Retirement Care, the Company's majority shareholder,
would pay down the amount it owes to the Company.
The Company completed a $5 million debenture placement on July 12, 1996.
These debentures bear interest at 9% per annum and are to be repaid in monthly
installments beginning on July 1, 1999, with full payment due by July 1, 2003.
The debentures are convertible into shares of the Company's Common Stock. The
two debentures, each in the amount of $2.5 million, were purchased by
Renaissance U.S. Growth and Income Trust, PLC, a fund listed on the London
Stock Exchange, and by Renaissance Capital Growth & Income Fund III, Inc., a
closed-end, publicly traded fund that invests in emerging growth companies.
Renaissance Capital Group, Inc. of Dallas, Texas manages both of these
investment funds.
The Company plans to open four additional distribution centers around
the United States during the next six months. Total capital expenditures
anticipated to fund this expansion will approximate $1,250,000. The Company
has received commitments from leasing and finance organizations in amounts
sufficient to meet these anticipated needs.
The Company presently does not anticipate any commitments for any other
material capital expenditures.
SEASONALITY AND INFLATION
The Company's business is relatively consistent and stable on a monthly
basis, and has not indicated any seasonality over the past three years.
In addition, the Company does not believe that inflation has had a
material effect on its results from operations during the past three years.
There can be no assurance, however, that the Company's business will not be
affected by inflation in the future.
-17-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Independent Auditors' Reports appear at pages F-1 through F-2, and
the Financial Statements and Notes to Financial Statements appear at pages F-3
through F-25 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No response required.
-18-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
------------------------ --- --------------------------------------
Donald F. Fox 48 President, Treasurer and Chief
Financial Officer
R. Scott Williams 36 Vice President - Strategic Development
Greg K. Hunt 36 Vice President - Operations
Roy Clifton Christianson 37 Vice President - Sales and Marketing
Mark W. Partin 29 Vice President - Finance and Corporate
Controller
Chris Brogdon 48 Chairman of the Board and Director
Edward E. Lane 60 Director
Darrell C. Tucker 38 Director
Philip M. Rees 33 Secretary
There is no family relationship between any Director or Executive
Officer of the Company.
The Company presently has no Nominating Committee, Compensation
Committee or Audit Committee.
Set forth below are the names of all Directors and Executive Officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during at least the last five
years:
Donald F. Fox - President, Treasurer and Chief Financial Officer. Mr.
Fox has been employed by the Company as its President, Treasurer and Chief
Financial Officer since April 1996, and served as a consultant to the Company
from December 1995 to April 1996. From August 1995 to December 1995, he was a
consultant to the City of Roswell, Georgia. From May 1987 to August 1995 he
was Chief Financial Officer of Argenbright Holdings Limited (US) and The ADI
Group Limited (UK). In this capacity, Mr. Fox managed the growth of these
security and transportation businesses from approximately $11 million in
annual sales to approximately $160 million in annual sales during this time
period. From March 1986 to May 1987, he was Chief Executive Officer of
Juiceco Distributors, Inc., a food service distribution company in Atlanta,
Georgia. From November 1982 to March 1986, Mr. Fox was Vice President -
Finance of RTM, Inc. which was engaged in restaurant operations. Mr. Fox
received a Bachelor's Degree in Business Administration from Georgia State
University in 1972 and an MBA Degree from Wharton Graduate School, University
of Pennsylvania in 1974.
R. Scott Williams - Vice President - Strategic Development. Mr.
Williams has been employed by the Company since March 1993. From 1988 to
1991, he was an Account Representative for Motorola Communications, Inc., a
communication systems
-19-
<PAGE>
manufacturing company. In 1991, he was employed with Med-Equip, Inc., a
medical distribution company. From 1991 to 1992, he was Vice President of
Sales for Zygiene Medical Technology, Inc., a medical manufacturing company.
Greg K. Hunt - Vice President - Operations. Mr. Hunt has been employed
by the Company since June 1997. From April 1995 to June 1997, he was Vice
President of Operations for Tri-Medical Supply, Inc., a distributor of medical
supplies to the long-term and alternate care markets. From April 1993 to
April 1995, Mr. Hunt was employed as Director of Purchasing by Convalescent
Services, Inc., a long-term care operator. From July 1987 to April 1993, he
was employed as Regional Operations Manager by Kimberly Quality Care, a
provider of home healthcare services. From November 1983 to January 1987, Mr.
Hunt was employed as a General Manager for American Surgical Supply, Inc., a
home healthcare supplier.
Roy Clifton Christianson - Vice President - Sales and Marketing. Mr.
Christianson has been employed by the Company since August 1996. From April
1995 to August 1996, he was Vice President - Operations in charge of the
Fayetteville distribution center for Atlantic Medical Supply Company, Inc., a
distributor of medical supplies to the long-term care market. From March 1995
to April 1995, Mr. Christianson was Eastern Regional Vice President for the
Long Term Care Division of General Medical, Inc., a distributor of medical
products. From 1994 to 1995, he was a Director of Sales and Marketing for the
Long Term Care Division of Bergen Brunswig, a manufacturer and distributor of
pharmaceuticals and medical products. From 1978 to 1994, Mr. Christianson was
employed by Southeastern Hospital Supply, Inc., a distributor of medical
supplies, in various capacities, the last being Vice President of Sales and
Marketing for the Long Term Care Division.
Mark W. Partin - Vice President - Finance. Mr. Partin has been employed
by the Company since May 1997. From 1995 to 1997, he worked with The Williams
Group of Companies, a diversified services company, in various capacities,
including Corporate Controller, Chief Financial Officer of a subsidiary and
Director of Special Projects, working extensively on mergers and acquisitions.
From 1991 to 1995, Mr. Partin was an accountant in the audit department of
Arthur Andersen, L.L.P. He received his CPA certification in the State of
Georgia in 1993. Mr. Partin received his Bachelor of Science in Business
Administration degree from the University of Tennessee in 1991.
Chris Brogdon - Chairman of the Board and Director. Mr. Brogdon has
been a Director of the Company since September 30, 1994. He has served as
President and a Director of Retirement Care Associates, Inc. ("Retirement
Care"), a New York Stock Exchange company, since October, 1991. He also
served as Treasurer of Retirement Care from October, 1991, to November, 1993.
He served as Secretary of Capitol Care Management Company, Inc. ("Capitol
Care"), a wholly-owned subsidiary of Retirement Care, since July, 1990. Mr.
Brogdon has been involved in financing and operating nursing homes and
retirement communities since 1982. From 1969 until 1982, Mr. Brogdon was
employed in the securities business as a retail salesman. Mr. Brogdon
attended Georgia State University in Atlanta, Georgia. Since March, 1987, Mr.
Brogdon has been Secretary/Treasurer of Winter Haven Homes, Inc. ("WHH") and
since August, 1990, he has been Secretary/Treasurer of National Assistance
Bureau, Inc. ("NAB"). Both WHH and NAB are engaged in the business of owning
and operating nursing homes and retirement communities. These two companies
either own or operate pursuant to long-term leases with options to purchase,
or are the sole or managing general partner of limited partnerships that own
or lease a total of ten nursing home properties. Mr. Brogdon is also a
Director of a publicly-held company which provides physical, speech and
occupational therapists to nursing homes and other long-term care providers,
and of New Care Health Corporation, a publicly-held company which provides
senior
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<PAGE>
residential care services, primarily as an operator of long-term care
facilities.
Edward E. Lane - Director. Mr. Lane has been a Director of the Company
since September 30, 1994. He has served as Secretary and a Director of
Retirement Care since October, 1991. Mr. Lane graduated from the University
of Iowa in 1959. From 1961 until 1968, he was self-employed as Gene Lane &
Associates where he was engaged in industrial financing with municipal tax
exempt bonds. From 1968 until 1971, he was employed by the investment banking
firm of Johnson, Lane, Space, Smith & Co. in Atlanta, Georgia. From 1972
until 1984, he was self-employed as Gene Lane & Associates where he was
involved with private investment banking principally in the areas of municipal
and industrial finance. In 1984, he was involved in the creation of the full
service investment banking firm of Lane, McNally & Jackson where he was a
principal until the firm was sold and merged into Bay City Securities, Inc. in
1987. In 1988, Mr. Lane co-founded Winter Haven Homes, Inc. to acquire
defaulted retirement centers and nursing homes. Mr. Lane also serves as
President and a Director of Gordon Jensen Health Care Association, Inc., a
nonprofit corporation that owns nine nursing homes and three personal care
facilities and National Assistance Bureau, Inc., a nonprofit corporation that
owns four health care facilities.
Darrell C. Tucker - Director. Mr. Tucker has been a Director of the
Company since September 30, 1994. He has been a Director of Retirement Care
since November, 1991, and Treasurer since November, 1993. Mr. Tucker also
serves as President of Capitol Care. He also served as President of Capitol
Care from October, 1990, until it was merged into the Company in November,
1992. From September, 1988, to July, 1990, he was a risk manager for Pruitt
Corporation where he was involved in insurance management for 30 long-term
health care facilities. From April, 1987 to August, 1988, he was Chief
Financial Officer for Allgood Health Care, Inc. which managed 12 nursing home
facilities. Mr. Tucker received a Bachelors Degree in Accounting from the
University of Georgia in 1980.
Philip M. Rees - Secretary. Mr. Rees has been Secretary of the Company
since October 18, 1994. He has been general counsel for Retirement Care since
July 1994. From May 1989 to July 1994, Mr. Rees was an attorney with the law
firm of Vincent, Chorey, Taylor & Feil in Atlanta, Georgia. He received a
Bachelors Degree in Economics in 1985 and a Juris Doctorate Degree in 1989
from the University of North Carolina.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, the following persons who
were either a director, officer or beneficial owner of more than 10% of the
Company's Common Stock, failed to file on a timely basis reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year: Scott
F. Lochridge, a former Executive Officer, filed one Form 4 late which reported
one transaction, and Mark W. Partin and Greg K. Hunt each filed Form 3's late.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information regarding the executive
compensation for the Company's Chief Executive Officer and each other
executive officer who received compensation in excess of $100,000 for the
years ended June 30, 1997 and 1996, the six months ended June 30, 1995, and
the year ended December 31, 1994:
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
SECURI-
TIES
UNDERLY-
OTHER RE- ING ALL
ANNUAL STRICTED OPTIONS/
OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP
COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS
SATION
- ------------------ ---- -------- ----- ------ -------- -------- -------
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Donald F. Fox, 1997 $167,500 -0- -0- -- -- --
- -0-
President 1996 $ 30,000 -0- -0- -- 75,000 --
- -0-
Gerald J. Flanagan,1997 $100,000 -0- -0- -- -- --
- -0-
President<FN1> 1996 $100,000 -0- -0- -- -- --
- -0-
1995 $ 50,000 -0- -0- -- -- --
- -0-
1994 $ 69,250 -0- -0- -- -- --
- -0-
Roy Cliff
Christianson, 1997 $173,000 -0- $6,200 -- 25,000 --
- -0-
Vice President - <FN2>
Sales & Marketing
Scott F. Lochridge,1997 $155,000 -0- -0- -- -- --
- -0-
Vice President -
Purchasing <FN3>
William J.
Gabriele, Chief 1994 $114,500 -0- -0- -- -- --
- -0-
Executive Officer
<FN4>
- -----------------------------
<FN>
<FN1>
Mr. Flanagan relinquished his title as President of the Company in April 1996,
and became Vice President of Manufacturing. In June 1997, Mr. Flanagan ceased
to be an officer of the Company.
<FN2>
Represents a car allowance paid to Mr. Christianson.
<FN3>
Mr. Lochridge ceased to be an officer of the Company in June 1997.
<FN4>
Mr. Gabriele resigned as an officer and Director of the Company on September
30, 1994.
</FN>
</TABLE>
-22-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM<FN1>
--------------------------------------------- -----------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARs
OPTIONS/ GRANTED TO EXERCISE EXPIR-
SARs EMPLOYEES IN OR BASE ATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- -------------- ---------- ------------ ----------- ------ ------- -------
Roy Clifton
Christianson 25,000 23.3% $5.75 8/6/01 $49,715 $87,761
- ---------------
<FN1>
Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on stock option exercise are
dependent on the future performance of the Company's Common Stock as well as
the option holder's continued employment. The amounts reflected in this table
may not necessarily be achieved.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES UNDER- VALUE OF UNEXER-
SHARES LYING UNEXER- CISED-IN-THE
ACQUIRED CISED OPTIONS MONEY\OPTIONS/
ON SARS AT FY-END SARS AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------ -------- -------- ---------------- ----------------
Donald F. Fox -0- -0- 75,000/0 $ 173,438/$0
Gerald J. Flanagan 28,000 $ 95,410 208,250/0 $1,204,206/$0
Roy Clifton
Christianson -0- -0- 25,000/0 $ 48,438/$0
EMPLOYMENT AGREEMENTS
In November 1993, effective as of July 1, 1993, the Florida Subsidiary
and the Company executed a five year employment agreement with Gerald J.
Flanagan., who was Vice President - Manufacturing, until June 1997. The
agreement shall be automatically extended for additional one year periods
unless terminated by either party on 60 days' notice. The agreement provides
for a base salary of $75,000 per year plus incentive bonuses, and the same
medical and life insurance benefits as are provided to the Company's senior
executive officers. The agreement contains trade secrets, confidentiality and
non-competition covenants. Effective October 1, 1994, Mr. Flanagan's salary
was increased to $100,000 per year. Mr. Flanagan is no longer an officer of
the Company, but is still an employee.
-23-
<PAGE>
R. Scott Williams, the Company's Vice President of Marketing, has an
employment agreement with the Company pursuant to which he presently receives
an annual salary of $120,000. The initial term of this agreement was through
February 21, 1995, but is automatically extendable for additional one year
periods unless either party gives 60 days' notice of an intent to terminate
prior to the end of a term.
Scott F. Lochridge, who was Vice President of Purchasing until June
1997, has a two-year employment agreement with AmeriDyne which became
effective on March 1, 1996. Under this agreement, Mr. Lochridge will receive
a base salary of $150,000 during the first year and $165,000 during the second
year. He will also be entitled to performance-based bonuses under a plan to
be agreed upon which would allow him to earn up to 30% of his annual salary as
additional compensation. Mr. Lochridge is also entitled to a $500,000 term
life insurance policy, the beneficiary of which is to be named by him, and a
$500 per month automobile allowance.
Donald F. Fox, who became President of the Company in April 1996,
presently has no employment agreement with the Company. From April to July
1996 he received a salary of $120,000 per year. Effective July 15, 1996, his
salary was increased to $160,000 per year, and on January 1, 1997 it was
increased to $175,000 per year.
Roy Cliff Christianson, who became Vice President - Sales and Marketing
in October 1996, has no employment agreement with the Company. He currently
receives an annual salary of $120,000.
Mark W. Partin, who became Vice President - Finance in May 1997, has no
employment agreement with the Company. He currently receives an annual salary
of $85,000.
Greg K. Hunt, who became Vice President - Operations in June 1997, has
no employment agreement with the Company. He currently receives an annual
salary of $85,000.
NON-QUALIFIED EMPLOYEE STOCK BONUS PLAN
On April 20, 1993, the Company's Board of Directors and a majority of the
owners of its Common Stock approved the adoption by the Company of a
Non-Qualified Employee Stock Bonus Plan (the "Plan") to reward individual
performance, provide incentives for employee performance, and to attract and
retain employees. The Company set aside 1,050,000 shares of its Common Stock
under the Plan, which is administered by the Board of Directors. Shares may
be awarded to employees of the Company, including its Subsidiaries, at a
purchase price of not less than $.01 per share. Options awarded under the
Plan will vest over a three year period and are exercisable for a period of
five years from date of grant. The only options which have been granted under
the Plan are an option to purchase 262,500 shares granted to Gerald J.
Flanagan, a former officer of the Company, in July 1993, exercisable at
$1.905 per share; an option to purchase 105,000 shares granted to R. Scott
Williams, an officer of the Company, in October 1994, exercisable at $2.143
per share; and options to purchase an aggregate of 52,500 shares granted to
two employees in May 1995, exercisable at $3.714 per share; and options to
purchase an aggregate of 47,250 shares granted to six employees in December,
1995, exercisable at $4.11 per share.
1996 STOCK OPTION PLAN
On February 1, 1996, the Company's Board of Directors adopted the
Company's 1996 Stock Option Plan (the "1996 Plan"). The plan was approved
by the Company's
-24-
<PAGE>
shareholders in January 1997. The 1996 Plan allows the Board to grant stock
options from time to time to employees, officers and directors of the Company
and consultants to the Company. The Board has the power to determine at the
time the option is granted whether the option will be an Incentive Stock
Option (an option which qualifies under Section 422 of the Internal Revenue
Code of 1986) or an option which is not an Incentive Stock Option. However,
Incentive Stock Options will only be granted to persons who are key employees
of the Company. Vesting provisions are determined by the Board at the time
options are granted. The total number of shares of Common Stock subject to
options under the 1996 Plan may not exceed 815,000, subject to adjustment in
the event of certain recapitalizations, reorganizations and similar
transactions. The option price must be satisfied by the payment of cash.
The Board of Directors may amend the 1996 Plan at any time, provided
that the Board may not amend the 1996 Plan to materially increase the number
of shares available under the 1996 Plan, materially increase the benefits
accruing to Participants under the 1996 Plan, or materially change the
eligible class of employees without shareholder approval.
On February 1, 1996, the Board of Directors granted non-qualified stock
options to purchase an aggregate of 89,250 shares of Common Stock. All of the
options are exercisable at $4.643 per share and are fully vested. The options
will expire five years after the date of grant.
Included in options granted on February 1, 1996, are non-qualified stock
options granted to Chris Brogdon, Edward E. Lane and Darrell C. Tucker,
Directors of the Company, to purchase 26,250 shares each, and non-qualified
stock options granted to Phillip M. Rees, Secretary of the Company, to
purchase 10,500 shares.
On April 15, 1996, the Board of Directors granted a non-qualified stock
option to Donald F. Fox, the Company's President, to purchase 75,000 shares of
the Company's Common Stock at $5.375 per share. The option is fully vested
and will expire five years after the date of grant.
On July 1, 1996, the Board of Directors granted a non-qualified stock
option to an employee of a subsidiary to purchase 25,000 shares of Common
Stock at $5.75 per share. The option was fully vested but expired upon the
termination of the employment of this person.
On August 6, 1996, the Board of Directors granted a non-qualified stock
option to Christopher L. Pence, who was then Vice President - Finance of the
Company, to purchase 25,000 shares of Common Stock at $5.75 per share. The
options became fully vested, and expire five years after the date of grant.
On August 9, 1996, the Board of Directors granted non-qualified stock
options to two employees each to purchase 50,000 shares of Common Stock at
$5.00 per share. These options are fully vested and expire five years after
the date of grant.
On October 23, 1996, the Company granted an incentive stock option to an
employee to purchase 7,500 shares of Common Stock at $5.00 per share. This
option is fully vested and will expire five years after the date of grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of October 3, 1997, as to
the shares of the Common Stock beneficially owned by each person who is the
beneficial owner of more than five percent (5%) of the Company's shares, each
of
-25-
<PAGE>
the Company's Directors and by all of the Company's Directors and Executive
Officers as a group. Each person has sole voting and investment power with
respect to the shares shown except as noted.
<TABLE>
<CAPTION>
AMOUNT OF BENE- PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OFFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
Retirement Care Associates, Inc.<FN1> 5,440,878 <FN2> 64.4%
6000 Lake Forrest Drive, Suite 200
Atlanta, GA 30328
Donald F. Fox 85,000 <FN3> 1.0%
6025 Shiloh Road
Alpharetta, GA 30005
Roy Clifton Christianson 25,000 <FN4> 0.3%
4401 Distribution Drive
Fayetteville, NC 28311
R. Scott Williams 113,077 <FN5> 1.4%
6025 Shiloh Road
Alpharetta, GA 30005
Mark W. Partin -- --
6025 Shiloh Road
Alpharetta, GA 30005
Greg K. Hunt -- --
6025 Shiloh Road
Alpharetta, GA 30005
Chris Brogdon 114,050 <FN6> 1.4%
6000 Lake Forrest Drive, Suite 200
Atlanta, GA 30328
Edward E. Lane 67,200 <FN7> 0.8%
6000 Lake Forrest Drive, Suite 200
Atlanta, GA 30328
Darrell C. Tucker 31,500 <FN8> 0.4%
6000 Lake Forrest Drive, Suite 200
Atlanta, GA 30328
Philip M. Rees 10,500 <FN9> 0.1%
6000 Lake Forrest Drive, Suite 200
Atlanta, GA 30328
All Directors and Executive Officers 446,327 5.2%
as a Group (8 Persons)
__________________
<FN>
<FN1>
Retirement Care Associates, Inc. ("Retirement Care") is a publicly-held
corporation of which Chris Brogdon is President, Director and a principal
shareholder; Edward E. Lane is Secretary, Director and a principal
shareholder; Darrell C. Tucker is a Director and a President of a subsidiary;
and Julian S. Daley and Harlan Mathews are Directors.
-26-
<PAGE>
In addition, Connie Brogdon, the wife of Chris Brogdon, is a principal
shareholder of Retirement Care. The following sets forth the percentage
ownership beneficially held by such persons in Retirement Care:
Chris Brogdon 18.0%
Edward E. Lane 17.7%
Darrell C. Tucker 4.4%
Julian S. Daley 0.3%
Harlan Mathews 0.1%
Connie Brogdon 18.0%
<FN2>
Includes 5,207,003 shares held by Retirement Care, 44,625 shares underlying
Class C Warrants held by Retirement Care; 89,250 shares of Common Stock into
which shares of Series A Convertible Preferred Stock held by Retirement Care
may be converted; and 100,000 shares underlying an option held by Retirement
Care.
<FN3>
Includes 10,000 shares held directly by Mr. Fox and 75,000 shares underlying
currently exercisable stock options held by Mr. Fox.
<FN4>
Represents 25,000 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Christianson.
<FN5>
Includes 8,077 shares of Common Stock held directly by Mr. Williams and
105,000 shares issuable upon the exercise of currently exercisable stock
options held by him.
<FN6>
Includes 65,300 shares held directly by Mr. Brogdon; 10,000 shares held by Mr.
Brogdon's wife; 12,500 shares which represents one-half of the shares owned by
Winter Haven Homes, Inc. of which Mr. Brogdon's wife is a 50% owner; and
26,250 shares issuable upon the exercise of currently exercisable stock
options held by him. Does not include shares held by Retirement Care
Associates, Inc. of which Mr. Brogdon is an officer, director and a principal
shareholder.
<FN7>
Includes 28,450 shares held directly by Mr. Lane; 12,500 shares which
represents one-half of the shares owned by Winter Haven Homes, Inc. of which
Mr. Lane is 50% owner; and 26,250 shares issuable upon the exercise of
currently exercisable stock options held by him. Does not include shares held
by Retirement Care Associates, Inc. of which Mr. Lane is an officer, director
and a principal shareholder.
<FN8>
Represents 5,250 shares held directly by Mr. Tucker, and 26,250 shares
issuable upon the exercise of currently exercisable stock options held by him.
Does not include shares held by Retirement Care Associates, Inc. of which Mr.
Tucker is an officer and director.
<FN9>
Represents 10,500 shares issuable upon the exercise of currently exercisable
stock options held by Mr. Rees.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1994, Retirement Care Associates, Inc., the Company's majority
shareholder, advanced the Company $165,000. This was repaid without interest
during February 1995.
In February 1995, Retirement Care Associates, Inc. ("Retirement Care"),
the Company's majority shareholder, purchased 85,000 shares of Series A
Preferred Stock and 42,500 Class C Redeemable Common Stock Purchase Warrants
for a total of $340,000 in cash as part of a private offering conducted by the
Company. Also
-27-
<PAGE>
in February 1995, the Company advanced $1,168,901 out of the proceeds of the
private offering to Retirement Care. The advance to Retirement Care is due on
demand and is interest free. This transaction was approved by the only
disinterested member of the Board of Directors based on an understanding among
the Board members that Retirement Care will repay the advance as the Board
determines the Company needs the money. In addition, if the Company needs to
borrow money from Retirement Care, as it did in 1994, Retirement Care will
loan the money on an interest free basis. It is the Company's policy that all
transactions with affiliates, including major shareholders and members of
management, must be approved by a majority of the disinterested directors. On
July 11, 1996, Retirement Care repaid $613,563 to the Company, representing
the entire outstanding balance owed to the Company from the proceeds of the
private offering advanced to Retirement Care in February, 1995. On August 22,
the Company advanced $750,000 to Retirement Care out of the proceeds of the
sale of Convertible Debentures in July, 1996, pursuant to an agreement
between the Company and Retirement Care dated August 22, 1996. This agreement
stipulates that funds advanced to Retirement Care by the Company, or by
Retirement Care to the Company, must be repaid within 45 days of the date of
the advance and will bear interest at the prime interest rate published in the
Wall Street Journal. As of June 30, 1997, Retirement Care owed $1,000,000 to
the Company under this agreement.
During the year ended June 30, 1997, nursing home and retirement
facilities owned, leased or managed by Retirement Care purchased a total of
approximately $7,848,000 in bulk medical supplies from the Company. The sales
made to these facilities are at the same prices the Company would receive from
non-affiliated persons. As of June 30, 1997, such facilities owed the Company
$5,135,000 in accounts receivable in connection with such sales.
Retirement Care has guaranteed lines of credit of the Company totaling
approximately $10,000,000 from a commercial bank. As of June 30, 1997,
$5,886,000 had been drawn on this line of credit.
In August 1996, the Company issued promissory notes totaling $10,850,000
in connection with the acquisition of Atlantic Medical Supply, Inc. and a
related company. Retirement Care agreed that in the event of a default in the
payment of such promissory notes, they could be converted into shares of
Retirement Care's common stock, and that Retirement Care would register such
stock for resale under the Securities Act of 1933. In connection with this
matter, the Company agreed to issue 100,000 shares of its Common Stock to
Retirement Care and an option to purchase an additional 100,000 shares of
Common Stock at $5.00 per share to Retirement Care as compensation for its
services.
On January 10, 1997, the Company repaid the promissory notes of
approximately $10,850,000 plus accrued interest which were due on that date.
The source of funds for the repayment was a $9,750,000 loan from Retirement
Care and borrowings under the Company's bank line of credit. The loan from
Retirement Care was made pursuant to a Convertible Promissory Note issued to
Retirement Care on January 10, 1997, which bore interest at 9% per annum, was
unsecured, and due on demand. The Convertible Promissory Note was convertible
into shares of the Company's Common Stock at a conversion price of $5.00 per
share, at the election of the holder. Retirement Care exercised its
conversion rights under the Convertible Promissory Note as of January 10,
1997, and, accordingly, a total of 1,950,000 shares of Common Stock were
issued to Retirement Care.
Scott F. Lochridge, who was an officer of the Company until June 1997,
holds a promissory note from a subsidiary of the Company dated March 1, 1996,
in the principal amount of $176,419. The note bears interest at 10% per annum
and
-28-
<PAGE>
is payable in 36 equal monthly installments of $5,693 commencing April 1,
1996. As of June 30, 1997, $109,000 in principal was outstanding under this
promissory note.
On September 12, 1996, the Company loaned $55,332 to Donald F. Fox, the
Company's President. The loan is due on demand and bears interest at 7% per
annum.
-29-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS. The following financial statements are
filed as part of this report:
PAGE(S)
Reports of Independent Certified Public Accountants............. F-1 to F-2
Consolidated Balance Sheets as of June 30, 1997, and
June 30, 1996....................................................... F-3
Consolidated Statements of Income for the years ended
June 30, 1997 and 1996; the six months ended June 30, 1996,
and for the year ended December 31, 1994............................ F-4
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1997 and 1996, the six months ended
June 30, 1996, and for the year ended December 31,
1994............................................................ F-5 to F-8
Consolidated Statements of Cash Flows for the
years ended June 30, 1997 and 1996, the six months ended
June 30, 1996, and for the year ended December 31,
1994............................................................ F-9 to F-10
Notes to Financial Statements................................... F-11 to F-25
(a) 2. FINANCIAL STATEMENT SCHEDULES. All schedules have been omitted,
as the required information is inapplicable or the information is presented in
the financial statements or the notes thereto.
(a) 3. EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION LOCATION
2.1 Agreement and Plan of Merger and Incorporated by reference to
Reorganization, dated as of Exhibit 2.1 to the Company's
February 17, 1997, among Sun Current Report on Form 8-K
Healthcare Group, Inc., Nectarine dated February 17, 1997
Acquisition Corporation and
Contour Medical, Inc.
2.2 Amendment No. 1 to the Agreement Incorporated by reference to
and Plan of Merger and Reorgani- Exhibit 2.1 to the Company's
zation dated as of February 17, Current Report on Form 8-K
1997 among Sun Healthcare Group, dated August 21, 1997
Inc., Nectarine Acquisition Cor-
poration and Contour Medical, Inc.
2.3 Asset Purchase Agreement with Filed herewith electronically
RawCar Group, L.L.C.
-30-
<PAGE>
3.1 Restated Articles of Incorpora- Incorporated by reference to
tion of Associated Health Care Exhibit 3.1 to the Company's
Industries, Inc. Form S-1 Registration State-
ment (File No. 33-66024)
3.2 Amendment to the Restated Incorporated by reference to
Articles of Incorporation Exhibit 3.2 to the Company's
Form S-1 Registration State-
ment (File No. 33-66024)
3.3 Bylaws of the Registrant Incorporated by reference to
Exhibit 3.3 to the Company's
Form S-1 Registration State-
ment (File No. 33-66024)
3.4 Second Amendment to the Restated Incorporated by reference to
Articles of Incorporation of Exhibit 3.4 to the Company's
Contour Medical, Inc., dated Form S-1 Registration State-
July 26, 1993 ment (File No. 33-66024)
3.5 Third Amendment to the Restated Incorporated by reference to
Articles of Incorporation of Exhibit 3.5 to the Company's
Contour Medical, Inc., dated Form S-1 Registration State-
August 27, 1993 ment (File No. 33-66024)
3.6 Fourth Amendment to the Restated Incorporated by reference to
Articles of Incorporation of Exhibit 3.6 to the Company's
Contour Medical, Inc., dated Form S-1 Registration State-
November 10, 1993 ment (File No. 33-66024)
3.7 Amended Bylaws Incorporated by reference to
Exhibit 3.7 to the Company's
Form S-1 Registration State-
ment (File No. 33-66024)
3.8 Sixth Amendment to Articles of Incorporated by reference to
Incorporation, dated November 9, Exhibit 3.8 to the Company's
1993 (there is no "Fifth" Amend- Form S-1 Registration State-
ment) ment (File No. 33-66024)
3.9 Amendment Number Five to Incorporated by reference to
Articles of Incorporation, Exhibit 3.9 to the Company's
dated April 25, 1994 Form S-1 Registration State-
ment (File No. 33-66024)
3.10 Amendment Number Six to Incorporated by reference to
Articles of Incorporation, Exhibit 3.10 to the Company's
dated May 13, 1994 Form S-1 Registration State-
ment (File No. 33-66024)
10.1 Non-Qualified Employee Stock Incorporated by reference to
Bonus Plan Exhibit 10.6 to the Company's
Form S-1 Registration State-
ment (File No. 33-66024)
-31-
<PAGE>
10.2 Employment Agreement by and be- Incorporated by reference to
tween Contour Medical Fabricaors Exhibit 10.8 to the Company's
of Florida, Inc., Associated Form S-1 Registration State-
Healthcare Industries, Inc. and ment (File No. 33-66024)
Gerald J. Flanagan, dated
July 1, 1993
10.3 1996 Stock Option Plan Incorporated by reference to
Exhibit 10.9 to the Company's
Form S-1 Registration State-
ment (File No. 33-64977)
10.4 Agreement and Plan of Merger by Incorporated by reference to
and among Contour Medical, Inc. Exhibit 10 to the Company's
Contour Merger Sub, Inc., Scott Current Report on Form 8-K
F. Lochridge and AmeriDyne Dated March 1, 1996
Corporation
10.5 Employment Agreement with Incorporated by reference to
Scott F. Lochridge Exhibit 10.11 to the Company's
Form S-1 Registration State-
ment (File No. 33-64977)
10.6 Promissory Note from AmeriDyne Incorporated by reference to
Corporation from Scott F. Exhibit 10.13 to the Company's
Lochridge Form S-1 Registration State-
ment (File No. 33-64977)
10.7 Share Purchase Agreement for Incorporated by reference to
the acquisition of Atlantic Exhibit 10.1 to the Company's
Medical Supply Company, Inc. Report on Form 8-K dated
August 6, 1996
10.8 Lease Agreement with William A. Incorporated by reference to
and Gerald Gehrand dated Exhibit 10.8 to the Company's
February 1, 1995, relating to Transition Report on Form
Registrant's warehouse space in 10-K for the period ended
St. Petersburg, Florida June 30, 1995
10.9 Convertible Debenture Loan Incorporated by reference to
Agreement with Renaissance Exhibit 10.1 to the Company's
Capital Growth & Income Fund Annual Report on Form 10-K for
III, Inc., and Renaissance US the year ended June 30, 1996
Growth and Income Trust PLC
10.10 Letter Agreement dated August Incorporated by reference to
22, 1996 with Retirement Care Exhibit 10.25 to the Company's
Associates, Inc. Annual Report on Form 10-K for
the year ended June 30, 1996
10.11 Lease Agreement with Meadows Filed herewith electronically
I/II,LLC for Alpharetta, Georgia
Facility
10.12 Sublease Agreement with Sunscript Filed herewith electronically
Pharmacy Corporation on Alpha-
retta, Georgia Facility
-32-
<PAGE>
10.13 Lease Agreement with Spieker Filed herewith electronically
Properties, L.P. for Portland,
Oregon Facility
10.14 Sublease Agreement with RawCar Filed herewith electronically
Group, L.L.C.
10.15 Lease Agreement with Westport Filed herewith electronically
Business Park Associates for
Ft. Lauderdale facility
21 Subsidiaries of the Registrant Filed herewith electronically
23.1 Consent of Cherry, Bekaert & Filed herewith electronically
Holland, L.L.P.
23.2 Consent of BDO Seidman, LLP Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
All financial statement schedules have been omitted, as the required
information is inapplicable or the information is presented in the financial
statements or the notes thereto.
(b) The Company did not file any Reports on Form 8-K during the quarter
ended June 30, 1997.
-33-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Contour Medical, Inc.
Alpharetta, Georgia
We have audited the accompanying consolidated balance sheets of Contour
Medical, Inc. (a subsidiary of Retirement Care Associates, Inc.) and
Subsidiaries (the Company) as of June 30, 1997 and 1996, and the related
statements of operations, stockholders' equity, and cash flows for the years
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 audits.
We conducted our audits 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 consolidated financial position of Contour Medical,
Inc. and Subsidiaries as of June 30, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Cherry, Bekaert & Holland, L.L.P.
Cherry, Bekaert & Holland, L.L.P.
Greensboro, North Carolina
October 9, 1997
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Contour, Medical, Inc.
St. Petersburg, Florida
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Contour Medical, Inc. (a subsidiary of
Retirement Care Associates, Inc.) and Subsidiaries for the six months ended
June 30, 1995 and the year ended December 31, 1994. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. These 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Contour Medical, Inc. and Subsidiaries for the six months ended June
30, 1995 and the year ended December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orlando, Florida
August 18, 1995, except for the stock split
discussed in Note 9 which is as of March 15, 1996
F-2
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and 1996
1997 1996
ASSETS ----------- -----------
Cash $ 311,657 $ 146,219
Accounts receivable:
Related parties 5,135,189 1,918,000
Trade, net of allowance for bad debts
of approximately $2,805,000 in 1997
and $410,000 in 1996 7,811,635 2,527,676
Inventories 5,130,142 2,876,792
Refundable income taxes - 21,406
Deferred income taxes 572,875 164,048
Prepaid expenses and other 237,687 51,519
Due from parent 973,164 618,897
Total current assets 20,172,349 8,324,557
Property and equipment, net 1,492,918 1,223,195
Other assets:
Deposit on equipment 311,453 416,184
Other 434,529 8,167
Goodwill, net of accumulated amortization
of approximately $251,000 in 1997 and
$11,000 in 1996 10,109,927 1,286,165
10,855,909 1,710,516
$32,521,176 $11,258,268
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 6,079,086 1,825,193
Accounts payable 3,839,548 2,036,652
Accrued expenses 728,784 366,716
Total current liabilities 10,647,418 4,228,561
Long-term debt, less current maturities 5,473,841 1,352,937
16,121,259 5,581,498
Stockholders' equity:
Preferred stock - Series A convertible;
$.001 par value, shares authorized -
1,256,000; issued and outstanding -
1335,000 and 600,000, respectively,
at aggregate liquidation preference 623,414 2,528,000
Common stock; $.001 par value, shares
authorized - 76,000,000; issued and
outstanding - 8,127,376 and 5,214,223,
respectively (net of $765 discount) 7,334 4,449
Additional paid-in capital 15,796,188 2,911,696
Retained earnings (deficit) (27,019) 232,625
Total stockholders' equity 16,399,917 5,676,770
$32,521,176 $11,258,268
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Six Months
Year Ended Year Ended Ended Year Ended
June 30, June 30, June 30, December 31,
1997 1996 1995 1994
----------- ----------- ---------- -----------
Sales $53,349,137 $14,542,421 $3,568,459 $3,945,745
Cost of sales 39,681,159 10,491,103 2,544,376 2,545,925
Gross profit 13,667,978 4,051,318 1,024,083 1,399,820
Selling, general and
administrative expenses 12,973,675 3,185,620 841,275 1,550,385
Litigation settlements - - - 30,000
Income (loss) from
operations 694,303 865,698 182,808 (180,565)
Other income (expenses):
Offering costs - - - (305,731)
Interest (1,295,556) (170,951) (39,098) (53,627)
Other, net 226,352 144,453 22,381 10,741
(1,069,204) (26,498) (16,717) (348,617)
Income (loss) before
income taxes (374,901) 839,200 166,091 (529,182)
Income tax (expense)
benefit 115,257 (312,166) (54,718) -
Net income (loss) $ (259,644) $ 527,034 $ 111,373 $ (529,182)
Earnings (loss) per share $ (0.05) $ 0.09 $ 0.02 $ (0.20)
Weighted average common
shares and share
equivalents outstanding 6,115,127 4,804,292 4,786,126 2,688,927
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit)
--------- ------ ---------- ---------
Balance, December 31, 1993 2,308,239 $1,129 $ 140,923 $ 185,971
Conversion of preferred
stock and warrants:
Class A 219,182 220 39,557 (14,777)
Class B 33,333 33 (33) -
Class D 238,450 238 75,212 (47,794)
Class E 172,986 173 295,569 -
Class One 2,000,000 2,000 370,844 -
Net loss - - - (529,182)
Balance, December 31, 1994 4,972,190 3,793 922,072 (405,782)
Issuance of Series A
preferred stock - - (214,997) -
Exercise of common stock
options 15,385 15 19,985 -
Correction of Class A
preferred stock Conversion 255 - - -
Redemption of Class A
warrants - - (40) -
Tax benefit from utilization
of net operating loss
carryforward - - 54,718 -
Retirement of treasury stock (414,230) - - -
Net loss - - - 111,373
Balance June 30, 1995 4,573,600 3,808 781,738 (294,409)
Issuance of stock 352,018 353 2,045,753 -
Exercise of common stock 25,000 25 49,975 -
1.05-for-1 forward stock split 247,601 247 (247) -
Correction for preferred stock 16,004 16 (16) -
Short-swing liability from a
shareholder - - 36,531 -
Preferred dividends in arrears - - (128,000)
Tax benefit from utilization
of net operating loss carry-
forward - - 125,962 -
Net income - - - 527,034
Balance, June 30, 1996 5,214,223 $ 4,449 $2,911,696 $ 232,625
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (continued)
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit)
--------- ------ ---------- ---------
Balance, June 30, 1996 5,214,223 $4,449 $2,911,696 $ 232,625
Convertible debt from
Atlantic acquisition con-
verted to common stock 1,950,000 1,950 9,748,050 -
Common stock issued for RCA's
guarantee of Contour's debt
for Atlantic 100,000 100 499,900 -
Series A converted to common
stock 488,250 488 1,859,512 -
Series A cumulative dividend
accrual - - (43,934) -
Series A dividends paid
Non-qualified options exercised
for common stock 68,083 40 154,306 -
1996 plan options exercised for
common stock 10,000 10 57,490 -
Class B warrants exercised for
common stock 42,285 42 181,182 -
Class C warrants exercised for
common stock 26,250 27 112,473 -
Consultant's warrants exercised
for common stock 228,285 228 315,513 -
Net income - - - (259,644)
Balance, June 30, 1997 8,127,376 $7,334 $15,796,188 $(27,019)
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (continued)
Convertible Preferred
Treasury Stock Stock - Series A
Shares Amount Shares Amount
-------- ------ -------- -----------
Balance, December 31, 1993 414,230 $ - - $ -
Balance, December 31, 1994 414,230 - - -
Issuance of Series A
preferred stock - - 600,000 2,400,000
Retirement of treasury
stock (414,230) - - -
Balance June 30, 1995 - - 600,000 2,400,000
Preferred dividends in
arrears - - - 128,000
Balance, June 30, 1996 - - 600,000 2,528,000
Series A converted to
common - - (465,000) (1,860,000)
Series A cumulative
dividend accrual - - - 43,934
Series A dividends paid - - - (88,520)
Balance June 30, 1997 - $ - 135,000 $ 623,414
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (continued)
Convertible Preferred Convertible Preferred
Stock - Class A Stock - Series B
Shares Amount Shares Amount
-------- -------- -------- ------
Balance, December 31, 1993 99,525 $ 25,000 2 -
Conversion of preferred
stock and warrants:
Class A (99,525) (25,000) - -
Class B - - (2) -
Balance, December 31, 1994 - $ - - $ -
Redeemable Cumulative Convertible Preferred
Preferred Stock Class D Stock - Class One
Shares Amount Shares Amount
---------- -------- ---------- --------
Balance, December 31, 1993 1,074,176 $400,500 - $ -
Conversion of preferred
stock and warrants:
Class D (1,074,176) (400,500) 2,000,000 372,844
Class One - - (2,000,000) (372,844)
Balance, December 31, 1994 - $ - - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months
Year Ended Year Ended Ended Year Ended
June 30, June 30, June 30, December 31,
1997 1996 1995 1994
----------- ---------- ----------- ---------
Cash flows from operating
activities:
Net income (loss) $ (259,644) $ 527,034 $ 111,373 $(529,182)
Adjustments to reconcile
net income (loss)to net
cash used in operating
activities:
Gain on sale of assets (608,423) - - -
Depreciation and
amortization 861,241 255,757 51,670 98,684
Guaranty fee 500,000 - - -
Offering costs - - - 305,731
Provision for doubtful
accounts 382,188 - - -
Tax benefit from util-
ization of net operat-
ing loss carryforward - 207,990 54,718 -
Cash provided by (used in):
Accounts receivable (5,343,342) (1,364,353) (1,123,856) (34,558)
Inventories 42,501 (318,832) (908,317) 33,978
Refundable income taxes (150,865) (10,726) (2,500) 90,941
Prepaid expenses and
other (121,788) 32,059 (61,325) (6,189)
Accounts payable (71,414) 402,534 767,004 23,263
Accrued expenses 362,069 144,490 80,835 (10,801)
Net cash provided by (used in)
operating activities (4,407,477) (124,047) (1,030,398) (28,133)
Cash flows from investing
activities:
Purchases of property and
equipment (969,486) (749,163) (304,762) (46,181)
Decrease (increase) in due
from parent (354,267) 550,004 (1,168,901) -
Deposit on equipment (446,258) - (228,282) -
Decrease (increase) in
other assets (196,575) - - 555
Acquisition of AmeriDyne,
net of cash acquired - (322,297) - -
Acquisition of Americare
Group and remaining interest
In Facility Supply (1,452,597) - - -
Proceeds on sale of Contour
Fabricators 3,350,000 - - -
Net cash provided by (used in)
investing activities $ (69,183) $ (521,456) $(1,701,945) $(45,626)
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Six Months
Year Ended Year Ended Ended Year Ended
June 30, June 30, June 30, December 31,
1997 1996 1995 1994
----------- ---------- ---------- ---------
Cash flows from financing
activities:
Deferred offering costs $ - $ - $ - $ (59,990)
Proceeds from issuance
of notes payable to
bank - 1,295,635 189,671 -
Repayment on notes
payable to bank - (686,679) - (42,177)
Proceeds from issuance
of notes payable and
long-term debt 12,750,473 - 482,622 -
Payments of notes payable
and long-term debt (8,841,166) - (34,328) -
Exercise of stock options 211,846 50,000 20,000 -
Increase (decrease) in
due to parent - - (165,000) 165,000
Proceeds from issuance of
preferred stock, net of
issuance costs - - 2,196,447 -
Redemption of Class A
warrants - - (40) -
Payment of Series A stock
dividend (88,520) - - -
Class B warrants exercised
for common 181,224 - - -
Class C warrants exercised
for common 112,500 - - -
Consultants' warrant
exercised for common 315,741 - - -
Payment of short-swing
liability by a share-
holder - 36,531 - -
Net cash provided by
financing activities 4,642,098 695,487 2,689,372 62,833
Net increase (decrease)
in cash 165,438 49,984 (42,971) (10,926)
Cash, beginning of period 146,219 96,235 139,206 150,132
Cash, end of period $ 311,657 $ 146,219 $ 96,235 $139,206
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Contour Medical, Inc. ("Contour Medical" or the "Company") was incorporated in
Nevada in April 1987 and in 1989 conducted an initial public offering. The
Company's common stock is traded in the over-the-counter market, and since
September 21, 1995, has been traded on the Nasdaq Small-Cap-Market under the
symbol "CTMI." Approximately 62% of the Company's common stock is owned by
Retirement Care Associates, Inc. ("Retirement Care"), a publicly-held company
engaged in the management and operation of retirement care and long-term
nursing home facilities in the Southeastern United States. The Company's
corporate offices are located in Alpharetta, Georgia.
Prior to 1996, the Company's revenues were derived predominantly through its
manufacturing facilities, Contour Fabricators, Inc. ("CFI") and Contour
Fabricators of Florida, Inc. ("CFFI"), located in Grand Blanc, Michigan and
St. Petersburg, Florida, respectively. These companies manufactured
disposable surgical procedure products and custom packaged procedural trays
for use in specialized medical applications. During 1997, the assets related
to these businesses were sold to an unrelated party.
In 1996, the Company acquired AmeriDyne Corporation ("AmeriDyne"), a Jackson,
Tennessee-based distributor of bulk medical supplies primarily to home health
agencies and hospitals. Sales from AmeriDyne included in the consolidated
statements of operations amounted to approximately $14,464,000 and $3,616,000
for 1997 and 1996, respectively. (See Note 13).
In 1997, the Company acquired Atlantic Medical Supply Company, Inc. ("Atlantic
Medical"), an Augusta, Georgia-based distributor of medical supplies and
ancillary products to long-term care providers. Sales from Atlantic Medical's
facilities in Georgia, North Carolina and Florida amounted to approximately
$26,757,000 in 1997. (See Note 12).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Contour Medical, Inc. and its wholly-owned subsidiaries,
Atlantic Medical Supply Company, Inc., AmeriDyne Corporation, Contour
Fabricators, Inc., and Contour Fabricators of Florida, Inc., collectively
referred to as "the Company." All material intercompany accounts and
transactions have been eliminated in the consolidation.
MANAGEMENT ESTIMATES - The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of consolidated assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements.
Estimates also affect the reported amounts of consolidated revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION - Sales are recognized upon shipment of products to
customers.
TRADE RECEIVABLES - The Company uses the allowance method to provide for
uncollectible accounts. Allowance for doubtful accounts approximated
$2,805,000 and $410,000 as of June 30, 1997 and 1996, respectively.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INVENTORIES - Inventories are valued at lower of cost (first-in, first-out) or
market. AmeriDyne inventories are valued at the lower of average cost or
market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed over the estimated useful lives of the assets by
accelerated methods for financial reporting and income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments held by the
Company at June 30, 1997 include cash, deposits and long-term debt.
Management believes that, considering current terms of similar financial
instruments, the carrying value of the Company's financial instruments
approximated their fair values at June 30, 1997.
GOODWILL - The Company has classified as goodwill the cost in excess of fair
value of the net assets of Atlantic Medical and AmeriDyne acquired in purchase
transactions. Goodwill is being amortized on the straight-line method over 40
years. Amortization charged to continuing operations amounted to
approximately $240,000 and $11,000 for the years ended June 30, 1997 and 1996,
respectively. The Company periodically reviews goodwill to assess
recoverability, and any impairment would be recognized in operating results if
a permanent diminution in value were to occur.
OFFERING COSTS - Fees, costs and expenses related to offerings of securities
are deferred and charged against the proceeds therefrom or, if the offering is
unsuccessful, charged to operations. Costs of $257,000 related to a proposed
public offering were deferred at December 31, 1993 and charged to operations
in the second quarter of 1994, when the offering was abandoned. Deferred
costs at December 31, 1994, related to the private placement discussed in Note
9, were charged against the proceeds therefrom in 1995.
DEFERRED LOAN COSTS - Fees, costs and expenses related to the issuance of
long-term debt are deferred and amortized over the term of the related debt
using the straight-line method. Amortization of deferred loan costs charged
to operations in 1997 approximated $46,000.
INCOME TAXES - Income taxes are accounted for using the asset and liability
method for financial accounting and reporting purposes. Accordingly, deferred
tax assets and liabilities are recognized for temporary differences between
the financial reporting basis of assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance
is provided for deferred tax assets when management considers it more likely
than not that some portion or all of the asset will not be realized.
EARNINGS (LOSS) PER SHARE - Earnings (loss) per common share are based on the
weighted average number of common shares outstanding and dilutive common stock
equivalent shares outstanding during each period, after giving effect to the
1.05-for-1 forward stock split which occurred in 1996. Common stock
equivalents for 1996, 1995 and 1994 have not been included, since the effect
would be antidilutive. Annual accruals of cumulative dividends in arrears of
approximately $44,000, $96,000 and $32,000 related to the Company's Class A
preferred stock
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(see Note 9) have been deducted from 1997, 1996 and 1995 net income and for
the calculation of earnings (loss) per common share, respectively.
CHANGE IN YEAR-END - The Company changed its fiscal year-end from December 31
to June 30 during 1995. Accordingly, the June 30, 1995 statements of
operations, stockholders' equity and cash flows are for the six months then
ended.
RECLASSIFICATIONS - Certain 1996 and 1995 amounts have been reclassified to
conform with the 1997 presentation. These reclassifications had no effect on
operations.
3. RELATED PARTY TRANSACTIONS
During 1995, the Company began distributing medical supplies to health care
facilities owned, leased, or managed by Retirement Care. Sales to these
facilities approximated $7,848,000, $5,456,000 and $1,426,000 for the years
ended June 30, 1997, 1996 and the six-month period ended June 30, 1995,
respectively. Trade accounts receivable of approximately $5,135,000 and
$1,918,000 related to these health care facility sales are outstanding as of
June 30, 1997 and 1996, respectively. Additionally, the Company had an
outstanding loan receivable due from Retirement Care of approximately $973,000
as of June 30, 1997 with interest at prime and $619,000 as of June 30, 1996
which is due on demand with no stated interest rate.
4. INVENTORIES
Inventories at June 30, 1997 and 1996 consisted of the following:
1997 1996
----------- -----------
Raw materials $ - $ 330,699
Work in process - 96,647
Finished goods 5,130,142 2,449,446
----------- -----------
$ 5,130,142 $ 2,876,792
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1997 and 1996 consisted of the following:
1997 1996
---------- ----------
Land and land improvements $ 9,841 $ 50,000
Building 5-45 yrs. 6,159 596,247
Machinery and equipment 3-7 yrs. 1,442,614 1,798,520
Furniture and fixtures 5-7 yrs. 498,876 146,536
Leasehold improvements 5 yrs. 74,717 251,352
Vehicles 3-5 yrs. 84,853 72,245
---------- ----------
2,117,060 2,914,900
Less accumulated depreciation 624,142 1,691,705
---------- ----------
$1,492,918 $1,223,195
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. PROPERTY AND EQUIPMENT (continued)
All property and equipment are pledged as collateral (see Note 6).
6. NOTES PAYABLE
Notes payable at June 30, 1997 and 1996 consisted of the following:
1997 1996
---------- ----------
Borrowings under $10,000,000 revolving line of
credit, interest based on 30 day LIBOR plus
2.00% (7.68% at June 30, 1997), payable monthly,
principal due October 31, 1997, collateralized by
accounts receivable, inventory, and guarantees
of Retirement Care Associates, Inc. $ 5,886,545 $ -
Convertible debentures, interest at 9.00% payable
monthly, principal due July 1, 2003, convertible
into shares of common stock 5,000,000 -
Borrowings under $750,000 non-revolving line of
credit, interest at prime (8.50% at June 30,
1997), principal of $20,833 plus interest due
monthly, collateralized by accounts receivable,
inventory, furniture, fixtures, equipment,
machinery, bank accounts and guarantees of
Retirement Care Associates, Inc. 548,491 -
Note payable to stockholder, interest at 10.00%,
principal and interest of $5,693, due monthly
through March 1999 109,252 163,646
Note payable to equipment company, interest at
14.00%, monthly installments of $405 including
interest, matures August 1998, collateralized by
equipment 5,546 -
Note payable to equipment company, interest at
11.00%, monthly installments of $533 including
interest, matures December 1997, collateralized
by equipment 3,093 8,805
Note payable to bank, interest at prime plus 1.00%
(9.25% at June 30, 1996), principal of $5,000 plus
interest due monthly through June 2000,
collateralized by equipment - 217,559
Note payable to bank, interest at prime plus .75%
(9.00% at June 30, 1996), principal of $7,605 plus
interest due monthly through May 2000,
collateralized by accounts receivable, inventory,
equipment and real property - 496,171
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. NOTES PAYABLE (continued) 1997 1996
------- ----------
Mortgage payable to bank, bearing interest at 8.58%,
principal and interest of $6,793 due monthly
through December 2003, collateralized by accounts
receivable, inventory, equipment and real property - 456,233
Mortgage payable to bank, interest at prime plus
.75% (9.00% at June 30, 1996), principal of $1,190
plus interest due monthly through December 2000,
collateralized by accounts receivable, inventory,
equipment and real property - 64,284
Borrowings under $100,000 line of credit, interest
at prime plus .75% (9.00% at June 30, 1996),
payable monthly, collateralized by accounts
receivable, inventory, equipment and real property - 65,000
Note payable to bank, interest at 8.75%, principal
and interest of $1,282 due monthly through April
2001, collateralized by equipment - 60,436
Borrowings under $500,000 line of credit, interest
at prime plus .25% (8.50% at June 30, 1996), payable
monthly, collateralized by accounts receivable,
inventory and equipment, and guarantees by
Retirement Care Associates, Inc. - 433,535
Note payable to leasing institution, interest at
14.60%, monthly installments of $309 plus sales
tax, matures June 1997, collateralized by
computer equipment - 2,924
Note payable to bank, interest at 9.00%, principal
and interest of $3,600 due monthly through May
1997, collateralized by accounts receivable,
inventory, furniture, fixtures, equipment,
machinery, bank accounts, and guarantees of
Retirement Care Associates, Inc. - 38,924
Note payable to bank, interest at 9.00%, principal
and interest of $5,266 due monthly through
October 1997, collateralized by accounts
receivable, inventory, furniture, fixtures,
equipment, machinery, bank accounts, and
guarantees of Retirement Care Associates, Inc. - 212,613
Borrowings under $975,000 line of credit,
interest at prime plus 1.25% (9.50% at June 30,
1996), principal is due on demand but no later
than May 15, 1997, collateralized by accounts
receivable, inventory, furniture, fixtures,
equipment, machinery, bank accounts, and
guarantees by Retirement Care Associates, Inc. - 958,000
11,552,927 3,178,130
Less current maturities (6,079,086) (1,825,193)
$ 5,473,841 $1,352,937
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. NOTES PAYABLE (continued)
The aggregate maturities of long-term debt are as follows as of June 30, 1997:
1998 $ 6,079,086
1999 300,350
2000 744,567
2001 503,534
2002 446,325
Thereafter 3,479,065
The Company's revolving line of credit and the provisions of indenture
relating to its 9% convertible debentures contain certain restrictive
financial covenants. Under the terms of the agreements, the Company is
required to maintain a debt to net worth ratio of no more than 2.5, a current
ration of no less than 1.50 and an interest coverage ratio of no less than
4.0. At June 30, 1997, the Company was out of compliance with the interest
coverage ratio requirements. The lending institutions have waived those
requirements as of June 30, 1997 and for the year then ended.
At June 30, 1997, the Company had approximately $4,113,000 and $202,000 of
unused credit under its revolving line of credit and its non-revolving
equipment line of credit, respectively. Outstanding draws against the
revolving and non-revolving lines of credit bear interest at the prime rate of
interest and LIBOR plus 2%, respectively.
7. LEASE COMMITMENTS
The Company is obligated under various noncancelable leases for equipment and
office space. Future minimum lease commitments under operating leases were as
follows as of June 30, 1997.
1998 $ 603,073
1999 538,680
2000 544,975
2001 406,644
2002 320,190
Thereafter -
Total rental expense was approximately $935,834, $349,600, $145,500 and
$203,000 for the years ended June 30, 1997 and 1996, the six-month period
ended June 30, 1995, and the year ended June 30, 1994, respectively.
8. INCOME TAXES
Income taxes are provided based on the liability method of accounting pursuant
to Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Income tax expense (benefit) includes the following amounts:
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INCOME TAXES (continued)
Six Months
Years Ended Ended Year Ended
June 30, June 30, December 31,
1997 1996 1995 1994
---------------------- ---------- -----------
Current:
Federal $ - $ 161,951 - -
State - 28,101 - -
Deferred (115,257) 122,114 54,718 -
Total income tax
expense (benefit) $(115,257) $ 312,166 54,718 -
The components of deferred tax assets derived from temporary deductible
differences are as follows:
Six Months
Years Ended Ended Year Ended
June 30, June 30, December 31,
1997 1996 1995 1994
-------------------- ---------- -----------
Allowance for uncollectible
accounts $ 556,875 $164,048 - -
Allowance for inventory
valuation 16,000 - - -
Non-deductible accruals - - 7,524 -
Net operating loss 444,546 355,108 459,568 485,519
1,017,421 519,156 467,092 485,519
Less valuation allowance (444,546) (355,108) (467,092) (485,519)
Net deferred tax asset
- current $ 572,875 $164,048 - -
The following summary reconciles differences from income taxes at the federal
statutory rate with the effective tax rate:
Six Months
Years Ended Ended Year Ended
June 30, June 30, December 31,
1997 1996 1995 1994
------------------ --------- -----------
Income taxes (benefits) at federal
statutory rate (34.00)% 34.00 % 34.00 % (34.00)%
State income taxes, net of
federal tax benefit - 3.60 % 3.10 % -
Carryforward of net operating loss - - (9.90)% -
Losses not available for carryback 34.00 % - - 34.00 %
Other, net - (0.04)% 5.00 % -
Income taxes at effective rate - 37.56 % 32.20 % -
As of June 30, 1997, the Company had net operating loss carryforwards for tax
purposes, expiring at various dates ending July 30, 2012, of approximately
$1.1 million which includes approximately $516,000 attributable to Contour
Medical, Inc. for the period prior to January 1, 1993. Due to certain change
of ownership
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INCOME TAXES (continued)
requirements of Section 382 of the Internal Revenue Code, utilization of the
Company's operating losses is expected to be limited to approximately $414,000
per year. The deferred tax asset related to the tax benefit of these losses
has been offset by a valuation allowance due to uncertainty of realization.
The valuation allowance increased approximately $89,000 during 1997 and
decreased approximately $112,000 during 1996.
The income tax benefit arising from any utilization of the net operating
losses attributable to CMI will be credited to additional paid-in capital when
recognized. During 1996, the income tax benefit of utilization of net
operating losses attributable to CMI of approximately $126,000 was credited to
paid-in capital.
9. CAPITAL STOCK
STOCK BONUS PLAN - The Company has a non-qualified employee stock bonus plan.
The Plan provides for the granting of up to 1,000,000 options for the purchase
of the Company's common stock to eligible employees at purchase prices of at
least $.01 per share. Options awarded under the Plan vest over a three-year
period from the date of grant and are exercisable over a five-year period from
the date of grant.
Changes in options outstanding are summarized as follows:
Option Price
Shares Per Share
------- -------------
Balance December 31, 1993 265,386 $1.30 - $2.00
Granted 100,000 $2.25
Balance, December 31, 1994 365,386 $1.30 - $2.25
Granted 50,000 $3.90
Exercised (15,385) $1.30
Canceled (1) $1.30
Balance, June 30, 1995 400,000 $2.00 - $3,90
Granted 45,000 $4.11
Exercised (25,000) $2.00
Stock split 21,000
Balance, June 30, 1996 441,000 $1.88 - $4.11
Exercised (68,083) $3.71 - $4.11
Canceled (40,500)
Balance, June 30, 1997 332,417
All of the above options were granted with an exercise price above fair market
value at the date of grant. In addition, 325,423 stock options related to the
non-qualified employee stock bonus plan were exercisable at June 30, 1996.
Common shares for future issuance under this plan totaled 919,532 at June 30,
1997.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CAPITAL STOCK (continued)
STOCK OPTION PLAN - In February 1996, the Company adopted the 1996 Stock
Option Plan (the "1996 Plan"). The 1996 Plan allows the Board of Directors to
grant stock options from time to time to employees, officers and directors of
the Company and consultants to the Company. The Board of Directors has the
right to determine, at the time of option, whether the option will be an
Incentive Stock Option or an option which is not an Incentive Stock Option.
Vesting provisions are determined by the Board of Directors at the time the
options are granted. The 1996 Plan provides for the granting of up to 815,000
options for the purchase of the Company's common stock.
Changes in options outstanding are summarized as follows:
Shares Option Price per Share
-------- ----------------------
Balance, June 30, 1995 - -
Granted 160,000 $4.64 - $5.75
Stock split 4,250
Balance, June 30, 1996 164,250 $4.64 - $5.75
Granted 207,500 $5.50 - $5.75
Canceled (10,000) $5.75
Exercised (65,000) $5.75
Balance, June 30, 1997 296,750
All of the above options were granted with an exercise price above fair market
value at the time of grant. In addition, all of the stock options related to
the 1996 plan were exercisable at June 30, 1997, and 518,250 common shares are
reserved for future issuance under this plan.
STOCK SPLIT - In February 1996, the Board of Directors authorized a 1.05-for-1
forward stock split of its common stock effective March 1996. All common
shares and per share amounts have been retroactively adjusted to give effect
to the forward stock split.
STOCK WARRANTS - At June 30, 1997, the Company had 757,584 stock warrants
outstanding. Information relating to these warrants is summarized as follows:
Number of
Common Exercise
Expiration Number of Shares Per Price Per
Type Date Warrants Warrant Warrant
--------------- ---------- --------- ---------- --------
Class C Feb. 1999 275,000 1.05 $ 4.50
Consultant Oct. 1997 86,334 1.05 $ 1.50
Consultant Oct. 1999 200,000 1.05 $ 3.00
Consultant Oct. 1997 46,250 1.05 $ 3.00
Consultant Sep. 1999 50,000 1.00 $ 5.50
Retirement Care
Associates Aug. 1999 100,000 1.00 $ 5.00
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CAPITAL STOCK (continued)
During fiscal year 1997, 40,272 of the Class B warrants were converted into
42,285 shares of common stock. The remaining class B warrants expired in July
1996.
CHANGE OF CONTROL - On September 30, 1994, Retirement Care acquired 889,002
shares of the Company's outstanding common stock and 2,000,000 shares of the
Company's Class One Convertible Preferred Stock from three persons who were
officers and directors of the Company. Subsequently, Retirement Care
converted the Class One Convertible Preferred Stock into 2,100,000 shares of
common stock. During the year ended June 30, 1997, Retirement Care
Associates, Inc. converted a note payable due from Contour Medical, Inc. into
1,950,000 shares of CMI's common stock. RCA also received 100,000 shares of
CMI's common stock as compensation for a loan guarantee.
CLASS ONE CONVERTIBLE PREFERRED STOCK - During 1994, the holders of 1,000,000
shares of Class D Redeemable Cumulative Preferred Stock exchanged their shares
for 2,000,000 shares of newly created no par Class One Convertible Preferred
Stock. The Class One Preferred Stock had a liquidation preference of $3.00
per share. Each Class One Preferred Share was convertible into 1.05 shares of
the Company's common stock. All 2,000,000 shares of Class One Preferred Stock
were converted into 2,100,000 shares of common stock in November 1994.
CLASS A CONVERTIBLE PREFERRED STOCK - During 1994, 99,525 shares of Class A
Convertible Preferred Stock were converted into 230,141 shares of common
stock. The conversion included a stock dividend of $14,777 for dividends in
arrears through the date of conversion.
CLASS B CONVERTIBLE PREFERRED STOCK - During 1994, two shares of Class B
Convertible Preferred Stock were converted into 35,000 shares of common stock.
CLASS D REDEEMABLE CUMULATIVE PREFERRED STOCK - In April 1994, 74,176 shares
of Class D Redeemable Cumulative Preferred Stock and 148,345 Class D warrants
were converted into 250,354 shares of common stock and 119,225 Class B
warrants. In addition, 1,000,000 shares of Class D Redeemable Cumulative
Preferred Stock and 846,667 Class D warrants were converted into 2,000,000
shares of new Class One Convertible Preferred Stock. In November 1994, the
Class One shares were converted into 2,100,000 shares of common stock. These
conversions included a stock dividend of $47,794 for dividends in arrears
through the date of conversion.
CLASS E CONVERTIBLE PREFERRED STOCK - In April 1994, 172,986 shares of Class E
Convertible Preferred Stock were converted into 181,635 shares of common
stock.
SERIES A CONVERTIBLE PREFERRED STOCK AND CLASS C WARRANTS - During 1995, the
Company completed a private placement of its securities consisting of 60 units
sold at a price of $40,000 per unit. Each unit sold in the private placement
consisted of 10,000 shares of the Company's Series A Convertible Preferred
Stock and 5,000 Class C Redeemable Common Stock Purchase Warrants. Each share
of Series A Preferred Stock has a $4 liquidation preference and is convertible
into 1.05 shares of the Company's common stock beginning in May 1996.
Additionally, the holders of the Series A Preferred Stock are entitled to
receive annual cash dividends (payable semiannually) of 4% of the liquidation
preference of the
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CAPITAL STOCK (continued)
stock, or $.16 per share, on a cumulative basis from the date of issuance.
During the year ended June 30, 1997, the Company paid $88,520 in Series A
Preferred Stock dividends. Cumulative dividends in arrears related to the
Series A Preferred Stock amounted to approximately $83,000 ($.61 per share)
and $128,000 ($.21 per share) for the years ended June 30, 1997 and 1996,
respectively. The Series A Preferred Stock may be redeemed by the Company at
$4 per share plus dividends in arrears beginning in May 1999. During the year
ended June 30, 1997, 465,000 shares of Series A Preferred Stock was converted
into 488,250 shares of common stock. In addition, 840,000 shares of common
shares are reserved for future issuance upon conversion of the total
authorized Series A Preferred Stock.
PREFERRED STOCK CANCELLATION - Subsequent to the conversion of the preferred
stock classes, the Company canceled the Class A, Class B, Class C, Class E and
Class One Convertible Preferred Stock and the Class D Redeemable Convertible
Preferred Stock.
ISSUANCE OF STOCK IN SATISFACTION OF LOANS - During the year ended June 30,
1997, the Company issued 1,950,000 shares of common stock in satisfaction of a
$9,750,000 note payable to Retirement Care.
SHARES RESERVED - At June 30, 1997, the Company has reserved common stock for
future issuance under all of the above arrangements amounting to 2,367,720.
ISSUANCE OF STOCK IN SATISFACTION OF A LOAN GUARANTEE FEE - During the year
ended June 30, 1997, the Company issued 100,000 shares of common stock in
satisfaction of a loan guarantee fee to Retirement Care. The loan guarantee
was related to the acquisition of Atlantic Medical.
10. MAJOR CUSTOMERS
Sales to significant customers were as follows:
Year ending June 30, Number of Customers Sales Volumes
-------------------- ------------------- -------------
1994 1 $ 531,000
1995 - -
1996 - -
1997 - -
As a result of the increased sales volume due to sales to related parties of
approximate $7,848,000 (see Note 3), there were no sales to significant other
customers during the years ended June 30, 1997 and 1996 and the six-month
period ended June 30, 1995, respectively.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. SUPPLEMENTAL CASH FLOW INFORMATION
Six Months
Years Ended Ended Year Ended
June 30, June 30, December 31,
1997 1996 1995 1994
----------------------- --------- -----------
Cash paid for interest $ 1,008,735 $ 170,951 $39,065 $53,627
Cash paid for income taxes $ - $ 930 $ 2,500 $ 5,000
Noncash financing and
investing activities:
Acquisition of Atlantic
Medical Supply Company,
Inc. and 20% of
Facility Supply, Inc. $10,500,000 $ - $ - $ -
Convertible note payable
issued to Retirement
Care Associates, Inc.
used to satisfy notes
payable issued in
connection with Atlantic
Medical Supply Company,
Inc. acquisition $ 9,750,000 $ - $ - $ -
Issuance of 100,000 shares
of common stock to
Retirement Care Associates,
Inc. as compensation for
guarantee of notes issued
in Atlantic Medical Supply
Company, Inc. acquisition $ 500,000 $ - $ - $ -
Issuance of 369,618 shares
of common stock for
purchase of AmeriDyne
Corporation $ - $2,100,000 $ - $ -
Deferred offering costs
charged to additional
paid-in-capital as an
offset to private placement
offering proceeds $ - $ - $11,444 $ -
Conversion of 1,074,176
shares of Class D Preferred
Stock and 995,012 Class D
Warrants into 250,372
shares of common stock and
2,000,000 shares of Class
One Preferred Stock $ - $ - $ - $400,500
$20,750,000 $2,100,000 $11,444 $400,500
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. ATLANTIC MEDICAL ACQUISITION
Effective July 1, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. for approximately $11.9 million in a
transaction accounted for as a purchase. The purchase price exceeded the fair
value of the net assets acquired by approximately $8.6 million. The resulting
goodwill is being amortized on the straight-line basis over 40 years. The
consolidated financial statements include the results of operations of
Atlantic Medical subsequent to June 30, 1996.
The following unaudited pro forma consolidated results of operations presents
information as if the acquisition had occurred at the beginning of the year
ended June 30, 1996. The pro forma information is presented for information
purposes only. Although it is based on historical information, it is
unaudited and does not necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results of operations of
the combined enterprise.
Unaudited Year Ended
June 30, 1996
--------------------
Sales $ 34,333,727
Net income $ 585,784
Per share $ .10
13. AMERIDYNE ACQUISITION
Effective March 1, 1996, the Company acquired all of the outstanding common
stock of AmeriDyne Corporation (AmeriDyne) for approximately $2.475 million in
cash and stock in a transaction accounted for as a purchase. The purchase
price exceeded fair value of the net assets acquired by approximately $1.3
million. The resulting goodwill is being amortized on the straight-line basis
over 40 years. The consolidated financial statements include the results of
operations of AmeriDyne subsequent to February 29, 1996.
The following unaudited pro forma consolidated results of operations presents
information as if the acquisition had occurred at the beginning of the fiscal
year. The pro forma information is provided for information purposes only.
It is based on historical information and does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined enterprise.
Unaudited Year Ended
June 30, 1996
--------------------
Sales $ 21,406,882
Net income $ 348,880
Per share $ .05
14. PRO-FORMA PRESENTATION OF STOCK COMPENSATION COSTS
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-based
Compensation." This new standard defines a fair value based method of
accounting for an employee stock option or similar equity instrument. This
statement gives entities a choice of recognizing related compensation expense
by adopting the new
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. PRO-FORMA PRESENTATION OF STOCK COMPENSATION COSTS (continued)
fair value method or to continue to measure compensation using the intrinsic
value approach under Accounting Principles Board (APB) Opinion No.25, the
former standard. If the former standard for measurement is elected, SFAS No.
123 requires supplemental disclosure to show the effects of using the new
measurement criteria. This statement is effective for the Company's 1997
fiscal year. The Company intends to continue using the measurement
prescribefd by APB Opinion No. 25, and accordingly, this pronouncement will
not affect the Company's financial position or results of operations.
The following is a summary of stock option activity and related information
for the years ended June 30:
NON-QUALIFIED STOCK OPTION PLAN: 1997 1996
------------------ -------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- -------- ------- --------
Outstanding - Beginning of year 441,000 2.16 400,000 1.97
Granted 0 45,000 4.11
Exercised (68,083) 3.05 (25,000) 4.11
Stock split 21,000 4.11
Forfeited (40,500) 3.85
------- -------
Outstanding - Ending of year 332,417 1.78 441,000 2.16
------- -------
Exercisable - End of year 325,423 367,439
Weighted average fair value
of options granted during
the year 0 2.38
Exercise prices for options outstanding as of June 30, 1997 ranged from $2 to
$4. The weighted average remaining contractual life of those options is 1.46
years.
STOCK OPTION PLAN: 1997 1996
------------------ -------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- -------- ------- --------
Outstanding - Beginning of year 164,250 4.97
Granted 207,500 5.30 164,250 4.97
Exercised (10,000) 5.75
Forfeited (65,000) 5.65
------- -------
Outstanding - Ending of year 296,750 5.03 164,250 4.97
------- -------
Exercisable - End of year 296,750 164,250
Weighted average fair value
of options granted during
the year 3.27 3.07
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. PRO-FORMA PRESENTATION OF STOCK COMPENSATION COSTS (continued)
Exercise prices for options outstanding as of June 30, 1997 ranged from $5 to
$6. The weighted average remaining contractual life of those options is 3.74
years.
Because the Company has adopted the disclosure-only provisions of SFAS No.
123, no compensation cost has been recognized for the stock option plans. Had
compensation cost for the Company's stock option plans been determined based
on the fair value at the grant date of the awards consistent with the
provisions of SFAS No. 123, the Company's net income (loss) and per share data
would have been stated as follows:
1997 1996
---------- --------
Net income (loss) - as reported $(259,644) $527,034
Net income (loss) - pro forma $(667,110) $194,040
Earnings (loss) per share - as reported $ (.05) $ 0.09
Earnings (loss) per share - pro forma $ (0.12) $ 0.02
The fair value of each option grant is estimated on the date of grant using
Black-Scholes option-pricing model with the following weighted average
assumption used for grants in 1997 and 1996; expected volatility of 68%,
risk-free interest rate of 6.0%, and expected lives ranging from 3 to 5 years.
F-25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
CONTOUR MEDICAL, INC.
Dated: October 14, 1997 By /s/ Donald F. Fox
Donald F. Fox, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Donald F. Fox President, Treasurer October 14, 1997
Donald F. Fox (Principal Financial
and Accounting Officer)
and Chief Financial
Officer
/s/ Chris Brogdon Director October 14, 1997
Chris Brogdon
/s/ Edward E. Lane Director October 14, 1997
Edward E. Lane
/s/ Darrell C. Tucker Director October 14, 1997
Darrell C. Tucker
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 27th day of June, 1997 by and between CONTOUR FABRICATORS, INC., a
Michigan corporation (hereinafter "CFI"); CONTOUR FABRICATORS OF FLORIDA,
INC., a Florida corporation (hereinafter "CFFI" and, together with CFI,
sometimes hereinafter collectively referred to as "Sellers"); CONTOUR MEDICAL,
INC., a Nevada corporation (hereinafter "CMI"); and RAWCAR GROUP, L.L.C., a
Michigan limited liability company (hereinafter "Purchaser").
RECITALS
A. Purchaser desires to purchase certain assets of CFI, CFFI and CMI,
all as more fully described herein.
B. Sellers and CMI (sometimes hereinafter collectively referred to as
the "Contour Parties") desire to sell certain assets to Purchaser.
C. The parties have agreed to set forth their agreement in writing.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1
AGREEMENT TO PURCHASE AND SELL
1.1 Sale. Sellers and CMI agree to sell, and Purchaser agrees to
purchase, the interest of Sellers and CMI in the following (the "Assets"):
A. All furniture, trade fixtures, equipment and tools owned by
CFI and all furniture, trade fixtures, equipment and tools of CFFI (other than
the furniture and equipment identified on Exhibit 1.1A attached hereto) used
in their manufacturing businesses and/or located at 3340 Scherer Drive, St.
Petersburg, Florida, including, but not limited to, those assets described on
Exhibit 1.1A attached hereto (it being understood that, for purposes of this
Agreement, the manufacturing business or operations of CFFI shall not include
its kit assembly business);
B. All of the current and usable inventory of CFI, wherever
located, and all of the current and usable manufacturing inventory of CFFI, as
the same shall exist as of the close of business on the Closing Date (as
hereinafter defined);
C. All of the accounts receivable of CFI and all of the
accounts receivable of CFFI relating to manufacturing only, as the same shall
exist as of the close of business on the Closing Date;
D. All of the rights, benefits and interest of CFI under all
contracts and agreements, written or oral, and all of the rights, benefits and
interest of CFFI under all contracts and agreements, written or oral, related
to the manufacturing business of CFFI;
E. All registered and unregistered trademarks, trade names,
copyrights, patents, 510ks, service marks and service names, and applications
therefor; all technology and technological processes, all research and
development, know-how, trade secrets, formulae and all other intellectual
property of CFI and all of the foregoing of CFFI used in connection with its
manufacturing operations;
F. All prepaid expenses of CFI and all prepaid expenses of CFFI
relating to its manufacturing business only;
G. All books, records, documents and other writings of CFI and
all of the foregoing used in connection with the manufacturing business of
CFFI;
H. All permits, licenses, certificates and governmental
authorizations, approvals, license applications or related certifications of
CFI and all of the foregoing obtained in connection with the manufacturing
operations of CFFI;
I. All data processing programs, software programs, computer
printouts, data bases and hardware and related items of CFI and all of the
foregoing used in the conduct of the manufacturing business of CFFI, including
accountings, invoices, auditing, pension and data processing bases and
programs;
J. Goodwill of Sellers as going concerns, all telephone numbers
of CFI, all yellow page advertisements (to the extent deliverable by Sellers)
and the right to the use of the names Contour Fabricators, Inc. and Contour
Fabricators of Florida, Inc.
K. The right to sublease from CMI the entirety of the building
located at 3340 Scherer Drive, St. Petersburg, Florida, for the period
commencing July 1, 1997 and terminating June 30, 2000 at a base rate of $4.23
per square foot plus sales tax and an annual increase measured by reference to
the Consumer Price Index and otherwise on terms substantially as set forth in
the prime lease.
L. Real estate of CFI commonly known as 4100 E. Baldwin Road,
Grand Blanc, Michigan, and located in Grand Blanc Township, Genessee County,
Michigan, legally described as:
A parcel of land in the West 1/2 of the NW 1/4 of Section
34, T6N-R7E, beginning at a point on the North line of Section 34, which is
East 861.22 feet from the NW corner of Section 34; thence, East along said
North line, 461-28 feet; thence, South 00 degrees 38 minutes East along the
West 1/8 line of Section 34, a distance of 2,165 feet to the NE'ly line of C &
O Railroad right-of-way line; thence, along said NE'ly line on a curve to the
left having a radius of 5,803.09 feet, chord bearing and distance of North 11
degrees 15 minutes West, 327.48 feet and North 12 degrees 52 minutes West
1,892.4 feet to the point of beginning;
M. All other assets, tangible or intangible, of CFI and all of
the foregoing used by CFFI in connection with the operation of its
manufacturing business;
N. The Environmental Tectonics Corporation Model 400-05 EtO
Sterilizer owned by CMI and constructed in CMI's facility at 3340 Scherer
Drive, St. Petersburg, Florida, which sterilizer shall be in operating order
at the time of sale, including all permits, licenses and governmental
approvals required therefor.
At Closing (as hereinafter defined), Sellers and CMI shall transfer,
assign, convey and deliver the Assets to Purchaser free and clear of all
security interests, liens, pledges, claims, charges, escrows, encumbrances,
encroachments, rights of first refusal, mortgages, indentures, easements,
licenses, restrictions or other covenants, agreements, understandings,
obligations, defects or irregularities affecting title to any of the Assets
(collectively, "Liens").
1.2 Assets Not Included. Notwithstanding Section 1.1, the following
(the "Excluded Assets") shall remain the property of Sellers and shall not be
included in the Assets:
A. All insurance policies relating to their respective
businesses and any rights or proceeds arising therefrom;
B. All minute books and stock record books of Sellers.
C. All cash, bank deposits, certificates of deposit, commercial
paper, treasury bills, marketable securities and other cash equivalents of
Sellers.
D. Any and all property, business and assets of every kind,
nature and description that are used in connection with CFFI's distribution
business or its kit assembly business.
E. All tax returns and financial statements of the Contour
Parties and any benefit, claim or receivable of the Contour Parties for
federal, state or local income taxes or refunds.
1.3 Covenant Not To Compete. At Closing, Sellers and CMI shall
execute a Covenant Not To Compete satisfactory to Purchaser.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Assets and the
covenant not to compete shall be Three Million Three Hundred Fifty Thousand
($3,350,000.00) Dollars.
2.2 Allocation of Purchase Price. The parties agree to allocate the
purchase price for the Assets in accordance with an allocation schedule to be
prepared by Purchaser in accordance with Section 1060 of the Internal Revenue
Code of 1986. The parties will report the federal, state and local tax
consequences of the purchase and sale contemplated hereby in a manner
consistent with such allocation schedule.
ARTICLE 3
TERMS OF PAYMENT
3.1 Payment. The purchase price shall be paid in cash or certified
funds at Closing.
3.2 Assumption of Liabilities. As of the Closing Date, Purchaser
shall assume and agree to pay, perform or otherwise discharge when due all of
the following liabilities relating to the Assets and existing at or arising on
or after the Closing Date (collectively, the "Assumed Liabilities") and shall
deliver to Sellers at Closing a duly executed instrument of assumption in form
sufficient to effect the assumption by Purchaser of the Assumed Liabilities:
(i) all of Sellers' obligations on the date hereof to fill orders from
inventory with respect to which payment is not made to Sellers; (ii) all of
Sellers' outstanding commitments for the purchase of raw materials and
supplies to the extent disclosed on the Contour Disclosure Schedule; (iii) all
of Sellers' liability for returned products and defective goods credited by
Purchaser's representatives in each case which were sold by Sellers prior to
Closing (but only to the extent so credited); and (iv) all obligations,
liabilities and commitments of either Seller arising out of any written
agreement, contract, instrument or other arrangement entered into in the
ordinary course of business and by which any of the Assets is bound or
affected or by which CFI or CFFI is bound in connection with the Assets (but
excluding any obligation or liability for any breach thereof occurring prior
to the Closing Date). Except as specifically set forth in the immediately
preceding sentence, Purchaser shall not assume, and shall have no liability
for, any debts, liabilities, obligations, expenses, taxes, contracts or
commitments of Sellers or CMI of any kind, character or description, whether
accrued, absolute, contingent or otherwise; provided, however, that Purchaser
shall be responsible for all liabilities and obligations pertaining to the
operation or ownership of the Assets arising subsequent to the Closing Date.
Sellers agree to satisfy in a timely manner all of their liabilities,
indebtedness and obligations not assumed by Purchaser pursuant to this
Agreement.
ARTICLE 4
TAXES, CLOSING COSTS AND ADJUSTMENTS TO PURCHASE PRICE
4.1 Liability for Taxes and Closing Costs. Purchaser, on the one
hand, and Sellers, on the other hand, shall be equally responsible for the
timely payment of (i) all title commitment fees and all closing costs related
to the closing of the real estate purchased hereunder, and (ii) all sales
(other than bulk sales), use, value added, documentary, stamp, registration,
transfer, conveyance, excise, recording, license and other similar taxes and
fees (collectively, "Transfer Taxes") arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement.
Purchaser shall prepare and timely file all tax returns required to be filed
in respect of the Transfer Taxes, provided that the Contour Parties shall be
permitted to prepare any such tax returns that are the primary responsibility
of the Contour Parties under applicable law. The preparation of any such tax
returns by the Contour Parties shall be subject to Purchaser's approval, which
approval shall not be withheld unreasonably.
4.2 Miscellaneous Business Taxes. All social security, sales, use,
unemployment, withholding and other business taxes for all years up to and
including the last completed tax year and all payroll periods for the current
tax year immediately preceding the Closing Date shall be paid in full by
Sellers.
4.3 Adjustments. Adjustments shall be made at the Closing for any
payroll and unpaid taxes and other liabilities, if any, attributable to
periods both on and prior and subsequent to the Closing Date. All real estate
taxes, personal property taxes, rents, utilities and all such other taxes,
charges and assessments, if any, relating to any real property to be sold to
or subleased by Purchaser hereunder shall be apportioned between Purchaser and
Sellers on the Closing Date on the basis of the tax year for which assessed.
If the Closing Date shall occur before the tax rate for any tax year is fixed,
the apportionment of taxes shall be upon the basis of the tax rate for the
next preceding year for which the tax rate is fixed applied to the latest
assessed valuation. The net amount of any of any such adjustments or
apportionment shall either be an increase or a decrease of the purchase price
and monies payable at Closing.
ARTICLE 5
BULK TRANSFER ACT COMPLIANCE
Sellers and Purchaser hereby waive compliance with the provisions of
Article 6 of the Uniform Commercial Code, entitled "Uniform Commercial Code -
Bulk Transfers", or comparable laws relating to bulk transfers as adopted in
the jurisdictions in which the Assets are located, to the extent applicable to
the transactions contemplated hereby. Sellers and CMI, jointly and severally,
shall indemnify and save harmless Purchaser from and against any and all
liability arising out of Sellers' and/or Purchaser's noncompliance with said
bulk transfer laws except to the extent arising out of Purchaser's failure to
pay, perform and discharge the Assumed Liabilities as and when due.
ARTICLE 6
REAL ESTATE
The following shall be applicable to the real estate sold to Purchaser
hereunder pursuant to Article 1.1(L) hereof:
6.1 Title Policy. At Closing, CFI shall deliver to Purchaser a policy
of title insurance without exceptions issued by Cislo Title Company, 1208 S.
Saginaw Street, Flint, Michigan, for an amount not less than the purchase
price for such real estate hereunder and insuring Purchaser herein as to the
nature of CFI's title in the above described property.
6.2 Possession. Possession of the real estate shall be given
immediately after Closing, subject to the rights of no tenants or others in
possession.
6.3 Limited Warranty Deed. CFI shall deliver to Purchaser at Closing
a limited or special warranty deed in the form required by the title company
to deliver the title policy contemplated under Section 6.1 above.
ARTICLE 7
REPRESENTATIONS, COVENANTS AND WARRANTIES OF CONTOUR PARTIES
Except as set forth on a Disclosure Schedule attached hereto that
specifically identifies the relevant subsection hereof to which it relates
(the "Contour Disclosure Schedule"), each Contour Party, severally and not
jointly with any other Contour Party, represents, covenants and warrants the
following to be true with respect to itself and not with respect to any other
Contour Party:
7.1 Organization and Authorization of Contour Parties. Such Contour
Party is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and has all requisite power and
authority to carry on its business as it is now being conducted.
7.2 Authorization of Contour Parties. Such Contour Party has all
requisite power and authority to execute, deliver and perform this Agreement
and all writings relating hereto and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement and all writings relating hereto by such Contour Party have been
duly and validly authorized by all necessary corporate action on the part of
such Contour Party. This Agreement and all writings relating hereto to be
signed by such Contour Party constitute valid and binding obligations of such
Contour Party enforceable in accordance with their respective terms. The
execution, delivery and performance by such Contour Party of this Agreement
and the consummation by such Contour Party of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) be subject to obtaining any required consents, approvals,
authorizations, exemptions or waivers, (ii) violate any provision of law, rule
or regulation to which such Contour Party is subject, (iii) violate any order,
judgment or decree applicable to such Contour Party, (iv) violate any
provision of the charter or Bylaws of such Contour Party, except, in each
case, for violations which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby or (v) result
in the creation of any Lien upon any of the Assets sold hereunder by such
Contour Party.
7.3 Financial Statements. Each Seller has delivered to Purchaser
copies of the following unaudited financial statements of such Seller, all of
which are true and complete and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
period indicated:
A. Balance Sheets. Balance sheets of CFI as of June 30, 1996
and April 30, 1997, certified by CFI's Treasurer, each of which presents, in
all material respects, a true and complete statement, as of its date, of CFI's
financial condition, assets and liabilities;
Balance sheets of CFFI as of June 30, 1996 and April 30, 1997, certified
by CFFI's Treasurer, each of which presents, in all material respects, a true
and complete statement, as of its date, of CFFI's financial condition, assets
and liabilities.
B. Profit and Loss. Statements of CFI's profit and loss for
the eight months ending June 30, 1996, and for the nine months ended April 30,
1997, certified by CFI's Treasurer, each of which accurately presents, in all
material respects, the results of CFI's operations for the period indicated;
Statements of CFFI's profit and loss for the twelve months ending June
30, 1995 and 1996, and for the nine months ended April 30, 1997, certified by
CFFI's Treasurer, each of which accurately presents, in all material respects,
the results of CFFI's operations for the period indicated.
C. Schedules of Accounts Payable, Purchase Orders and Accounts
Receivable. The Contour Disclosure Schedule includes a schedule of accounts
payable (including taxes) as of April 30, 1997, outstanding purchase orders as
of June 26, 1997 and accounts receivable (with aging) with respect to CFFI
(other than as to its distribution and kit assembly businesses) and CFI, all
as of April 30, 1997, which schedule is true, complete and accurate in all
material respects.
7.4 Absence of Certain Changes in Sellers. Since April 30, 1997,
there has not been:
A. Any change in Sellers' financial condition, assets,
liabilities or business other than changes in the ordinary course of business,
none of which has been materially adverse;
B. Any damage or loss, whether or not covered by insurance,
materially and adversely affecting Sellers' properties or business;
C. Any declaration, or setting aside, or payment of any
dividend or other distribution in respect to Sellers, shares, or any direct or
indirect redemption, purchase or other acquisition of any such shares.
D. Any increase in the compensation payable or to become
payable by Sellers to any of their officers, employees or agents, or any
deferred compensation arrangement entered into with, or any bonus payment or
arrangement made to or with, any of them; or
E. Any labor trouble or any event or condition of any character
materially or adversely affecting Sellers' business or prospects.
7.5 Title to Properties of Sellers.
A. Personal Property. Sellers have good and marketable title
to all their personal property sold hereunder. None of such personal property
is subject to any Lien, except as specifically disclosed. Except as otherwise
specified, all leasehold improvements, furnishings, machinery and equipment of
Sellers sold hereunder are in good condition in the aggregate, ordinary wear
and tear excepted and consistent with their age and use; and, to the best
knowledge of Sellers, substantially comply with all applicable laws,
ordinances and regulations.
B. Real Property. The following shall be applicable to the
real estate to be subleased to Purchaser hereunder pursuant to Article 1.1(K)
hereof and, where provided, real estate to be sold by CFI pursuant to Article
1.1(L) hereof:
(a) The lease of real property at 3340 Scherer Drive, St.
Petersburg, Florida, to which CMI is a party is fully effective and affords
CMI peaceful and undisturbed possession of the subject matter of the lease,
and a true and complete copy of such lease has been delivered to Purchaser.
Said lease has been duly authorized and executed by the parties and is in full
force and effect. To the knowledge of CMI, CMI is not in default under such
lease, nor, to the knowledge of CMI, has any event occurred which, with the
notice or passage of time, or both, would give rise to such a default. To the
knowledge of CMI, the other party to such lease is not in default under such
lease, and there is no event which, with the notice or passage of time, or
both, would give rise to such a default. To the knowledge of CFI and CMI with
regard to the real estate to be sold and leased pursuant to this Agreement,
neither is in violation of any zoning, building or safety ordinance,
regulation or requirement, or other law or regulation applicable to the
operation of its properties, nor, to the knowledge of CFI and CMI with regard
to such real estate, has any notice of such violation been received by them.
To the knowledge of CFI and CMI, there are no defaults by CFI or CMI or by any
other party which might curtail in any material respect the present use of its
respective properties. Except for the consent of the lessor of the real
property at 3340 Scherer Drive, St. Petersburg, Florida, which consent has
been obtained, no consent or approval is required with respect to the lease or
sale of the real property to be leased and/or sold hereunder from any other
parties or from any regulatory authority, and no filing with any regulatory
authority is required in connection therewith.
(b) To the knowledge of CMI and/or CFFI, (i) no Hazardous
Waste (as defined below) or Hazardous Material (as defined below) is present
on the property nor has CMI and/or CFFI ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste or Hazardous
Material, (ii) CMI and/or CFFI do not have any material liability under, and
have not violated in any material respect, any Environmental Law (as defined
below), (iii) CMI and/or CFFI are in compliance in all material respects with
all applicable environmental laws, and (iv) CMI and/or CFFI have never entered
into or been subject to any material judgment, consent decree, compliance
order, or administrative order with respect to any material environmental or
health and safety matter or received any demand letter, formal complaint or
claim with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law. For purposes of this Agreement, (i)
"Hazardous Material" shall mean and include any hazardous waste, hazardous
material, hazardous substance, petroleum product, oil, toxic substance,
pollutant, or contaminant, as defined or regulated under any Environmental
Law, or any other substance which may pose a threat to the environment or to
human health or safety; (ii) "Hazardous Waste" shall mean and include any
hazardous waste as defined or regulated under any Environmental Law; and (iii)
"Environmental Law" shall mean any environmental or health and safety-related
law, regulation, rule, ordinance or by-law at the foreign, federal, state or
local level, whether existing as of the date hereof, previously enforced or
subsequently enacted.
7.6 Intellectual Property Rights; Employee Restrictions.
A. To the knowledge of each Seller, it has exclusive ownership
of, with a right to use, sell, license, dispose of and bring actions for
infringement of, all Intellectual Property Rights (as hereinafter defined)
material to the conduct of its business as presently conducted (the "Sellers'
Rights");
B. To the knowledge of each Seller, the business of such Seller
as presently conducted and the production, marketing, licensing, use and
servicing of any products or services of such Seller, do not infringe any
patent, trademark, copyright, trade secret rights of any third parties or any
other Intellectual Property Rights of any third parties;
C. No claim is pending or, to the knowledge of either Seller,
threatened against such Seller, nor has any such Seller received any written
notice or other written claim from any person asserting that any of the
Sellers' present or contemplated activities infringe or may infringe any
Intellectual Property Rights of such person;
D. To the knowledge of each Seller, no employee of such Seller
has received notice that any such employee is in violation of any agreement or
in breach of any agreement or arrangement with former or present employers
relating to proprietary information or assignment of inventions.
As used herein, the term "Intellectual Property Rights" shall mean all
intellectual property rights, all patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright applications, computer programs and other
computer software, inventions, designs, samples, specifications, schematics,
know-how, trade secrets, proprietary process and formulae, all source and
object code, algorithms, architecture, structure, display, screens, layouts,
development tools, promotional materials, data bases, customer lists, supplier
and dealer lists and marketing research, and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records. The Contour Disclosure Schedule
contains a list and brief description of all patents, patent applications,
trademarks and registered copyrights owned by or registered in the name of
Sellers or of which Sellers are the licensor or licensee of material rights or
in which Sellers have any material right.
7.7 Customers, Distributors and Suppliers. The relationships of each
Seller with its customers, distributors and suppliers are, to the knowledge of
such Seller, good commercial working relationships. No customer, distributor
or supplier has canceled, materially modified or otherwise terminated its
relationship with such Seller or has during the last twelve (12) months
decreased materially its service, supplies or materials to such Seller or its
usage or purchase of the services or products of Seller, nor, to the knowledge
of such Seller, does any customer, distributor or supplier have any plan or
intention to do any of the foregoing.
7.8 Contracts of Sellers. Sellers have no contract or commitment
extending beyond December 31, 1997.
7.9 Status of Contracts of Sellers. To the knowledge of each Seller,
such Seller has complied, in all material respects, with all of the provisions
of contracts described in this Agreement and of all other contracts and
commitments to which such Seller is a party.
7.10 Compensation Paid by CFFI. The Contour Disclosure Schedule
includes a true and complete list, as of April 30, 1997, certified by CFFI's
Treasurer, showing the names of all persons who are employed by CFFI (other
than in its distribution or kit assembly businesses) as of such date,
including how and how much these persons are paid and the date of employment
of these persons with CFFI.
7.11 Employment Contracts of Sellers . There are no written or oral
contracts of employment between Sellers and any employee except as set forth
on the Disclosure Schedule. There exists no liability of Sellers to any
employee or former employee that will not be paid in full at Closing.
7.12 Employment Benefit Plan of Sellers. Sellers have no pension,
bonus, profit sharing or retirement plans for officers or employees.
7.13 Insurance of Sellers' Property. All assets owned or leased by
Sellers are adequately insured against fire and casualty, and valid policies
therefor are outstanding and duly in force and the premiums have been paid
when due. Sellers have not received any notice of any cancellation of
policies pertaining to the foregoing.
7.14 Multi-Employer Employee Benefit Plans. Sellers sponsor no
multi-employer employee pension or other qualified retirement plan and are not
required to contribute to such plan.
7.15 Taxes of Sellers. Each Seller has paid any and all taxes, license
fees or other charges levied, assessed or imposed on its business and any of
its property, except those that are not due and payable.
7.16 Tax Returns of Sellers.
A. Preparation. Each Seller has duly prepared and filed any
and all tax returns and reports required to be filed by it by federal, state
and local tax authorities.
B. Correctness. The returns of each Seller filed are correct,
true and complete in all material respects.
C. Payment. Any and all such taxes, including sales, corporate
franchise, property, excise and use taxes have been paid or are adequately
provided for on the latest financial statement of each Seller.
D. No Dispute. Neither Seller is involved in any dispute with
any tax authority about the amount of taxes due, nor has either Seller
received any notice of any deficiency, audit or other indication of deficiency
from any tax authority not disclosed to the parties to this Agreement.
7.17 Directors and Officers of Contour Parties. The Contour Disclosure
Schedule sets forth the names of all officers, directors and resident agents
of Sellers and CMI.
7.18 Litigation Regarding Sellers. There is no litigation or
proceeding either pending or, to the knowledge of either Seller, threatened
against or relating to such Seller, its properties or business in any
judicial, quasi judicial or administrative forum; further, such Seller does
not know or have reasonable grounds to know any basis for any such action,
including grievances with labor contracts.
7.19 Restrictions Regarding Sellers. There are no outstanding
judgments, orders or restrictions against either Seller that, individually or
in the aggregate with all other such items, could reasonably be expected to
have a material adverse effect on the business of such Seller.
7.20 Licenses of Sellers. To the knowledge of each Seller, the Contour
Disclosure Schedule sets forth a list of all licenses that each Seller
requires to operate its business.
7.21 Union Contract of Sellers. Neither Seller has any union contract
for any of its employees, and neither Seller has received any notice and has
no reason to believe any notice will be given regarding union activity.
7.22 Assumed Names of Sellers. Neither Seller conducts its business
under an assumed name.
7.23 Reliance. The foregoing representations and warranties are made
with the knowledge and expectation that Purchaser is placing complete reliance
on them.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as may be set forth on a Disclosure Schedule attached hereto that
specifically identifies the relevant subsection hereof to which it relates
(the "Purchaser Disclosure Schedule"), Purchaser represents, covenants and
warrants the following to be true:
8.1 Organization and Authorization of Purchaser.
A. Purchaser is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Michigan
and has all requisite power and authority to carry on its business as it is
now being conducted.
B. Purchaser has all requisite power and authority to execute,
deliver and perform this Agreement and all writings relating hereto and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and all writings relating hereto by Purchaser
have been duly and validly authorized by all necessary action on Purchaser's
part. This Agreement and all writings relating hereto to be signed by
Purchaser constitute valid and binding obligations of Purchaser enforceable in
accordance with their respective terms. The execution, delivery and
performance by Purchaser of this Agreement and the consummation by Purchaser
of the transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (i) be subject to obtaining any
required consents, approvals, authorizations, exemptions or waivers, (ii)
violate any provision of law, rule or regulation to which Purchaser is
subject, (iii) violate any order, judgment or decree applicable to Purchaser
or (iv) violate any provision of the Articles of Organization or Operating
Agreement of Purchaser, except, in each case, for violations which in the
aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
8.2 Litigation. There are no actions, suits, claims, investigations
or legal or administrative or arbitration proceedings pending or, to the best
of Purchaser's knowledge, threatened (i) against Purchaser with respect to
which there is a reasonable likelihood of a determination that would have a
material adverse effect on the ability of Purchaser to perform its obligations
under this Agreement or (ii) that seeks to enjoin or obtain damages in respect
of the consummation of the transactions contemplated hereby. There are no
actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending or, to the best knowledge of Purchaser,
threatened that seek to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
8.3 Consents. No consent, approval or authorization of, or exemption
by, or filing with, any governmental authority is required in connection with
execution, delivery and performance by Purchaser of this Agreement, or the
taking of any other action contemplated hereby, excluding, however, consents,
approvals, authorizations, exemptions and filings, if any, which Sellers are
required to obtain or make.
8.4 Disclaimer. EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, NO
CONTOUR PARTY MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IN
CONNECTION WITH THE ASSETS OR THE TRANSACTIONS CONTEMPLATED HEREBY. EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT, THE ASSETS BEING TRANSFERRED TO
PURCHASER AT THE CLOSING ARE TO BE CONVEYED HEREUNDER "AS IS WHERE IS" ON THE
CLOSING DATE AND IN THEIR THEN PRESENT CONDITION, AND PURCHASER SHALL RELY ON
ITS OWN EXAMINATION THEREOF. EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT,
NO CONTOUR PARTY MAKES ANY WARRANTY OF MERCHANTABILITY, SUITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, OR QUALITY, OF ANY OF THE ASSETS BEING SO
TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT.
8.5 Reliance. The foregoing representations and warranties are made
by Purchaser with the knowledge and expectation that Sellers and CMI are
placing complete reliance on them.
ARTICLE 9
CERTAIN COVENANTS
9.1 Books and Records; Personnel. For a period of seven (7) years
after the Closing Date:
A. Purchaser shall not dispose of or destroy any of the
business records and files of Sellers without first offering to turn over
possession thereof to Sellers by written notice to Sellers at least thirty
(30) days prior to the proposed date of such disposition or destruction.
B. Purchaser shall allow Sellers and their agents access to all
business records and files of Sellers as to which Sellers shall require access
in connection with any matter relating to Sellers' ownership of the Assets or
conduct of the business of Sellers prior to the Closing during normal working
hours at Purchaser's principal place of business or at any location where such
records are stored, and Sellers shall have the right, at their own expense, to
make copies of any such records and files; provided, however, that any such
access or copying shall be had or done in such a manner so as not to interfere
with the normal conduct of business of Purchaser.
C. Purchaser shall make available to Sellers upon Sellers'
written request and at Sellers' expense, but consistent with Purchaser's
business requirements, (i) copies of such records and files of Sellers as
Sellers may request, (ii) Purchaser's personnel to assist Sellers in locating
and obtaining records and files maintained by Sellers, and (iii) any of
Purchaser's personnel whose assistance or participation is reasonably required
by Sellers in anticipation of, or preparation for, existing or future
litigation or other matters in which Sellers are involved.
D. The foregoing provisions of this Section 9.1 shall be in
addition to the other obligations of Purchaser hereunder.
9.2 Purchaser Confidentiality. All documents and information
obtained by Purchaser relating to Sellers or CMI shall be held by Purchaser in
strictest confidence; provided, however, that Purchaser shall have no
confidentiality obligation to Sellers or CMI with respect to information
relating to the Assets. No such documents or information shall be disclosed
by Purchaser to any third party or be used by Purchaser for any purpose other
than facilitating the transactions contemplated by this Agreement unless
required to be disclosed pursuant to judicial order or law. It is agreed that
money damages would not be a sufficient remedy for any breach of this Section
9.2 and that Sellers and CMI shall be entitled to injunctive relief as a
remedy for any such breach. Such remedy shall not be deemed to be the
exclusive remedy for breach of this Section 9.2 but shall be in addition to
all other remedies available at law or in equity. Purchaser further agrees
and covenants that any confidential information that it has obtained in
connection with its ownership of the Assets or in the course of the
performance of its obligations or the exercise of its rights under this
Agreement may not be used by Purchaser in any judicial or administrative
proceeding brought by Purchaser against Sellers or CMI except in any
proceeding for breach of this Agreement.
9.3 Employees. CFI intends to terminate all of its employees (the
"CFI Employees") and CFFI intends to terminate those employees referred to in
Section 7.10 hereof (the "CFFI Employees") as of 12:00 midnight on the Closing
Date. Purchaser intends to offer employment to substantially all of the CFI
Employees and to a majority of the CFFI Employees effective as of the day next
following the Closing Date at the wage and salary levels equal to or greater
than in effect immediately prior to the Closing Date; provided, however,
nothing herein shall affect Purchaser's right to discharge any such employee
at any time for any reason whatsoever.
ARTICLE 10
BROKER
Each party represents and warrants that all negotiations related to this
Agreement have been carried on by the parties without the intervention of any
broker.
ARTICLE 11
NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, to Sellers at Sellers'
addresses given in this Agreement, or to Purchaser at Purchaser's address
given in this Agreement, or to any other address that Purchaser or Sellers
shall designate in writing.
ARTICLE 12
EXECUTION OF DOCUMENTS
Purchaser and the Contour Parties mutually agree that each shall take
all steps reasonably necessary to facilitate the purchase and sale
contemplated in this Agreement and to execute any other documents reasonably
necessary to carry out and put into effect the terms of this Agreement,
including, but not limited to, a bill of sale for the purchased Assets, an
instrument of assumption as contemplated by Section 3.2 hereof, an amendment
to the charter of each Seller changing such Seller's corporate name to a name
wholly dissimilar from such name, and a sublease of a portion of CMI's
leasehold interest.
ARTICLE 13
CONDITIONAL TAX CLEARANCE
Immediately after the Closing Date, Sellers shall apply for issuance of
a conditional tax clearance or like document pertaining to sales, use, single
business, income, payroll withholding and unemployment taxes to the extent
applicable and, in that regard, shall prepare all appropriate returns and
reports for submitting the application for issuance of a conditional tax
clearance.
ARTICLE 14
INDEMNIFICATION
14.1 Indemnification of Purchaser. Subject to the limitations
hereinafter set forth, the Contour Parties shall, jointly and severally,
indemnify and save Purchaser and each of its members harmless from, against,
for and in respect of any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action, encumbrances
and reasonable costs and expenses suffered, sustained, incurred or required to
be paid by them including, without limitation, reasonable fees and
disbursements of counsel (collectively, the "Damages") suffered, sustained,
incurred or required to be paid by any of them by reason of: (i) the claims of
any broker or finder engaged by Sellers or CMI; (ii) the untruth, inaccuracy
or breach of any representation, warranty, agreement or covenant of any
Contour Party contained in or made in connection with this Agreement that was
not known to Purchaser prior to the date hereof; (iii) the assertion against
Purchaser of any liability or obligation of Sellers' or relating to Sellers'
operations on or prior to the Closing Date, whether absolute or contingent,
matured or unmatured, known or unknown, other than Assumed Liabilities; and
(iv) noncompliance with any applicable bulk sales or similar laws. Purchaser
shall not be entitled to recover any amount for any claims from Sellers or CMI
under this Section 14.1 unless and until the aggregate amount which Purchaser
is entitled to recover in respect of such claims exceeds $25,000.00, and
indemnification shall be made by the indemnifying party hereunder only to the
extent the aggregate amount of such claims exceeds $25,000.00; provided that
the maximum amount recoverable by Purchaser for indemnification claims from
the Contour Parties under this Section 14.1 shall be $1,500,000.00 in the
aggregate.
14.2 Indemnification of Contour Parties. Subject to the limitations
hereinafter set forth, Purchaser shall indemnify and save the Contour Parties
and each of their respective shareholders, subsidiaries, affiliates, officers
and directors harmless from, against, for and in respect of any and all
Damages suffered, sustained, incurred or required to be paid by them by reason
of (i) the claims of any broker or finder engaged by Purchaser; (ii) the
untruth, inaccuracy or breach of any representation, warranty, agreement or
covenant of Purchaser contained in or made pursuant to this Agreement that was
not known to such Contour Party prior to the date hereof; (iii) any event or
occurrence related to the ownership or operation of any of the Assets after
the Closing Date; (iv) liabilities arising in connection with the Assumed
Liabilities. The Contour Parties shall not be entitled to recover any amount
for any claims from Purchaser under this Section 14.2 unless and until the
aggregate amount which the Contour Parties are entitled to recover in respect
of such claims exceeds $25,000.00 and indemnification shall be made by the
indemnifying party hereunder only to the extent the aggregate amount of such
claims exceeds $25,000.00; provided that the maximum amount recoverable by the
Contour Parties for indemnification claims from Purchaser under this Section
14.2 shall be $1,500,000.00 in the aggregate.
14.3 Rules Regarding Indemnification.
A. The obligations and liabilities of each indemnifying party
hereunder with respect to Damages resulting from the assertion of liability by
the indemnified party or third parties shall be subject to the following terms
and conditions:
(i) the indemnified party shall give prompt written
notice to the indemnifying party of any claim that might give rise to a claim
by the indemnified party against the indemnifying party based on the indemnity
agreements contained in Sections 14.1 and 14.2 hereof, stating the nature and
basis of said claims and the amounts thereof, to the extent known; and
(ii) if any action, suit or proceeding is brought
against the indemnified party, with respect to which the indemnifying party
may have liability under the indemnity agreements contained in Sections 14.1
and 14.2 hereof, the action, suit or proceeding shall be defended (including
all
proceedings on appeal or for review that counsel for the indemnified party
shall deem appropriate) by the indemnifying party. The indemnified party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the indemnified party's own expense
unless (A) the employment of such counsel and the payment of such fees and
expenses both shall have been specifically authorized by the indemnifying
party in connection with the defense of such action, suit or proceeding or (B)
such indemnified party shall have reasonably concluded and specifically
notified the indemnifying party that there may be specific defenses available
to it that are different from or additional to those available to the
indemnifying party or that such action, suit or proceeding involves or could
have an effect upon matters beyond the scope of the indemnity agreements
contained in Sections 14.1 and 14.2 hereof, in any of which events the
indemnifying party, to the extent made necessary by such defenses, shall not
have the right to direct the defense of such action, suit or proceeding on
behalf of the indemnified party. In such case only that portion of such fees
and expenses reasonably related to matters covered by the indemnity agreements
contained in Sections 14.1 and 14.2 hereof shall be borne by the indemnifying
party. The indemnified party shall be kept fully informed of such action,
suit or proceeding at all stages thereof whether or not it is so represented.
The indemnifying party shall make available to the indemnified party and its
attorneys and accountants all books and records of the indemnifying party
relating to such proceedings or litigation, and the parties hereto agree to
render to each other such asistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
B. An indemnified party's right to indemnification pursuant to
this Article 14 shall be calculated net of any net (giving effect to the
payment of any additional taxes that may be incurred by such party from
treatment of such indemnification payments as taxable income or gain to such
party) tax benefit to such party (utilized by such party against income of
such party in the year that such party deducts such liability, loss, claim,
cost or expense in its income tax returns, regardless of whether such party
receives any tax benefits in any other year by reason of any net operating
loss or other available income tax carryforwards or carrybacks), resulting
from such liability, loss, claim, cost or expense.
C. The indemnified party shall not make any settlement of any
claims without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld or delayed.
D. Except as herein expressly provided, the rights and remedies
provided in this Article 14 are the exclusive rights and remedies of a party
hereunder with respect to the transactions contemplated hereby and shall
preclude the assertion by any party of any other rights or the seeking of any
other rights or remedies against any other party hereto.
E. No party shall have any liability under this Article 14
unless on or before December 31, 1998, the indemnifying party is given written
notice asserting a claim for indemnity hereunder with respect thereto, in
which event the survival period for such claim shall be tolled.
ARTICLE 15
CLOSING
The closing of the transactions contemplated hereby (the "Closing") is
taking place simultaneously with the execution hereof at the offices of Hicks,
Schmidlin & Bancroft, 2300 Austin Parkway, Flint, Michigan commencing at 10:00
a.m., eastern daylight time, on June 27, 1997 or at such other time and/or
place and/or on such other date as the parties may mutually agree (the
"Closing Date").
ARTICLE 16
MISCELLANEOUS
16.1 Amendment. This Agreement shall not be amended, altered or
terminated except by a writing executed by each Party.
16.2 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Michigan.
16.3 Headings. The paragraph headings used in this Agreement are
included solely for convenience.
16.4 Entire Agreement. This Agreement sets forth the entire
Understanding of the parties; further, this Agreement shall supersede and/or
replace any oral or written Agreement(s) relating to this subject matter
entered into by the parties before the date of this Agreement.
16.5 Waiver. The waiver by any party of any breach or breaches of any
provision of this Agreement shall not operate as or he construed to be a
waiver of any subsequent breach of any provision of this Agreement.
16.6 Binding Effect. This Agreement, inclusive of its terms and
provisions, shall survive the closing and shall be binding on and inure to the
benefit of, and be enforceable by, the respective heirs, legal
representatives, successors and assigns of the parties.
16.7 Dispute Resolution. Except with respect to matters as to which
injunctive relief is being sought, any dispute arising out of or relating to
this Agreement that has not been settled within thirty (30) days by good faith
negotiation between the parties to this Agreement shall be submitted to the
American Arbitration Association for final and binding arbitration pursuant to
AAA's arbitration rules. Any such arbitration shall be conducted in Genessee
County, Michigan.
16.8 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules (including the Contour Disclosure Schedule and Purchaser Disclosure
Schedule) identified in this Agreement are incorporated hereby by reference
and made a part hereof.
IN WITNESS WHEREOF, Purchaser, CMI and Sellers have caused this
Agreement to be executed as of the date first above written by their
respective officers or representatives thereunder duly authorized.
SELLERS:
CONTOUR FABRICATORS, INC.
By: /s/ Donald F. Fox
Its: President
Address: 6025 Shiloh Road
Alpharetta, Georgia 30005
CONTOUR FABRICATORS OF FLORIDA, INC.
By: /s/ Donald F. Fox
Its: President
Address: 6025 Shiloh Road
Alpharetta, Georgia 30005
CONTOUR MEDICAL, INC.
By: /s/ Donald F. Fox
Its: President
Address: 6025 Shiloh Road
Alpharetta, Georgia 30005
PURCHASER:
RAWCAR GROUP, L.L.C.
By: /s/ Richard A. Weaver
Its: President
Address:----------------------------
STANDARD WAREHOUSE LEASE AGREEMENT 54,560 square feet
Atlanta Industrial/1996
Meadows V
Shiloh Road
Alpharetta, GA 30202
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between Meadows I/II,
LLC hereinafter referred to as "Landlord", and Contour Medical, Inc.
hereinafter referred to as "Tenant";
W I T N E S S E T H :
1. PREMISES AND TERM. In consideration of the obligation of Tenant
to pay rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and leases to Tenant,
and Tenant hereby accepts and leases from Landlord certain premises situated
within the County of Forsyth, State of Georgia, more particularly described on
Exhibit "A" attached hereto and incorporated herein by reference, together
with all rights, privileges, easements, appurtenances, and amenities belonging
to or in any way pertaining to the premises and together with the buildings
and other improvements situated or to be situated upon said premises (said
real property, building and improvements being hereinafter referred to as the
"Premises").
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date", as hereinafter defined, and ending sixty (60) months thereafter;
provided however, that in the event the commencement date is a date other than
the first day of a calendar month, said term shall extend for said number of
months in addition to the remainder of the calendar month following the
commencement date.
A. The commencement date shall be March 1, 1997. Tenant acknowledges
that it has inspected and accepts the Premises, and specifically the buildings
and improvements comprising the same, in their present condition, as suitable
for the purpose for which the Premises are leased. Taking of possession by
Tenant shall be deemed conclusively to establish that said buildings and other
improvements are in good and satisfactory condition as of when possession was
taken. Tenant further acknowledges that no representations as to the repair
of the Premises, nor promises to alter, remodel or improve the Premises have
been made by Landlord, unless such are expressly set forth in this lease. If
this lease is executed before the Premises become vacant or otherwise
available and ready for occupancy, or if any present tenant or occupant of the
Premises holds over, and the Landlord cannot acquire possession of the
Premises prior to said commencement date, Landlord shall not be deemed to be
in default hereunder, and Tenant agrees to accept possession of the Premises
at such time as Landlord is able to tender the same, which date shall
thenceforth be deemed the commencement date; and Landlord hereby waives
payment of rent covering any period prior to the tendering of possession to
Tenant hereunder. After delivery of possession to Tenant the Tenant shall,
upon demand, execute and deliver to Landlord a letter of acceptance of
delivery of the Premises.
B. In the event this lease pertains to a building or building
interior finish to be constructed, the provisions of this subparagraph B shall
apply in lieu of the provisions of subparagraph A above and the commencement
date shall be the date upon which the buildings and other improvements erected
and to be erected upon the premises shall have been substantially completed in
accordance with the plans and specifications described in Exhibit "B" attached
hereto and incorporated herein by reference provided however, that if Landlord
shall be delayed in such substantial completion as a result of: (i) Tenant's
failure to agree to plans, specifications, and cost estimates, by within a
reasonable period of time, unless such failure is the result of Tenant's good
faith efforts to resolve Tenant's legitimate concerns with any such items and
Tenant diligently seeks to resolve such concerns in a timely manner; (ii)
Tenant's request for materials, finishes or installations other than
Landlord's standard, which request causes an actual delay in Landlord's
substantial completion as a result of unavailability, additional time to
complete, or other factors causing an actual delay; (iii) Tenant's changes in
plans; or (iv) the performance or completion of a party employed by Tenant,
the commencement date and the payment of rent hereunder shall be accelerated
by the number of days of such delay, and provided further that if Landlord can
not substantially complete the premises as a result of any of events (i)
through (iv) above, Landlord may at its election complete so much of
Landlord's work as may be practical under the circumstances and, by written
notice to tenant, establish the commencement date of such partial completion,
subject to any applicable accelerations due to delays resulting from events
(i) through (iv) above. Taking of possession by Tenant shall be deemed
conclusively to establish that said buildings and other improvements have been
completed in accordance with the plans and specifications and that the
Premises are in good and satisfactory condition, as of when possession was so
taken. Tenant acknowledges that no representations as to the repair of the
Premises have been made by Landlord, unless such are expressly set forth in
this lease. After delivery of possession to Tenant, Tenant shall, upon
demand, execute and deliver to Landlord a letter of acceptance of delivery of
the Premises. In the event of any dispute as to substantial completion of
work performed or required to be performed by Landlord, the certificate of
Landlord's architect or general contractor shall be conclusive.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord rent for the Premises, in advance
without demand, deduction or set off, for the entire term hereof at the rate
of Twenty-Three Thousand One Hundred and Eighty-Eight and 00/100 Dollars ($
23,188.00 ) per month. One such monthly installment shall be due and payable
on the date hereof and a like monthly installment shall be due and payable on
or before the first day of each calendar month succeeding the commencement
date recited above during the hereby demised term, except that the rental
payment for any fractional calendar month at the commencement or end of the
lease period shall be prorated. [See Provision 29] With respect to the rent
that is posted by Tenant at the execution of this Lease, Landlord will credit
to Tenant's second month of rent interest on the posted rent at an annual rate
of four percent (4%).
B. Upon Tenant's execution of this Lease, Tenant shall provide to
Landlord an unconditional, irrevocable Letter of Credit (hereinafter, the
"L.C.") in the amount of Two Hundred Seventy-Eight Thousand Two Hundred and
Fifty-Six and 00/100 Dollars ($278,256.00), substantially identical in form to
Exhibit F attached hereto, in favor of and naming Landlord as the beneficiary,
which L.C. shall be issued by Barnett Bank. If Tenant's eventual investment
in tenant improvements, above Landlord's contribution, is less than
$100,000.00, then Tenant will increase the amount of the L.C. by such
shortfall. For example, if Tenant only invests $60,000 in tenant
improvements, then the amount of the L.C. will be increased to $318,256.00.
Tenant agrees that the L.C. shall be kept in full force and effect during the
Term of this Lease. However, if Tenant has performed its obligations under
this Lease in a diligent and timely manner, and Tenant's net worth increases
by ten percent (10%) annually over its 6/30/96 10K, then upon each anniversary
of the Commencement Date, the amount of the L.C. shall be reduced by twenty
percent (20%). If the term of the L.C. is for less than the full Term of this
Lease, then Tenant shall successfully renew the L.C. sixty (60) days prior to
any interim expiration. Landlord shall have the right to draw upon the L.C.
and have the proceeds thereof paid to Landlord at any time after the
occurrence of an Event of Default under the Lease and the expiration of any
applicable cure periods.
Failure of Tenant to comply with the provisions of this Paragraph shall,
at the option of Landlord, constitute an Event of Default under this Lease.
3. USE.
A. The demised Premises shall be used only for the purpose of general
office, receiving, storing, shipping and selling (other than retail) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto, and subject to any building or
building complex rules and regulations, such rules and regulations not to be
inconsistent with Tenant's rights hereunder and not to be enforced without a
copy of such rules and regulations being provided to Tenant. Permitted use in
the Premises is to include assembly of procedural medical trays for
sterilization. Outside storage, including without limitation, trucks and
other vehicles, is prohibited without Landlord's prior written consent.
Tenant will be permitted to have four (4) service vehicles parked at the
loading dock at night and in legal parking spaces during the business day.
Tenant shall at its own cost and expense obtain any and all licenses and
permits necessary for any such use. Tenant shall comply with all governmental
laws, ordinances and regulations applicable to the use of the Premises, and
shall promptly comply with all governmental orders and directives for the
correction, prevention and abatement of nuisances in or upon, or connected
with, the Premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, not take any other action which would constitute a
nuisance or would disturb or endanger any other tenants of the building in
which their Premises are situated or unreasonably interfere with their use of
their respective Premises. Without Landlord's prior written consent, Tenant
shall not receive, store or otherwise handle any product, material or
merchandise which is explosive or highly flammable. Tenant will not permit
the Premises to be used for any purpose or in any manner (including without
limitation any method of storage) which would render the insurance thereon
void or the insurance risk more hazardous or cause the State Board of
Insurance or other insurance authority to disallow any sprinkler credits.
B. Tenant agrees that the point pressure resulting from Tenant's
racking system, inventory, forklifts and equipment pertaining to Tenant's use
of the Premises shall not exceed allowable design floor loading for floor
slabs on grade. Tenant shall hold harmless Landlord from any loss, liability,
and expenses, both real and alleged, arising out of such damage or repair
caused by Tenant's negligence or failure to comply with this paragraph.
4. TAXES.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys
around the building; provided however, that the maximum amount of taxes to be
paid by Landlord hereunder during any one real estate tax year shall be
Thirty Thousand Six Hundred and Twenty-Four and no/100 Dollars ($30,624.00).
If, in any real estate tax year during the term hereof or any renewal or
extension, the taxes levied or assessed against the building and the grounds,
parking areas, driveways and alleys around the building during such tax year
shall exceed the sum set forth in the preceding sentence, Tenant shall pay to
Landlord as additional rental, upon demand, the amount of such excess. In the
event any such amount is not paid within twenty (20) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest at the
rate of twenty percent (20%) per annum from the date of such receipt until
payment by Tenant. In the event the Premises constitute a portion of a
multiple occupancy building, Tenant agrees to pay to Landlord, as additional
rental, the amount of Tenant's "proportionate share" (as defined in
subparagraph 27B below) of the excess taxes referred to in this subparagraph.
Landlord reserves the right to require Tenant during each month of the lease
term to pay an escrow deposit to Landlord equal to one-twelfth of its
proportionate share of the estimated taxes. If the Tenant's total tax escrow
payments are less than Tenant's actual proportionate share of such taxes,
Tenant shall pay to Landlord upon demand the tax payment shortage; if the
total tax escrow payments of Tenant are more than Tenant's actual
proportionate share of such taxes, Landlord shall return such excess to Tenant
or retain such excess and credit it to Tenant's next accruing tax escrow
payment, at Tenant's option.
B. If at any time during the term of this lease, the present method
of taxation shall be changed so that, in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents for the present or any future
building or buildings on the Premises, then all such taxes, assessments,
levies or charges, or the part thereof so measured or based, shall be deemed
to be included within the term "taxes" for the purposes hereof, provided,
however, nothing herein is intended to require Tenant to pay Landlord's income
tax obligations.
C. The Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand from
time to time, as additional rent, the amount of tenant's proportionate share
of the cost of such service, so long as such service is an unrelated third
party.
D. Any payment to be made pursuant to this paragraph 4 with respect
to the real estate tax year in which this lease commences or terminates shall
be prorated.
5. LANDLORD'S REPAIRS AND OBLIGATIONS. Landlord shall at its expense
maintain only the roof, foundation and the structural soundness of the
exterior walls of the building in good repair, reasonable wear and tear
excepted. Tenant shall repair and pay for any damage caused by the negligence
of Tenant, or Tenant's employees, agents or invitees, or caused by Tenant's
default hereunder. The term "walls" as used herein shall not include windows,
glass or plate glass, doors, store fronts or office entries. Tenant shall
immediately give Landlord written notice of defect or need for repairs, after
which Landlord shall have reasonable opportunity to repair same or cure such
defect. Landlord's liability with respect to any defects, repairs or
maintenance for which landlord is responsible under any of the provisions of
this lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect.
6. TENANT'S REPAIRS AND OBLIGATIONS.
A. Tenant shall at its own cost and expense keep and maintain all
parts of the Premises (except those for which Landlord is expressly
responsible under the terms of this lease) in good condition, promptly making
all repairs, repainting, and replacements, including but not limited to,
windows, glass and plate glass, doors, any office entries, interior walls and
finish work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems servicing only the Premises, dock boards, truck doors,
dock bumpers, paving, plumbing work and fixtures, termites and pest
extermination, grounds maintenance, common sewage line plumbing, common
exterior lighting (if applicable), and other obligations of the building,
keeping the parking areas, driveways, alleys and the whole of the Premises in
a clean and sanitary condition. Tenant shall only be obligated to pay for its
proportionate share of the general maintenance and repair of the Building that
is deemed to benefit the Building generally and not those that benefit a
specific other tenant of the Building. Tenant shall not be obligated to
repair any damage caused by fire, tornado or other casualty covered by the
insurance to be maintained by Landlord pursuant to subparagraph 12A below,
except that Tenant shall be obligated to repair all wind damage to glass
except with respect to tornado or hurricane damage.
B. The cost of maintenance and repair of any common party walls (any
wall, divider, partition or any other structure separating the Premises from
any adjacent Premises) shall be shared by Tenant and the tenant or tenants
occupying the adjacent Premises. Tenant shall not damage any demising wall or
disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any
demising wall caused by Tenant or its employees, agents or invitees.
C. In the event the Premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall
have the exclusive right to use the parking areas, if any, as may be
designated by Landlord in writing, subject to such reasonable rules and
regulations as Landlord may from time to time prescribe and subject to rights
of ingress and egress of other tenants. Landlord shall not be responsible for
enforcing Tenant's exclusive parking rights against any third parties.
D. Landlord reserves the right to perform and provide all or any part
of Tenant's repairs and obligations under subparagraph 6A above, and Tenant
shall, in lieu of the obligations set forth under subparagraph 6A above with
respect to such items, pay monthly as additional rent due under subparagraph
2A for its proportionate share of the cost and expense, including overhead,
for those items; and further provided that if Tenant or any other particular
tenant of the building can be clearly identified as being responsible for
obstructions or stoppage of the common sanitary sewage line, then Tenant, if
Tenant is responsible, shall pay the entire cost thereof, upon demand, as
additional rent. If, for any calendar year during which this Lease is in
effect, Tenant's total monthly payments made pursuant to this subparagraph are
less than Tenant's actual proportionate share of such repair obligations,
Tenant shall pay to Landlord the payment shortage. If the total monthly
payments are more than Tenant's actual proportionate share of such repairs and
obligations, Landlord shall return such excess to Tenant or retain such excess
and credit it to Tenant's next accruing monthly payment for such repairs and
obligations, at Tenant's ption.
E. In the event the Premises constitute a portion of a multiple
occupancy building, Landlord shall have the right to coordinate any repairs
and other maintenance of any rail tracks serving the building and if Tenant
uses such rail tracks, Tenant shall reimburse Landlord from time to time, as
additional rent, for a share of the costs of such repairs and maintenance and
any other sums specified in any agreement to which Landlord is a party
respecting such tracks, such share to be a fraction, the numerator of which is
the space contained in the Premises, and the denominator of which is the
entire space occupied by rail users in the building.
F. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all hot water, heating and air conditioning systems
and equipment within the Premises. The maintenance contractor and the
contract must be approved by Landlord. The service contract must include all
services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to the Landlord) within thirty (30) days of the date Tenant takes
possession of the Premises.
7. ALTERATIONS. Except as provided for herein, Tenant shall not make
any alterations, additions or improvements to the Premises (including but not
limited to roof and wall penetrations) without the prior written consent of
Landlord, not to be unreasonably withheld or delayed. In the event Landlord
consents to the making of any such alterations, additions or improvements by
Tenant, the same shall be made by Tenant, at Tenant's sole cost and expense,
in accordance with all applicable laws, ordinances and regulations, and all
requirements of Landlord's and Tenant's insurance policies and only in
accordance with plans and specifications approved by Landlord; and any
contractor or person selected by Tenant to make the same and all
subcontractors must first be approved in writing by Landlord. Landlord, for
Tenant's benefit, will bid the plans and specifications for any alterations
among three (3) qualified contractors. Tenant shall approve any awardee for
any alteration and Tenant shall fully reimburse Landlord for the entire cost
thereof within twenty (20) days after written notification of Tenant by
Landlord providing Tenant with an invoice or other request (or statement).
Tenant may, without the consent of Landlord, but at its own cost and expense
and in a good workmanlike manner erect such shelves, bins, machinery and trade
fixtures as it may deem advisable, without altering the basic character of the
building or improvements and without overloading or damaging such building or
improvements, and in each case complying with all applicable governmental
laws, ordinances, regulations and other requirements. All alterations,
additions, improvements and partitions erected by Tenant shall be and remain
the property of Tenant during the term of this lease and Tenant shall, unless
Landlord otherwise elects as hereinafter provided, remove all alterations,
additions, improvements and partitions erected by Tenant and restore the
Premises to their original condition by the date of termination of this lease
or upon earlier vacating of the Premises, reasonable wear and tear excepted;
provided, however, that if Landlord so elects in writing prior to termination
of this lease or upon earlier vacating of the Premises, such alterations,
additions, improvements and partitions shall become the property of Landlord
as of the date of termination of this lease or upon earlier vacating of the
Premises and shall be delivered up to the Landlord with the Premises.
Notwithstanding the foregoing sentence, all shelves, bins, machinery and trade
fixtures installed by Tenant may be removed by Tenant prior to the termination
of this lease if Tenant so elects, and shall be removed by the date of
termination of this lease or upon earlier vacating of the Premises if required
by Landlord reasonable wear and tear excepted. Upon any such removal Tenant
shall restore the Premises to their original condition. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the building and other
improvements situated on the Premises.
8. SIGNS. Tenant agrees to conform to Landlord's signage program for
the building; however, all costs and expenses for the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall have the right to
install standard signs upon the Premises only where first approved in writing
by Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all signs prior to
the termination of this lease. Such installations and removals shall be made
in such a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury of defacement, including
without limitation, caused by installation and/or removal.
9. INSPECTION AND RIGHT OF ENTRY. Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any time in the
event of an emergency and to enter and inspect the Premises at any reasonable
time during business hours, for the purpose of ascertaining the condition of
the Premises or in order to make such repairs as may be required or permitted
to be made by Landlord under the terms of this lease, provided, however, that
Landlord will not unreasonably interfere with Tenant's business operations.
During the period that is six (6) months prior to the end of the term hereof,
Landlord and Landlord's agents and representatives shall have the right to
enter the Premises at any reasonable time during business hours for the
purpose of showing the Premises and shall have the right to erect on the
Premises a suitable sign indicating the Premises are available. Tenant shall
give written notice to Landlord at least thirty (30) days prior to vacating
the Premises and shall arrange to meet with Landlord for a joint inspection of
the Premises prior to vacating. In the event of Tenant's failure to give such
notice or arrange such joint inspection, Landlord's inspection at or after
Tenant's vacating the Premises shall be conclusively deemed correct for
purposes of determining Tenant's responsibility for repairs and restoration.
10. UTILITIES. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into the Premises in
accordance with the specifications, if any, attached hereto; but Tenant shall
pay for all water, gas, heat, light, power, telephone, sewer, sprinkler
charges and other utilities and services used on or from the Premises,
together with any taxes, penalties, surcharges or the like pertaining thereto,
and any maintenance charges for utilities, and shall furnish all electric
light bulbs and tubes. Such services will be separately metered to Tenant,
and Tenant shall pay all charges metered for the Premises. Landlord shall in
no event be liable for any interruption or failure of utility services on the
Premises.
11. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not sell, assign, encumber or otherwise transfer by
operation of law or otherwise, this lease or any interest herein, sublet the
Premises or any portion thereof, or suffer any other person to occupy or use
the Premises or any portion thereof, without the prior written consent of
Landlord as provided herein, not to be unreasonably withheld or delayed, nor
shall Tenant permit any lien to be placed on the Tenant's interest by
operation of law. Tenant shall, by written notice, advise Landlord of its
desire from and after a stated date (which shall not be less than thirty (30)
days nor more than ninety (90) days after the date of Tenant's notice) to
sublet the Premises or any portion thereof for any part of the term thereof
and in such event Landlord shall have the right, to be exercised by giving
written notice to Tenant within ten (10) days after receipt of Tenant's
notice, to terminate this lease as to the portion of the Premises described in
Tenant's notice and such notice shall, if given, terminate this lease with
respect to the portion of the Premises therein described as of the date stated
in Tenant's notice. Said notice by Tenant shall state the name and address of
the proposed subtenant, and Tenant shall deliver to Landlord a true and
complete copy of the proposed sublease with said notice. If said notice shall
specify all of the Premises and Landlord shall give said termination notice
with respect thereto, this lease shall terminate on the date stated in
Tenant's notice. If landlord, upon receiving said notice by tenant, with
respect to any of the premises, shall not exercise its right to terminate.
Landlord will not unreasonably withhold its consent to Tenant's subletting the
Premises specified in said notice. Tenant shall, at Tenant's sole cost and
expense, discharge in full any outstanding commission obligation on the part
of Landlord with respect to this lease, and any commission which may be due
and owing as a result of any proposed assignment or subletting, whether or not
the lease is terminated pursuant hereto and rented by Landlord to the proposed
subtenant or any other tenant.
B. Any subletting hereunder by Tenant shall not result in Tenant being
released or discharged from any liability under this lease. As a condition to
Landlord's prior written consent as provided for in subparagraph 11A above,
the subtenant or subtenants shall agree in writing to comply with and be bound
by all of the terms, covenants, conditions, provisions and agreements of this
lease, and Tenant shall deliver to Landlord promptly after execution, an
executed copy of each sublease and an agreement of said compliance by each
sublessee.
C. Landlord's consent to any sale, assignment, encumbrance, subletting,
occupation, lien or other transfer shall not release Tenant from any of
Tenant's obligations hereunder or be deemed to be a consent to any subsequent
occurrence. Any sale, assignment, encumbrance, subletting, occupation, lien
or other transfer of this lease which does not comply with the provisions of
this paragraph 11 shall be null and void.
12. FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain insurance covering the building of
which the Premises are a part in an amount not less than eighty percent (80%)
(or such greater percentage as may be necessary to comply with the provisions
of any co-insurance clauses of the policy) of the replacement cost thereof,
insuring against the perils of Fire, Lightning, Extended Coverage, Vandalism
and Malicious Mischief, extended by Special Extended Coverage Endorsement to
insure against all other Risks of Direct Physical Loss, such coverages and
endorsements to be as defined, provided and limited in the standard bureau
forms prescribed by the insurance regulatory authority for the state in which
the Premises are situated for use by insurance companies admitted in such
state for the writing of such insurance on risks located within such state.
Subject to the provisions of subparagraphs 12C, 12D and 12E below, such
insurance shall be for the sole benefit of Landlord and under its sole
control. If during the second full lease year after the commencement date of
this lease, or during any subsequent year of the primary term or any renewal
or extension, Landlord's cost of maintaining such insurance shall exceed
Landlord's cost of maintaining such insurance for the first full lease year of
the term hereof, Tenant agrees to pay to Landlord, as additional rental, the
amount of such excess (or in the event the Premises constitute a portion of a
multiple occupancy building, Tenant's full proportionate share of such
excess). Said payments shall be made to Landlord within twenty (20) days
after presentation to Tenant of Landlord's statement setting forth the amount
due. Any payment to be made pursuant to this subparagraph 12A with respect to
the year in which this lease commences or terminates shall bear the same ratio
to the payment which would be required to be made for the full year as the
part of such year covered by the term of this lease bears to a full year.
B. If any increase in the fire and extended coverage insurance
premiums paid by Landlord or other Tenants for the building in which Tenant
occupies space is caused by Tenant's use and occupancy of the Premises, or if
Tenant vacates the Premises of this Lease and causes an increase in such
premiums, then Tenant shall pay as additional rental the amount of such
increase to Landlord.
C. If the buildings situated upon the Premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
D. If the buildings situated upon the Premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be
completed within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage, this lease shall terminate and the rent
shall be abated during the unexpired portion of this lease, effective upon the
date of the occurrence of such damage.
E. If the buildings situated upon the Premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph
12A above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within two hundred (200) days after the
date upon which Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the Premises by Tenant and except that Tenant shall pay
to Landlord upon demand any amount by which Landlord's cost of such
rebuilding, repair and/or replacement exceeds net insurance proceeds paid to
Landlord in connection with such damage and except that Landlord may elect not
to rebuild if such damage occurs during the last year of the term of the lease
exclusive of any option which is unexercised at the time of such damage. If
the Premises are untenantable in whole or in part following such damage, the
rent payable hereunder during the period in which they are untenantable shall
be reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such above
referenced repairs and rebuilding within two hundred (200) days after the date
upon which Landlord is notified by Tenant of such damage, Tenant may at its
option terminate this lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
F. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering
written notice of termination to Tenant within fifteen (15) days after such
requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
G. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured in policies
of insurance covering such property, even if such loss or damage shall have
been caused by the fault or negligence of the other party, or anyone for whom
such party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage
occurring during such times as the releasor's policies shall contain a clause
or endorsement to the effect that any such release shall not adversely affect
or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it will request
its insurance carriers to include in its policies such a clause or
endorsement. If extra cost shall be charged therefore, each party shall
advise the other thereof and of the amount of the extra cost, and the other
party, at its election, may pay the same, but it shall not be obligated to do
so.
13. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees, or of any other person entering upon the
Premises, or caused by the buildings and improvements located on the Premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the Premises, and Tenant hereby covenants and
agrees that it will at all times indemnify and hold safe and harmless the
property, the Landlord (including without limitation the trustee and
beneficiaries if Landlord is a trust), Landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of
or relating to any such damage or injury; except injury to persons or damage
to property the sole cause of which is the negligence of Landlord or the
failure of Landlord to repair any part of the Premises which Landlord is
obligated to repair and maintain hereunder within a reasonable time after the
receipt of written notice from Tenant of needed repairs. Tenant shall procure
and maintain throughout the term of this lease a policy or policies of
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with:
(i) the Premises; (ii) the condition of the Premises; (iii) Tenant's
operations in and maintenance and use of the Premises; and (iv) Tenant's
liability assumed under this lease, the limits of such policy or policies to
be in the amount of not less than $500,000 per occurrence in respect to injury
to persons (including death), and in the amount of not less than $100,000 per
occurrence in respect to property damage or destruction, including loss of use
thereof. All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies or
certificates of such policies, together with receipt evidencing payment of
premiums therefor, shall be delivered to Landlord prior to the commencement
date of this lease. Not less than fifteen (15) days prior to the expiration
date of any such policies, certified copies of the renewals thereof (bearing
notations evidencing the payment of renewal premiums) shall be delivered to
Landlord. Such policies shall further provide that not less than thirty (30)
days written notice shall be given to Landlord before such policy may be
canceled or changed to reduce insurance provided thereby.
14. CONDEMNATION.
A. If the whole or any substantial part of the Premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are being used, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this
lease is not terminated as provided in subparagraph 14A above, this lease
shall not terminate but the rent payable hereunder during the unexpired
portion of this lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances.
C. All compensation awarded for any taking (or the proceeds of
private sale in lieu thereof) of the Premises, buildings or other
improvements, or any part thereof, shall be the property of Landlord and
Tenant hereby assigns its interest in any such award to Landlord; provided,
however, Landlord shall have no interest in any award made to Tenant for loss
of business or for the taking of Tenant's fixtures and improvements if a
separate award for such items is made to Tenant.
15. HOLDING OVER. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed.
If Landlord agrees in writing that Tenant may hold over after the expiration
or termination of this lease, unless the parties hereto otherwise agree in
writing on the terms of such holding over, the hold over tenancy shall be
subject to termination by Landlord at any time upon not less than thirty (30)
days advance written notice, or by Tenant at any time upon not less than
thirty (30) days advance written notice, and all of the other terms and
provisions of this lease shall be applicable during that period, except that
Tenant shall pay Landlord from time to time upon demand, as rental for the
period of any hold over, an amount equal to one and one half (1-1/2) the rent
in effect on the termination date, computed on a daily basis for each day of
the hold over period. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend this lease except as otherwise
expressly provided. The preceding provisions of this paragraph 15 shall not
be construed as consent for Tenant to hold over.
16. QUIET ENJOYMENT. Landlord covenants that it now has, or will
acquire before Tenant takes possession of the Premises, good title to the
Premises, free and clear of all liens and encumbrances, excepting only the
lien for current taxes not yet due, such mortgage or mortgages as are
permitted by the terms of this lease, zoning ordinances and other building and
fire ordinances and governmental regulations relating to the use of such
property, and easements, restrictions and other conditions of record. In the
event this lease is a sublease, then Tenant agrees to take the Premises
subject to the provisions of the prior leases. Landlord represents and
warrants that it has full right and authority to enter into this lease and
that Tenant, upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and quietly have,
hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this lease.
17. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default by Tenant under this lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of five (5) days
after notice to Tenant from Landlord; or
B. Tenant shall vacate all of the Premises or fail to continuously
operate its business at the Premises for the permitted use set forth in
paragraph 3 whether or not Tenant is in default of the rental payments due
under this lease; or
C. Tenant shall fail to discharge any lien placed upon the Premises
in violation of paragraph 22 hereof within sixty (60) days after any such lien
or encumbrance is filed against the Premises provided, however, if such lien
hinders Landlord in financing, selling or managing the Building, Tenant will
discharge or bond over the lien immediately; or
D. Tenant shall fail to comply with any term, provision or covenant
of this lease (other than the foregoing in this paragraph 17), and shall not
cure such failure within twenty (20) days after written notice thereof to
Tenant.
E. Default by any guarantor of this Lease of the terms of its
guaranty, or the bankruptcy or insolvency of any guarantor.
18. REMEDIES.
A. Upon each occurrence of an event of default, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand:
(1) Terminate this lease, and/or
(2) Enter upon and take possession of the premises with or without
terminating this lease; and/or
(3) Alter all docks and other security devices at the premises with or
without terminating this lease, and pursue, at Landlord's option, one or more
remedies pursuant to this lease, tenant hereby specifically waving any state
or federal law to the contrary;
and in any such event tenant immediately shall surrender its premises to
landlord, and if Tenant fails to do so, Landlord, without waiving any other
remedy it may have, may enter upon and take possession of the premises or any
part thereof by force if necessary, without being liable for prosecution or
any claim of damages therefor.
B. In the event of a default or threatened default of this Lease by
Tenant, Landlord shall be entitled to all equitable remedies, including,
without limitation injunction and specific performance. The various rights,
remedies, powers, options and elections of Landlord reserved, expressed or
contained in this lease are cumulative, and no one of them shall be deemed to
be exclusive of the others, or of such other rights, remedies, powers, options
or elections as are now, or may hereafter, be conferred upon Landlord by law
or in equity. Failure by Landlord to enforce one or more of the remedies
herein provided shall not be deemed or construed to constitute a waiver of
such default, or any violation or breach of any of the terms, provisions, or
covenants herein contained, or a waiver of Landlord's right thereafter to
insist upon strict compliance with the terms hereof.
C. In the event that Landlord shall have taken possession of the
Premises pursuant to the authority herein granted, then Landlord shall have
the right to keep in place and use all of the furniture, fixtures and
equipment at the Premises, including that which is owned by or leased to
Tenant at all times prior to any foreclosure thereon by Landlord or
repossession thereof by any lessor thereof or third party having a lien
thereon. Landlord shall also have the right to remove from the Premises
(without the necessity of obtaining a distress warrant, writ of sequestration
or other legal process) all or any portion of such furniture, fixtures,
equipment and other property located thereon and to place same in storage at
any Premises within the County in which the Premises is located; and in such
event, Tenant shall be liable to Landlord for costs incurred by Landlord in
connection with such removal and storage. Landlord shall also have the right
to relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") claiming to be
entitled to possession thereof who presents to Landlord a copy of any
instrument represented to Landlord by Claimant to have been executed by Tenant
(or any predecessor Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or
other property, without the necessity on the part of Landlord to inquire into
the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord
making any investigation or inquiry as to the validity of the factual or legal
basis upon which Claimant purports to act; and Tenant agrees to indemnify and
hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. The rights
of Landlord herein stated shall be in addition to any and all other rights
which Landlord has or may hereafter have at law or in equity; and Tenant
stipulates and agrees that the rights herein granted Landlord are commercially
reasonable.
19. LANDLORD'S LIEN. [Intentionally omitted]
20. MORTGAGES.
A. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting
a lien or charge upon the Premises or the improvements situated thereon,
provided however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this lease shall be deemed superior to such lien, whether
this lease was executed before or after said mortgage or deed of trust.
Tenant shall at any time hereafter on demand execute any instruments, releases
or other documents which may be required by any mortgagee for the purpose of
subjecting and subordinating this lease to the lien of any such mortgage,
provided that Landlord will obtain a non-disturbance agreement identical to
Exhibit G of this Lease from such mortgagee. All mortgages or deeds of trust
referred to in this subparagraph 20A refer to first mortgages or deeds of
trust only.
B. Tenant agrees not to look to the mortgagee, as mortgagee, mortgagee
in possession, or successor entitled to the property, for accountability for
any security deposit required by the Landlord hereunder, unless said sums have
been received by said mortgagee as security for Tenant's performance of this
lease.
21. LANDLORD'S DEFAULT. In the event Landlord should become in default
in any payments due on any such mortgage described in Paragraph 20 hereof or
in the payment of taxes or any other items which might become a lien upon the
Premises and which Tenant is not obligated to pay under the terms and
provisions of this lease, Tenant is authorized and empowered after giving
Landlord five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for or on behalf of
Landlord together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant;
provided however,that Tenant shall not be authorized and empowered to make any
payment under the terms of this Paragraph 21 unless the item paid shall be
superior to Tenant's interest hereunder. In the event Tenant pays any
mortgage debt in full, in accordance with this paragraph, it shall, at its
election, be entitled to the mortgage security by assignment or subrogation.
22. MECHANICS LIENS AND OTHER TAXES. Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind the interests of Landlord in
the Premises or to charge the rentals payable hereunder for any claim in favor
of any person dealing with Tenant, including those who may furnish materials
or perform labor for any construction or repairs, and each such claim shall
affect and each such lien shall attach to, if at all, only the leasehold
interest granted to Tenant by this instrument. Tenant covenants and agrees
that it will pay or cause to be paid all sums legally due and payable by it on
account of any labor performed or materials furnished in connection with any
work performed on the Premises on which any lien is or can be validly and
legally asserted against its leasehold interest in the Premises or the
improvements thereon and that it will save and hold Landlord harmless from any
and all loss, cost or expense based on or arising out of asserted claims or
liens against the leasehold estate or against the right, title and interest of
the Landlord in the Premises or under the terms of this lease. Tenant agrees
to give Landlord immediate written notice if any lien or encumbrance is placed
on the Premises.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment by Landlord to Tenant or with reference to the sending, mailing or
delivery of any notice or the making of any payment by Tenant to Landlord
shall be deemed to be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligations to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith:
LANDLORD: TENANT:
Meadows I/II, LLC Contour Medical, Inc.
Attention: John R. Decker 3340 Scherer Drive
c/o Childress Klein Properties St. Petersburg, FL 33716
300 Galleria Parkway, N.W., Suite 600 Attn: Donald F. Fox
Atlanta, Georgia 30339
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be
bound by notices given in accordance with the provisions of this paragraph to
the same effect as if each had received such notice.
24. HAZARDOUS MATERIALS.
A. For purposes of this section, "Hazardous Materials" shall include
all solid, liquid or gaseous materials defined or regulated as wastes under
any federal statute or regulation or any state or local law, regulation or
ordinance and shall further include all other substances defined or regulated
as pollutants or as hazardous, toxic, infectious, or radioactive substances
under any federal statute or regulation or any state or local law, regulation
or ordinance, all as amended from time to time.
B. Tenant shall not cause or permit any Hazardous Materials to be
used, generated, stored or disposed of on, under or about, or transported to
or from the Premises (collectively, "Hazardous Materials Activities") except
in compliance with all applicable federal, state and local laws, regulations,
ordinances and order governing such Hazardous Materials or Hazardous Materials
Activities, which compliance shall be at Tenant's sole cost and expense.
Additionally, Tenant shall not cause or permit any Hazardous Materials to be
disposed of on, under or about the Premises without the express prior written
consent of the Landlord, which may be withheld for any reason and may be
revoked at any time.
C. Landlord shall not be liable to Tenant or to any other party for
any Hazardous Materials Activities conducted or permitted on, under or about
the Premises by Tenant or by Tenant's employees, agents, contractors,
licensees or invitees, and Tenant shall indemnify, defend and hold Landlord
harmless from any claims, damages, fines, penalties, losses, judgments, costs
and liabilities arising out of or related to any Hazardous Materials
Activities conducted or permitted on, under or about the Premises by Tenant or
by Tenant's employees, agents, contractors, licensees or invitees, regardless
of whether Landlord shall have consented to, approved of, participated in or
had notice of such Hazardous Materials Activities. The provisions of this
paragraph shall survive the expiration or termination of this lease.
D. At the expiration or earlier termination of this lease, Tenant
shall remove from the Premises, at Tenant's sole expense, all Hazardous
Materials located, stored and disposed of on, under or about the Premises.
Tenant shall close, remove or otherwise render safe any buildings, tanks,
containers or other facilities related to the Hazardous Materials Activities
conducted or permitted on the Premises in the manner required by all
applicable laws, regulations, ordinances or orders.
25. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an
assignment of Tenant for the benefit of creditors, or any action taken or
suffered by Tenant under any insolvency, bankruptcy, or reorganization act,
shall be Landlord's option constitute a breach of this Lease by Tenant. Upon
the happening of any such event or at any time thereafter, this Lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant. In no event shall this Lease be assigned or assignable by operation
of law or by voluntary or involuntary bankruptcy proceedings or otherwise and
in no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency, or reorganization proceedings.
26. LANDLORD'S LIABILITY. Any liability of Landlord hereunder shall be
enforceable only out of the Building or Property and in no event out of the
separate assets of any constituent partner of Landlord. No holder or
beneficiary of any mortgage or deed of trust on any part of the Property shall
have any liability to Tenant hereunder for any default of Landlord.
27. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. In the event the Premises constitutes a portion of a multiple
occupancy building or building complex, Tenant's "proportionate share", as
used in this lease, shall mean a fraction, the numerator of which is the space
contained in the Premises and the denominator of which is the entire leasable
space contained in the building or building complex.
C. The terms, provisions and covenants and conditions contained in
this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly
provided. Landlord shall have the right to assign any of its rights and
obligations under this lease. Each party agrees to furnish to the other,
promptly upon demand, a corporate resolution, proof of due authorization by
partners, or other appropriate documentation evidencing the due authorization
of such party to enter into this lease.
D. The captions inserted in this lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this lease,
or any provision hereof, or in any way affect the interpretation of this
lease.
E. Tenant agrees from time to time within ten (10) days after request
of Landlord, to deliver to Landlord, or Landlord's designee a certificate of
occupancy (if applicable) and an estoppel certificate stating that this lease
is in full force and effect, the date to which rent has been paid, the
unexpired term of this lease and such other matters pertaining to this lease
as may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish such estoppel certificates in a timely fashion is a
material inducement for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Tenant shall also,
prior to vacating the Premises, pay to Landlord the amount, as estimated by
Landlord, of Tenant's obligation hereunder for real estate taxes and insurance
premiums for the year in which the lease expires or terminates. All such
amounts shall be used and held by Landlord for payment of such obligations of
Tenant hereunder, with Tenant being liable for any additional costs therefor
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied, as the case may be. Any
security deposit held by Landlord shall be credited against the amount payable
by Tenant under this subparagraph 25G.
H. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or
provision of this lease that is illegal, invalid or unenforceable, there be
added as a part of this lease contract a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
I. Because the Premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the Premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the Premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its provisions.
This lease in all respects shall be governed by the laws of the State of
Georgia.
L. Tenant shall not install drapes, curtains, blinds or any window
treatment without Landlord's prior written approval.
M. The duties and obligations of Tenant herein shall be binding upon
all or any of them. The duties and obligations of Tenant shall run and extend
not only to the benefit of the Landlord, as named herein, but to the
following, at the option of the following or any of them: (i) any person by,
through or under which Landlord derives the right to lease the Premises; (ii)
the owner of the Premises; and (iii) holders of mortgage or rent assignment
interests in the Premises, as their respective interests may appear; provided,
however, nothing contained herein shall be construed to obligate Tenant to pay
rent to any person other than the Landlord until such time as Tenant has been
given written notice of either an exercise of a rent assignment or the
succession of some other party to the interests of Landlord.
N. In order to induce Landlord to enter into this Lease Agreement,
Tenant agrees to provide to Landlord, before the initiation of construction of
the Premises and at any other time when reasonably requested by Landlord, an
audited balance sheet and income statement for the fiscal year most recently
concluded. Such balance sheet and income statement shall be for the legal
entity which is entering into the Lease Agreement with Landlord and/or the
entity guaranteeing the performance of Tenant's obligations under the Lease.
Tenant fully understands and agrees that a request for such information by
Landlord's lender or a prospective buyer for the Building will be deemed
reasonable.
O. In all provisions of this Lease, when Landlord's approval is
required, such approval shall not be unreasonably withheld or delayed.
28. ADDITIONAL PROVISIONS. See Additional Provisions, Paragraphs 29
through 31, attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the printed portion of this lease, said
Additional Provisions shall prevail.
EXECUTED BY LANDLORD, this 23rd day of October, 1996.
Meadows I/II, LLC
By:/s/ John R. Decker
John R. Decker
Attest/Witness: Its: Managing Member
/s/ Margaret Warner
Title: Project Administrator
EXECUTED BY TENANT, this 23rd day of October, 1996.
Attest/Witness: CONTOUR MEDICAL, INC.
/s/ Lou Ann Anstis By:/s/ Donald F. Fox
Title:Executive Assistant Its:President
<PAGE>
ADDITIONAL PROVISIONS
29. The Base Monthly Rental provided for in Paragraph 2a of this Lease shall
be increased on every anniversary of the Commencement Date by two percent (2%)
of the immediately preceding month's rent. Therefore, the Base Monthly Rental
schedule for the Term of this Lease shall be:
Months 1 - 12: $23,188.00
Months 13 - 24: $23,652.00
Months 25 - 36: $24,125.00
Months 37 - 48: $24,607.00
Months 49 - 60: $25,099.00
30. With respect to the immediately adjacent five (5) bays of the Building,
or 38,080 square feet (hereinafter, the "Expansion Space"), Landlord will hold
the Expansion Space off of the market until January 1, 1997. If Tenant has
not expanded into and leased the Expansion Space by January 1, 1997, Landlord
will be released from this provision and will be free to lease the Expansion
Space to others without notice. Tenant agrees to make its best efforts to
inform Landlord as soon as possible of Tenant's intentions with regard to the
Expansion Space. When Tenant informs Landlord of its intent not to lease the
Expansion Space, this Paragraph will be rendered null and void.
31. Tenant is granted two (2) consecutive three (3) year renewal options at
a rental rate that is equal to ninety-five percent (95%) of the then current
market rental rate for comparable space in the North Georgia 400 industrial
submarket. The exercise of each renewal will require written notice to
Landlord from Tenant six (6) months prior to the expiration of the then
current Term.
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Total Area = 8.66 Acres
All that tract or parcel of land lying in and being a part of Land Lot 887 of
the 2nd District, 1st Section, Forsyth County, Georgia and being more
particularly described as follows:
To find the TRUE POINT OF BEGINNING, commence at a point at the intersection
of the Western right-of-way of Shiloh Road East (60 foot right-of-way), and
the Southwestern right-of-way of Shiloh Road, (a 60 foot right-of-way),
Proceed Northwesterly along said Shiloh Road a distance of 2,179.52 feet to an
iron pin set; Said point being the TRUE POINT OF BEGINNING.
From the TRUE POINT OF BEGINNING as thus established, and continuing along
said right-of-way of Shiloh Road, Proceed North 02o19o03" East a distance of
101.43 feet to a 1/2" rebar found; Thence proceed North 02o18'58" East a
distance of 710.45 feet to a point; Thence proceed along a curve to the left
said curve having a radius of 740.80 feet and an arc length of 7.50 feet
(said arc being subtended by a chord bearing of North 02o00'58" East and a
chord distance of 7.50 feet to an iron pin set); Thence leaving said Shiloh
Road proceed South 87o41'13" East a distance of 455.00 feet to a 1/2 rebar
found; Thence proceed South 02o18'55" West a distance of 720.86 feet to a
iron pin set; Thence proceed South 04o14'18" West a distance of 130.18 feet
to an iron pin set; Thence proceed North 81o17'20" West a distance of 283.36
feet to a point; Thence proceed North 87o41'05" West a distance of 169.01
feet to a point; Said point being the TRUE POINT OF BEGINNING.
Said tract of land containing 8.66 Acres, is shown on, and described according
to a plat by Blue Ridge Engineering, titled Boundary Survey for Meadows 5,
Dated October 7, 1996 and bearing the seal of H. Tate Jones, Georgia
Registered Land Surveyor 2339, said plat is hereby made part of this legal
description by this reference.
<PAGE>
EXHIBIT "B"
IMPROVEMENT AGREEMENT
Added to and made a part of this Lease Agreement is Landlord's obligation to
install the improvements described in this Exhibit "B" and Exhibit "B-1" in a
diligent and workman like manner at no cost to Tenant.
1. Exhibit D of this Lease is a final floor plan of Tenant's Premises.
Landlord will improve 11,500 square feet of office area in accordance with the
configuration therein and in accordance with Landlord's standard finishes per
Exhibit "B-1" at no cost to Tenant.
2. Landlord is also obligated to improve the warehouse area of the Premises
with heating, lighting, and ventilation customary in the Atlanta Industrial
Market.
3. Any square footage of office area in excess of the 11,500 square feet
referenced above and any finishes above the level of finishes provided in
Exhibit "B-1" will be designed and installed by Landlord at Tenant's sole cost
and expense. Fifty percent (50%) of such cost shall be due and payable before
the commencement of interior construction, and fifty percent (50%) shall be
due before Tenant occupies the Premises.
As a point of clarification, as supplemental information to Exhibit
"B-1" Landlord's standard finishes and specifications specifically excludes
the following:
a) Wood trims and moldings
b) Wall covering
c) Cabinetry, shelving and mill work
d) Glass partitions
e) Insulated partitions
f) Sound batting and sound proofing
g) Marble, ceramic tile and wood flooring
h) Structural reinforcement for mezzanine office
i) Sprinkler system enhancements
j) Concrete loading ramps
<PAGE>
EXHIBIT "B-1"
STANDARD SPECIFICATIONS
PARTITIONS
Demising Partitions: One-hour rated office/warehouse partition: 6" metal
studs to structure with 1/2" type "X" fire code
drywall each side and 3-1/2' SAB in cavity (test
number: UL Des U.448).
Note: Furnish and install 6", 25 gauge metal studs at 16"
o.c. to limiting height of 20'-0".
Furnish and install 6", 20 gauge metal studs at 24"
o.c. to limiting height of 25'3".
Furnish and install 6", 20 gauge metal studs at 16"
o.c. to limiting height of 32'11".
Interior Partitions: 3-5/8", 25 gauge metal studs at 24" O.C., with 1/2"GWB
each side - slab to ceiling grid.
Warehouse Partitions: If office is over 25% of total lease, office warehouse
is to be one-hour rated.
Non-rated office/warehouse partition: 3-5/8" metal
studs to structure with 1/2" GWB and 3-1/2" SAB to
1'0" above finished ceiling at office side and 1/2"
GWB to structure at warehouse side.
DOORS
Tenant Entry Door: 3'-0"W x 7'-0"H glass storefront door
Tenant Interior Door: 3'-0"W x 7'-0"H flush solid core stain grade birch
veneer in hollow metal frame.
Bifold Door: 6'-8"H stain grade flush birch veneer.
Hardware: PDQ ST-Plantation Design:
126 passage set
176 privacy set
182 lockset
Closers: LCN painted silver
Door Stops: Floor stops: Quality #331ES
CEILINGS
Grid: 2' x 4' x 15/16" white Donn grid
Acoustical Tile: Armstrong 2' x 4' x 5/8" Cortega minaboard flat
fissured
Ceiling Height: 9'-0"
LIGHTING/ELECTRICAL
Light Fixtures: Lithonia 2 GT - 440 2' x 4' 4-lamp with acrylic lens
Emergency Egress
Lighting: Lithonia #6 ELM or combination unit: Lithonia #H2MSW1R
Exit Signs: Lithonia #MSW3 REL.
Audio/Visual Strobes:
HVAC
Diffusers: 2' x 2' perf. face
Return Air: 2' x 2' perf. face
Exhaust Fans:
Thermostats:
SPRINKLERS
Type: Exposed chrome
FINISHES
Carpet: 26 oz level loop or 30 oz cut pile; 22 oz. textured level
loop
Base: Roppe; 4"h rubber cove
Vinyl Composition Tile: Tarkett; Expressions
Door Trim Paint: Alkyd base semi-gloss Duron or equal
<PAGE>
EXHIBIT "C"
ESTOPPEL CERTIFIATE
Landlord: ________________________________
Tenant: ________________________________
Premises: ________________________________
Area: _______________________________ Sq. Ft. Lease Date: _________
The undersigned Tenant under the above-referenced lease (the "Lease")
hereby ratifies the Lease and certifies to ________________ ("Landlord") as
owner of the real property of which the premises demised under the Lease (the
"Premises") is a party, as follows:
1. That the term of the Lease commenced on ________________, 19_____
and the Tenant is in full and complete possession of the Premises demised
under the Lease and has commenced full occupancy and use of the Premises, such
possession having been delivered by Landlord and having been accepted by
Tenant.
2. That the Lease calls for base monthly rent installments of
$_______________ which commenced to accrue on the __________ day of
___________________, 19____.
3. That additional rent based upon the annual operating charges for
the Building, as defined in the Lease, is payable by Tenant. Tenant is
currently paying $_____________ monthly as an estimated amount for this
additional rent. Tenant asserts no right to audit or contest annual operating
charges paid by Tenant for _________ and all prior years.
4. That no advance rental or other payment has been made in
connection with the Lease, except rental for the current month. There is no
"free rent" or other concession under the remaining term of the Lease, and the
rent has been paid to and including ___________, 19_____.
5. That a security deposit in the amount of $__________________ is
being held by Landlord, which amount is not subject to any set-off or
reduction or to any increase for interest or other credit due to Tenant.
6. That all obligations and conditions under said Lease to be
performed to date by Landlord or Tenant have been satisfied, free of defenses
and set-offs including all construction work in the Premises.
7. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time
or giving of notice or both, would constitute an event of default; and that
said Lease has: (Initial one)
( ) not been amended, modified, supplemented, extended, renewed
or assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
8. That the Lease provides for a primary term of ________ months; the
term of the Lease expires on the _______ day of _____________, 19_____; and
that (Initial one)
( ) neither the Lease nor any of the documents listed in
Paragraph 7 (if any) contain an option for any additional term or terms.
( ) the Lease and/or the documents listed under Paragraph 7,
above, contain an option for _____________ additional term(s) of ____________
year(s) and ___________ month(s) (each) at a rent to be determined as follows:
____________________________________________
____________________________________________
9. That, to the best of Tenant's knowledge, there is no apparent or
likely contamination of the real property or the Premises by Hazardous
material, and Tenant does not use, nor has Tenant disposed of, hazardous
materials in violation of environmental laws on the real property or the
Premises.
10. That there are no actions, voluntary or involuntary, pending
against the Tenant under the bankruptcy laws of the United States or any state
thereof.
11. That this certification is made knowing that Landlord is relying
upon the representation herein made.
Tenant:
_____________________________________
Dated: ______________ By: _____________________________
Typed Name: __________________
Title:
__________________
<PAGE>
EXHIBIT "D"
FLOOR PLAN
[DIAGRAM]
<PAGE>
EXHIBIT "E"
KEY PLAN / SITE PLAN
[DIAGRAM]
<PAGE>
EXHIBIT "F"
LETTER OF CREDIT
WACHOVIA
- ------------------------------------------------------------------------------
SEPTEMBER 18, 1996 PAGE: 1
BENEFICIARY: APPLICANT:
CK WINDWARD #1, LLC, A NORTH EXECUTIVE OFFICE CENTER INC
CAROLINA LIMITED LIABILITY COMPANY A GEORGIA CORPORATION
3025 WINDWARD PLAZA SEVEN PIEDMONT CENTER, STE 500
ALPHARETTA, GA 30202 ATLANTA, GA 30305
AMOUNT: EXACTLY USED 311,367.00
EXACTLY THREE HUNDRED ELEVEN THOUSAND
THREE HUNDRED SIXTY SEVEN AND 00/100's
U.S. DOLLARS
PLACE OF EXPIRY: DECEMBER 31, 2000
PLACE OF EXPIRY: AT OUR COUNTERS
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. LC870-074784 IN
YOUR FAVOR FOR THE ACCOUNT OF EXECUTIVE OFFICE CENTER INC. A GEORGIA
CORPORATION UP TO THE AGGREGATE AMOUNT OF EXACTLY USD 311,367.00
THIS LETTER OF CREDIT IS AVAILABLE FOR PAYMENT BY PRESENTATION OF YOUR DRAFTS
AT SIGHT DRAWN ON US BEARING THE CLAUSE: "DRAWN UNDER WACHOVIA BANK OF
GEORGIA, N.A., LETTER OF CREDIT NO: LC870-074784", ACCOMPANIED BY THE
FOLLOWING:
1 - BENEFICIARY'S SIGNED STATEMENT READING: "APPLICANT HAS DEFAULTED UNDER THE
TERMS OF THE OFFICE LEASE AGREEMENT BETWEEN APPLICANT AND BENEFICIARY, WITH
ALL APPLICABLE CURE PERIODS HAVING EXPIRED, INCLUDING TWO (2) BUSINESS DAYS
NOTICE OF INTENT OF BENEFICIARY TO DRAW ON THIS LETTER OF CREDIT".
2 - COPY OF NOTICE OF DEFAULT.
3 - THE ORIGINAL LETTER OF CREDIT.
SPECIAL CONDITIONS:
UNLESS THE NOTIVCE OF DEFAULT HAS BEEN PRESENTED AS SET FORTH ABOVE, THE
AMOUNT OF THIS STANDBY LETTER OF CREDIT SHALL REDUCE IN ACCORDANCE WITH THE
FOLLOWING SCHEDULE:
DATE NEW AMOUNT
JANUARY 2, 1998 USD$233,525.25
JANUARY 2, 1999 USD$155,683.50
JANUARY 2, 2000 USD$ 77,841.75
ALL DRAFTS MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT.
WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION OF DOCUMENTS TO US
ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT.
THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER:LC870-074784
THIS CREDIT IS TRANSFERABLE AND TRANSFER MAY BE EFFECTED BY WACHOVIA BANK OF
GEORGIA, N.A. PROVIDED THAT YOU DELIVER TO US YOUR WRITTEN REQUEST FOR
TRANSFER IN FORM AND SUBSTANCE SATISFACTORY TO US WITH A BANKING INSTITUTION'S
AUTHENTICATION OF YOUR SIGNATURE. THE ORIGINAL OF THIS LETTER OF CREDIT WITH
ANY AMENDMENTS MUST BE RETURNED TO US WITH THE TRANSFER REQUEST AND OUR
CUSTOMARY TRANSFER FEE OF 1/2 OF ONE PERCENT (MINIMUM USD 275.00) OF THE
AMOUNT
TO BE TRANSFERRED.
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS DOCUMENTARY CREDIT IS
SDUBJECT TO UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993
REVISION, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500.
WACHOVIA BANK OF GEORGIA, N.A.
INTERNATIONAL DIVISION
By: /s/ Amy Walter
AUTHORIZED SIGNATURE
PLEASE DIRECT ANY CORRESPONDENCE INCLUDING DRAWING OR INQUIRY QUOTING OUR
REFERENCE NUMBER TO WACHOVIA BANK, 301 N. MAIN STREET, WINSTON-SALEM, N.C.
27150, ATTN: STANDBY LETTER OF CREDIT UNIT.
THIS DOCUMENT CONSISTS OF 2 PAGE(S)<PAGE>
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this First Amendment") is made and entered into
effective the 30th day of June, 1997, by and between MEADOWS I/II, LLC
(hereinafter referred to as "Landlord") and CONTOUR MEDICAL, INC., a Nevada
corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated October 23, 1996 (hereinafter referred to as the "Original Lease") for
certain premises consisting of 54,560 square feet therein defined as the
"Premises" and located in the Meadows V Building, Alpharetta, Georgia 30005,
such Premises being more particularly shown and outlined on Exhibit "A",
attached hereto and incorporated herein by reference (hereinafter referred to
as the "Original Premises");
WHEREAS, Landlord and Tenant desire to modify and amend the Original
Lease, subject to and upon the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing, the sum of
Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby modify and amend the Original Lease as follows:
1. Premises Redefined: Exhibit "A" of the Original Lease is hereby
modified and amended by deleting such Exhibit in its entirety and substituting
in lieu thereof the Exhibit "A" attached to this First Amendment and
incorporated herein by reference. In addition, the definition of the
"Premises" in the Original Lease is hereby modified and amended by increasing
such definition to include not only the Original Premises, but also the
additional 15,040 square feet of space located contiguous to the Original
Premises and more particularly shown as outlined on Exhibit "A" (hereinafter
referred to as the "Additional Premises"). The Original Premises and the
Additional Premises are hereinafter collectively referred to as the "Premises"
and all references in the Original Lease, as modified herein, to the
"Premises" shall mean and refer to the Original Premises and the Additional
Premises.
2. Completion of Construction
A. The commencement date of the Lease for the Original Premises
shall be the earlier of July 1, 1997 or the date upon which Landlord causes
the construction of the Original Premises to be substantially complete (as
hereinafter defined) in accordance with the plans and specifications
referenced on Exhibit "B", attached hereto and incorporated herein by
reference, which Exhibit "B" shall supersede in all respects the Exhibit "B"
attached to the Original Lease. As used herein, the construction of the
Original Premises shall be deemed to be "substantially complete" when the
construction of the Original Premises is completed to the extent (i) that a
certificate of occupancy has been issued therefor, (ii) Landlord has tendered
possession thereof to Tenant and (iii) otherwise in accordance with plans and
specifications referenced on Exhibit "B", as certified by Landlord's
architect, with only minor punch list items to be completed, the lack of
completion of which will not impair Tenant's occupancy of or conduct of
Tenant's usual business from the Premises. Following such substantial
completion of the Original Premises, Landlord shall have a reasonable period,
not to exceed thirty (30) days, to complete and remedy any items shown on the
punch list that Landlord and Tenant shall mutually agree upon within the first
ten (10) days after Tenant takes occupancy of the Original Premises.
B. In the event that Landlord fails to deliver the Original
Premises to Tenant substantially complete on or before July 1, 1997, then
Tenant shall be entitled to a credit against all rent payable under the Lease
for the period of such delay in an amount equal to one hundred fifty percent
(150%) of the daily rent payable under the Lease, computed on a daily basis
for each day of such delay, commencing on July 1, 1997 and continuing until
Landlord has delivered the Original Premises to Tenant substantially complete.
Such credit shall be taken and withheld by Tenant against the first
installments of rent due hereunder until fully recovered by Tenant, at which
time full rental shall recommence. (By way of example, in the event that
Landlord fails to deliver the Original Premises substantially complete until
July 3, 1997, then Tenant's rent shall be abated until July 6, 1997.)
Notwithstanding the foregoing, Tenant shall have no right to the credit as
specified in this subparagraph B as the result of (i) Tenant's request for
materials, finishes or other installations or change orders other than
Landlord's standard and other than those reflected on Exhibit "B", which
request causes an actual delay in Landlord's substantial completion as a
result of unavailability, additional time to complete or other factors causing
an actual delay of which Landlord gives Tenant notice immediately upon such
request by Tenant, (ii) any delay in performance or completion as a result of
any party employed by Tenant including any delay resulting from failure of the
plans provided by Susan Wells to comply with governmental requirements ((i) -
(ii) are hereinafter collectively referred to as "Tenant Delays") or (iii)
delay in substantial completion caused by civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls (but only to the extent such
regulations are not now in existence, or, if now in existence, are arbitrarily
imposed or delayed by public officials over which Landlord has no control),
fire or other casualty or Act of God after the date of the First Amendment
(provided that weather delays shall only constitute Acts of God to the extent
such weather occurs after the date of this First Amendment and actually
prevents the delivery or installation of materials, supplies or workers to the
Original Premises (hereinafter collectively referred to as "Force Majeure
Delays").
C. The commencement date of the Lease for the Additional
Premises shall be the earlier of September 1, 1997 or the day upon which
Landlord causes the construction of the Additional Premises to be
substantially complete (as defined above) in accordance with the plans and
specifications referenced on Exhibit "B". Following substantial completion of
the Additional Premises, Landlord shall have a reasonable period, not to
exceed thirty (30) days, to complete and remedy any items shown on the punch
list that Landlord and Tenant shall mutually agree upon within the first ten
(10) days after Tenant (or Tenant's permitted sublessee) takes occupancy of
the Additional Premises.
D. In the event that Landlord fails to deliver the Additional
Premises to Tenant substantially complete on or before September 15, 1997,
then Tenant shall be entitled to a credit against the base rent payable under
the Lease for the Additional Premises for the period of such delay in an
amount equal to one hundred fifty percent (150%) of such daily rent, computed
on a daily basis for each day of such delay, commencing September 15, 1997 and
continuing until Landlord has delivered the Additional Premises to Tenant
substantially complete. Such credit shall be taken and withheld by Tenant
against the next incurring installments of rent due under the Lease until
fully recouped by Tenant, at which time full rental shall recommence.
Notwithstanding the foregoing, Tenant shall have no right to the credit as
specified in the immediately preceding sentences as a result of Tenant Delays
or Force Majeure Delays.
3. Rental. Paragraph 2A of the Original Lease is hereby modified and
amended by deleting such paragraph in its entirety and substituting in lieu
thereof the following:
A. Tenant agrees to pay Landlord base rent for the Premises, in
advance without demand, deduction or set off at a rate of (i) Twenty Three
Thousand, One Hundred Eighty-Eight and No/100 Dollars ($23,188.00) per month
with respect to the Original Premises, commencing on the commencement date for
the Original Premises and (ii) Six Thousand Three Hundred Ninety-Two and
No/100 Dollars ($6,392.00) per month with respect to the Additional Premises,
commencing on the commencement date for the Additional Premises. Following the
commencement dates for both the Original Premises and the Additional Premises,
the total base rent payable hereunder shall be equal to Twenty Nine Thousand
Five Hundred Eighty and No/100 Dollars ($29,580.00) per month. Such base rent
shall be due and payable on or before the first day of each calendar month
succeeding the commencement date for the Original Premises and the Additional
Premises during the term, except that rental payments for any fractional
calendar months at the
commencement (as to either the Original Premises or the Additional Premises)
or termination of the lease shall be prorated and such base rent shall be
increased as set forth in Paragraph 29 hereof. With respect to the rent posted
by Tenant at the execution of the Lease, Landlord will credit against Tenant's
second month of rental payments interest on the posted rent at the annual rate
of four percent (4%) per annum.
4. Taxes. The first sentence of Paragraph 4A of the Lease is hereby
modified and amended by deleting such sentence in its entirety and
substituting in lieu thereof the following:
Landlord hereby agrees to pay before they become delinquent
all taxes, assessments, and governmental charges of any kind and nature
whatsoever (hereinafter collectively referred to as the "Taxes") lawfully
levied or assessed against the building and the grounds, parking areas,
driveways and alleys around the building. In the event that during any one
real estate tax year, Tenant's proportionate share of Taxes paid by Landlord
exceeds Twelve Thousand Three and 20/100 Dollars ($12,003.20) with respect to
the Original Premises or Three Thousand Three Hundred Eight and 80/100 Dollars
($3,308.80) with respect to the Additional Premises, Tenant shall pay to
Landlord as additional rental, upon demand, the amount of such excess.
5. Use. Paragraph 3A of the Original Lease is hereby modified and
amended by adding the following sentence immediately following the final
sentence thereof:
Notwithstanding anything to the contrary set forth above,
Landlord hereby represents and warrants that the Premises, upon completion of
the construction of the improvements thereto by Landlord, will comply in all
respects with all laws necessary for Tenant's intended use; provided, however,
the foregoing representation and warranty only extends to construction of the
sprinkler system in the building to Class III standards.
6. Tenant's Repairs. Paragraph 6A of the Original Lease is hereby
modified and amended by adding the following immediately following the final
sentence thereof:
Landlord covenants and agrees that on the commencement dates
for the Original Premises and the Additional Premises, Landlord shall assign
to Tenant all rights under all bonds. warranties and guaranties under the
existing construction contract between Landlord and the general contractor, as
well as any subcontractors and, if necessary, obtain the consent of the
contractor or subcontractor, as applicable, thereto, with respect to any items
for which Tenant has maintenance obligations under the Lease, and, upon
request thereafter, shall cooperate with Tenant in the event that Tenant
desires to make any claim under any such bonds, guaranties or warranties.
7. Assignment and Subletting. Paragraph 11A of the Original Lease is
hereby modified and amended by deleting the second sentence thereof in its
entirety and substituting in lieu thereof the following:
Tenant shall, by written notice, advise Landlord of Tenant's
desire from and after a stated date (which date shall not be less than thirty
(30) days nor more than ninety (90) days after the date of Tenant's notice) to
sublet the Premises or any portion thereof for any part of the term hereof and
in such event Landlord shall have the right, in Landlord's discretion which
shall be exercised within ten (10) days after receipt of such request to (i)
consent to such sublease, whereupon Tenant shall be entitled to enter into
such sublease upon the terms and conditions that were submitted to Landlord,
or (ii) refuse to consent to such sublease, in which event Landlord shall have
the right to terminate this Lease as to the portion of the Premises described
in Tenant's notice and such notice shall, if given, terminate this Lease with
respect to such portion of the Premises therein described as of the date
stated in Tenant's notice; provided, however, Tenant shall have the right to
rescind such request for sublease by notice given to Landlord within five (5)
days after receipt of Landlord's termination notice, whereupon Landlord's
termination notice shall automatically be deemed null and void.
Paragraph 11A of the Original Lease is hereby further modified and amended by
deleting the following sentence therefrom "If landlord, upon receiving said
notice by tenant, with respect to any of the premises, shall not exercise its
right to terminate."
Section 11 of the Lease is further modified and amended by adding the
following subparagraph D thereto:
D. Landlord hereby consents to Tenant's sublease of the
Additional Premises to Sunscript Pharmacy Corporation; provided however, such
consent does not release or relieve Tenant of any obligation or duty hereunder
with respect to the Additional Premises.
8. Fire and Casualty Damage. The first sentence of paragraph 12A of
the Original Lease is hereby modified and amended by deleting therefrom the
reference to eighty percent (80%) and substituting in lieu thereof a reference
to one hundred percent (100%).
9. Quiet Enjoyment. Paragraph 16 of the Original Lease is hereby
modified and amended by adding the following sentence immediately following
the final sentence thereof:
Landlord agrees to hereafter use reasonable efforts to
obtain a subordination, non-disturbance and attornment agreement from its
existing lender with respect to Tenant's rights under this Lease and continued
occupancy of the Premises in the event of any foreclosure or deed in lieu
thereof and shall endeavor to obtain such agreement within thirty (30) days
after the date of execution of this First Amendment.
10. Notices. Paragraph 23C of the Lease is hereby modified and amended
by adding the following sentence immediately following the final sentence
thereof:
Notwithstanding the foregoing, following the commencement
date, Tenant's address for notices shall be as follows:
Contour Medical, Inc.
6025 Shiloh Road
Alpharetta, Georgia 30005
Attention: Mr. Donald F. Fox
11. Hazardous Materials. Section 24 of the Lease is hereby modified
and amended by adding the following subparagraph E thereto:
E. Notwithstanding anything to the contrary contained in
this Section 24 or elsewhere in this Lease, Landlord, to the best of
Landlord's knowledge hereby represents and warrants that there are no
Hazardous Materials or Hazardous Material Activities currently existing on the
Premises or on property adjacent or in proximity thereto, nor have such
Hazardous Materials or Hazardous Material Activities previously existed with
respect to the Premises, or property adjacent or in proximity thereto, and
that Tenant shall have no obligation under subparagraph D. above, to remove
any Hazardous Materials that were located. stored or disposed of on, under or
about the Premises at any time prior to the commencement date of this Lease
12. Proportionate Share. Paragraph 27B of the Lease is hereby modified
and amended by adding the following sentence immediately after the final
sentence thereof:
Landlord and Tenant hereby agree that following the
commencement date for both the Original Premises and the Additional Premises,
Tenant's proportionate share shall be equal to fifty percent (50%), calculated
based upon the number of square feet in the Premises (69,600) in proportion to
the number of square feet in the building (139,200), which square footage
Landlord hereby represents and warrants are accurate measurements of the
Premises and the building.
13. Increase in Base Rental. Section 29 of the Original Lease is
hereby modified and amended by deleting such section in its entirety and
substituting in lieu thereof the following:
29. The base monthly rental provided for in Paragraph 2A of
this Lease shall be increased on every anniversary of the first (1st) full
month following the commencement date with respect to the Original Premises by
two percent (2%) per annum of the month's base rent applicable in the month
immediately prior to such increase, such that the base monthly rental
hereunder shall be as follows:
months 1- 12: $29,580.00
months 13 - 24: $30,171.60
months 25 - 36: $30,775.03
months 37 - 48: $31,390.53
months 49 - termination: $32.018.34
14. Renewal Options. Section 31 of the Original Lease is hereby
modified and amended by deleting such section in its entirety and substituting
the following in lieu thereof:
A. Landlord hereby grants to Tenant, and Tenant hereby accepts,
two (2) successive three (3) year options (the "Options") to renew this Lease
at a rental rate (the "Rate") which shall be equal to ninety-five percent
(95%) of the then current fair market rental rate for comparable space in the
North Georgia, Interstate 400 Industrial submarket, as determined below.
B. In the event that Tenant determines that Tenant may be
interested in exercising either of the Options, Tenant shall give notice of
such interest to Landlord within the period not longer than twelve (12) months
prior to the expiration of the then current term and not later than nine (9)
months prior to the expiration of the then current term and Landlord and
Tenant shall thereafter negotiate for a period of not more than fifteen (15)
days to reach a determination of the Rate that will be in effect for the
applicable option period. In the even that Landlord and Tenant are unable to
so agree, the following provisions will apply:
i. Landlord and Tenant shall each within fifteen (15)
days thereafter appoint an individual qualified and experienced in appraisals
and designated as an M.A.I. appraiser under the standards of the American
Institute of Real Estate Appraisers, which appraisers (a) shall have no
personal or financial interest that would disqualify such appraisers from
exercising an independent and impartial judgment and (b) shall have a minimum
of five (5) years experience appraising industrial space in the submarket
described above as to the matter under appraisal, and such appraisers as so
appointed shall thereafter during a period not to exceed thirty (30) days
determine the Rate.
ii. In the event that the two (2) appraisers'
determination of the Rate varies by less than ten percent (10%), then such
determinations shall be averaged and such average shall be the Rate
iii. In the event that the two (2) appraisers determination
of the Rate varies by more than ten percent (10%), then the two (2) appraisers
shall jointly appoint a third appraiser who shall be similarly qualified and
who shall make a determination as to the Rate for the option period. Upon such
determination by such third appraiser, the three (3) appraisal amounts shall
be averaged and such amount shall be and constitute the amount of the Rate
payable with respect to such option period.
iv. Tenant and Landlord shall each bear the cost of the
appraiser appointed by them and shall each bear one-half (1/2) of the cost of
the third appraiser.
C. Upon completion of the procedures set forth in B, above,
Tenant shall have until the date six (6) months prior to the expiration of the
then current term to exercise the applicable Option upon notice to Landlord,
whereupon this Lease skill be extended upon all of the same terms and
conditions as set forth herein except that the base rent shall be the Rate as
determined above. If Tenant, after following the procedures outlined in
Section B above, fails to exercise the Option, Tenant agrees to reimburse
Landlord for Landlord's actual out-of-pocket costs for appraisers pursuant to
such Section.
D. Notwithstanding anything to the contrary set forth above, in
no event shall the Rate (as determined pursuant to Sections A and (if
applicable) B above) be less than the base rent in effect immediately prior to
the expiration of the then expiring term.
Except as expressly modified and amended herein, Landlord and Tenant
hereby ratify and affirm that the Original Lease is in full force and effect
as of the date hereof and hereby acknowledge and agree that all references in
the Original Lease to the "Lease" shall mean and refer to the Original Lease
as modified and amended hereby.
LANDLORD:
MEADOWS I/II, LLC
By: /s/ John R. Decker
John R. Decker, its Managing
Member
TENANT:
CONTOUR MEDICAL, INC., a Nevada
corporation
By: /s/ Donald F. Fox
Donald F. Fox, President
<PAGE>
EXHIBIT "A"
[DIAGRAM]
<PAGE>
EXHIBIT "B"
FAX TRANSMITTAL
S.M. Wells & Associates, Inc.
Interior Design/Space Planning
106 Interlochen Drive, N.E.
Atlanta, Georgia 30342
404/252-9882 Fax: 404/252-1366
TO: MIRIAM DENT DATE: JUNE 30, 1997
FAX: #404/525-2224 PAGES: ONE (1),
INCLUDING THIS PAGE.
FROM: SUSAN WELLS
PROJECT: CONTOUR MEDICAL, INC.
MESSAGE: MIRIAM, THE FOLLOWING IS A LIST OF PLANS & SPECIFICATIONS OF THE
CONSTRUCTION DOCUMENTS FOR CONTOUR MEDICAL, INC.:
A0.1 COVER SHEET
AO.2 GENERAL NOTES
A0.3 GENERAL NOTES
A1 DIMENSIONED PARTITION PLAN
*A1.1 DIMENSIONED PARTITION PLAN
REFLECTED CEILING PLAN
POWER AND COMMUNICATION PLAN
FINISH PLAN
A.2 REFLECTED CEILING PLAN
A.3 POWER/COMMUNICATION PLAN
A4.1 FLOOR FINISH PLAN
A4.2 WALL FINISH PLAN
ID FURNITURE PLAN (FOR REFERENCE ONLY)
*ID.1 FURNITURE PLAN
A5.1 INTERIOR ELEVATIONS
A5.2 INTERIOR ELEVATIONS
A6.1 ENLARGED PLAN, ELEVATIONS & DETAILS
A6.2 ENLARGED PLAN, ELEVATIONS & DETAILS
A6.3 SECTIONS & DETAILS
A6.4 SECTIONS & DETAILS
A7 DOOR SCHEDULE
* THESE PLANS WERE ADDED LATER IN THE PROJECT WHEN CONTOUR MEDICAL DECIDED
TO TAKE ADDITIONAL SPACE.
PLEASE LET ME KNOW IF YOU NEED ADDITIONAL INFORMATION.
EXHIBIT "B"
[DIAGRAM]
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made and entered into this
18th day of August, 1997, by and between CONTOUR MEDICAL, INC., a Nevada
corporation, as "Sublessor", and SUNSCRIPT PHARMACY CORPORATION, a New Mexico
corporation, as "Sublessee".
W I T N E S S E T H :
WHEREAS, Sublessor executed and entered into that certain Lease Agreement
dated October 23, 1996, by and between Meadows I/II, LLC as "Landlord"
("Master Lessor"), and Sublessor as "Tenant", as amended by First Amendment to
Lease dated June 30, 1997 (such Lease Agreement, as so amended, is hereinafter
collectively referred to as the "Master Lease") concerning certain premises
located in the Meadows V Building, Alpharetta, Georgia 30005, being therein
described and defined as the "Premises";
WHEREAS, a true, correct and complete copy of the Master Lease is
attached hereto as Exhibit "A" and incorporated herein by reference; and
WHEREAS, Sublessor desires to sublease to Sublessee, and Sublessee
desires to sublease from Sublessor, a portion of the Premises, such portion
being more particularly described and shown on Exhibit "B", attached hereto
and incorporated herein by reference (the "Subleased Premises").
NOW, THEREFORE, for and in consideration of the foregoing, the sum of Ten
and No/100 Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby covenant and agree as follows:
1. Sublease Subject to Master Lease. This Sublease and Sublessee's
possession of the Subleased Premises hereunder is and shall be expressly
subject and subordinate to all of the terms, covenants and conditions
contained in the Master Lease, a copy of which Sublessee expressly
acknowledges has been reviewed by Sublessee. Sublessee covenants and agrees to
observe and perform all of the terms, covenants and conditions to be performed
by the Tenant under the Master Lease with respect to the Subleased Premises
(provided that Sublessee shall not be obligated to pay any rent other than as
provided in Section 3 of this Sublease) and further covenants and agrees not
to do or suffer or permit anything to be done or suffered which would result
in a default or event of default under the Master Lease or cause the Master
Lease to be terminated. All of the terms, covenants and conditions of the
Master Lease (including without limitation, all defined terms thereunder) are
hereby incorporated herein with the same force and effect as if set forth in
full and the parties agree that all such terms, covenants and conditions shall
apply to the Subleased Premises and whenever the Master Lease imposes duties
or obligations on the Tenant thereunder, the same duties and obligations shall
be deemed to refer to Sublessee with respect to the Subleased Premises and
Sublessee hereby expressly assumes such duties and obligations.
Notwithstanding the foregoing, Sublessee shall not be entitled to exercise any
rights or options of the Tenant under the Master Lease (including without
limitation any renewal, expansion, early termination or other rights or
options), Sublessor hereby expressly reserving all such rights and options and
Sublessee hereby expressly acknowledging and agreeing that Sublessee's rights
and options are limited to those expressly set forth in this Sublease.
Sublessor and Sublessee hereby covenant and agree that in the event that
Sublessor exercises the renewal option under the Master Lease, Sublessor and
Sublessee shall enter into an amendment to this Sublease to renew it upon the
same terms and conditions as set forth in the renewal of the Master Lease
except that the Base Rental per square foot for the Subleased Premises shall
be equal to the Base Rent per square foot payable by Sublessor for the
Premises under the Master Lease. If Sublessor determines not to exercise an
extension or renewal, Sublessor will upon Sublessee's request assist Sublessee
in the negotiation with Master Lessor whereby Sublessee will enter into its
own lease with Master Lessor, provided that Sublessor shall have no obligation
to compromise its own rights under the Master Lease or to expend any funds in
connection therewith.
2. Term. The term of this Sublease shall commence on September 1, 1997
(the "Commencement Date") and shall expire at midnight on June 30, 2002 (the
"Expiration Date"). Notwithstanding the foregoing, this Sublease shall
terminate immediately upon termination of the Master Lease for any reason
whatsoever; Provided, however, that in the event that the Master Lease is
terminated solely as a result of Sublessor's wilful default thereunder,
Sublessor agrees to reimburse Sublessee for any remaining unamortized costs of
capital improvements expended by Sublessee in connection with the Subleased
Premises after the date of such wilful default, which shall be Sublessee's
sole right and remedy in the event of such wilful default by Sublessor
resulting in a termination of this Sublease.
3.Rent.
(a)Base Rent: Sublessee shall pay Base Monthly Rental in the amount
of $9,487.73. Base Monthly Rental shall be increased to the following amounts
on the following dates:
Date: Increased Base Amount:
7/1/98 - 6/30/99 $ 9,677.49
7/1/99 - 6/30/00 $ 9,871.04
7/1/00 - 6/30/01 $10,068.46
7/1/01 - 6/30/02 $10,269.83
(b)Additional Rent: Sublessee shall pay as additional rent hereunder
Sublessee's "Proportionate Share" of the following: (i) any and all charges
for taxes and insurance due under the Master Lease; (ii) any and all charges
for utilities servicing the Subleased Premises; and (iii) any and all other
charges or sums due under the Master Lease (other than rent applicable to the
remainder of the Premises and other than interest or late charges not
resulting from Sublessee's failure to comply with Sublessee's obligations
hereunder). As used herein, Sublessee's "Proportionate Share" shall mean that
portion of all costs, expenses and additional rent oayable under the Master
Lease multiplied by a fraction, the numerator of which shall be the number of
square feet contained in the Subleased Premises and the denominator of which
is the number of square feet contained in the entire Leased Premises, or
15,040/69,600. If and to the extent that Sublessor is required to make
estimated or monthly installments or escrow payments under the Master Lease,
Sublessee at Sublessor's option and election shall likewise make such
estimated or monthly installments or escrow payments according to Sublessee's
Proportionate Share.
(c)Method of Payment. All Base Monthly Rental payable by Sublessee
under this Sublease and any and all other sums payable by Sublessee to
Sublessor hereunder shall be deemed to be rental payable hereunder and are
hereinafter sometimes collectively called the "Sublease Rent". Each monthly
installment of Sublease Rent shall be paid by Sublessee on or before the first
(1st) day of each and every calendar month during the term of this Sublease,
in advance, to the office of Sublessor set forth below, or to such other place
as Sublessor may designate, and shall be payable without notice, set off or
deduction whatsoever. The amount of Sublease Rent shall be prorated for any
partial calendar month during the term of this Sublease. If any Sublease Rent
hereunder is not paid within five (5) days after the date when such payments
are due then Sublessee shall in addition to the amount due pay a late charge
equal to three percent (3%) of the unpaid amount, not as a penalty but as a
reasonable estimate by the parties of Sublessor's administrative costs
resulting from such late payment, and Sublessee shall in addition pay interest
at the rate of one and one-half percent (1~1/2%) per month on such unpaid
amount until such amount has been paid in full. In addition, Sublessee shall
be responsible for any and all sums due to Master Lessor under the Master
Lease as a result of such late payment, after deducting the amounts already
paid by Sublessee for late charges and interest, and such acceptance by
Sublessor of any and all such sums shall not limit any other rights and
remedies available to Sublessor in the event of nonpayment of the Sublease
Rent.
4.Use. Sublessee shall use the Subleased Premises only for purposes
consistent with the uses permitted under the Master Lease and shall comply in
all respects with the Master Lease. In furtherance and not in limitation of
the foregoing, Sublessee shall not use, suffer or permit any Hazardous
Materials or Hazard Materials Activities on, in or about the Subleased
Premises.
5. Maintenance. Sublessee shall maintain the Subleased Premises in good
order and repair and shall assume the entire responsibility for repairs to the
Subleased Premises which may become necessary during the term of this
Sublease. Sublessor has and shall have no obligation to provide any services
to the Subleased Premises or to make any repairs or improvements thereto,
provided that to the extent Master Lessor provides any services pursuant to
the Master Lease, Sublessee shall be entitled to enjoy such services with
respect to the Subleased Premises to the extent such services relate thereto.
6. Tenant Improvements: Alterations. Sublessee shall not make any
changes, alterations, additions or improvements to the Subleased Premises
without first obtaining the written consent of Sublessor (which consent shall
not be unreasonably withheld) and, to the extent required under the Master
Lease, Sublessee shall also obtain written consent from Master Lessor
thereunder.
7. Condition of Leased Premises. Sublessee represents and warrants that
Sublessee has inspected the Subleased Premises and Sublessee agrees to take
possession of the Subleased Premises in its present "as is" condition, with
all faults. Sublessee acknowledges and agrees that no representations or
warranties with respect to the condition of the Subleased Premises have been
made by Sublessor, Master Lessor or any agent or representative of either of
the foregoing with respect to the Subleased Premises or the condition thereof
or fitness for a particular purpose, including, but not limited to, with
respect to any Hazardous Materials or other environmental conditions.
8. No Assianment or Sublettinq. Sublessee shall not assign this Sublease
or sublet the Subleased Premises or any part thereof, nor permit the use or
occupancy of the Subleased Premises by any third party, without first
obtaining the written consent of both Sublessor and Master Lessor, either of
whom may withhold such consent in their respective sole and absolute
discretion.
9. Insurance. During the term of this Sublease, Sublessee, at its sole
cost and expense, shall provide and maintain such insurance as may be
required to conform with the provisions of the Master Lease with respect to
the Subleased Premises and otherwise in conformity with reasonable and
customary business practices. Sublessee shall cause Sublessor and Master
Lessor to be named as additional insureds in such policies, which shall
contain provisions that they cannot be cancelled or amended except upon not
less than thirty (30) days prior written notice to all additional insureds
and that the act or omission of one (1) insured will not invalidate the
policy as to the other insureds. Sublessee shall furnish Sublessor reasonably
satisfactory evidence, in the form of an insurance policy or original
certificate, that such insurance is in effect at or before the Commencement
Date and thereafter on request, at reasonable intervals and in all cases
prior to the expiration of the policy then in effect. Any insurance required
under this Sublease to be provided by Sublessee may be evidenced by
certificate of insurance for a blanket policy provided same is acceptable to
Master Lessor.
10. Default; Remedies. The occurrence of any one (1) or more of the
following events, after the passage of notice of such default by Sublessor as
provided below (provided, however, that Sublessee shall only be entitled to
one (1) notice of default per year) shall constitute a default under this
Sublease by Sublessee:
(a) If Sublessee shall fail to pay any Sublease Rent or any other
sum due hereunder when and as the same becomes due and payable and fails to
cure such default within five (5) days after notice of such default by
Sublessor;
(b) If Sublessee shall fail to perform or observe any other term,
condition or provision of this Sublease to be performed or observed by
Sublessee within ten (10) days after notice of such default by Sublessor
(provided that Sublessee shall be offered up to an additional twenty (20) days
to so cure, if such additional period for cure does not constitute or create a
default under the Master Lease);
(c) If Sublessee shall abandon or vacate all or any portion of the
Subleased Premises;
(d) If Sublessee is adjudicated a bankrupt or if a permanent
receiver is appointed for all or any portion of Sublessee's property or
Sublessee's interest in the Subleased Premises;
(e) If, whether voluntarily or involuntarily, Sublessee takes
advantage of any debtor relief proceedings under any present or future law
whereby the Sublease Rent or any part thereof is, or is proposed to be,
reduced or payment thereof deferred:
(f) If Sublessee makes an assignment for the benefit of creditors
or if the Subleased Premises or Sublessee's effects or interest therein should
be levied upon or attached under process; or
(g) If Sublessee shall default under the Master Lease or cause or
create a condition, fact or circumstance whereby Sublessor shall be in default
thereunder within ten (10) days after such notice of such default by Sublessor
(provided that Sublessee shall be offered up to an additional twenty (20) days
to so cure, if such additional period for cure does not constitute or create a
default under the Master Lease).
Upon the occurrence of any default, Sublessor shall have the option to
pursue any one or more of the following remedies:
(a) Sublessor may, with or without terminating this Sublease and
without prejudice to any other remedy Sublessor may have for possession,
arrearages in Sublease Rent or damages for breach of contract or otherwise,
immediately or at any time thereafter reenter the Subleased Premises and expel
or remove Sublessee therefrom and all persons and entities claiming by,
through or under Sublessee and all property belonging to or placed on the
Subleased Premises by, at the direction of or with the consent of Sublessee,
by force if necessary, without being liable to prosecution or any claim for
damages therefor; and Sublessee agrees to indemnify Sublessor for all loss
and damage which Sublessor may suffer by reason of such termination of this
Sublease or of Sublessee's right to possession hereunder, whether through
inability to relet the Subleased Premises or through decrease in rental or
otherwise.
Sublessor, at its option and with or without terminating this Sublease, may
also declare the entire amount of the Sublease Rent which would become due and
payable during the remainder of the term of this Sublease to be due and
payable immediately, in which event such sum shall be due and payable
immediately and Sublessee agrees to pay the same at once, together with all
Sublease Rent and other sums theretofor due, it being understood and agreed
that such payment shall be and constitute Sublessor's liquidated damages,
Sublessor and Sublessee acknowledging and agreeing that it is difficult or
impossible to determine the actual damages Sublessor would suffer from
Sublessee's breach hereof and that the agreed upon liquidated damages are not
punitive or penalties and are just, fair and reasonable (b) Sublessor, with or
without terminating this Sublease, may immediately or at any time thereafter
relet the Subleased Premises or any part thereof for such time or times, at
such rental or rentals and upon such other terms and conditions as Sublessor
in its sole discretion may deem advisable, and Sublessor may make any
alterations or repairs to the Subleased Premises which it may deem necessary
or proper to facilitate such reletting; and Sublessee shall pay all costs of
such reletting including, but not limited to, the cost of any such
alterations and repairs to the Subleased Premises, attorneys' fees and
brokerages commissions; and if this Sublease shall not have been terminated,
Sublessee shall continue to pay all Sublease Rent and all other charges due
under this Sublease up to and including the date of beginning of payment of
rent by any subsequent sublessee of part or all of the Subleased Premises,
and thereafter Sublessee shall pay monthly during the remainder of the term
of this Sublease the difference, if any, between the rent and other charges
collected from any such subsequent sublessee or sublessees and the Sublease
Rent and other charges reserved in this Sublease, but Sublessee shall not be
entitled to receive any excess of any such rents collected over the Sublease
Rent reserved herein.
(c) Sublessor, with or without terminating this Sublease, may
recover from Sublessee all damages and expenses Sublessor suffers or incurs by
reason of Sublessee's default, including, without limitation, costs of
recovering the Subleased Premises, attorneys' fees and any unamortized value
of improvements to the Subleased Premises and brokerage commissions, all of
which shall be due and payable by Sublessee to Sublessor immediately upon
demand.
(d) Sublessor shall be entitled to exercise any and all of the
rights and remedies to which Sublessor is entitled by law, in equity or
otherwise and also any and all of the rights and remedies specifically
provided to the Master Lessor in the Master Lease in the event of a default
by the Tenant thereunder, and wherever in the Master Lease rights and
remedies are given to the Master Lessor, the same shall be deemed to be
given to Sublessor hereunder.
The remedies provided for in this Sublease are in addition to any
other remedies available to Sublessor at law or in equity, by statute or
otherwise. All remedies provided in this Sublease are cumulative and may be
exercised alternatively, successively or in any other manner. The exercise by
Sublessor of any one or more of the rights and remedies provided in this
Sublease shall not prevent the subsequent exercise by Sublessor of any one or
more of the other rights or remedies herein provided. In addition to and not
in limitation of the foregoing, if Sublessee shall be in default hereunder,
Sublessor is hereby empowered and may, but shall have no obligation to do so,
and without waiving or releasing Sublessee from any obligation of Sublessee
or any other right or remedy of Sublessor under this Sublease or otherwise,
make any payment or perform any action or correct any such default on
Sublessee's part to be made, performed or observed as in this Sublease
provided. All sums so paid by Sublessor and all necessary incidental costs
shall be deemed Sublease Rent hereunder and shall be payable to Sublessor by
Sublessee on demand and Sublessor shall have (in addition to any right or
remedy of Sublessor) the same rights and remedies in the event of nonpayment
thereof by Sublessee as in the case of any other default by Sublessee in the
payment of Sublease Rent. All sums so paid by Sublessor and all such
necessary incidental expenses shall accrue simple interest at a rate of one
and one half percent (1-1/2%) per month from demand until payment, and
Sublessee shall pay to Sublessor such accrued interest together with all such
sums and expenses. This paragraph shall survive the expiration or
termination of this Sublease, by lapse of time or otherwise.
11. Notice. Any notice to be given under this Sublease shall be in
writing and shall be sent by (i) hand delivery, (ii) next business day
delivery via a national delivery service such as Federal Express, (iii) by
telecopier or facsimile, provided a confirming copy is sent by one of the
methods described in (i), (ii) or (iv), or (iv) registered or certified U.S.
mail, return receipt requested, postage prepaid, addressed to the parties at
their respective addresses as stated herein. Notices shall be effective (i)
on the date of hand delivery, (ii) one (1) business day after deposit with a
national courier service, (iii) on the date the sender receives verbal or
electronic or other confirmation of receipt of transmission via telecopier or
facsimile, regardless of when the confirming copy is actually delivered or
(iv) three (3) days after deposit in the U.S. Mail. Inability to deliver due
to change of address for which no notice was given, or refusal to accept
delivery or inability to transmit via telecopier or facsimile due to
reception or mechanical difficulties on the recipient's end shall be deemed
delivery hereunder. Each party shall have the right to designate by notice in
writing any other address to which such party's notice is to be sent.
Notice to Sublessor:Contour Medical, Inc.
6025 Shiloh Road, Suite A
Alpharetta, Georgia 30005
Attention: Mr. Donald F. Fox
Telephone: 770/888-8528
Facsimile: 770/888-8638
With a copy to: Miriam J. Dent, Esq.
Rogers ~ Hardin
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telephone: 404/420-4608
Facsimile: 404/525-2224
Notice to Sublessee:Sunscript Pharmacy Corporation
101 Sun Lane
Albuquerque, New Mexico 87109
Attention: Mr. John Driscoll
Telephone: 505/856-2442
Facsimile: 505/823-4344
With a copy to: Sun Healthcare Group, Inc. Legal Dept.
101 Sun Lane
Albuquerque, New Mexico 87109
Attention: Nikki Mann, Esq.
Telephone: 505/856-2363
Facsimile: 505/828-0944
12. Indemnification. Sublessee shall and does hereby indemnify, defend
and hold Sublessor and Master Lessor harmless from and against any and all
loss,
cost, damage or expense suffered or incurred by Sublessor and Master Lessor
arising out of or resulting from any use or occupancy of the Subleased
Premises and any acts or omissions of Sublessee and Sublessee's agents,
contractors, employees, licensees and invitees. The foregoing indemnification
obligation of Sublessee shall include attorneys' fees, investigation costs and
other costs and expenses incurred by Sublessor and Master Lessor. Sublessee's
indemnity shall encompass the indemnity obligations provided in the Master
Lease but shall not encompass any claims, actions or damages arising solely
from Sublessor's negligence or wilful misconduct. This paragraph shall survive
the expiration or earlier termination of this Sublease by lapse of time or
otherwise.
13. Attorneys' Fees. If as a result of any default by either party
hereunder, the nondefaulting party uses the services of any attorneys in order
to secure compliance with the provisions hereof or recover damages therefor,
or to terminate this Sublease or, if the defaulting party is Sublessee, to
evict Sublessee, the defaulting party shall reimburse the nondefaulting party
upon demand for any and all attorneys' fees and expenses so incurred by the
nondefaulting party. This paragraph shall survive the expiration or
termination of this Sublease, by lapse of time or otherwise.
14. Surrender. On the date upon which the term hereof shall expire and
come to an end, whether on the Expiration Date, by lapse of time, as a result
of default or otherwise, Sublessee, at the Sublessee's sole cost and expense,
shall quit and surrender the Subleased Premises to Sublessor in the same good
order and condition as existed on the Commencement Date. This paragraph shall
survive the expiration or termination of this Sublease, by lapse of time or
otherwise.
15. Brokers. Sublessor and Sublessee hereby represent and warrant that
there are no brokers or others who might be entitled to any fees or
commissions as a result of this Sublease or Sublessee's occupancy of the
Subleased Premises. Sublessor and Sublessee hereby indemnify, defend and hold
each other harmless from and against any and all loss, cost, damage or
expense suffered or incurred by the indemnified party as a result of any
claim made against the indemnified party which is based upon a breach of the
foregoing representation and warranty by the indemnifying party. This
paragraph shall survive the expiration or termination of this Sublease, by
lapse of time or otherwise.
16. Successors and Assiqns. This Sublease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Sublessor may assign this Sublease.
17. Sublessor's Richt of Access. Master Lessor and Sublessor shall have
the right to enter the Subleased Premises, including entry for repairs,
inspections or to exhibit the Subleased Premises to others, upon reasonable
notice to Sublessee at reasonable times except in the case of the emergency
(in which case no notice shall be required).
18. Governinq Law. This Sublease shall be construed in accordance with
and governed by the laws of the State of Georqia.
19. Merqer and Modification Clause. This Sublease constitutes the full
and final understanding of the parties with respect to the subject matter
described herein and supersedes any and all prior agreements, written or oral,
express or implied. This Sublease may not be amended other than by a writing
executed by the parties hereto. To the extent any provision of this Sublease
is held to be unenforceable by any court of competent jurisdiction, the
unenforceability thereof shall not affect any other provision hereof, and such
other provisions shall remain in full force and effect.
20. Time of the Essence. Time is of the essence of this Sublease and
each and all of its provisions.
21. Miscellaneous. The words "Sublessor" and "Sublessee" as used herein
shall include the plural as well as the singular. This Sublease grants
Sublessee the right to possess and enjoy the use of the Subleased Premises
subject to the terms, conditions and provisions of this Sublease and the
Master Lease and no estate is conveyed by this Sublease. Nothing in this
Sublease shall be deemed to make or imply that Sublessor and Sublessee are
partners or joint venturers. Submission of this Sublease for examination or
signature by Sublessee does not constitute a reservation of or option to
lease and is not effective as a lease or otherwise until execution and
delivery by both Sublessor and Sublessee.
Sublessee shall not, without the prior written consent of Sublessor and Master
Lessor, record this Sublease or a short form memorandum hereof. The captions
and headings contained in this Sublease are for convenience only and do not in
any way limit, amplify or modify the terms, conditions or provisions of this
Sublease.
22. Release and Subroqation. Sublessee hereby waives and releases
Sublessor and Master Lessor from any and all claims, rights, demands and
causes of action which Sublessee might have at any time against Sublessor or
Master Lessor on account of loss or damage that is or should be covered by any
insurance policy Sublessee has or is required to have pursuant to this
Sublease and the Master Lease. Sublessee and Sublessor shall obtain from their
respective insurance companies a waiver of all rights of subrogation which the
insurance companies might have against the other. This paragraph shall survive
the expiration or termination of this Sublease, by lapse of time or otherwise.
23. Waiver. Waiver of any term, condition or provision hereof shall not
be deemed to be a waiver of any subsequent breach of the same or any other
term,
condition or provision herein contained, nor shall any custom or practice
which may develop between the parties hereof be construed to waive or lessen
the right of the parties to insist upon the performance in strict accordance
with the terms, conditions and provisions hereof. The acceptance of any
Sublease Rent hereunder by Sublessor shall not be deemed to be a waiver of any
preceding breach or default by Sublessee regardless of Sublessor's knowledge
of such preceding breach or default at the time of acceptance thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
Agreement as of the date set forth above.
SUBLESSOR:
CONTOUR MEDICAL, INC., a Nevada corporation
By:/s/ Donald F. Fox
Donald F. Fox, President
[CORPORATE SEAL]
SUBLESSEE:
SUNSCRIPT PHARMACY CORPORATION
a New Mexico corporation
By: /s/ John Dill
Title: President
[CORPORATE SEAL]
BASIC LEASE INFORMATION
PRIVATE
LEASE DATE: July 14, 1997
LANDLORD: SPIEKER PROPERTIES, L.P.
a California limited partnership
ADDRESS OF LANDLORD: Spieker Properties
4380 S.W. Macadam Avenue, Suite 100
Portland, Oregon 97201
TENANT: Contour Medical, Inc.
a Nevada corporation
PREMISES: Airport Way Commerce Park
14135 N.E. Airport Way
Portland, OR 97230
Paragraph 1
Premises: Approximately 39,375 square feet in Building B of an approximate
123,750 square foot building (computed from measurements to the exterior of
outside walls of the building and to the center of interior walls), such
premises being shown and outlined in red on the plan attached hereto as
Exhibit A, and being part of the real property described in Exhibit B attached
hereto. The measurements of the Premises and the Project is approximate, but
binding on the parties for all purposes of this Lease.
Paragraph 1
Lease Term: Commencing on the "Commencement Date" as hereinafter defined and
ending 72 months thereafter except that in the event the Commencement Date is
a date other than the first day of a calendar month, said term shall extend
for said number of days in addition to the remainder of the calendar month
following the Commencement Date.
Paragraph 1
Scheduled Term Commencement Date: September 1, 1997
Paragraph 2
Monthly Base Rent: September 1, 1997 - August 31, 1998 $12,469.00
September 1, 1998 - August 31, 1999 $12,843.00
September 1, 1999 - August 31, 2000 $13,228.00
September 1, 2000 - August 31, 2001 $13,625.00
September 1, 2001 - August 31, 2002 $14,034.00
September 1, 2002 - August 31, 2003 $14,455.00
Paragraph 2B Security Deposit: $0.00
Paragraph 4A Tenant's Initial Monthly Escrow Payment
for Taxes and Other Charges: $ 1,358.00
Paragraph 7 Tenant's Initial Monthly Common Area
Maintenance Charge: $ 1,536.00
Paragraph 13B Tenant's Initial Monthly Insurance
Escrow Payment: $ 59.00
Tenant's Initial Monthly Payment Total: $15,422.00
The foregoing Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any of the Basic
Lease Information shall mean the respective information herein above set forth
and shall be construed to incorporate all of the terms provided under the
particular Lease paragraph pertaining to such information. In the event of
any conflict between any Basic Lease Information and the Lease, the former
shall control.
Please Initial
Tenant DFF
Landlord JBS
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between SPIEKER PROPERTIES,
L.P., a California Limited Partnership hereinafter referred to as "Landlord",
and CONTOUR MEDICAL, INC., a Nevada corporation hereinafter referred to as
"Tenant";
WITNESSETH
1. PREMISES AND TERM.
A. In consideration of the obligation of Tenant to pay rent as herein
provided, and in consideration of the other terms, provisions and covenants
hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes
and leases from Landlord those certain Premises as outlined in red on Exhibit
"A" attached hereto (hereinafter referred to as the "Premises") and
incorporated herein by reference, together with all rights, privileges,
easements, appurtenances, and amenities belonging to or in any way
appertaining to the Premises and together with the buildings and other
improvements situated or to be situated upon land described in Exhibit "B"
attached hereto.
B. TO HAVE AND TO HOLD the same for a term commencing on the
"Commencement Date", as hereinafter defined, and ending thereafter as
specified in the Basic Lease Information, attached hereto, (the "Lease Term"),
provided, however, that, in the event the "Commencement Date" is a date other
than the first day of a calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the
"Commencement Date".
C. The "Commencement Date" shall be the Scheduled Term Commencement Date
shown in the Basic Lease Information, attached hereto and incorporated herein
by reference. After the Commencement Date, Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery of the Premises,
specifying the Commencement Date and the rent commencement date, in recordable
form.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord Base Rent for the Premises, in
advance, without demand, deduction or set off, for the entire Lease Term
hereof at the rate specified in the Basic Lease Information, payable in
monthly installments. One such monthly installment shall be due and payable
on the date hereof and a like monthly installment shall be due and payable on
or before the first day of each calendar month succeeding the Commencement
Date recited above during the Lease Term, except that the rental payment for
any fractional calendar month at the commencement or end of the Lease period
shall be prorated on the basis of a 30-day month.
3. USE. The Premises shall be used only for the purpose of general office,
receiving, storing, shipping, assembly, light manufacturing, and selling
medical related products, materials and merchandise made and/or distributed by
Tenant and for such other lawful purposes as may be incidental thereto.
Outside storage, including without limitation, trucks and other vehicles, is
prohibited without Landlord's prior written consent which shall not be
unreasonably withheld. Tenant shall at its own cost and expense obtain any
and all licenses and permits necessary for its use of the Premises. Tenant
shall comply with all governmental laws, ordinances and regulations applicable
to the use of the Premises, and shall promptly comply with all governmental
orders and directives including but not limited to those regarding the
correction, prevention and abatement of nuisances in or upon, or connected
with, the Premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action which would constitute a
nuisance or would disturb or endanger any other tenants of the building in
which the Premises are situated or unreasonably interfere with their use of
their respective Premises. In addition to any other remedies Landlord may
have for a breach by Tenant of the terms of this Section 3, Landlord shall
have the right to have Tenant evicted from the Premises. Without Landlord's
prior written consent, which shall not be unreasonably withheld, Tenant shall
not receive, store or otherwise handle any product, material or merchandise
which is explosive or highly flammable. Tenant will not permit the Premises
to be used for any purpose or in any manner (including without limitation any
method of storage) which would render the insurance thereon void or the
insurance risk more hazardous or cause the State Board of Insurance or other
insurance authority to disallow any sprinkler credits. Landlord warrants the
Tenant's usage of the Premises, as described above, is in compliance with
Landlord's insurance guidelines. In the event Tenant's misuse of Premises
shall result in an increase in insurance premiums, Tenant shall be solely
responsible for said increase.
4. TAXES AND OTHER CHARGES.
A. Tenant agrees to pay its proportionate share of any and all real and
personal property taxes, regular and special assessments, license fees and
other charges of any kind and nature whatsoever, payable by Landlord as a
result of any public or quasi-public authority, private party, or owner's
association levy, assessment or imposition against, or arising out of
Landlord's ownership of or interest in, the real estate described in Exhibit
"B" attached hereto, together with the building and the grounds, parking
areas, driveways, roads, and alleys around the building in which the Premises
are located, or any part thereof (hereinafter collectively referred to as the
"Charges"). During each month of the Lease Term, Tenant shall make a monthly
escrow deposit with Landlord (the "Escrow Payment") equal to 1/12 of its
proportionate share of the Charges which will be due and payable for that
particular calendar year. Tenant authorizes Landlord to use the funds
deposited by Tenant with Landlord under this Paragraph 4 to pay the Charges.
Each Escrow Payment shall be due and payable, as additional rent, at the same
time and in the same manner as the payment of monthly rental as provided
herein. The amount of the initial monthly Escrow Payment will be specified in
the Basic Lease information. The initial Escrow Payment is based upon
Tenant's proportionate share of the estimated Charges for the year in
question, and the monthly Escrow Payment is subject to increase or decrease as
determined by Landlord to reflect an accurate escrow of Tenant's estimated
proportionate share of the Charges. The Escrow Payment account of Tenant
shall be reconciled annually. If the Tenant's total Escrow Payments are less
than Tenant's actual pro rata share of the Charges, Tenant shall pay to
Landlord upon demand the difference; if the Tenant's total Escrow Payments are
more than Tenant's actual pro rata share of the Charges, unless the Lease is
expired, in which case such overages shall be returned immediately to Tenant,
Landlord shall retain such excess and credit it to Tenant's Escrow Payment
account for the successive year's Charges. Tenant's proportionate share of
the Charges shall be computed by multiplying the Charges by fraction, the
numerator of which shall be the number of gross leasable square feet of floor
space in the Premises and the denominator of which shall be the total
applicable gross leasable square footage or such other equitable apportionment
as may be adopted.
B. If Tenant should fail to pay any Escrow Payments required to be paid
by Tenant hereunder, in addition to any other remedies provided herein,
Landlord may, if it so elects, pay such Escrow Payments or taxes, assessments,
license fees and other charges. Any sums so paid by Landlord shall be deemed
to be so much additional rental owing by Tenant to Landlord and due and
payable upon demand as additional rental plus interest at the rate of eighteen
percent (18%) per annum from the date of payment by Landlord until repaid by
Tenant.
C. (1) If at any time during the Lease Term, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments, fees or charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents of the present or any future building or
buildings, then all such taxes, assessments, fees or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
"Charges" for the purposes hereof.
(2) Tenant may, alone or along with other tenants of the building
containing the Premises, in its or their own name(s) dispute and contest any
Charges by appropriate proceedings diligently conducted in good faith, but
only after Tenant and all other tenants, if any, joining with Tenant in such
contest have deposited with Landlord the amount so contested and unpaid or
their proportionate shares thereof as the case may be, which shall be held by
Landlord without obligation for interest until the termination of the
proceedings, at which time the amount(s) deposited shall be applied by
Landlord toward the payment of the items held valid, and Tenant's share of any
excess shall be returned to Tenant. Tenant further agrees to pay to Landlord
upon demand Tenant's share (as among all Tenants who participated in the
contest) of all court costs, interest, penalties and other liabilities
relating to such proceedings. Tenant hereby indemnifies and agrees to hold
harmless the Landlord from and against any cost, damage or expense (including
attorney's fees) in connection with any such proceedings only to the extent
that Tenant has supported such action. The prevailing party shall receive all
courts costs, interest penalties, and other liabilities relating to such
proceedings from the other party.
(3) Any payment to be made pursuant to this Paragraph 4 with
respect to the calendar year in which this Lease commences or terminates shall
bear the same ratio to the payment which would be required to be made for the
full calendar year as that part of such calendar year covered by the Lease
Term bears to a full calendar year.
D. Tenant shall be liable for all taxes levied against personal property
and trade fixtures placed by Tenant in the Premises. If any such taxes are
levied against Landlord or Landlord's property and if Landlord elects to pay
the same or if the assessed value of Landlord's property is increased by
inclusion of personal property and trade fixtures placed by Tenant in the
Premises and Landlord elects to pay the taxes based on such increase, Tenant
shall pay to Landlord upon demand that part of such taxes for which Tenant is
primarily liable hereunder.
5. TENANT'S MAINTENANCE.
A. Tenant shall at its own cost and expense keep and maintain all parts
of the Premises (except those for which Landlord is expressly responsible
under the terms of this Lease) in good condition, promptly making all
necessary repair and replacements, including but not limited to, windows,
glass and plate glass, doors, any special office entry, interior walls and
finish work, floor and floor covering, heating and air conditioning systems,
dock boards, truck doors, dock bumpers, paving repairs, plumbing work and
fixtures, termite and pest extermination, regular removal of trash and debris,
keeping the parking areas, driveways, alleys and the whole of the Premises in
a clean and sanitary condition. Tenant shall not be obligated to repair any
damage caused by fire, tornado, or other casualty covered by the insurance to
be maintained by Landlord pursuant to subparagraph 13(A) below, except that
Tenant shall be obligated to repair all wind damage to glass except with
respect to tornado or hurricane damage.
B. Tenant shall not damage any demising wall or disturb the integrity
and support provided by any demising wall and shall, at its sole cost and
expense, promptly repair any damage or injury to any demising wall caused by
Tenant or its employees, agents, licensees or invitees.
C. Tenant and its employees, customers and licensees shall have the
right to use the parking areas, if any, as may be designated by Landlord in
writing, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe and subject to rights of ingress and egress of other
tenants. Landlord shall not be responsible for enforcing Tenant's exclusive
parking rights against any third parties, although Landlord will make all
reasonable efforts to assist Tenant's parking situation. If Tenant or any
other particular tenant of the building can be clearly identified as being
responsible for obstructions or stoppage of a common sanitary sewage line,
then Tenant, if Tenant is responsible, or such other responsible Tenant, shall
pay the entire cost thereof, upon demand, as additional rent.
D. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all heating and air conditioning systems and
equipment within the Premises.
6. LANDLORD'S REPAIRS. After reasonable notice from Tenant, Landlord shall
repair the roof, exterior walls and foundations, and the cost thereof shall be
borne by the Landlord. Tenant shall repair and pay for any damage to such
items to be maintained by Landlord caused by any act, omission or negligence
of Tenant, or Tenant's employees, agents, licensees or invitees, or caused by
Tenant's default hereunder. The term "walls" as used herein shall not include
windows, glass or plate glass, doors, special store fronts or office entries.
Tenant shall immediately give Landlord written notice of defect or need for
repairs, after which Landlord shall have a reasonable opportunity and time to
repair same or cure such defect. Landlord's liability with respect to any
defects, repairs or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance or the curing of such defect.
7. MONTHLY COMMON AREA MAINTENANCE CHARGE. Tenant agrees to pay as an
additional charge each month for its proportionate share of the cost of
operation and maintenance of the Common Area which shall be defined from time
to time by Landlord. Common Area costs which may be incurred by Landlord at
its reasonable discretion, shall include, but not limited to those costs
incurred for lighting, water, sewage, trash removal, exterior painting,
exterior window cleaning, sweeping, management, accounting, policing,
inspecting, sewer lines, plumbing, paving, landscape maintenance, plant
material replacement, repair or replacement of downspouts and gutters, and
other like charges, and Landlord's fee for supervision and administration of
the items set forth in this paragraph, currently at 10%. Landlord shall
maintain the Common Areas in reasonably good condition and repair. The
proportionate share to be paid by Tenant of the cost of operation and
maintenance of the Common Area shall be computed on the ratio that the gross
leasable square feet of the Premises bears to the total applicable gross
leasable square footage or such other equitable apportionment as may be
adopted. Landlord shall make monthly or other periodic charges based upon the
estimated annual cost of operation and maintenance of the Common Area, payable
in advance but subject to adjustment after the end of the fiscal year on the
basis of the actual cost for such year. Any such periodic charges shall be
due and payable upon delivery of notice thereof. The initial Common Area
Maintenance Charge, subject to adjustment as provided herein, shall be due and
payable, as additional rent, at the same time and in the same manner as the
time and manner of the payment of monthly rental as provided herein. The
amount of the initial monthly Common Area Maintenance Charge shall be as
specified in the Basic Lease Information. Operating expenses will not include
refinancing costs, management fees in excess of 3% of gross receipts,
administrative salaries above Building Manager, advertising, promotional
costs, and brokerage fees, repairs or improvements required to bring the
property in compliance with Federal, State, or Local Codes, Acts, Ordinances
in effect prior to Lease Commencement Date, income, franchise or inheritance
taxes, repairs of any latent defects, and/or the costs of any environmental
remediation not resulting from Tenant's operation at the Premises.
8. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord which shall not be
unreasonably withheld. Tenant may, without the consent of Landlord, but at
its own cost and expense and in a good workmanlike manner erect such shelves,
bins, machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements and without overloading or
damaging such building or improvements, and in each case complying with all
applicable governmental laws, ordinances, regulations and other requirements.
All alterations, additions, improvements and partitions erected by Tenant
shall be and remain the property of Tenant during the Term of this Lease and
Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove
all alterations, additions, improvements and partitions erected by Tenant and
restore the Premises to their original condition by the date of termination of
this Lease or upon earlier vacating of the Premises, provided, however, that
if Landlord so elects prior to termination of this Lease or upon earlier
vacating of the Premises, any or all alterations, additions, improvements and
partitions as elected by Landlord shall become the property of Landlord as of
the date of termination of this Lease or upon earlier vacating of the Premises
and shall be delivered up to the Landlord with the Premises. All shelves,
bins, machinery and trade fixtures installed by Tenant may be removed by
Tenant prior to the termination of this Lease if Tenant so elects, and shall
be removed by the date of termination of this Lease or upon earlier vacating
of the Premises if required by Landlord; upon any such removal Tenant shall
restore the Premises to their original condition. All such removals and
restoration shall be accomplished in good workmanlike manner so as not to
damage the primary structure or structural qualities of the buildings and
other improvements situated on the Premises.
9. SIGNS. Tenant shall not install signs upon the Premises without
Landlord's prior written approval, and any such signage shall be subject to
any applicable governmental laws, ordinances, regulations and other
requirements. Tenant shall remove all such signs by the termination of this
Lease. Such installations and removals shall be made in such a manner as to
avoid injury or defacement of the building and other improvements, and Tenant
shall repair any injury or defacement, including without limitation
discoloration, caused by such installation and/or removal. Tenant and
sub-Tenant shall be allowed signage above their space similar to other tenants
within the park.
10. INSPECTION.
A. Landlord and Landlord's agents and representatives shall have the
right to enter and inspect the Premises at any reasonable time during business
hours, and only when accompanied by a representative of Tenant, for the
purpose of ascertaining the condition of the Premises or in order to make such
repairs as may be required or permitted to be made by Landlord under the terms
of this Lease. During the period that is six (6) months prior to the end of
the Term hereof, Landlord and Landlord's agents and representatives shall have
the right to enter the Premises at any reasonable time during business hours
for the purpose of showing the Premises and shall have the right to erect on
the Premises a suitable sign indicating the Premises are available.
B. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the Premises and shall arrange to meet with Landlord
for a joint inspection of the Premises prior to vacating. In the event of
Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall be
conclusively deemed correct for purposes of determining Tenant's
responsibility for repairs and restoration. It shall be the responsibility of
Tenant, prior to vacating the Premises, to clean and repair the Premises and
restore them to the condition in which they were in upon delivery of the
Premises to Tenant at the Commencement Date, reasonable wear and tear
excepted. Cleaning, repair and restoration shall include, but not be limited
to, removal of all trash, where necessary, cleaning of carpet and flooring,
replacement of light bulbs and tubes, cleaning and wiping down of all
fixtures, and all similar work, which shall be done at the latest practical
date prior to vacation of the Premises. Tenant shall be required to repair
all heating and air conditioning systems if they have not been kept up per the
Maintenance Contract.
11. UTILITIES. Landlord agrees to provide at its cost water, electricity
and gas service connections into the Premises; but Tenant shall pay for all
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or from the Premises, together with any taxes,
penalties, surcharges, or the like pertaining thereto and any maintenance
charges for utilities and shall furnish all electric light bulbs and tubes.
If any such services are not separately metered to Tenant, Tenant shall pay a
reasonable proportion as determined by Landlord of all charges jointly metered
with other Premises. Landlord shall in no event be liable for any
interruption or failure of utility services on the Premises.
12. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right, voluntarily or involuntarily, to
assign, convey, transfer, mortgage or sublet the whole or any part of the
Premises, to any other company, under this Lease without the prior written
consent of Landlord. In the event Tenant applies to Landlord for consent to
assign, convey, transfer or sublet the Premises, Landlord may condition such
consent upon the right to receive one-half of the profit, if any, which Tenant
may realize on account of such assignment, conveyance, transfer or sublease of
the Premises. For purposes of this paragraph, "profit" shall mean any sum
which the assignee, sublessee or transferee is required to pay, or which is
credited to Tenant as rent in excess of the Rents required to be paid by
Tenant to Landlord under this Lease. Landlord also reserves the right to
recapture the Premises or applicable portion thereof in lieu of giving its
consent by notice given to Tenant within twenty (20) days after receipt of
Tenant's written request for assignment or subletting. Such recapture shall
terminate this Lease as to the applicable space effective on the prospective
date of assignment or subletting, which shall be the last day of a calendar
month and not earlier than sixty (60) days after receipt of Tenant's request
hereunder. In the event that Landlord shall not elect to recapture and shall
thereafter give its consent, Tenant shall pay Landlord a reasonable fee, not
to exceed $500.00, to reimburse Landlord for processing costs incurred in
connection with such consent. Tenant may sublet or assign space to any
subsidiary of Contour Medical or Sun Health without Landlord's written consent
which shall not be unreasonably withheld.
B. Notwithstanding any permitted assignment or subletting, Tenant shall
at all times remain directly, primarily and fully responsible and liable for
the payment of the rent herein specified and for compliance with all of its
other obligations under the terms, provisions and covenants of this Lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
Premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided, or provided by law, may at its
option, collect directly from such assignee or subtenant all rents becoming
due to Tenant under such assignment, transfer or sublease and apply such rent
against any sums due to Landlord from Tenant hereunder, and no such collection
shall be construed to constitute a novation or a release of Tenant from the
further performance of Tenant's obligations hereunder.
13. INSURANCE, FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain insurance covering the building of which
the Premises are a part in an amount not less than one hundred percent (100%)
(or such greater percentage as may be necessary to comply with the provisions
of any co-insurance clauses of the policy) of the "replacement cost" thereof
as such term is defined in the Replacement Cost Endorsement to be attached
thereto, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other Risks of Direct Physical Loss, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
State in which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located
within such state. Subject to the provisions of subparagraph 13, C, D, E
below, such insurance shall be for the sole benefit of Landlord and under its
sole control. In the event the insurance policy shall contain a deductible,
Tenant shall be liable for and pay its proportionate share of the deductible
withheld from insurance proceeds or payable under the terms of the insurance
policy in the event of a claim or insured loss thereunder. Tenant's
proportionate share is total square feet of Premises divided by total project
size of 205,000 square feet and will be capped at said share at $10,000.00.
B. Tenant agrees to pay its proportionate share of Landlord's cost of
carrying fire and extended coverage insurance ("Insurance") on the building.
During each month of the term of this Lease, Tenant shall make a monthly
escrow deposit with Landlord equal to one-twelfth of its proportionate share
of the Insurance on the buildings and grounds which will be due and payable
for that particular year. Tenant authorizes Landlord to use the funds
deposited by him with Landlord under this paragraph to pay the cost of such
insurance. Each Insurance Escrow payment shall be due and payable, as
additional rent, at the same time and manner of the payment of the monthly
rental as provided herein. The initial share of the estimated Insurance for
the year in question, and the monthly Insurance Escrow Payment is subject to
increase or decrease as determined by Landlord to reflect an accurate monthly
escrow of Tenant's estimated proportionate share of this Insurance. The
Insurance Escrow Payment account of Tenant shall be reconciled annually. If
the Tenant's total Insurance Escrow Payments are less than Tenant's actual pro
rata share of the Insurance, Tenant shall pay to Landlord upon demand the
difference; if the total Insurance Escrow Payments of Tenant are more than
Tenant's actual pro rata share of the Insurance, Landlord shall promptly
refund the balance of such excess to Tenant after first crediting the excess
to the next monthly payment by Tenant for its proportionate share of Taxes and
Insurance unless the Lease is expired, in which case such overages shall be
returned immediately to Tenant. Tenant's cost of insurance shall be computed
by multiplying the cost of Insurance by a fraction, the numerator of which
shall be the number of gross leasable square feet of floor space in the
Premises and the denominator of which shall be the total applicable gross
leasable square footage. The amount of the initial monthly Insurance Escrow
Payment will be as specified in the Basic Lease Information.
C. If the building, of which the Premises are a part, should be damaged
or destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
D. If the building, of which the Premises are a part, should be totally
destroyed by fire, tornado or other casualty, or if it should be so damaged
thereby that rebuilding or repairs cannot in Landlord's reasonable estimation
be completed within one hundred and twenty (120) days after the date upon
which Landlord is notified by Tenant of such damage, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective upon the date of the occurrence of such damage. Landlord
shall give notice to Tenant in writing of its determination to terminate this
Lease within thirty (30) days following the date of the occurrence of such
damage.
E. If the building, of which the Premises are a part, should be damaged
by any peril covered by the Insurance to be provided by Landlord under
subparagraph 13(A) above, but only to such extent that rebuilding or repairs
can in Landlord's estimation be completed within one hundred and twenty (120)
days after the date upon which Landlord is notified by Tenant of such damage,
this Lease shall not terminate, and Landlord shall at its sole cost and
expense thereupon proceed with reasonable diligence to rebuild and repair such
building to substantially the condition in which it existed prior to such
damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partition, fixtures, additions and other improvements
which may have been placed in, or about the Premises by Tenant. If the
Premises are untenantable in whole or in part following such damage, the rent
payable hereunder during the period in which they are untenantable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord shall fail to complete such repairs
and rebuilding within one hundred and twenty (120) days after the date upon
which Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this Lease by delivering written notice of termination to Landlord
as Tenant's exclusive remedy, whereupon all rights and obligations hereunder
shall cease and terminate.
G. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured through or
under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of Insurance
covering such property, even if such loss or damage shall have been caused by
the fault or negligence of the other party, or anyone for whom such party may
be responsible; provided, however, that this release shall be applicable and
in force and effect only with respect to loss or damage occurring during such
times as the releasor's policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect or impair said
policies or prejudice the right of the releasor to recover thereunder and then
only to the extent of the Insurance proceeds payable under such policies.
Each of the Landlord and Tenant agrees that it will request its Insurance
carriers to include in its policies such a clause or endorsement. If extra
cost shall be charged therefor, each party shall advise the other thereof and
of the amount of the extra cost, and the other party, at its election, may pay
the same, but shall not be obligated to do so.
14. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, servants, guests, invitees or visitors, or to any other
person whomsoever, for any injury to person or damage to property on or about
the Premises, resulting from and/or caused in part or whole by the negligence
or misconduct of Tenant its employees, agents, servants, guests, invitees or
visitors, or of any other person entering upon the Premises, or caused by the
building and improvements located on the Premises becoming out of repair, or
caused by leakage of gas, oil, water or steam or by electricity emanating from
the Premises, or due to any cause whatsoever, and Tenant hereby covenants and
agrees that it will at all times indemnify and hold safe and harmless the
property, the Landlord (including without limitation the trustee and
beneficiaries if Landlord is a trust), Landlord's employees, agents, servants,
guests, invitees, and visitors from any loss liability, claims, suits, costs,
expenses, including without limitation attorney's fees and damages, both real
and alleged, arising out of any such damage or injury; except injury to
persons or damage to property the sole cause of which is the negligence of
Landlord or the failure of Landlord to repair any part of the Premises which
Landlord is obligated to repair and maintain hereunder within a reasonable
time after the receipt of written notice from Tenant of needed repairs.
Tenant shall procure and maintain throughout the term of this Lease a policy
or policies of Insurance, at its sole cost and expense, insuring both Landlord
and Tenant against all claims, demands or actions arising out of or in
connection with: (i) the Premises; (ii) the condition of the Premises; (iii)
Tenant's operations in and maintenance and use of the Premises; and (iv)
Tenant's liability assumed under this Lease, the limits of such policy or
policies to be in the amount of not less than $1,000,000 per occurrence in
respect of injury to persons (including death) and in respect of property
damage or destruction, including loss of use thereof. All such policies shall
be procured by Tenant from responsible Insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt evidencing
payment of premiums therefor, shall be delivered to Landlord prior to the
commencement date of this Lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewals thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby.
15. CONDEMNATION.
A. If the whole or any substantial part of the Premises should be taken
for any public or quasi-public use under government law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are being used, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective when the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and this Lease is not
terminated as provided in the subparagraph above, this Lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all
of the circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord shall be entitled to receive the entire award. Tenant shall be
entitled to make a claim in any condemnation proceedings which does not reduce
the amount of Landlord's award, for the value of any furniture, furnishing and
fixtures installed by and at the sole expense of Tenant.
16. HOLDING OVER. Tenant will, at the termination of this Lease by lapse of
time or otherwise, yield up immediately possession to Landlord. If Landlord
agrees in writing that Tenant may hold over after the expiration or
termination of this Lease, unless the parties hereto otherwise agree in
writing on the terms of such holding over, the hold over tenancy shall be
subject to termination by Landlord at any time upon not less than thirty (30)
days advance written notice, or by Tenant at any time upon not less than
thirty (30) days advance written notice, and all of the other terms and
provisions of this Lease shall be applicable during that period, except that
Tenant shall pay Landlord from time to time upon demand, as rental for the
period of any hold over, an amount equal to one and one-half (1-1/2) the Base
Rent in effect on the termination date, or such lesser rental as Landlord and
Tenant may agree upon if the hold over will not cause a delay in another
tenant moving into the space, plus all additional rental as defined herein,
computed on a daily basis for each day of the hold over period. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this Lease except as otherwise expressly provided. The preceding
provisions of this Paragraph 16 shall not be construed as Landlord's consent
for Tenant to hold over.
17. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the Premises, good fee or leasehold title to
the Premises, free and clear of all liens and encumbrances, excepting only the
lien for current taxes not yet due, such mortgage or mortgages as are
permitted by the terms of this Lease, zoning ordinances and other building and
fire ordinances and government regulations relating to the use of such
property, and easements, restrictions and other conditions or record. In the
event this Lease is a sublease, then Tenant agrees to take the Premises
subject to the provisions of the prior leases. Landlord represents and
warrants that it has full right and authority to enter into this Lease and
that Tenant, upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and quietly have,
hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any payment with respect to taxes hereunder when due, or any
other payment or reimbursement to Landlord required herein when due, and such
failure shall continue for a period of ten (10) days after receiving such
written notice from Landlord.
B. Tenant shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
C. Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any State thereof; or Tenant shall be adjudged bankrupt
or insolvent in proceedings filed against Tenant thereunder.
D. A receiver or trustee shall be appointed for all or substantially all
of the assets of Tenant.
E. Tenant shall desert or vacate any substantial portion of the Premises
and Tenant fails to make any rental payments.
F. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than the foregoing in this Paragraph 18), and shall not cure
such failure within thirty (30) days after written notice thereof to Tenant.
19. REMEDIES. Upon the occurrence of any such events of default described
in Paragraph 18 hereof, Landlord shall have the option to pursue any one or
more of the following remedies without any notice or demand whatsoever.
A. Landlord may accelerate all rent payments due hereunder which shall
then become immediately due and payable.
B. Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel
or remove Tenant and any other person who may be occupying such Premises or
any part thereof, by force if necessary, without being liable for prosecution
or any claim of damages therefor, and Tenant agrees to pay to Landlord on
demand the amount of all loss and damage which Landlord may suffer by reason
of such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise.
C. Enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor, and relet the Premises for such terms ending
before, on or after the expiration date of the Lease Term, at such rentals and
upon such other conditions (including concessions and prior occupancy periods)
as Landlord in its reasonable discretion may determine, and receive the rent
therefor; and Tenant agrees to pay to the Landlord on demand any deficiency
that may arise by reason of such reletting. Landlord shall have no obligation
to relet the Premises or any part thereof and shall not be liable for refusal
or failure to relet or in the event of reletting for refusal or failure to
collect any rent due upon such reletting. In the event Landlord is successful
in reletting the Premises at a rental in excess of that agreed to be paid by
Tenant pursuant to the terms of this Lease, Landlord and Tenant each mutually
agree that Tenant shall not be entitled, under any circumstances, to such
excess rental, and Tenant does hereby specifically waive any claim to such
excess rental.
D. Enter upon the Premises, by force if necessary, without being liable
for prosecution or any claim for damages therefor, and do whatever Tenant is
obligated to do under the terms of this Lease; and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant further
agrees that Landlord shall not be liable for any damages resulting to the
Tenant from such action, whether caused by the negligence of Landlord or
otherwise.
E. Whether or not Landlord retakes possession or relets the Premises,
Landlord shall have the right to recover unpaid rent and all damages caused by
Tenant's default, including attorney's fees. Damage shall include, without
limitation: all rentals lost, all legal expenses and other related costs
incurred by Landlord following Tenant's default, all costs incurred by
Landlord in restoring the Premises to good order and condition, or in
remodeling, renovating or otherwise preparing the Premises for reletting, all
costs (including without limitation any brokerage commissions and the value of
Landlord's time) incurred by Landlord, plus interest thereon from the date of
expenditure until fully repaid at the rate of eighteen percent (18%) per
annum.
F. In the event Tenant fails to pay any installment of rent, additional
rent or other charges hereunder as and when such installment is due, to help
defray the additional cost to Landlord for processing such late payments
Tenant shall pay to Landlord on demand a late charge in an amount equal to
five percent (5%) of such installment; and the failure to pay such amount
within ten (10) days after written demand therefore shall be an event of
default hereunder. The provision for such late charge shall be in addition to
all of Landlord's other rights and remedies hereunder or at law and shall not
be construed as liquidated damages or as limiting Landlord's remedies in any
manner.
G. Pursuit of any of the foregoing remedies shall not preclude pursuit
of any of the other remedies herein provided or any other remedies provided by
law, such remedies being cumulative and non-exclusive, nor shall pursuit of
any remedy herein provided constitute a forfeiture or waiver of any rent due
to Landlord hereunder or of any damages accruing to Landlord by reason of the
violation of any of the terms, provisions and covenants herein contained. No
act or thing done by the Landlord or its agents during the Lease Term hereby
granted shall be deemed a termination of this Lease or an acceptance of the
surrender of the Premises, and no agreement to terminate this Lease or accept
a surrender of said Premises shall be valid unless in writing signed by
Landlord. No waiver by Landlord of any violation or breach of any of the
terms, provisions and covenants herein contained shall be deemed or construed
to constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained. Landlord's acceptance of the
payment of rental or other payments hereunder after the occurrence of an event
of default shall not be construed as a waiver of such default, unless Landlord
so notifies Tenant in writing. Forbearance by Landlord to enforce one or more
of the remedies herein provided upon an event of default shall not be deemed
or construed to constitute a waiver of such default or of Landlord's right to
enforce any such remedies with respect to such default or any subsequent
default. If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this Lease, it shall become
necessary or appropriate for Landlord to employ or consult with an attorney
concerning or to enforce or defend any of Landlord's rights or remedies
hereunder, Tenant agrees to pay any reasonable attorney's fees so incurred.
20. LANDLORD'S LIEN. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages
in rent as well as any and all other sums of money then due to Landlord
hereunder shall first have been paid and discharged. In the event of a
default under this Lease, Landlord shall have, in addition to any other
remedies provided herein or by law, all rights and remedies under the Uniform
Commercial Code, including without limitation the right to sell the property
described in this Paragraph 20 at public or private sale. Tenant hereby
agrees to execute such financing statements and other instruments necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created. Any statutory lien for rent is not hereby waived, the express
contractual lien herein granted being in addition and supplementary thereto.
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting
a lien or charge upon the Premises or the improvements situated thereon,
provided, however, that if the mortgages, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust.
Tenant shall at any time hereafter on demand execute any instruments, releases
or other documents which may be required by any mortgagee for the purpose of
subjecting and subordinating this Lease to the lien of any such mortgage. In
the event Landlord obtains a new mortgage on the property, Landlord shall
obtain and deliver to Tenant a Non-Disturbance Agreement from the holder of
such mortgage affecting the real estate in a form reasonably acceptable to
Tenant.
22. LANDLORD'S DEFAULT. In the event Landlord should become in default in
any payment due on any such mortgage described in Paragraph 21 hereof or in
the payment of taxes or any other item which might become a lien upon the
Premises and which Tenant is not obligated to pay under the terms and
provisions of this Lease. Tenant is authorized and empowered after giving
Landlord five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for or on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant or
deducted by Tenant from next rent payment due, provided however, that Tenant
shall not be authorized and empowered to make any payment under the terms of
this Paragraph 22 unless the item paid shall be superior to Tenant's interest
hereunder. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
23. MECHANIC'S LIENS. Tenant shall have no authority, express or implied,
to create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the Premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform
labor for any construction or repairs, and each such claim shall affect and
each such lien shall attach to, if at all, only the leasehold interest granted
to Tenant by this instrument. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed
on the Premises on which any lien is or can be validly and legally asserted
against its leasehold interest in the Premises or the improvements thereon and
that it will save and hold Landlord harmless from any and all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Landlord in
the Premises or under the terms of this Lease.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment by Landlord to Tenant or with reference to the sending, mailing or
delivery of any notice or the making of any payment by Tenant to Landlord
shall be deemed to be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address hereinbelow set forth or
at such other address as Landlord may specify from time to time by written
notice delivered in accordance herewith. Tenant's obligation to pay rent and
any other amounts to Landlord under the terms of this Lease shall not be
deemed satisfied until such rent and other amounts have been actually received
by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not
when deposited in the United States Mail, postage prepaid, overnight carrier,
Certified or Registered Mail, addressed to the parties hereto at the
respective addresses set out below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith:
LANDLORD: TENANT:
Spieker Properties, L.P. Contour Medical
P.O. Box 5909 6025 Shiloh Road
Portland, OR 97228-5909 Alpharetta, GA 30005
Telephone: 503-221-5700 Telephone:
Facsimile: 503-221-8627 Facsimile:
If and when included within the term "Landlord", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord; if and when included within the term "Tenant", as
used in this instrument, there are more than one person, firm or corporation,
all shall jointly arrange among themselves for their joint execution of such a
notice specifying some individual at some specific address within the
continental United States for the receipt of notices and payments to Tenant.
All parties included within the terms "Landlord" and "Tenant", respectively,
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
25. HAZARDOUS MATERIALS. Tenant hereby covenants and agrees not to cause or
permit the presence, use, generation, release, discharge, storage, disposal,
or transportation of any Hazardous Materials (as defined below) on, under, in,
above, to, or from the Premises, the Common Areas or any portion of the Park
other than in strict compliance with all applicable federal, state, and local
laws, regulations, and orders. For the purposes of this Lease the term
"Hazardous Materials" shall refer to any substances, materials, and wastes
that are or become regulated as hazardous or toxic substances under any
applicable local, state, or federal law, regulation, or order if Tenant is
conclusively proven to have caused such contamination under this provision.
Tenant shall indemnify, defend, and hold Landlord harmless from and against
(a) any loss, cost, expense, claim, or liability arising out of any
investigation, monitoring, clean-up, containment, removal, storage, or
restoration work ("Remedial Work") required by, or incurred by Landlord or any
non-governmental entity or person in a reasonable belief that such work is
required by, any applicable federal, state, or local law, governmental agency,
or political subdivision, and (b) any claims of third parties for loss,
injury, expense, or damage arising out of the presence, release, or discharge
of any Hazardous Material on, under, in, above, to, or from the Premises
during the term of this Lease, occurring as a result of Tenant's operations on
the Premises. In the event any Remedial Work is so required under any
applicable federal, state, or local law during the term of this Lease, Tenant
shall perform or cause to be performed the Remedial Work in compliance with
such law, regulation, or order. All Remedial Work shall be performed by one
or more contractors under the supervision of a consulting engineer, each
selected by Tenant and approved in advance in writing by Landlord. In the
event Tenant shall fail to commence the Remedial Work in timely fashion or
fail to prosecute diligently the Remedial Work to completion, Landlord may,
but shall not be required to, cause the Remedial Work to be performed, subject
fully to the indemnification provisions of this paragraph. The foregoing
indemnification obligation shall survive termination of this Lease.
Remediation or compliance for any contamination occurring prior to the
Commencement Date of this Lease shall be the responsibility of the Landlord.
26. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly
provided. Landlord shall have the right to assign any of its rights and
obligations under this Lease. Each party agrees to furnish to the other,
promptly upon demand, a corporate resolution, proof of due authorization by
partners, or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
C. The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease,
or any provision hereof, or in any way affect the interpretation of this
Lease.
D. Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate that this Lease is in full force and effect, the date to which
rent has been paid, the unexpired term of this Lease and such other matters
pertaining to this Lease as may be requested by Landlord. It is understood
and agreed that Tenant's obligation to furnish such estoppel certificates in a
timely fashion is a material inducement for Landlord's execution of this
Lease.
E. This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the Term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the Term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including without limitation all
heating and air conditioning systems and equipment therein, in good condition
and repair pursuant to Paragraph 10(B) hereof. Tenant shall also, prior to
vacating the Premises, pay to Landlord the amount, as estimated by Landlord,
of Tenant's obligation hereunder for real estate taxes and insurance premiums
for the year in which the Lease expires or terminates. All such amounts shall
be used and held by Landlord for payment of such obligations of Tenant
hereunder, with Tenant being liable for any additional costs therefor upon
demand by Landlord, or with any excess to be returned to Tenant after all such
obligations have been determined and satisfied, as the case may be. Any
security deposit held by Landlord shall be credited against the amount payable
by Tenant under this Paragraph 25(F).
G. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the Term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added as part of this Lease contract a clause or provision as similar in terms
to such illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
H. Because the Premises are on the open market and are presently being
shown, this Lease shall be treated as an offer with the Premises being subject
to prior Lease, and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the Premises without notice, and this Lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
I. All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this Lease.
27. LIABILITY OF LANDLORD. Tenant agrees that no trustee, officer,
employee, agent or individual partner of Landlord, or its constituent
entities, shall be personally liable for any obligation of Landlord hereunder,
and that Tenant must look solely to the interests of Landlord, or its
constituent entities in the subject real estate, for the enforcement of any
claims against Landlord arising hereunder.
28. DISCLOSURE. The managing partners of Landlord and other related parties
are licensed real estate brokers or salespersons. This disclosure is made
pursuant to OAR 863-10-046.
29. TENANT IMPROVEMENTS. After Tenant's approval of bids, Landlord will,
at its cost and expense, demise and build out the Premises according to the
construction drawings and specifications which shall be attached to and made
part of this Lease Agreement. Landlord shall contribute $125,000.00 towards
tenant improvements of the Premises. In addition to this amount, Landlord
shall also construct one (1) Kelley Model EOD-66 edge of dock leveler at one
(1) dock high door, an eye wash station and battery charge station in the
warehouse area, and seal the warehouse floor. Landlord warrants that all
heating, ventilation, air conditioning, electrical, plumbing, structural,
mechanical, and fire sprinklers are in good working order and in compliance
with all applicable codes and ordinances in effect at the time of the
commencement of this Lease.
30. RENEWAL OPTION. While this Lease is in full force and effect, provided
Tenant is not in material default of any of the terms, covenants, and
conditions thereof, Tenant shall have the option to extend the original term
of this Lease for an additional five (5) years. Such extension of the
original term shall be under the same terms and conditions as provided for in
the original Lease except for this paragraph and except that the rent during
the Extension Term shall be at then fair market value in effect for comparable
facilities in the Rivergate industrial market of Portland, Oregon. Notice of
the Tenant's intention to exercise the option must be given to Landlord, in
writing, at least one hundred eighty days prior to the expiration date of the
original term of this Lease. After notification from Tenant, Landlord will
have fifteen (15) days with which to present their proposed rental rate for
the renewal term. After receipt of this, Tenant shall have fifteen (15) days
to respond to the proposed rate. If Landlord and Tenant cannot agree within
fifteen (15) days following Landlord's receipt of Tenant's response, Tenant
shall, within fifteen (15) days thereafter, either rescind its notice of
exercise of the extension option in writing, or, if no such recission is given
by Tenant to Landlord, rent shall be determined as follows: Landlord and
Tenant shall each select, at their own cost and expense, as an Arbitrator, an
independent, certified MAI Appraiser familiar with commercial rental rates in
the Portland metropolitan area. The two Arbitrators so chosen shall each use
their good faith and judgment to agree upon a fair market rental for the
Premises during the renewal period. If they are unable to agree within thirty
(30) days after their appointment, then a third Arbitrator, having similar
qualifications, shall be chosen by the first two Arbitrators. The third
Arbitrator shall then select from the fair market rental values submitted by
the other two Arbitrators, the value of which the third Arbitrator deems to
more closely represent the fair market rental value. The fair market rental
value selected by the third Arbitrator shall be the rent for the ensuing five
year term. In no event will the rental rate for any Extension Term be less
than the rent for the previous term.
31. TERMINATION OPTION. Landlord shall allow the Tenant the right to
terminate this Lease at the end of the forty-eighth (48th) month of the Lease
Term. Landlord will require one hundred and twenty (120) days prior written
notice from the Tenant to exercise this option and a termination fee equal to
any unamortized brokerage fees, tenant improvements, and unamortized specialty
improvements to the Premises.
32. BROKER. Both parties acknowledge that Mohr Partners and West Coast
Investment Realty represent the Tenant solely and shall be compensated by the
Landlord solely, as per separate agreement.
33. PARKING. Tenant will be allowed forty (40) parking space.
34. DELAYS IN COMMENCEMENT. Except for Tenant caused delays, for each day
past the Commencement Date the construction is not substantially complete,
Landlord shall credit Tenant's rent 1/30th of the monthly rent. Substantial
completion shall be defined as (i) issuance of a Certificate of Occupancy for
the Premises, (ii) certification of substantial completion from Landlord's
Architect, and (iii) condition of the Premises must be otherwise ready for
Tenant to occupy and conduct its usual business. Tenant shall prepare
punchlists for submittal to Landlord within a short time after occupancy.
Landlord shall then have thirty (3) days to complete or repair punchlist
items. Such completions and/or repairs shall occur during non-business hours,
except to the extent that completion does not unreasonably interfere with
Tenant's conduct of its usual business within the Premises.
LANDLORD: TENANT:
Spieker Properties, L.P. Contour Medical, Inc.
a California limited partnership a Nevada corporation
By: Spieker Properties, Inc.
a Maryland corporation
Its: General Partner
By: /s/ John B. Souther, Jr. By: /s/ Donald F. Fox
John B. Souther, Jr.
Senior Vice President
Date: 7/18/97 Date: 7/17/97
SUBLEASE AGREEMENT
THIS AGREEMENT is made this 27th day of June, 1997, by and between
CONTOUR MEDICAL, INC., a Nevada corporation, (hereinafter referred to as
"Sublessor"), whose address is 6025 Shiloh Road, Alpharetta, GA 30005 and
RawCar GROUP, L.L.C., a Michigan limited liability company, (hereinafter
referred to as "Sublessee"), whose address is 4100 E. Baldwin Road, Grand
Blanc, MI 48439.
W I T N E S S E T H:
WHEREAS, Sublessor has entered into that certain Lease (hereinafter
referred to as the "Prime Lease") for a term ending June 30, 2000 with William
A. and Gerald Gehrand as Lessor (hereinafter referred to as the "Prime
Lessor") for lease of approximately 33,060 square feet for property located at
3340 Scherer Drive and approximately 32,000 square feet located at 3360
Scherer Drive in St. Petersburg, Florida; and
WHEREAS, Sublessor wishes to sublet a portion of the subject property of
the Prime Lease to Sublessee, and Sublessee wishes to sublease the same from
Sublessor upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and promises as
hereinafter set forth, the parties hereby agree as follows:
ARTICLE 1
CONSTRUCTION WITH PRIME LEASE
1.1 The terms, conditions and provisions of the Prime Lease are
incorporated herein by reference and shall, as between Sublessor and
Sublessee, constitute the terms, conditions and provisions of the Sublease,
except to the extent that such are inapplicable to, inconsistent with or
modified by the provisions of this Sublease. Nothing contained in this
Sublease shall be construed to create any privily of estate or of contract
between Sublessee and the Prime Sublessor.
ARTICLE 2
LEASED PREMISES
2.1 Sublessor hereby demises and leases unto Sublessee the real estate
and improvements comprising approximately 33,060 square feet (hereinafter
referred to as "Premises") located in the City of St. Petersburg, Florida, and
commonly known as 3340 Scherer Drive.
ARTICLE 3
TERM
3.1 The term of this Sublease shall be for a period commencing July 1,
1997 and ending June 30, 2000.
3.2 If for any reason the Prime Lease is terminated prior to the
expiration date hereof, this Sublease shall thereupon be terminated and
Sublessor shall not be liable to Sublessee by reason thereof unless said
termination shall have resulted from the breach or default of Sublessor under
the Prime Lease.
ARTICLE 4
RENT
4.1 Sublessee shall pay to Sublessor at the address set forth above, or
at such other address as Sublessor may designate in writing, as rent for the
Premises, the minimum annual sum of One Hundred Thirty-Nine Thousand Eight
Hundred Forty-Three and 80/100 ($139,843.80) Dollars, payable without prior
demand, in equal monthly installments of Eleven Thousand Six Hundred Fifty
Three and 65/100 ($11,653.65) Dollars, each in advance on or before the first
day of each calendar month during the term of this Sublease, plus sales tax
and an annual increase measured by reference to the Consumer Price Index as
provided in Section 6 of the Prime Lease.
ARTICLE 5
USE AND OCCUPANCY
5.1 Sublessee agrees that the Premises shall not be used for any purpose
in violation of any law, ordinance or regulation and that Sublessee shall
comply with all laws, ordinances and regulations applicable to the Premises.
Sublessor warrants that the Premises may continue to be used for manufacturing
and other purposes to the same extent that such were so used by Sublessor
during the period of the Prime Lease preceding the term of this Sublease,
notwithstanding any provision of the Prime Lease to the contrary.
ARTICLE 6
TAXES AND OTHER CHARGES
6.1 Sublessee shall have no obligation for any real property taxes
applicable to the Premises.
6.2 Sublessee shall pay when due and before the assessment of any
penalty or interest, directly to the appropriate governmental authorities, all
taxes, assessments and charges of any kind assessed or levied upon any
personal property of Sublessee located upon the Premises.
6.3 Sublessee agrees to defend and hold Sublessor harmless from
liability for any and all taxes for which Sublessee is responsible hereunder,
together with any interest, penalties or other sums thereby imposed, and from
any sale or other proceeding to enforce payment thereof.
ARTICLE 7
INSURANCE
7.1 Sublessor shall at all times during the term of this Sublease
maintain in force insurance as required under Section 3 of the Prime Lease.
7.2 All insurance costs for the coverages required under Paragraph 7.1
hereof shall be prorated based upon the ratio of the square footage of the
Premises to the square footage of the entire property leased under the Prime
Lease and for the first and last years of this Sublease shall be prorated
between Sublessor and Sublessee on the basis of the ratio between the time the
Premises are leased to Sublessee and the time the Premises are not so leased.
Sublessee shall reimburse Sublessor for Sublessee's share of the insurance
costs as herein provided and shall make payment to Sublessor therefor as
additional rent hereunder payable at the time and place rent shall be due.
7.3 All insurance policies maintained as provided in this Article shall
name Sublessee as an additional insured and shall provide that they will not
be canceled without at least thirty (30) days prior written notice to each
named insured.
7.4 Each policy of insurance shall provide that the insurer waives any
right of subrogation against either party in connection with or arising out of
any damage or loss covered by such insurance. Each of the parties hereby
releases and relieves the other, and waives such party~s entire right of
recovery against the other, for loss or damage arising out of or incident to
the risks insured against under this Article, whether due to the negligence of
Sublessor or Sublessee, their agents, employees, contractors, invitees,
licensees or guests, to the extent of any recovery under such insurance.
ARTICLE 8
INDEMNIFICATION
8.1 Sublessee shall indemnify and hold Sublessor harmless from and
against any and all claims for loss or damage to person or property arising
from Sublessee's use or occupancy of the Premises or any activity permitted or
suffered by Sublessee to be conducted on or about the Premises Sublessee
further agrees to indemnify and hold Sublessor harmless against any and all
claims arising from any breach or default in the performance of any obligation
on Sublessee's part to be performed hereunder, or arising from any negligence
of Sublessee, its agents, officers, employees, contractors, representatives,
invitees, licensees and guests, and from and against all costs, attorney fees,
expenses and liabilities incurred by Sublessor in the defense of any such
claim or action brought thereon. Sublessor shall indemnify and hold Sublessee
harmless from and against any and all claims for loss or damage to person or
property arising from any negligent act or omission of Sublessor, its agents,
officers, employees, contractors, representatives, invitees, licensees and
guests, and from and against all costs, attorney fees, expenses and
liabilities incurred by Sublessee in the defense of any such claim or action
brought thereon.
ARTICLE 9
REPAIRS, MAINTENANCE AND OTHER COSTS
9.1 Sublessee shall, throughout the term of this Sublease, at
Sublessee's sole cost and expense, maintain the interior of the Premises in
good order and repair, including, but not limited to, all plumbing, electrical
and air conditioning elements serving the Premises, and shall pay for all
water, sewer and refuse collection for the Premises. Sublessor shall be
responsible for maintaining in good order and repair the remainder of the
Premises, including, but not limited to, the roof, outer walls, foundation,
drive, parking areas and grounds. 9.2 If within a reasonable time after notice
to Sublessor of the need of repairs or maintenance for which Sublessor is
responsible hereunder, Sublessor neglects to undertake such repairs or
maintenance, Sublessee may undertake same and deduct the expenses thereof from
the rent due Sublessor.
ARTICLE 10
FIRE OR OTHER CASUALTY
10.1 If the Premises should be damaged or destroyed by fire, flood or
other casualty, Sublessee shall give immediate notice thereof to Sublessor.
Should the Premises be totally destroyed, or so damaged that rebuilding or
repairs cannot reasonably be completed within ninety (90) days from the date
of written notification by Sublessee to Sublessor of the occurrence of the
damage, this Sublease shall terminate and rent shall be abated for the
unexpired portion of the Sublease, effective as of the date of said written
notification. If the Premises shall be damaged, but not to such an extent that
rebuilding or repairs cannot reasonably be completed within ninety (90) days
from the date of written notification by Sublessee to Sublessor of the
occurrence of the damage, this Sublease shall not terminate, but Sublessor
shall, if the casualty has occurred prior to the final six (6) months of the
Sublease term, at Sublessor's full cost and risk, proceed forthwith to rebuild
or repair the Premises to substantially the same condition in which they
existed prior to such damage. If the casualty occurs during the final six (6)
months of the Sublease term, Sublessor shall not be required, but may, rebuild
or repair such damage. If the Premises, whether or not they are to be rebuilt
or repaired, remain for any time untenantable in whole or in part following
such damage, the rent payable hereunder during the period in which they are
untenantable shall be adjusted appropriately. In the event that Sublessor
fails to complete such rebuilding or repair within ninety (90) days from the
date of written notification by Sublessee to Sublessor of the occurrence of
the damage, Sublessee may, at its option, terminate this Sublease by written
notification at such time to Sublessor, whereupon all rights and obligations
hereunder shall cease.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
11.1 Sublessee shall have the right without the prior written consent of
Sublessor to assign this Sublease or sublet the Premises, provided any such
assignee or sublessee shall agree to comply with the terms of this Sublease.
Any such assignment or sublease shall not relieve Sublessee of its obligations
under this Sublease.
ARTICLE 12
NO PRIME LEASE RENEWAL
12.1 Sublessor hereby agrees not to seek or enter into any extension,
renewal or additional lease with respect to the Premises extending beyond the
expiration date of the term hereof.
ARTICLE 13
ENVIRONMENTAL
13.1 To the best knowledge of Sublessor, (i) no Hazardous Waste (as
defined below) or Hazardous Material (as defined below) is present on the
Premises, nor has Sublessor ever generated, transported, used, stored,
treated, disposed of or managed any Hazardous Waste or Hazardous Material,
(ii) Sublessor has no material liability and has not violated in any material
respect any Environmental Law (as defined below), (iii) Sublessor is in
compliance in all material respects with all applicable Environmental Laws,
and (iv) Sublessor has never entered into or been subject to any material
judgment, consent decree, compliance order or administrative order with
respect to any material environmental or health and safety matter or received
any demand letter, formal complaint or claim with respect to any environmental
or health and safety matter or the enforcement of any environmental law.
13.2 Sublessor hereby agrees to indemnify, defend and hold harmless
Sublessee from and against all claims, liabilities and expenses, including
reasonable attorney fees, arising from or incurred in connection with any
Hazardous Waste or Hazardous Material on or about the Premises or relating to
any investigation or clean-up of Hazardous Waste or Hazardous Material on or
about the Premises to the extent that such Hazardous Waste or Hazardous
Material is present at the time possession is delivered as provided hereunder.
13.3 For purposes of this Sublease, (i) "Hazardous Material" shall mean and
include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant or contaminant, as defined
or regulated under any Environmental Law or any other substance which may pose
a threat to the environment or to human health or safety; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated
under any Environmental Law; and (iii) "Environmental Law" shall mean any
environmental or health and safety related law, regulation, rule, ordinance or
bylaw at the foreign, federal, state or local level, whether existing as of
the date hereof, previously enforced or subsequently enacted.
ARTICLE 14
NON-WAIVER
14.1 The failure by Sublessor or Sublessee to insist upon prompt and
strict performance of any of the terms, conditions or undertakings of this
Sublease shall not be construed as a waiver of the same or any other term,
condition or undertaking.
ARTICLE 15
NOTICES
15.1 Any notices or consents to be given by or on behalf of either party
to the other shall be in writing and delivered by mail, registered or
certified, return receipt requested, to each party at the address first above
written. All notices shall be deemed effective upon mailing.
ARTICLE 16
APPLICABLE LAW AND CONSTRUCTION
16.1 The laws of the State of Michigan shall govern the validity,
performance and enforcement of this Sublease. The invalidity or
unenforceability of any provision of this Sublease shall not affect or impair
any other provision. The submission of this document for examination does not
constitute an offer to lease, or a reservation of or option for the Premises,
and becomes effective only upon execution and delivery thereof by Sublessor
and Sublessee.
16.2 The terms, covenants, agreements, conditions and undertakings
contained herein shall be binding upon and shall inure to the benefit of the
successors, heirs, assigns and personal representatives of the parties hereto.
16.3 All negotiations, considerations, representations and
understandings between the parties with respect to the subject matter hereof
are incorporated herein and in the Prime Lease (to the extent that such is not
inconsistent herewith) and may be modified or altered only by agreement in
writing by the parties.
16.4 The headings of the several Articles contained herein are for
convenience only and do not define, limit or construe the contents of such
Articles.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
Agreement as of the day and year first above written.
SUBLESSOR:
CONTOUR MEDICAL, INC.
By:/s/ Donald F. Fox
Donald F. Fox
Its: President
SUBLESSEE:
RAWCAR GROUP, L.L.C.
By:/s/ Richard A. Weaver
Richard A. Weaver, Member
Westport Business Park,
Building Three
2525 Davie Road, Suite 322 Lease Preparation Date: December 17, 1996
Davie, Florida 33317 Revision Date: January 7, 1997
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between WESTPORT
BUSINESS PARK ASSOCIATES, a Florida general partnership (the "Landlord") and
CONTOUR MEDICAL, INC., a Nevada corporation authorized to transact business
within the State of Florida (the "Tenant"):
WITNESSETH:
1.01 Premises. In consideration of Tenant's obligation to pay rent and
of the other terms, provisions and covenants hereof, Landlord leases to Tenant
and Tenant leases from Landlord, all that portion of certain real property
situated within the County of Broward, State of Florida, legally described in
Exhibit A, as is more particularly outlined on the site plan contained in
Exhibit B (the "Premises"), including any truck loading areas specifically
marked in red on Exhibit B for Tenant's exclusive use. The Premises and the
building within which the Premises is located (the "Building") are part of a
larger development (the "Development") commonly known as Westport Business
Park. Provided that Tenant is not in default, Tenant and Tenant's employees,
customers, licensees shall have the non-exclusive right to use, in common with
the other parties occupying the Building, the lobbies, elevators, common
restrooms, common hallways and common parking areas, subject to such
reasonable rules, posted signs and regulations as Landlord may, from time to
time, prescribe.
2.01 Term of Lease. The term of this Lease shall be for a period
commencing on the "Commencement Date", as hereinafter defined, and ending
sixty (60) months as hereinafter defined, provided, however, that, if the
Commencement Date is a date other than the first day of a calendar month, the
rental term shall extend for said number of months in addition to the
remainder of the calendar month following the Commencement Date, the intent
being that the expiration date for the rental term will be the last day of a
calendar month.
2.02 Commencement Date. (a) Unless postponed under this paragraph or
under paragraph 2.02(b), the Commencement Date shall be the date the Tenant is
tendered the Premises. The taking of possession of the Premises by Tenant
shall be deemed conclusively to establish that the Premises are in good and
satisfactory condition as of when possession was taken and that Tenant has
determined that the Premises are suitable for Tenant's intended purposes.
Landlord has made no warranties with respect to suitability and Tenant hereby
expressly waives any implied warranty of same. Tenant further acknowledges
that no representations as to the repair of the Premises, nor promises to
alter, remodel or improve the Premises have been made by Landlord, unless such
are expressly set forth in this Lease. If this Lease is executed before the
Premises become vacant or otherwise available and ready for occupancy, or if
any present tenant or occupant of the Premises holds over, and Landlord cannot
acquire possession of the Premises prior to the Commencement Date, Landlord
shall not be deemed to be in default hereunder, and Tenant agrees to accept
possession of the Premises at such time as Landlord is able to tender the
same, which date shall thenceforth be deemed the Commencement Date; and
Landlord hereby waives payment of rent covering any period prior to the
tendering of possession to Tenant hereunder. After the Commencement Date,
Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the Premises.
(b) If interior modifications are to be made to the Premises by
Landlord as expressly specified in this Lease, the provisions of this
subparagraph B shall apply if Landlord's work is not completed by the
Commencement Date specified in paragraph (a) above. In such event, the
Commencement Date shall be the date upon which the interior modifications to
be completed by Landlord hereunder, as applicable, shall have been
substantially completed as expressly provided for in this Lease. Delays of
any nature whatsoever attributable to Tenants acts or omissions or to the acts
or omissions of Tenant's employees, agents or contractors, shall not be cause
for delay of the Commencement Date. Landlord shall notify Tenant in writing
as soon as Landlord has completed its work. If the Landlord's work is not
substantially completed as aforesaid, Tenant shall notify Landlord in writing
of Tenant's objections. Landlord shall have a reasonable time after delivery
of such notice in which to take such corrective action as may be necessary,
and shall notify Tenant in writing as soon as Landlord deems such corrective
action has been completed so that Landlord's work is completed. Taking of
possession by Tenant shall be deemed conclusively to establish that the
Landlord has completed all work required to be performed by Landlord to get
the Premises ready for Tenant's occupancy and that the Premises are in good
and satisfactory condition, as of when possession was so taken. Except as
otherwise expressly set forth in this Lease, Tenant acknowledges that no
representations as to the repair of the Premises have been made by Landlord.
After the Commencement Date, Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises. If there is a
dispute as to substantial completion or work performed or required to be
performed by Landlord, the certificate of Landlord's architect or general
contractor shall be conclusive.
3.01 Base Rent. Tenant agrees to pay to Landlord monthly base rent for
the Premises, in advance, without demand, deduction or set off, for the entire
term beginning on the Commencement Date according to the following schedule:
MONTH MONTHLY BASE RENT
1-12 $9,125.94
13-24 $9,650.42
25-36 $10,174.90
37-48 $10,699.38
49-60 $11,223.85
provided, however, that if the Commencement Date is a day other than the first
day of a calendar month, then for the initial partial month, Tenant agrees to
pay a per diem Base Rental of $300.03 a day for each day of the partial month
beginning on the Commencement Date and ending on the last day of the partial
month in which the Commencement Date falls. Each installment of monthly Base
Rent shall be due and payable on or before the first day of each calendar
month succeeding the Commencement Date, except that the rental payment for the
initial month shall be due and payable upon Tenant's execution of this Lease.
4.01 Security Deposit. Tenant agrees to deposit with Landlord on
the date hereof an irrevocable Letter of Credit for $13,600 issued by a bank
with its charter in the United States, which irrevocable letter of credit
shall be held by Landlord, as security for the full, timely and faithful
performance of Tenant's covenants and obligations under this Lease, it being
expressly agreed that the delivery of the letter of credit is not an advance
rental deposit or a measure of Landlord's damages. Upon the occurrence of any
event of default by Tenant, Landlord may, from time to time, without prejudice
to any other remedy, draws on the letter of credit to the extent necessary to
make good any arrears of rent or other payments due Landlord hereunder, and
any other damage, injury, expense or liability caused by Tenant's default; and
Tenant shall pay to Landlord on demand the amount so applied in order to
restore the letter of credit to its original amount.
5.01 Permitted Use. The Premises shall be continuously used for the
sole purpose of general business offices and/or for receiving, storing,
shipping and selling (other than at retail) products, materials and
merchandise made and/or distributed by Tenant and for no other use or purpose.
Tenant shall at Tenant's own cost and expense obtain any and all licenses and
permits necessary for any such use. The overnight parking of automobiles,
trucks or other vehicles so long as allowed by code, will not be prohibited.
The outside storage of any property including trash or garbage is prohibited.
Tenant agrees that Tenant will, at Tenant's own cost and expense keep Tenant's
employees, agents, customers, invitees, and/or licensees from parking on any
streets running through or contiguous to the Building or the Development.
Tenant agrees that no washing of any type will take place in the Premises
including the truck apron and parking areas. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action which would constitute a
nuisance or would disturb or endanger any other tenants of the Development or
unreasonably interfere with such tenants' use of their respective premises or
permit any use which would adversely affect the reputation of the Development.
6.01 Tenant's Taxes. Tenant shall be responsible to pay before
delinquency all franchise taxes, assessments, levies or charges measured by or
based in whole or in part upon the rents payable hereunder or Tenant's gross
receipts and all sales taxes and other taxes imposed upon or assessed by
reason of the rents and other charges payable hereunder.
7.01 Definition of Operating Costs. The term "Operating Costs" shall
mean all costs and expenses paid or incurred by Landlord or on Landlord's
behalf in connection with the ownership, management, repair, replacement,
remodeling, maintenance and operation of the Building, including, without
limitation, all assessed real property taxes, assessments, (whether general or
special) and governmental charges of any kind and nature whatsoever including
assessments due to deed restrictions and/or owner's associations, which accrue
against the Building, the costs of maintaining and repairing the Building's
parking lots, parking structures, easements and landscaping, property
management fees not to exceed 4% of gross rentals, utility costs to the extent
not separately metered, insurance premiums, depreciation of the costs of
replacement (as defined below) of the Building and improvements in the
Building but not including any structural repairs or replacements which are
normally chargeable to capital accounts under sound accounting principles.
The term "operating costs" does not include: (I) costs of alterations of
tenants' premises; (ii) costs of curing construction defects; (iii) interest
and principal payments on mortgages, and other debt cost; (iv) real estate
brokers' leasing commissions or compensation; (v) any cost or expenditure for
which Landlord is reimbursed, whether by insurance proceeds or otherwise; (vi)
cost of any service furnished to any other occupant of the Building which
Landlord does not provide to tenant hereunder. Structural repairs and
replacements are repairs and replacements to the foundations, load-bearing
walls, columns and joists and replacement of roofing and roof deck.
Notwithstanding anything contained herein to the contrary, depreciation of
any capital improvements which are intended to reduce Operating Costs, or are
required under any governmental laws, regulations or ordinances which were not
applicable to the Building at the time it was constructed, or are recommended
by the N.F.P.A. Life Safety Code, shall be included in Operating Costs. If
Landlord selects the accrual method of accounting rather than the cash
accounting method for Operating Costs purposes, Operating Costs shall be
deemed to have been paid when such expenses have accrued.
Tenant acknowledges that certain of the costs of the management, operation and
maintenance of the Building may be common to all of the buildings within the
Development owned by Landlord and Tenant consents to Landlord's allocation of
such common costs among the various buildings owned by Landlord within the
Development and the amount of such common cost allocated by Landlord to the
Building shall be deemed an Operating Cost, provided that the allocation
method used by Landlord is reasonable. Landlord may also, in a reasonable
manner, allocate insurance premiums for so-called "blanket" insurance policies
which insure other properties as well as the Building and said allocated
amount shall be deemed to be an Operating Cost.
If at any time during the term of this Lease the present method of taxation
shall be changed so that in lieu of the whole or any part of any taxes,
assessments, or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents for the present or any future
building or buildings on the premises, then all such taxes, assessments,
levies or charges, or the part thereof so measured or based, shall be deemed
to be included within the term "taxes" for the purposes hereof.
7.02 Tenant's Proportionate Share of Operating Costs. Tenant shall pay
to Landlord as additional rent beginning on the Commencement Date and
continuing during the entire term of this Lease, including any extended term,
Tenant's proportionate share of Operating Costs calculated on the basis of the
ratios set forth in Section 8.01. Any payments with respect to any partial
calendar year in which the term commences or ends shall be prorated. Tenant
agrees to pay $3,461.56 per month as an estimated amount for Operating Costs
as defined in Article 7.01. Landlord may, at any time, deliver to Tenant its
estimate (or revised estimate) of such additional amounts payable under this
Section for each calendar year. On or before the first day of the next month
and on or before the first day of each month thereafter, Tenant shall pay to
Landlord as additional rent such amount as Landlord reasonably determines to
be necessary to bring and keep Tenant current. As soon as practicable after
the close of each calendar year, Landlord shall deliver to Tenant an itemized
statement showing the total amount payable by Tenant under this Article. If
such statement shows an amount due from Tenant that is less than the estimated
payments previously paid by Tenant, it shall be accompanied by a refund of the
excess to Tenant or at Landlord's option the excess shall be credited against
the next monthly installment of rent at option of Tenant. If such statement
shows an amount due from Tenant that is more than the estimated payments paid
by Tenant, Tenant shall pay the deficiency to Landlord, as additional rent.
If an amount is due and is not paid within thirty (30) days after the date of
Landlord's statement to Tenant, Tenant agrees to pay a late fee of 5% of the
unpaid balance. Tenant or Tenant's representatives shall have the right after
seven (7) days prior written notice to Landlord to examine Landlord's books
and records of Operating Costs during normal business hours within one hundred
and twenty (120) days following the furnishing of the statement to Tenant.
Unless Tenant take written exception to any item within one hundred and fifty
(150) days following the furnishing of the statement to Tenant (which item
shall be paid in any event), such statement shall be considered as final and
accepted by Tenant. The taking of exception to any item shall not excuse
Tenant from the obligation to make timely payment based upon the statement as
delivered by Landlord.
8.01 Tenant's Proportionate Share. For purposes of Section 7.02,
Tenant's "proportionate share" means a fraction the numerator of which shall
be the rentable area contained in the Premises and the denominator of which
shall be the rentable area contained in the Building, from time to time, as
determined by Landlord. Notwithstanding anything contained in this Lease to
the contrary, Landlord shall have the right, from time to time, to make
additions or deletions to the Building.
9.01 Tenant's Obligations. (a) Tenant shall, at Tenant's own cost and
expense, keep and maintain all parts of the Premises and such portion of the
Development within Tenant's exclusive control, in good condition, promptly
making all necessary repairs and replacement, whether ordinary or
extraordinary, with materials and workmanship of the same character, kind and
quality as the original, including but not limited to, windows, glass and
plate glass, doors, skylights, any special office entries, interior walls and
finish work, floors and floor coverings, heating and air conditioning systems,
electrical systems and fixtures, sprinkler systems, water heaters, dock board,
truck doors, dock bumpers, and plumbing work and fixtures. Tenant, as part of
Tenant's obligation hereunder, shall keep the whole of the Premises in a clean
and sanitary condition. Tenant will as far as possible keep all such parts of
the Premises from deteriorating, ordinary wear and tear excepted, and from
falling temporarily out of repair, and upon Termination of this Lease in any
way, Tenant will yield up the Premises to Landlord in good condition and
repair, loss by fire or other casualty covered by insurance to be secured
pursuant to Article 15 excepted (but not excepting any damage to glass or loss
not reimbursed by insurance because of the existence of a deductible under the
appropriate policy). Tenant shall not damage any dividing wall or disturb the
integrity and supports provided by any demising wall and shall, at Tenant's
sole cost and expense, properly repair any damage or injury to any demising
wall caused by Tenant or Tenant's employees, agents or invitees. Tenant
shall, at Tenant's own cost and expense, as additional rent, pay for the
repair of any damage to the Premises, the Building, or the Development
resulting from and/or caused in whole or in part by Tenant's negligence or
misconduct, or the negligence or misconduct of Tenant's agents, servants,
employees, patrons, customers, or any other person entering upon the
Development as a result of Tenant's business activities or caused by Tenant's
default hereunder.
(b) At Tenant's own cost and expense, Tenant agrees to enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor reasonably approved by Landlord, for servicing all heating and air
conditioning systems and equipment servicing the Premises and an executed copy
of such contract shall be delivered to Landlord. This service contract must
include all services suggested by the equipment manufacturer within the
operations/maintenance manual and must become effective within thirty (30)
days of the date Tenant take possession of the Premises. If Tenant fails to
do so, then Landlord may (but shall not be required to), upon notice to
Tenant, elect to enter into such a maintenance service contract on Tenant's
behalf, or perform the work itself and, in either case, charge Tenant
therefore, together with a reasonable charge for overhead.
9.02 Landlord's Obligations. Landlord shall maintain those portions of
the Building not within the exclusive possession of tenants in good repair,
reasonable wear and tear and any casualty covered by the provisions of Article
15 excepted, making all necessary repairs and replacements, whether ordinary
or extraordinary structural or nonstructural, including roof, foundation,
walls, downspouts, gutters, regular mowing of any grass, trimming, weed
removal and general landscape maintenance, exterior painting, exterior
lighting, exterior signs and common sewage plumbing and the maintenance of all
paved areas including driveways and alleys. Tenant shall immediately give
Landlord written notice of any defect or need for repairs, after which
Landlord shall have a reasonable opportunity to repair the same or cure such
defect. Landlord's liability with respect to any defects, repairs, or
maintenance or the curing of such defect for which Landlord is responsible
under the provisions of this Lease shall be limited to the cost of such
repairs or maintenance or the curing of such defect. The term "walls" as used
herein shall not include windows, glass or plate glass, doors, special store
front or office entry.
10.01 Alterations. Tenant agrees that Tenant will not make any
alterations, additions or improvements to the Premises (including, without
limitation, the roof and wall penetrations) without the prior written consent
of Landlord, which consent will not be unreasonably withheld. If Landlord
shall consent to any alterations, additions or improvements proposed by
Tenant, Tenant shall construct the same in accordance with all governmental
laws, ordinances, rules and regulations and all requirements of Landlord's and
Tenant's insurance policies and only in accordance with plans and
specifications approved by Landlord; and any contractor or person selected by
Tenant to make the same, or, at Landlord's option and discretion, the
alterations, additions or improvements shall be made by Landlord for Tenant's
account and Tenant shall fully reimburse Landlord for the entire cost thereof.
Tenant may, without the consent of Landlord, but at Tenant's own cost and
expense and in good workmanlike manner erect such shelves, bins, machinery and
other trade fixtures as Tenant may deem advisable, without altering the basic
character of the Building or Development and without overloading the floor or
damaging the Building or Development, and in each case after complying with
all applicable governmental laws, ordinances, regulations and other
requirements. All shelves, bins, machinery and trade fixtures installed by
Tenant may be removed by Tenant prior to the termination of this Lease if
Tenant so elect, and shall be removed by the date of termination of this Lease
or upon earlier vacating of the Premises if required by Landlord; upon any
such removal Tenant agrees to restore the Premises to their original
condition. All such removals and restoration shall be accomplished in a good
and workmanlike manner so as not to damage the primary structure or structural
quality of the Building.
11.01 Signs and Window Treatment. Tenant agrees that Tenant will not
install any signs upon the Building or Development without the express written
consent of Landlord which consent will not be unreasonably withheld. Landlord
will provide, at Tenant's request and cost, Landlord's standard identification
sign, which sign shall be removed by Tenant upon termination of this Lease at
which time Tenant shall restore the property to the same condition as prior to
installation of said sign. Tenant shall not install drapes, curtains, blinds
or any window treatment without Landlord's prior written consent. Landlord
may from time to time require Tenant to change its signage to conform to a
revised standard for the Building, provided Landlord pays the cost of removing
and replacing such signs. Landlord shall maintain all signs and the cost
thereof shall be charged to Tenant.
12.01 Inspections. Landlord and Landlord's agents and
representatives
shall have the right to enter and inspect the Premises at any time during
business hours for the purpose of ascertaining the condition of the Premises
or in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this Lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the
Premises are available. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Premises and shall arrange to meet with
Landlord for a joint inspection of the Premises prior to vacating. If Tenant
fails to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant vacates the Premises shall be conclusively
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration.
13.01 Utilities. Tenant agrees to pay for all gas, heat, light,
power,
telephone, and other utilities and services used on or from the Premises,
including without limitation, Tenant's proportionate share as determined by
Landlord for the use of such utilities which are not separately metered and
any central station signaling system installed in the Premises or the
Building, together with any taxes, penalties and surcharges or the like
pertaining thereto and any maintenance charges for utilities. Tenant shall
furnish and install all electric light bulbs, tubes and ballasts, other than
those originally provided to the Premises by Landlord. Landlord shall in no
event be liable for any interruption or failure of utility services on or to
the Premises.
14.01 Assignment and Subletting. (a) Tenant shall not have the
right to assign, sublet, transfer or encumber this Lease, or any interest
therein, without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Any attempted assignment, subletting, transfer
or encumbrance by Tenant in violation of the terms and covenants of this
Paragraph shall be void. All cash or other proceeds of any assignment, such
proceeds as exceed the rentals called for hereunder in the case of a
subletting and all cash or other proceeds of any other transfer of Tenant's
interest in this Lease shall be paid to Landlord, whether such assignment,
subletting or other transfer is consented to by Landlord or not, unless
Landlord agrees to the contrary in writing, and Tenant hereby assign all
rights Tenant might have or ever acquire in any such proceeds to Landlord.
Any assignment, subletting or other transfer of Tenant's interest in this
Lease shall be for an amount equal to the then fair market value of such
interest. These covenants shall run with the land and shall bind Tenant and
Tenant's representatives in any bankruptcy proceeding, successors and assigns.
Any assignee, sublessee or transferee of Tenant's interest in this Lease (all
such assignees, sublessees and transferees being hereinafter referred to as
"successors"), by assuming Tenant's obligations hereunder shall assume
liability to Landlord for all amounts paid to persons other than Landlord by
such successors in contravention of this Paragraph. No assignment, subletting
or other transfer, whether consented to by Landlord or not, shall relieve
Tenant of Tenant's liability and obligations hereunder. Upon the occurrence
of an "event of default" as hereinafter defined, if the Premises or any part
thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, as provided by law, may at its option collect
directly from such assignee or subtenant all rents becoming due to Tenant
under such assignment or sublease and apply such rent against any sums due to
Landlord for Tenant hereunder, and no such collection shall be construed to
constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
(b) If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute Tenant's property or of Tenant's estate within the meaning of the
Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and be
promptly paid or delivered to Landlord.
Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand
execute and deliver to Landlord an instrument confirming such assumption.
(d) A change in control shall constitute an assignment requiring
Landlord's consent. The transfer of 50% or more of your stock, if you are a
corporation, or a change in 50% or more of your partners, if you are a general
partnership or limited partnership, or a change in your general partner if you
are a limited partnership, shall constitute a change in control for this
purpose, requiring Landlord's consent.
(e) Your involvement in a merger transaction, whether or not you are
the surviving corporation in the merger, shall be considered an assignment of
this Lease requiring Landlord's consent.
(f) An assignment or subletting of your interest in this Lease without
Landlord's specific written prior consent shall, at Landlord's option, be an
event of default curable after a ten day notice period or a non curable Event
of Default without the necessity of any notice of grace period. If Landlord
elects to treat such unconsented to assignment or subletting as a non curable
Event of Default, Landlord shall have the right to either (I) terminate this
Lease, or (ii) not terminate the Lease and to instead increase the monthly
Base Rent to the amount specified in Section 18.01 of this Lease as if you
were holding over.
15.01 Fire and Casualty Damage. (a) Landlord agrees to maintain
insurance covering the Building in an amount not less than eighty (80%)
percent (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the replacement cost
thereof, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other Risks of Direct Physical Loss, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
state in which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located
within such state. Subject to the provisions of subparagraphs 15.01(c),
15.01(d), and 15.01(e) below, such insurance shall be for the sole benefit of
Landlord and under its sole control.
(b) If the Building should be damaged or destroyed by fire, tornado or
other casualty, Tenant shall give written notice thereof to Landlord.
If the Building should be totally destroyed by fire, tornado or other
casualty, or if the Building should be so damaged thereby that rebuilding or
repairs cannot in Landlord's estimation be completed within one hundred and
fifty days after the date upon which Landlord is notified by Tenant of such
damage, this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.
(d) If the Building should be damaged by any peril covered by insurance
to be provided by Landlord under subparagraph 15.01(a) above, but only to such
extent that rebuilding or repairs can in Landlord's estimation be completed
within one hundred and fifty days after the date upon which Landlord is
notified by Tenant of such damage, this Lease shall not terminate, and
Landlord shall at its sole cost and expense thereupon proceed with reasonable
diligence to rebuild and repair such buildings to substantially the condition
in which they existed prior to such damage, except that Landlord shall not be
required to rebuild, repair or replace any part of the partitions, fixtures,
additions and other improvements which may have been placed in, on or about
the Premises by Tenant and except that Landlord may elect not to rebuild if
such damage occurs during the last year of the term of the Lease exclusive of
any option which is unexercised at the time of such damage. If the Premises
are untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. If
Landlord should fails to complete such repairs and rebuilding within one
hundred and fifty days after the date upon which Landlord is notified by
Tenant of such damage, Tenant may, at Tenant's option, terminate this Lease by
delivering written notice of termination to Landlord as Tenant's exclusive
remedy, whereupon all rights and or obligations hereunder shall cease and
Terminate. Should construction be delayed because of changes, deletions, or
additions in construction requested by Tenant, strikes, lockouts, casualties,
acts of God, war, material or labor shortages, governmental regulation or
control or other causes beyond the reasonable control of Landlord, the period
of restoration, repair or rebuilding shall be extended for the time Landlord
is so delayed.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this Lease by delivering
written notice of termination to Tenant within fifteen (15) days after such
requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
(f) Tenant and the Landlord each hereby release the other from any loss
or damage to property caused by fire or any perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage
occurring during such times as the releasor's policies shall contain a clause
or endorsement to the effect that any such release shall not adversely affect
or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Tenant and the Landlord each agrees to request the insurance
carriers to include in its policies such a clause or endorsement.
16.01 Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, resulting
from and/or caused in part or whole by Tenant's negligence or misconduct or by
the negligence or misconduct of Tenant's agents, servants or employees or any
other person entering upon the Premises, or caused by the buildings and
improvements located on the Premises becoming out of repair, or caused by
leakage of gas, oil, water or steam or by electricity emanating from the
Premises, or due to any cause whatsoever other than the gross negligence or
intentional acts of Landlord, and Tenant hereby covenant and agrees that
Tenant will at all times indemnify and hold safe and harmless the Development,
the Landlord, Landlord's agents and employees from any loss, liability,
claims, suits, costs, expenses, including without limitation attorney's fees
and damages, both real and alleged, arising out of any such damage or injury;
except injury to persons or damage to property the sole cause of which is the
gross negligence of Landlord or the failure of Landlord to repair any part of
the Building which Landlord is obligated to repair and maintain hereunder
within a reasonable time after the receipt of written notice from Tenant of
needed repairs. Tenant shall procure and maintain throughout the term of the
Lease a policy or policies of insurance, at Tenant's sole cost and expense,
insuring both Landlord and Tenant against all claims, demands or actions
arising out of or in connection with: (I) the Premises; (ii) the condition of
the Premises; (iii) Tenant's operations in and maintenance and use of the
Premises; and (iv) Tenant's liability assumed under this Lease, the limits of
such policy or policies to be in the amount of not less than $2,000,000 per
occurrence in respect to injury to persons (including death), and in the
amount of not less than $250,000 per occurrence in respect to property damage
or destruction, including loss of use thereof. All such policies shall be
procured by Tenant from responsible insurance companies reasonbly satisfactory
to Landlord. Certified copies of such policies, together with receipt
evidencing payment of premiums therefore, shall be delivered to Landlord prior
to the Commencement Date. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewal thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby.
17.01 Condemnation. (a) If the whole or any substantial part of the
Premises or Building should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent domain, or
by private purchase in lieu thereof and the taking would prevent or materially
interfere with the use of the Premises or Building for the purpose for which
they are then being used, this Lease shall terminate effective when the legal
taking shall occur as if the date of such taking were the date originally
fixed in the Lease for the expiration of the term.
(b) If the part of the Premises or Building shall be taken for any
public or quasi-public use under governmental law, ordinance or regulation, or
by right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided above, this Lease shall not terminate but
the rent payable hereunder during the unexpired portion of this Lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances and Landlord shall undertake to restore the Premises to a
condition suitable for Tenant's use, as near to the condition thereof
immediately prior to such taking as is reasonably feasible under all the
circumstances.
If there is a taking or private purchase in lieu thereof, Tenant and
Landlord shall each be entitled to receive and retain such separate awards
and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings; provided that Tenant shall not be
entitled to receive any award for the loss of any improvements paid for by
Landlord or for Tenant's loss of Tenant's leasehold interest, the right to
such award as to such items being hereby assigned by Tenant to Landlord.
18.01 Holding Over. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed.
If Landlord agrees in writing that Tenant may hold over after the expiration
or termination of this Lease, unless the parties hereto otherwise agrees in
writing on the terms of such holding over, the hold over tenancy shall be
subject to termination by Landlord at any time upon not less than (5) days
advance written notice, or by Tenant at any time upon not less than thirty
(30) days advance written notice, and all of the other terms and provisions of
this Lease shall be applicable during that period, except that Tenant shall
pay Landlord from time to time upon demand, as rental for the period of any
hold over, an amount equal to two hundred percent (200%) the rent in effect on
the termination date, computed on a daily basis for each day of the hold over
period. Tenant shall also pay to Landlord all damages sustained by Landlord
resulting from retention of possession by Tenant, including the loss of any
proposed subsequent tenant for any portion of the Premises. No holding over
by Tenant, whether with or without consent of Landlord, shall operate to
extend this Lease except as otherwise expressly provided. The preceding
provisions of this paragraph shall not be construed as consent for Tenant to
hold over.
19.01 Quiet Enjoyment. Landlord represents and warrants that it has
full right and authority to enter into this Lease and that upon Tenant's
payment of the rents herein set forth and performing Tenant's other covenants
and agreements herein set forth, Tenant shall peaceably and quietly have, hold
and enjoy the Premises for the term without hindrance or molestation from
Landlord, subject to the terms and provisions of this Lease. Landlord agrees
to make reasonable efforts to protect Tenant from interference or disturbance
by other tenants or third persons; however, Landlord shall not be liable for
any such interference or disturbance, nor shall Tenant be released from any of
the obligations of this Lease because of such interference or disturbance. If
this Lease is a sublease, then the Tenant agrees to take the Premises subject
to the provisions of the prior lease.
20.01 Events of Default. The following events shall be deemed to be
events of default by Tenant under this Lease:
(a) Tenant fails to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein
when due and such failure shall continue for a period of five (5) days from
the date such payment was due, however twice yearly within ten (10) days of
due date.
(b) Tenant shall generally not pay debts as they become due or shall
admit in writing of the inability to pay debts or shall make a general
assignment for the benefit of creditors; or Tenant shall commence any case,
proceeding or other action seeking to have an order for relief entered on
Tenant's behalf as a debtor to adjudicate as being a bankrupt or insolvent, or
seeking reorganization or relief of debtors or seeking appointment of a
receiver, trustee, custodian or other similar official for Tenant or for all
or of any substantial part of Tenant's property; or Tenant shall take any
action to authorize or in contemplation of any of the actions set forth above
in this paragraph; or
Any case, proceeding or other action against Tenant shall be
commenced seeking to have an order for relief entered against Tenant as debtor
or to adjudicate Tenant as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of Tenant or
Tenant's debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for Tenant or the for all or any
substantial part of Tenant's property.
(d) A receiver or trustee shall be appointed for all or substantially
all of Tenant's assets.
(e) Tenant deserts or vacates any substantial portion of the Premises.
(f) Tenant fails to discharge any lien placed upon the Premises in
violation of Paragraph 25.01 hereof within sixty (60) days after any such lien
or encumbrance is filed against the Premises.
(g) Tenant fails to comply with any term, provision or covenant of this
Lease (other than the foregoing in this Paragraph 20.01), and shall not cure
such failure within twenty (20) days after written notice thereof to Tenant.
(h) Tenant fails to continuously operate Tenant's business at the
Premises for the permitted use set forth in Paragraph 5.01 whether or not
Tenant are in default of the rental payment due under this Lease.
20.02 Remedies. (a) Upon the occurrence of any of such events of
default described in Paragraph 20.01 hereof, Landlord shall have the option to
pursue any one or more of the following remedies without any notice or demand
whatsoever;
(1) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel
or remove Tenant and any other person who may be occupying the Premises or any
part thereof, without being liable for prosecution or any claim of damages
therefore.
(2) Enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim for damages
therefore, and relet the Premises and receive the rent therefore.
(3) Enter upon the Premises, without being liable for prosecution or
any claim for damages therefore, and do whatever Tenant is obligated to do
under the terms of this Lease; and Tenant agrees to reimburse Landlord on
demand for any expenses which Landlord may incur in thus effecting compliance
with Tenant's obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to Tenant from such
action, whether caused by the negligence of Landlord or otherwise.
(5) Exercise any other right or remedy available to Landlord at law or
in equity.
(b) If Landlord elects to regain possession of the Premises by a
forcible detainer proceeding, Tenant hereby specifically waives any statutory
notice which may be required prior to such proceeding, and agrees that
Landlord's execution of this Lease is, in part, consideration for this waiver.
If Tenant fails to pay any installment of rent hereunder as when such
installment is due, to help defray the additional cost to Landlord for
processing such late payments, Tenant agrees to pay to Landlord on demand a
late charge in an amount equal to five (5%) percent of such installment; and
the failure to pay such amount within five (5) days after demand therefore
shall be an event of default hereunder. The provision for such late charge
shall be in addition to all of Landlord's other rights and remedies hereunder
or at law and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner.
(d) If Tenant's check, given to Landlord in payment, is returned by the
bank for non-payment, Tenant agrees to pay all expenses incurred by Landlord
as a result thereof.
(e) Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by written agreement
between Tenant and Landlord. No removal or other exercise of dominion by
Landlord over Tenant's property or others at the Premises shall be deemed
unauthorized or constitute a conversion, Tenant hereby consenting, after any
event of default, to the aforesaid exercise of dominion over Tenant's property
within the Premises. All claims for damages by reason of such re-entry and/or
repossession are hereby waived, as are all claims for damages by reason of any
distress warrant, forcible detainer proceedings, sequestration proceedings or
other legal process. Tenant agrees that any re-entry by Landlord may be
pursuant to judgment obtained in forcible detainer proceedings or other legal
proceedings or without the necessity for any legal proceedings, as Landlord
may elect, and Landlord shall not be liable for trespass or otherwise.
(f) If Landlord elects to terminate the Lease by reason of an event of
default, then notwithstanding such termination, Tenant shall be liable for and
shall pay to Landlord, at the address specified for notice to Landlord herein,
the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the present value of the
total rental hereunder for the remaining portion of the lease term (had such
term not been terminated by Landlord prior to the date of expiration.
(g) If Landlord elects to repossess the Premises without terminating
the Lease, or if Landlord elects to terminate the Lease, then Tenant, at
Landlord's option, shall be liable for and shall pay to Landlord, at the
address specified for notice to Landlord herein, all rental and other
indebtedness accrued to the date of such repossession, plus rental required to
be paid by Tenant to Landlord during the remainder of the lease term until the
date of expiration of the term as stated in Section 2.01 diminished by any net
sums thereafter received by Landlord through reletting the Premises during
said period (after deducting expenses incurred by Landlord as provided in
subparagraph 20.02(h). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph
may be brought from time to time, on one or more occasions, without the
necessity of Landlord's waiting until expiration of the lease term.
(h) In case of any event of default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable for and shall
pay to Landlord, at the address specified for notice to Landlord herein, in
addition to any sum provided to be paid above, brokers' fees incurred by
Landlord in connection with reletting the whole or any part of the Premises;
the costs of removing and storing Tenant's property or the property of any
other occupant; the costs of repairing, altering, remodeling or otherwise
putting the Premises into the condition it was in at the Commencement Date,
and all reasonable expenses incurred by Landlord in enforcing or defending
Landlord's rights and/or remedies including reasonable attorney's fees and
court costs, investigation costs, costs of appeal, and all other expenses
incurred by Landlord, which in no event shall be less than, but may be greater
than, 15% of all sums due and owing by Tenant to Landlord whether or not suit
is actually filed.
(I) Upon a termination or repossession of the Premises for an event of
default, Landlord shall not have any obligation to relet or to attempt to
relet the Premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord may relet the whole or any
portion of the Premises for any period to any tenant and for any use and
purpose.
(j) If Tenant fails to make any payment or cure any default hereunder
within the time herein permitted, Landlord, without being under any obligation
to do so and without thereby waiving such default, may make such payment
and/or remedy such other default for Tenant's account (and enter the Premises
for such purpose), and thereupon Tenant shall be obligated to, and hereby
agrees, to pay Landlord upon demand, all costs, expenses and disbursements
(including reasonable attorney's fees) incurred by Landlord in taking such
remedial action.
(k) If Landlord shall have taken possession of the Premises pursuant to
the authority herein granted then Landlord shall have the right to keep in
place and use all of the furniture, fixtures and equipment at the Premises,
including that which is owned or leased to Tenant at all times prior to any
foreclosure thereon by Landlord or repossession thereof by any lessor thereof
or third party having a lien thereon, Landlord shall also have the right to
remove from the Premises (without the necessity of obtaining a distress
warrant, writ of sequestration or other legal process) all or any portion of
such furniture, fixtures, equipment and other property located thereon and to
place same in storage at any Premises within the County in which the Premises
is located; and in such event, Tenant shall be liable to Landlord for costs
incurred by Landlord in connection with such removal and storage. Landlord
shall also have the right to relinquish possession of all or any portion of
such furniture, fixtures, equipment and other property to any person
("claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or a predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or
Tenant's predecessor's signature(s) thereon and without the necessity of
Landlord making any nature of investigation or inquiry as to the validity of
the factual or legal basis upon which Claimant purports to act; and Tenant
agrees to indemnify and hold Landlord harmless from all cost, expense, loss,
damage and liability incident to Landlord's relinquishment of possession of
all or any portion of such furniture, fixtures, equipment or other property to
Claimant. Any and all property which may be removed from the Premises by
Landlord pursuant to the authority of this Lease or of Law, to which Tenant is
or may be entitled, may be handled, removed and stored, as the case may be, by
or at the direction of Landlord at the risk, cost and expense of Tenant, and
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upon demand any and all
expenses incurred in such removal and all storage charges against such
property so long as the same shall be in Landlord's possession or under
Landlord's control. Any such property of Tenant not retaken by Tenant from
storage within thirty (30) days after the removal from the Premises shall
conclusively be presumed to have been conveyed by Tenant to Landlord under
this Lease as a bill of sale without further payment or credit by Landlord to
Tenant. The rights of Landlord herein stated shall be in addition to any and
all other rights which Landlord has or may hereafter have at law or in equity;
and Tenant stipulates and agrees that the rights herein granted Landlord are
commercially reasonable.
21.01 Rights Reserved to Landlord. Landlord reserves and may
exercise
the following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or the
Development within 120 days notice.
(b) To install and maintain a sign or signs on the exterior of the
Building;
To designate all sources furnishing sign painting and lettering,
lamps and bulbs used on the Premises so long as such source is an unrelated
third party and prices charged herein is competitive;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or the
Development provided that the granting of such exclusive does not interfere
with Tenant's use of the Premises;
(f) To change the arrangement and/or location of entrances and
corridors in and to the Building and to add, remove, rename
or modify buildings, roadways, parking areas, walkways, landscaping, lakes,
grading and other improvements in or to the
Development so long as such change does not create an unreasonable impediment
to Tenant's business.
22.01 Relocation of Premises. Landlord shall have the right at any
time
during the term hereof, upon giving Tenant not less than sixty (60) days prior
written notice, to provide and furnish Tenant with comparable space of
approximately the same size and configuration as the Premises within the
building and remove and place Tenant in such space, with Landlord to pay all
reasonable costs and expenses incurred as a result of Tenant's removal.
Should Tenant refuse to permit Landlord to move Tenant to such new space at
the end of the sixty (60) day period, Landlord shall have the right to cancel
and terminate this Lease effective ninety (90) days from the date of original
notification by Landlord. If Landlord moves Tenant to the new space, this
Lease and each and all of its Terms, conditions and covenants shall remain in
full force and effect and be deemed applicable to the new space and the new
space shall thereafter be deemed to be the leased Premises as though Landlord
and Tenant had entered into an expressed written amendment of this Lease with
respect hereto. Relocation costs shall include the cost of new stationary and
announcements.
23.01 Landlord's Lien. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all of Tenant's goods, wares, equipment,
fixtures, furniture, inventory, accounts, contract rights, chattel paper and
other personal property situated on the Premises, and such property shall not
be removed therefrom without the consent of Landlord until all arrearages in
rent as well as any and all other sums of money then due to Landlord hereunder
shall first have been paid and discharged. In the event of a default under
this Lease, Landlord shall have, in addition to any other remedies provided
herein or by law, all rights and remedies under the Uniform Commercial Code,
including without limitation the right to sell the property described in this
Section at public or private sale upon five (5) days notice to Tenant. Tenant
hereby agrees to execute such financing statements and other instruments
necessary or desirable in Landlord's discretion to perfect the security
interest hereby created.
Landlord agrees that, upon Tenant's request, Landlord will execute documents
reasonably satisfactory to Landlord which will evidence Landlord's agreement
to subordinate its rights under this Section 23.01 to the rights of Tenant's
lender if the purpose of the request is to enable Tenant to obtain funds
needed for working capital or expansion needs or with respect to existing
loans.
24.01 Subordination. Tenant is accepting this Lease subject and
subordinate to any mortgage and/or deed of trust now or at any time hereafter
constituting a lien or charge upon the Building or the Premises, without the
necessity of any act or execution of any additional instrument of
subordination; provided, however, that if the mortgagee, trustee, or holder of
any such mortgage or deed of trust elects to have Tenant's interest in this
Lease superior to any such instrument, then by notice to Tenant from such
mortgagee, trustee or holder, this Lease shall be deemed superior to such
lien, whether this Lease was executed before or after said mortgage or deed of
trust. Tenant shall at any time hereafter on demand execute any instruments,
releases or other documents which may be required by any mortgagee for the
purpose of evidencing the subjection and subordination of this Lease to the
lien of any such mortgage or for the purpose of evidencing the superiority of
this Lease to the lien of any such mortgage as may be the case.
25.01 Mechanics Liens. (a) Tenant shall have no authority, express
or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind the interests of Landlord in the
Premises or to charge the rentals payable hereunder for any claim in favor of
any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs and nothing contained in this
Lease shall be construed as a consent on the part of the Landlord to subject
the estate of the Landlord to liability under the Construction Lien Law of the
State of Florida, it being expressly understood that the Landlord's estate
shall not be subject to liens for improvements made by Tenant and each such
claim shall affect and each such lien shall attach to, if at all, only the
leasehold interest granted to Tenant by this instrument. Tenant covenants and
agrees that Tenant will pay or cause to be paid all sums legally due and
payable by Tenant on account of any labor performed or materials furnished in
connection with any work performed on the Premises on which any lien is or can
be validly and legally asserted against its leasehold interest in the Premises
or the improvements thereon and that Tenant will save and hold Landlord
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease. Tenant agrees to give Landlord immediate written notice if any lien or
encumbrance is placed on the Premises.
(b) Notwithstanding any provision of this Lease relating to
improvements, additions, alterations, repairs or reconstruction of or to the
Premises, Tenant and the Landlord each agrees and confirm that: (I) Landlord
has not consented nor will Landlord ever consent to the furnishing of any
labor or materials to the Premises that would or may result in any mechanic's
or materialman's lien attaching to Landlord's interest in the Premises; (ii)
Tenant is not the agent of Landlord for the purposes of any such improvements,
additions, alterations, repairs or reconstruction; and (iii) except as
expressly provided herein, Landlord has retained no control over the manner in
which any such improvements, additions, alterations, repairs or reconstruction
are accomplished, and has made no agreement to make or be responsible for any
payment to or for the benefit of any person furnishing labor or materials in
connection therewith. No one furnishing labor or materials to or for Tenant's
account shall be entitled to claim any lien against the interest of Landlord
in the Premises and such entities shall look solely to Tenant and Tenant's
leasehold interest under this Lease for the satisfaction of any such claims.
Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the Premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if
the assessed value of Landlord's property is increased by inclusion of
personal property, furniture or fixtures placed by Tenant in the Premises, and
Landlord elects to pay the taxes based on such increase, Tenant shall pay to
Landlord upon demand that part of such taxes.
26.01 Notices. Each provision of this instrument or of any
applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment shall be deemed to be complied with when and if the following
steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord shall be payable to: Westport Business Park Associates, Lockbox
Number 055079097, P.O. Box 5512, Ft. Lauderdale, Florida 33102-5348, or to
such other entity at the such other address as Landlord may specify from time
to time by written notice delivered in accordance herewith.
(b) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or not,
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith: (a) if to Landlord c/o
Premier Asset Management, Inc., 2100 Park Central Boulevard North, Suite 900,
Pompano Beach, 33064; and (b) if to Tenant at the Premises address.
If and when included within the term "Landlord", or "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments. All parties included within the terms "Landlord" and "Tenant"
respectively, shall be bound by notices given in accordance with the
provisions of this paragraph to the same effect as if each had received such
notice.
27.01 Miscellaneous. (a) Words of any gender used in this Lease
shall
be held or construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires.
(b) The terms, provisions and covenants and conditions contained in
this Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly
provided. Landlord shall have the right to assign any of its rights and
obligations under this Lease and Landlord's grantee or Landlord's successor,
as the case may be, shall upon such assignment, become Landlord hereunder,
thereby freeing and relieving the grantor or assignor, as the case may be, of
all covenants and obligations of Landlord hereunder. Each party agrees to
furnish to the other, promptly upon demand, a corporate resolution, proof of
due authorization by partners, or other appropriate documentation evidencing
the due authorization of such party to enter into this Lease. Nothing herein
contained shall give any other tenant in the Development or the Building any
enforceable rights either against Landlord or Tenant as a result of the
covenants and obligations of either party set forth herein. If there is more
than one Tenant, Tenant's obligation shall be joint and several. Any
indemnification of, insurance of, or option granted to Landlord shall also
include or be exercisable by Landlord's agents and employees.
The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease,
or any provision hereof, or in any way affect the interpretation of this
Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current term
(exclusive of any renewal periods which have not then actually commenced).
This provision is not intended to be a measure or agreed amount of Landlord's
liability with respect to any particular breach and shall not be utilized by
any court or otherwise for the purpose of determining any liability of
Landlord hereunder, except only as a maximum amount not to be exceeded in any
event. In addition, it is expressly understood and agreed that nothing in
this Lease shall be construed as creating any liability against Landlord, or
its successors and assigns, personally, and in particular without limiting the
generality of the foregoing, there shall be no personal liability to pay any
indebtedness accruing hereunder or to perform any covenant, either express or
implied, herein contained, and that all personal liability of Landlord, or its
successors and assigns, of every sort, if any, is hereby expressly waived by
Tenant, and that so far as Landlord, or its successors and assigns is
concerned Tenant shall look solely to the Building for the payment thereof.
(e) This Lease constitutes the entire understanding and agreement
between Tenant and the Landlord with respect to the subject matter of this
Lease, and contains all of the covenants and agreements of Landlord and Tenant
with respect thereto. Tenant and the Landlord each acknowledge that no
representations, inducements, promises or agreements, oral or written, have
been made by Landlord or Tenant, or anyone acting on behalf of Landlord or
Tenant, which are not contained herein, and any prior agreements, promises,
negotiations, or representations not expressly set forth in this Lease are of
no force or effect. Except as set forth in Section 8.01 above, this Lease may
not be altered, changed or amended except by an instrument in writing signed
by both parties hereto.
(f) All of Tenant's obligations not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term, including without limitation,
all payment obligations with respect to Operating Costs and all obligations
concerning the condition of the Premises. Upon the expiration or earlier
termination of the term, and prior to Tenant vacating the Premises, Landlord
and Tenant shall jointly inspect the Premises and Tenant shall pay to Landlord
any amount reasonably estimated by Landlord as necessary to put the Premises,
including without limitation heating and air conditioning systems and
equipment therein, in good condition and repair. Any work required to be done
by Tenant prior to Tenant's vacation of the Premises which has not been
completed upon such vacation, shall be completed by Landlord and billed to
Tenant at cost plus fifteen percent. Tenant shall also, prior to vacating the
Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for Operating Costs. All such amounts shall be used and
held by Landlord for payment of Tenant's obligations hereunder, with Tenant
being liable for any additional costs therefore upon demand by Landlord, or
with any excess to be returned to Tenant after all such obligations have been
determined and satisfied, as the case may be. Any security deposit held by
Landlord shall be credited against the amount payable by Tenant under this
Section.
(g) If any clause, provision or portion of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not affect, impair or
render invalid or unenforceable the remainder of this Lease nor any other
clause, phrase, provision or portion hereof, nor shall if affect the
application of any clause, phrase, provision or portion hereof to other
persons or circumstances, and it is also the intention of the parties to this
Lease that in lieu of each such phrase, provision or portion of this Lease
that is invalid or unenforceable, there be added as a part of this Lease, a
clause, phrase, provision or portion, as similar in form and substance to such
invalid or unenforceable clause, provision or portion as may be possible and
as will be legal, valid and enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation of
the Premises. Landlord shall not be bound hereby until its delivery to Tenant
of an executed copy hereof signed by Landlord, already having been signed by
Tenant, and until such delivery Landlord reserves the right to exhibit and
lease the Premises to other prospective tenants. Notwithstanding anything
contained herein to the contrary Landlord may withhold delivery of possession
of the Premises from Tenant until such time as Tenant have paid to Landlord
the security deposit required hereunder and the first month's rent as required
hereunder, and any other sums required hereunder.
(I) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there shall be
excluded from the computations for any such time period, any delays due to
causes beyond the control of Landlord.
(j) Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute additional rent.
(k) Tenant agrees from time to time within ten (10) days after request
of Landlord, to deliver to Landlord or Landlord's designee, a certificate of
occupancy and an estoppel certificate stating that this Lease is in full force
and effect, the date to which rent has been paid, the expired term of this
Lease, and such other matters pertaining to this Lease as may be requested by
Landlord. It is understood and agreed that Tenant's obligation to furnish
such estoppel certificates in a timely fashion is a material inducement for
Landlord's execution of this Lease.
(l) Tenant represents and warrants that Tenant has dealt with no
broker, agent or other person in connection with this transaction, and that no
broker, agent or other person brought about this transaction, other than
Edward P. Mitchell of Premier Commercial Realty, Inc. (Landlord's broker) and
Steve Wasserman of Lehrer & Company (Tenant's broker). Tenant agrees to
indemnify and hold Landlord harmless from and against any and all claims to
pay any other broker, agent or other person claiming a commission or other
form of compensation other than Premier Commercial Realty, Inc. and Lehrer &
Company by virtue of having dealt with Tenant with regard to this leasing
transaction.
28.01 Compliance With Public Accommodation Laws. Tenant assumes all
responsibility for compliance of the Premises with any and all applicable
laws, regulations and building codes governing non-discrimination and public
accommodations and commercial facilities ("Public Accommodation Laws")
including, without limitation, the requirement of the Americans with
Disabilities Act, 42 USC 12-101 and all regulations and promulgations
thereunder. Tenant agrees to complete any and all alterations, modifications
or improvements to the Premises necessary in order to comply with all Public
Accommodation Laws during the term of this Lease whether such improvements or
modifications are the legal responsibility of the Landlord, Tenant or a third
party. Tenant agrees to indemnify, defend and hold harmless Landlord from and
against any and all claims, liabilities, fines, penalties, losses and
expenses, including attorneys fees, arising in connection with Tenant's
failure to comply with the provisions of this Section. Landlord, but not
Landlord's successors and assigns or any mortgage holder encumbering the
Premises, represents and warrants to Tenant that it has no knowledge that the
Premises is not currently in compliance with the ADA.
29.01 Environmental Matters. (a) Compliance with Environmental Laws.
Tenant shall at all times and in all respects comply with all federal, state
and local laws, ordinances and regulations including Development Orders
("Hazardous Materials Laws") relating to industrial hygiene, environmental
protection or the use, analysis, generation, manufacture, storage, presence,
disposal, or transportation or other handling of any oil, flammable
explosives, asbestos, urea formaldehyde, radioactive materials or waste,
bleaches, detergents, or other hazardous, toxic, contaminated or polluting
materials, substances or wastes, including, without limitations, any
"biohazardous waste", "biomedical waste", "pollutants", "petroleum products",
"hazardous chemicals", "hazardous substances", "hazardous wastes", "hazardous
materials" or "toxic substances" under any such laws, ordinances or
regulations (collectively, "Hazardous Materials").
(b) Hazardous Materials Handling and Storage. Tenant agrees that, at
Tenant's own expense, Tenant will procure, maintain in effect and comply with
all conditions of any and all permits, licenses and other governmental and
regulatory approvals required for Tenant's use of the Premises, including,
without limitation, discharge of (appropriately treated) materials or wastes
into or through any sanitary sewer serving the Premises. Except as discharged
into the sanitary sewer in strict accordance and conformity with all
applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous
Materials removed from the Premises to be removed and transported solely by
duly licensed haulers to duly licensed facilities for final disposal of such
materials and wastes. Tenant shall in all respects handle, treat, deal with
and manage any and all Hazardous Materials in, on under or about the Premises
in total conformity with all applicable Hazardous Materials Laws and prudent
industry practices regarding management of such Hazardous Materials. All
reporting obligations imposed by Hazardous Materials Laws are strictly
Tenant's responsibility. Upon expiration or earlier termination of the term of
the Lease, Tenant shall cause all Hazardous Materials to be removed from the
Premises and transported for use, storage or disposal in accordance and
compliance with all applicable Hazardous Materials Laws. Tenant shall not take
any remedial action in response to the presence of any Hazardous Materials in
or about the Premises or any Building, nor enter into any settlement
agreement, consent decree or other compromise in respect to any claims
relating to any Hazardous Materials in any way connected with the Premises or
Building, without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, Tenant shall remove any tanks or fixtures
which contain or contained, or are contaminated with Hazardous Materials.
If Tenant, under the Lease, is expressly allowed to store Hazardous Materials
at the Premises, then all Hazardous Materials shall be stored indoors, in a
safe and secure manner, designed to ensure that any spills, overflows, or
discharges will be reasonably prevented from entering the soils, groundwater,
drainage, and/or sanitary sewer system serving the Premises.
Underground or Above Ground Tanks. Tenant will not be allowed to
construct or use any underground or above ground tanks for the purpose of
storing Hazardous Materials without first obtaining the express written
consent of the Landlord. Landlord reserves the following rights: (I) the
sole and exclusive right to prohibit for any reason whatsoever the use or
construction of underground or above ground tanks; (ii) the right to specify
how the tanks will be constructed, how the tanks will be operated and how the
tanks will be monitored; (iii) the right to be listed as an insured on
Tenant's liability insurance policy with respect to the use of the tanks; and
(iv) the right to require Tenant to execute an indemnification and hold
harmless agreement which indemnifies and holds Landlord harmless from any
damages caused by Tenant's use of the tanks.
Upon the termination of the Lease, Tenant agrees to pay for and shall be
required to remove any underground or above ground tanks and to restore the
Premises to the condition it was in prior to the construction of the tank(s).
(d) Notices. Tenant must immediately notify Landlord in writing of: (I)
any enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant, the Premises
or Building relating to damage, contribution, cost recovery compensation, loss
or injury resulting from or claimed to result from any Hazardous Materials;
and (iii) any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials; (iv) any reports made to any
environmental agency arising out of or in connection with any Hazardous
Materials in, on or removed from the Premises or Building, including any
complaints, notices, warnings, reports or asserted violations in connection
therewith; and (v) any requests for permit approvals or exemptions to any
regulatory agency and the regulatory agency's response to the request. Tenant
shall also supply to Landlord as promptly as possible, and in any event within
five (5) business days after Tenant first receive or send the same, with
copies of all claims, reports, complaints, notices, warnings or asserted
violations relating in any way to the Premises, Building or Tenant's use
thereof. Tenant shall promptly deliver to Landlord copies of hazardous waste
manifests reflecting the legal and proper disposal of all Hazardous Materials
removed from the Premises.
29.02 Indemnification of Landlord. Tenant expressly agrees to
indemnify, defend (by counsel acceptable to Landlord), protect, and hold
Landlord, and each of Landlord's partners, employees, agents, attorneys,
successors and assigns, free and harmless from and against any and all claims,
liabilities, penalties, forfeitures, losses or expenses (including attorneys'
fees) for death of or injury to any person or damage to any property
whatsoever (including water tables and atmosphere), arising from or caused in
whole or in part, directly or indirectly, by (I) the presence in, on, under or
about the Premises or Building or discharge in or from the Premises or
Building of any Hazardous Materials caused by Tenant or Tenant's use,
analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under, about or
from the Premises or Building, or (ii) Tenant's failure to comply with any
Hazardous Materials Law whether knowingly or unknowingly, the standard herein
being one of strict liability. Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repair, cleanup or detoxification or decontamination of
the Premises or Building, and the preparation and implementation of any
closure, remedial action or other required plans in connection therewith, and
shall survive the expiration or earlier termination of the term of the Lease.
For purposes of the release and indemnity provision hereof, any acts or
omissions by Tenant, or by Tenant's employees, agents, assignees, contractors
or subcontractors or others acting on Tenant's behalf (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
29.03 Additional Insurance or Financial Capacity. If at any time it
reasonably appears to Landlord that Tenant is not maintaining insurance or
other means of financial capacity to enable Tenant to fulfill Tenant's
obligation to Landlord hereunder, whether or not then accrued, liquidated,
conditional or contingent, Tenant shall procure and thereafter maintain in
full force and effect such insurance or other form of financial assurance,
with or from companies or persons and in forms reasonably acceptable to
Landlord, as Landlord may from time to time reasonably request. Landlord may
procure such insurance if Tenant fails to meet Tenant's obligation hereunder
and the cost thereof shall be passed through to Tenant.
29.04 Environmental Audit; Right of Entry. Landlord shall have the right
to require Tenant to undertake and submit to Landlord a periodic environmental
audit from an environmental company approved by Landlord, which audit shall
cover Tenant's compliance with this Section. Tenant shall promptly comply with
all requirements of such audit and cure all matters raised therein at Tenant's
sole cost. Unless Landlord has actual knowledge or a reasonable belief that
Tenant is not in compliance with Hazardous Materials Laws, the audit shall be
done by Landlord, at Landlord's cost, provided, however, if the audit reflects
Tenant's non compliance with Hazardous Material Laws, then Tenant agrees to
reimburse to Landlord the cost of the audit.
Tenant agrees to grant to all interested governmental agencies reasonable
access to the Premises.
29.05 Radon Gas. Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
Tenant's county public health unit.
30.01 Effective Date. The date of this Lease and all references in
this Lease to "the date hereof" or similar references shall be deemed to refer
to the last date in point of time, on which all parties hereto have executed
this Lease.
31.01 Tenant Improvements. Landlord shall complete the following
Tenant Improvements in Building Standard Materials.
1. Demise the Premises.
2. Separate the electric.
3. Provide a $5,000.00 allowance for the relocation of walls in
the office area, which work will be performed by Tenant and payment of the
allowance will be paid after the work is completed.
These are the only Tenant Improvements to be provided by Landlord.
32.01 First Extended Term. Tenant shall have the option to extend
the term of this Lease for a thirty-six (36) month extended term (the "First
Extended Term"), the First Extended Term to begin on the day after the end of
the primary term of the Lease. To effectively exercise Tenant's First
Extended Term option, Tenant must provide the Landlord with written notice of
Tenant's intention to extend and the written notice must be received by the
Landlord no later than six (6) months prior to the end of the primary term of
this Lease. If Landlord does not receive Tenant's written notice of Tenant's
intention to extend the term prior to the six (6) month deadline, Tenant shall
not be entitled to exercise the First Extended Term option.
32.02 Base Rent During First Extended Term. If Tenant exercises
Tenant's First Extended Term option, then Tenant agrees to pay to Landlord
monthly base rent for the Premises, in advance, without demand, deduction or
set off, for the entire First Extended Term hereof beginning on the first day
of the First Extended Term at a rate equal to the then market rate for
comparable property in Ft. Lauderdale, Florida determined as of the first day
of the First Extended Term. The monthly base rental shall be adjusted on each
anniversary date of the first day of the First Extended Term (the Adjustment
Date") falling within the First Extended Term, the adjustment to be computed
in accordance with Section 34.01. For purposes of this Section 32.02, the
determination of market rate shall be made by Landlord. Notwithstanding,
Tenant shall have the right to disagree with Landlord's determination and to
submit Tenant's own determination of market rate. If Landlord does not agree
with Tenant's determination, then Tenant and the Landlord shall mutually
select an independent appraiser qualified to appraise commercial property and
who shall have experience in the appraisal of similar properties in the Ft.
Lauderdale area. The sole function of the independent appraiser shall be to
determine which among Landlord's and Tenant's determinations of market rate is
correct and the decision of the independent appraiser shall be final and
binding upon the parties. The cost of the independent appraiser shall be paid
for by the party whose market rate determination was found by the independent
appraiser to not be correct. In this regard, the standard to be used by
Landlord, Tenant and the independent appraiser in determining market rate is
the rent that a new tenant first moved into the Premises would pay if the new
tenant had Tenant's rights and obligations under the Lease.
Notwithstanding anything in the above to the contrary, Landlord reserves the
right to refuse to allow Tenant the option of extending the term of this Lease
if: (a) Tenant is not occupying and doing business from the Premises at the
time an option to extend is exercised or at the time the extended term
commences.
During any extended term of this Lease, all of the terms, covenants and
conditions of this Lease shall apply as if the extended term were part of the
primary term of the Lease.
33.01 Second Extended Term. Tenant shall have the option to extend
the term of this Lease for a thirty-six (36) month extended term (the "Second
Extended Term"), the Second Extended Term to begin on the day after the end of
the First Extended Term of the Lease. To effectively exercise Tenant's Second
Extended Term option, Tenant must provide the Landlord with written notice of
Tenant's intention to extend and the written notice must be received by the
Landlord no later than six (6) months prior to the end of the First Extended
Term of this Lease. If Landlord does not receive Tenant's written notice of
Tenant's intention to extend the rental term prior to the six (6) month
deadline, Tenant shall not be entitled to exercise the Second Extended Term
option.
33.02 Base Rent During Second Extended Term. If Tenant exercises
Tenant's Second Extended Term option, then Tenant agrees to pay to Landlord
monthly base rent for the Premises, in advance, without demand, deduction or
set off, for the entire Second Extended Term hereof beginning on the first
day of the Second Extended Term at a rate equal to the then market rate for
comparable property in Ft. Lauderdale, Florida determined as of the first day
of the Second Extended Term. The monthly base rental shall be adjusted on
each anniversary date of the first day of the Second Extended Term (the
Adjustment Date") falling within the Second Extended Term, the adjustment to
be computed in accordance with Section 34.01. For purposes of this Section
33.02, the determination of market rate shall be made by Landlord.
Notwithstanding, Tenant shall have the right to disagree with Landlord's
determination and to submit Tenant's own determination of market rate. If
Landlord does not agree with Tenant's determination, then Tenant and the
Landlord shall mutually select an independent appraiser qualified to appraise
commercial property and who shall have experience in the appraisal of similar
properties in the Ft. Lauderdale area. The sole function of the independent
appraiser shall be to determine which among Landlord's and Tenant's
determinations of market rate is correct and the decision of the independent
appraiser shall be final and binding upon the parties. The cost of the
independent appraiser shall be paid for by the party whose market rate
determination was found by the independent appraiser to not be correct. In
this regard, the standard to be used by Landlord, Tenant and the independent
appraiser in determining market rate is the rent that a new tenant first moved
into the Premises would pay if the new tenant had Tenant's rights and
obligations under the Lease.
Notwithstanding anything in the above to the contrary, Landlord reserves the
right to refuse to allow Tenant the option of extending the term of this Lease
if: (a) Tenant is not occupying and doing business from the Premises at the
time an option to extend is exercised or at the time the extended term
commences.
During any extended term of this Lease, all of the terms, covenants and
conditions of this Lease shall apply as if the extended term were part of the
primary term of the Lease.
34.01 Rent Escalation: On each Adjustment Date, the monthly base
rent
amount shall be adjusted in accordance with the Consumer Price Index for Urban
Wage Earners and Clerical Workers (U.S. City Average: All Items), issued by
the Bureau of Labor Statistics of the U.S. Department of Labor (the "Index")
using the 1982-84 as a base of 100 ("Index Number"). The monthly base rent
shall be adjusted by multiplying the monthly base rent currently payable
immediately before adjustment by a fraction, the numerator of which shall be
the Index Number for the third month immediately preceding the Adjustment Date
and the denominator of which shall be the Index Number for the fifteenth month
immediately preceding the Adjustment Date.
If the Index is changed so that it affects the calculations achieved
hereunder, the Index will be converted in accordance with a conversion factor
published by the U.S. Department of Labor, Bureau of Labor Statistics. If the
Index is discontinued during the term of this Lease, such other government
index or computation with which it is replaced shall be used in order to
obtain substantially the same result as would have been obtained if the Index
had not been discontinued.
Each and every term and provision of this Lease, including all exhibits
attached hereto, is agreed to by Tenant on January 10, 1997.
TENANT
Contour Medical, Inc.
(Witnesses as to Tenant) a Nevada corporation
/s/ Lou Ann Englis By: /s/ Donald F. Fox
/s/ James J. Brands Print Name: Donald F. Fox
Print Title: PRES/CEO
Each and every term and provision of this Lease, including all exhibits
attached hereto, is agreed to by the Landlord on ____________________, 1997
LANDLORD
WESTPORT BUSINESS PARK ASSOCIATES
a Florida general partnership
(Witnesses as to Landlord)
By: Sarria, Inc.,
___________________________ a Florida corporation
___________________________ By:______________________________
Isaac Sredni, President
By: Saldano, Inc.,
_________________________ a Florida corporation
_____________________________ By:________________________________
Erwin Sredni, President
By: Alesio, Inc.,
a Florida corporation
By:_________________________________
Jack Azout, President
<PAGE>
EXHIBIT A
Legal Description
Approximately 25,175 square feet of office and/or warehouse space located in a
building containing approximately 132,001 square feet situated on a portion of
Phase I which consists of approximately 12.435 acres on a portion of Tracts 2
and 3 in Tier 31, together with a portion of Tract 2 in Tier 33, together with
a portion of Tract 2 in Tier 35 and a portion of that 30 foot roadway (now
vacated) lying between said Tiers 33 and 35, all according to the Plat of
"Newman's Survey", recorded in Plat Book 2, Page 26 of the Public Records of
Dade County, Florida. Property lies within the 100-year flood plain.
Premises more particularly described as 2525 Davie Road, Fort Lauderdale,
Florida as shown in Exhibit B. Further described as Westport Building Three
situated within a development known as Westport Business Park consisting of
approximately 51,447 acres.
<PAGE>
EXHIBIT B
[DIAGRAM]
SUBSIDIARIES OF THE REGISTRANT
Other Names
Under Which
State of Business
Name of Subsidiary Incorporation is Conducted
- --------------------------------------- ------------- ------------
Contour Medical - Michigan, Inc. Michigan None
Contour Medical of Central Florida, Inc. Florida None
AmeriDyne Corporation Tennessee None
Atlantic Medical Supply Company, Inc. Georgia None
Americare Health Services Corp. Delaware None
Americare Group Purchasing Corp. Delaware None
Facility Supply, Inc. Florida None
Gerimed, Inc. Florida None
Florida ACLF, Inc. Florida None
Quest Medical Supply, Inc. Georgia None
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Contour Medical, Inc.
Alpharetta, Georgia
We hereby consent to the incorporation by reference in the Registration
Statement of Contour Medical, Inc. on Form S-8 (File Number 33-92110) of our
report dated October 9, 1997 relating to the consolidated financial statements
of Contour Medical, Inc. and Subsidiaries as of June 30, 1997 and 1996 and for
the years then ended appearing in the Company's Annual Report on Form 10-K for
the year ended June 30, 1997.
/s/ Cherry, Bekaert & Holland, L.L.P.
Cherry, Bekaert & Holland, L.L.P.
October 9, 1997
Greensboro, North Carolina
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Contour Medical, Inc.
St. Petersburg, Florida
We hereby consent to the incorporation by reference in the Registration
Statement of Contour Medical, Inc. on Form S-8 (File Number 33-92110) of our
report dated August 18, 1995, except for the stock split discussed in Note 9
which is as of March 15, 1996, relating to the consolidated financial
statements of Contour Medical, Inc. and subsidiaries appearing in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Orlando, Florida
October 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages F-3 and F-4 of the
Company's Form 10-K for the fiscal year ended June 30, 1997, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 311,657
<SECURITIES> 0
<RECEIVABLES> 12,946,824
<ALLOWANCES> 2,804,734
<INVENTORY> 5,130,142
<CURRENT-ASSETS> 20,172,349
<PP&E> 1,492,918
<DEPRECIATION> 624,142
<TOTAL-ASSETS> 32,521,176
<CURRENT-LIABILITIES> 10,647,418
<BONDS> 0
0
623,414
<COMMON> 7,334
<OTHER-SE> 15,796,188
<TOTAL-LIABILITY-AND-EQUITY> 32,521,176
<SALES> 53,349,137
<TOTAL-REVENUES> 53,349,137
<CGS> 39,681,159
<TOTAL-COSTS> 52,654,833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,295,556
<INCOME-PRETAX> (374,901)
<INCOME-TAX> (115,257)
<INCOME-CONTINUING> (259,644)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (259,644)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
