<TABLE>
ANNUAL REPORT FOR SMALL BUSINESS ISSUERS
SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1995
Commission File No. 0-17068
EXCAL ENTERPRISES, INC.
(Name of small business issuer as specified in its charter)
Delaware 59-2855398
(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
100 N. Tampa Street Tampa, Florida 33602
(Address of principal executive offices, including zip code)
(813) 224-0228
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act:
Title of Each Class Name of each Exchange
on Which Traded
Common Stock N/A
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was
required to file such reports), and, (2) has been subject to
such filing requirements for the past 90 days.
Yes__X__ No_____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form and no
disclosure will be contained to the best of registrant's knowledge,
in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any amendment of
this Form 10-KSB. [ ]
Revenue for the fiscal year ended June 30, 1995 was $2,238,986.
The aggregate market value of the voting stock held by
non-affiliates computed by reference to the closing bid price of
such
stock of $1.50 as of August 31, 1995 was $4,213,839.
The number of shares outstanding of the issuer's common capital
stock, par value $.001 per share, as of September 30, 1995
was 4,666,866 shares.
ITEM 1. BUSINESS
General
Excal Enterprises, Inc., a Delaware corporation (the
"Company"), was formed in July 1986. In June 1995, the Company
changed its name from Assix International, Inc. During the initial
years of its operating history, the Company acquired, by
way of a series of mergers and asset acquisitions, the assets of
predecessor entities which were engaged in business
operations substantially similar to those presently conducted by
the Company's automotive division. On June 30, 1995, the
Company transferred all its automotive assets, contracts, and
related liabilities to Assix Automotive, Inc., a newly formed,
wholly-owned subsidiary. The Company's automotive division markets
ride-related automotive services through retail tire
dealer service outlets.
The Company engages in two distinct business operations: (i)
its automotive services operations and (ii) its commercial
real estate lease operations. The Companys commercial real estate
lease operations are operated through Imeson Center,
Inc., a wholly-owned subsidiary. This subsidiary owns, leases, and
manages certain real property located in Jacksonville,
Florida consisting of a two story building containing approximately
1,676,000 square feet of rentable office and warehouse
space. This property was acquired from Sears as part of the
settlement agreement regarding termination of the licensed dealer
agreement between the Company and Sears in February 1994.
The Company appointed Mr. W. Carey Webb as its new President
and Chief Executive Officer in August 1994. Mr.
Webb is responsible for redirecting the Company's operations while
developing a new senior management team. The
Company hired Mr. Scott Glasscock as General Manager of the
Companys automotive division in January 1995. The
Company hired Mr. Timothy R. Barnes as its Vice President and Chief
Financial Officer in August 1995. Mr. R. Park
Newton, III, the Company's former President and Chief Executive
Officer and now, Chairman of the Board (a board position
only), resigned from all officer positions of the Company and its
subsidiaries in September 1995 and is no longer involved in
operational matters other than as a member of the board of
directors. The Company plans to pursue various growth
strategies and new opportunities.
Imeson Center Real Estate Operations
The Company's real estate operations are limited to the
management of the property owned by its wholly-owned
subsidiary, Imeson Center, Inc. The officers and directors of
Imeson Center, Inc. are comprised of certain of the Company's
officers and directors. The building itself is broken into 15
separate warehouse bays each containing 99,446 square feet of
rentable space. Seven bays are located on the first floor with
eight bays on the second floor. An additional first floor bay is
divided into two floors of office space, each containing
approximately 92,000 square feet of rentable space and a lobby
area.
As of June 30, 1995, 13 of the warehouse bays and one floor of the
office space were leased (See Dependence on Major
Customers).
The Property includes approximately 74 acres of real estate.
The Company is investigating its options regarding
development or sale of some of the out parcels, subject to the
presence of suitable purchasers or lessees and compliance with
environmental and other applicable laws. Any such development or
preparation for sale will require capital expenditures by
the Company.
Automotive Services Operations
Automobile owners balance their automobile's tires to reduce
vibration transmitted from the tires to the automobile
frame. These vibrations, commonly referred to as "out of balance"
or "smooth road shake", are caused by the stress of
normal driving conditions and by replacement of the automobile's
original tires with newly purchased tires that may not
precisely match the wheel assembly. The conventional electronic
wheel balancer reduces imbalance in the tire/wheel
assembly by determining a particular location on the wheel rim to
place lead weights to countereffect the imbalance in the
wheel assembly and to allow the wheel to achieve uniform
rotation.
The Company markets its AccuBalance program, a 5 step wheel
balance program that is the latest state-of-the-art
technology in ride-related services, through licensed dealers. The
AccuBalance program is the only name-brand process
which restores OEM specifications for a complete (static balance,
dynamic balance, and flex correction) wheel balance to the
tire/wheel assembly. This added value service provides the
smoothest ride possible while improving tire life and overall
vehicle handling and performance.
Prior to 1991, the Company marketed a premium wheel balancing
service under the Tire Matching brand name through
licensed dealers with its Tire Matcher System TM6000 ("TM6000").
The TM6000 measured and reduced the flex variation
of a tire/wheel assembly. Following this procedure, the assembly
was balanced on a conventional wheel balancer
manufactured by other industry suppliers. The Company no longer
utilizes the TM6000 and transferred substantially all of
its TM6000 machines to Sears, a former licensed dealer in fiscal
1994. The principal ride-related service the Company's
automotive division presently markets to the general public through
its licensed dealers is the AccuBalance
("AccuBalance") complete wheel balancing program using its Corvi
marketing program and Combi System TM7000 (the
"Combi-Matcher"). The Company provides its licensed dealers with
equipment, necessary training, service and marketing
support in order that they may sell the Company's AccuBalance
service to the general public in exchange for certain
payments to the Company for usage of its proprietary service.
The Company's Combi-Matcher combines into one mechanism a
conventional electronic wheel balancer to reduce "out
of balance" in the wheel assembly and the Companys tire matching
technology to reduce force variation by buffing the outer
shoulder of the tire. The Combi-Matcher applies hydraulic
pressure to the rotating, inflated tire/wheel assembly to simulate
actual driving conditions and automatically balances the tire/wheel
assembly. The tire buffing device detects any
unacceptable flex variation of the tire/wheel assembly side-wall
under simulated driving conditions ("force variation
technology"), and buffs the tire in designated areas of the tread.
This process provides consistent tire/wheel assembly
shoulder strength ("uniform flex") throughout the circumference of
the assembly and results in a more uniform tire tread
footprint on the road.
The Company's use of force variation technology to reduce flex
variation of the tire tread is a technique initially
introduced into tire production facilities in the mid-1970's by the
automotive industry. Given that tire manufacturing remains
highly labor-intensive and is subject to manufacturing variances,
tire manufacturers have developed a number of patented
devices and techniques to reduce force variation and achieve high
product quality. While these tire manufacturers' patented
devices and techniques have proven effective and reliable in
reducing "out of balance" conditions, the combination of
operational complexity, high manufacturing cost, and the need for
trained personnel have generally confined the use of this
technology to the original equipment manufacturing facilities.
Although these devices reduce "out of balance" in the original
tire equipment, they are of limited practical use in the automobile
after-market where normal driving conditions have caused
rim stress within the wheel rim. Management believes that the
AccuBalance service is the only service currently available in
the automotive after-market industry that uses force variation
technology to reduce the effects of rim stress, and/or force
variation.
Management of the Company also believes that its AccuBalance
service, which combines the functions of a conventional
electronic wheel balancer with the Companys tire matching
technology, is technologically superior to utilization of a
conventional electronic wheel balancer alone. However, there can
be no assurance that the AccuBalance technology is in fact
technologically superior or that competing technology will not be
developed that is superior, less labor-intensive or more
cost-effective than the Companys AccuBalance technology.
Management believes, although there can be no assurance, that
normal growth of the tire dealers comprising the
Company's current licensed dealer network may increase the number
of licensed dealer locations utilizing the Combi-
Matcher technology. If the number of licensed dealers utilizing
the Combi-Matcher technology increases or if expenses are
lowered, management believes the automotive operation will reduce
its operational loss. Net profit from automotive
operations will be realized only if sufficient economies of scale
are achieved through the expansion of the Company's
licensed dealer network. This expansion will require additional
investment in marketing and capital, the availability of which
cannot be assured.
Market For the Company's Products and Services
The Company believes that a market exists for its AccuBalance
services. The sale of tires and ride-related services is
accomplished primarily through retail tire dealer service outlets.
The Company's management is of the opinion that the retail
sale of automobile tires has become intensely competitive,
resulting in a negative impact on the profit margins of retail
tire
dealers in general. Consequently, it is management's opinion that
retail tire-dealers increasingly rely upon the sale of ride-
related services to increase revenue and produce margins of profit
not otherwise achievable from tire sales alone.
Management believes that the AccuBalance service directly
addresses the commercial realities of today's after-sale
automotive services market. The Company's AccuBalance service
program is made available to tire dealer retail service
outlets which agree to serve as licensed dealers upon terms and
conditions negotiated between the Company and the
participating retail service outlets. The Company's marketing plan,
an integral part of the AccuBalance service program,
recommends pricing the AccuBalance service for approximately 50%
more than the standard fee for conventional electronic
wheel balancing. The Company believes that retail customer
acceptance of and satisfaction with the AccuBalance service
supports this recommended price structure. Accordingly, the
Company believes that the AccuBalance service should be
more profitable for its licensed dealers than a conventional
electronic wheel balancing program.
The Company believes the AccuBalance service is compatible
with the existing business operations of its licensed
dealers. At retail tire dealer outlets, ride-related services are
already sold to the public. The licensed dealer merely provides
an additional ride-related service that complements the existing
product and service lines of the retail outlet. Under the
Company's typical agreement with licensed dealers, the Company
provides the licensed dealers with all necessary equipment,
continuous maintenance service and promotional material. The
licensed dealers then perform the AccuBalance service using
the Company's equipment, in exchange for which the Company receives
certain fees calculated, in part, by reference to the
actual usage of the service.
The Company previously established a nationwide network of
licensed dealers that performed the Matching service
utilizing the TM6000. However, the Company's licensed dealers
utilizing the TM6000 have terminated their relationship
with the Company. Although management of the Company intends to
continue to market the Company's AccuBalance
service utilizing the Combi-Matcher technology, there can be no
assurance that the Company will be successful in those
efforts or that, if successful, those efforts will result in
significant or sustained revenue in the Company. Training and
selling
costs associated with the AccuBalance service and competitive
pricing within the geographic service area of each licensed
dealer, among other things, may have a negative impact upon the
profitability of the AccuBalance service program.
Dependence on Major Customers
The Company's automotive operation has derived substantially
all of its revenue from service agreements entered into
with licensed dealers. In fiscal 1994, Sears, a former licensed
dealer who utilized the TM6000 machines, terminated its
relationship with the Company. Sears represented 76% of the
Company's fiscal 1994 revenue. Big Ten Tires terminated its
relationship with the Company effective June 30, 1995. Big Ten
Tires represented 25% and 7% of the Companys automotive
services revenue in fiscal 1995 and fiscal 1994, respectively. As
a result, the Company's automotive operations have been
substantially reduced.
As of July 1, 1995, the Company's automotive operations
consisted of eleven different licensed dealer agreements
representing 131 Combi-Matcher licensed dealer programs. Three of
these agreements, with Michel Tire Company, 4 Day
Tire, and Tires by Wheel Works, Inc., accounted for 62% of the
Companys automotive services revenue in fiscal 1995
(82% excluding revenue from Big Ten Tires). Management of the
Company is attempting to increase the automotive
operation's network of licensed dealers. This expansion effort is
concentrated in the geographic areas within which the
Company currently operates (California, Texas, Ohio, Indiana,
Kentucky, Tennessee, Florida and Georgia).
The Company had leases with two tenants for its Imeson Center
facility as of June 30, 1995. The first lease, with Laney
& Duke Terminal Warehouse Company, Inc. (Laney & Duke), is for
1,293,000 square feet of warehouse space and expires
on December 31, 1995. The Company is negotiating with the lessee to
obtain a new lease beginning January 1, 1996. The
second lease, with America Online (AOL), is for 92,000 square feet
of office space beginning June 16, 1995 and terminating
on June 15, 2002. The Company currently has 199,000 square feet of
warehouse space and 92,000 square feet of office space
that is not leased. Significant renovations will need to be made to
the available space before it can be leased. In addition, the
two-story construction of the warehouse facility is unique and may
limit the number of businesses that would consider the
property suitable for lease. No assurances can be made regarding
the likelihood of locating tenants for the available space or
obtaining a new lease with the existing tenant of the warehouse
space. Management expects Imeson Center to account for the
majority of the Companys revenue and profit in fiscal 1996.
Competition
All aspects of the tire and automotive service business are
highly competitive. The business is subject to numerous
competitive factors which include price, quality, reliability and
market acceptance. The Company believes that its
competitive position is enhanced by the unique features of the
Combi-Matcher, the quality and performance of the
AccuBalance service, and the Company's delivery, training and
service capability. Although the Company believes that its
AccuBalance service is unique to the marketplace, there can be no
assurance that other companies with significantly greater
financial, marketing, technological or other resources will not
prove competitive. There can be no assurance that any of the
Company's competitors will not implement aggressive pricing
strategies or develop superior technology, either of which
could adversely impact the Company's competitive position. In
order to remain competitive in its market, the Company may
be required to develop and manufacture new, more competitive
products or services or to develop more competitive and cost
effective training and service capabilities. These activities may
require substantial capital expenditures, the funds for which
may not be available, and even if such expenditures are made, they
may not prove successful.
With respect to the Company's real estate subsidiary, the
commercial real estate market is subject to numerous
competitive factors, including the location of the real property,
the physical condition of the real property, the owner or
lessor's willingness to make capital improvements, the duration and
terms of any leasing arrangements, the availability of
financing for capital improvements and purchase obligations, and
fluctuations in real property values.
Product Development and Enhancement
The Company spent $169,327 in fiscal 1995 to improve the wheel
balancing system incorporated in its Combi-Matcher
licensed dealer program. The wheel balancing system currently used
by the Company is manufactured by Beissbarth, an
unrelated entity. The Company is dependent on Beissbarth for
access to repair parts for the balance portion of the licensed
dealer programs. If the Company is unable to obtain the parts
required to maintain its equipment, there would be a significant
negative impact on the Companys operations. The Company intends to
use the improved balancer in the manufacture of new
Combi-Matcher licensed dealer programs.
Patents, Licenses, Trademarks
The technological processes used in the Combi-Matcher are, in
the belief of management, adequately covered by three
United States patents that have been licensed to the Company. Two
of the patents expire in 1996 and the other patent expires
in 1997. The Company believes that these patents give its product
and services a competitive advantage over available
conventional electronic wheel balancing products and services.
The Company is not aware of any pending or threatened actions
by third-party entities alleging that the Combi-Matcher
infringes any patents, nor does it believe that any of its business
activities constitute an actual or threatened infringement on
any applicable patents. Moreover, management of the Company is
not aware of any pending or anticipated patent
applications covering technological processes similar in nature to
the processes covered by the Company's patents. However,
if third parties obtain patent protection of processes similar in
nature or competitive to that of the Combi-Matcher process, or
upon the expiration in 1996 and 1997 of the Company's remaining
patents covering those technologies, either such event may
have a materially adverse impact upon the financial condition of
the Company.
The Company previously acquired certain proprietary rights to
the Combi-Matcher pursuant to an agreement that
obligates the Company to pay Lourens de Groot a royalty fee equal
to $80 per Combi-Matcher produced by the Company.
The Company entered into a lease and license agreement with
Ride Control Systems, Inc., a South Carolina company
wholly-owned by R. Park Newton, III and his wife. In June 1994,
the Company entered into a settlement agreement with
Ride Control Systems, Inc. and R. Park Newton regarding the lease
and license agreement. See "Item 12. Certain
Relationships and Related Transactions."
United States patent applications for aspects of the
Combi-Matcher not covered by the above-referenced patents and
certain international patent applications have been filed by the
Company or have been transferred to the Company by the
prior claimants to the patent protection for such technology. Such
patent applications remain pending at this time. The
Company is not actively pursuing the issuance of the applied-for
patents and the Company therefore does not expect the
applied-for patent protection to be granted in the foreseeable
future. There can be no assurance that patents will be issued or,
if issued, that the extent of their coverage will provide adequate
protection for the Company's technological processes.
The registered trademark "AccuBalance" is owned by the
Company. Other trademarks registered in the name of the
Company include "Assix", "For That New Car Ride", "Quality
Assurance", "The Final Mile", "Assuring Your Total Ride
Value" and "Rim Stress." In addition to the marks associated with
certain of the referenced trademarks, the stylized smiling
vehicle mark is a service mark registered in the Company's name.
Employees
On September 30, 1995, the Company employed 23 full time
employees. Of that number, 5 were employed in the
corporate offices, 13 were employed in the automotive subsidiary
and 5 were employed by the real estate subsidiary. By
contrast, on October 1, 1993, the Company had 42 full-time
employees and 2 part-time employees. The reduction was
primarily attributable to the loss of Sears as a licensed dealer
and a restructuring plan implemented in the fall of 1993. The
Company reduced its work force through a combination of voluntary
attrition and termination of certain employees.
The Company's employees' are not covered by collective
bargaining agreements. The Company believes the relations
with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's real property consists of approximately
1,676,000 square feet of warehouse/office space in a single two
story structure (of which 1,492,000 square feet is warehouse space
and 184,000 square feet is office space) located on 74
acres at One Imeson Park Boulevard in Jacksonville, Florida. This
property is primarily built of concrete and steel with a flat
roof. There are no liens or encumbrances on the property. The
Company intends to lease the warehouse/office space in this
property in order to generate recurring revenue sufficient to cover
all operating costs.
On July 8, 1994, the Company purchased a 35,000 square foot
facility at 808 N. Rome Avenue in Tampa, Florida which
contains management offices and serves as its automotive services
manufacturing facility. The Company owns this property
free and clear of any liens or encumbrances.
The Company entered into a lease for approximately 3,500
square feet of office space for its executive offices at 100
North Tampa Street, Suite 3575, Tampa, Florida 33602. The lease on
this downtown Tampa office space commenced
October 15, 1994 and terminates on October 15, 2000.
The Company believes that its present facilities are adequate
for its expected operations.
ITEM 3. LEGAL PROCEEDINGS
Other than the litigation described in Note 15 of the
accompanying financial statements, which is incorporated herein by
reference, the Company is aware of no other material legal
proceedings, pending or threatened, to which any director, officer
or affiliate of the Company, or any beneficial owner of more than
5% of the Companys common stock is a party adverse to
the Company or has a material interest adverse to the Company or to
which the Company is a party or its property subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on
May 31, 1995 in Jacksonville, Florida to elect three
nominees as members of the Board of Directors, to ratify the
selection by the Company's Board of Directors of Pender,
Newkirk & Company as independent certified public accountants for
the Company's fiscal year ended June 30, 1995, to
approve the transfer of all of the Companys automotive assets to
Assix Automotive, Inc., a newly formed wholly-owned
subsidiary of the Company, and to amend the Companys Certificate of
Incorporation to change the name of the Company to
Excal Enterprises, Inc. All matters put before the shareholders
passed with voting as follows:
<CAPTION>
Description
For Against Abstained
Director nominees:
<S> <C> <C>
<C>
R. Park Newton, III 3,940,870
214,350 -
Aris Newton
3,952,942 202,278 -
John L. Caskey 3,954,574
200,646 -
Notification of accountants 4,113,406
13,670 28,144
Transfer of automotive assets 2,448,620
61,038 85,484
Corporate name change 3,909,710
67,958 28,084
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ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
<TABLE>
From October 1988 to October 1, 1993, shares of the Company's
common stock were listed for trading on the National
Association of Security Dealers, Inc. Automated Quotation System
(NASDAQ). Effective October 1, 1993, the Company
was delisted from NASDAQ for failing to have complete Annual
Reports on Form 10-K filed for the years ended June 30,
1991 and June 30, 1992. From August 1988 until September 1994, the
Company was also listed on the Boston Stock
Exchange. The Company was delisted from the Boston Stock Exchange
effective September 2, 1994 for failing to have
complete audited financial statements for the period ended June 30,
1993. These delistings were a result of Ernst & Young
disassociating its unqualified audit opinion from the Company's
financial statements for those periods. The principal market
for the Company's common stock is the over-the-counter market.
The following table sets forth the range of high and low
closing bid prices in dollars per share of common stock for each
full quarterly period within the two most recent fiscal years.
Prices represent inter-dealer quotations, without adjustment for
retail markup, markdown or commissions, and may not represent
actual transactions.
<CAPTION>
Fiscal Year Ended June 30, 1995
High
Low
<S> <C>
<C>
Quarter ended September 30, 1994
$ 1.46
$ .63
Quarter ended December 31, 1994
1.25
.25
Quarter ended March 31, 1995
1.00
.25
Quarter ended June 30, 1995
1.44
.63
Fiscal Year Ended June 30, 1994
Quarter ended September 30, 1993
$ .22
$.05
Quarter ended December 31, 1993
.17
.05
Quarter ended March 31, 1994
1.19
.06
Quarter ended June 30, 1994
1.19
.25
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As of October 6, 1995, there were approximately 244
shareholders of record. In addition, as of the same date, there
were
74 individual participants in security position listings
furnished by Cede & Co., New York, New York, registered clearing
agency and holder of approximately 50% of the Companys
outstanding common stock.
No cash dividends or other distributions have been paid by the
Company since its inception with respect to shares of the
Company's common stock. It is the present policy, and the expected
future policy, of the Company not to pay cash dividends
and to retain future earnings to support the Company's growth.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Companys operational revenue and costs fall into three
categories. Licensed dealer program revenue and costs
relate to the Companys automotive services operations. Commercial
real estate rental revenue and costs relate to the lease
and management of the property located in Jacksonville, Florida
(Imeson Center) that was received in the settlement of the
licensed dealer agreement termination with Sears. General and
administrative costs represent the costs of the corporate office,
which provides operational and financial management support to the
automotive and real estate operations and is
investigating new business opportunities for the Company.
Licensed Dealer Program
Historically, the Company has derived substantially all of its
revenue from its automotive services operations. More
particularly, the Company's revenue is derived from agreements
entered into with licensed dealers that market and sell the
Company's ride-related services. Sears, which represented 75% of
the licensed dealer program revenue for Fiscal 1994
terminated its relationship with the Company on February 24, 1994.
The Company entered into a settlement agreement with
Sears under which Sears and the Company mutually released each
other from any and all claims arising from the terminated
business relationship. As part of the settlement agreement, Sears
paid the Company $16,168,000 in cash and transferred to
the Company's newly-formed subsidiary approximately 74 acres of
Duval County, Florida improved real property and
personal property with an estimated fair market value (based on MAI
appraisal) of $6,000,000. The Company transferred
certain patents, trademarks, and 1,226 Tire Matching licensed
dealer programs to Sears as part of the settlement agreement.
The typical licensed dealer agreement requires a flat monthly
fee for rental of equipment plus a fee per usage. While
revenue declined by $2,816,413 in the year ended June 30, 1995
(Fiscal 1995) as compared to the year ended June 30, 1994
(Fiscal 1994), revenue from licensed dealers other than Sears
increased by 17%. As of June 30, 1995, Big Ten Tires
terminated its licensed dealer agreement. Big Ten Tires accounted
for 25% of the Companys revenue in Fiscal 1995 and,
excluding Sears, 28% in Fiscal 1994. Therefore, unless the Company
can sign additional licensed dealers or install more
licensed dealer programs at new facilities of the current licensed
dealers, revenue for Fiscal 1996 will be significantly below
revenue for Fiscal 1995. As of June 30, 1995, the Company had
licensed dealer agreements with eleven different licensed
dealers utilizing 131 Combi-Matchers. Three of these licensed
dealers accounted for 62% of Fiscal 1995 revenue, 82%
excluding Big Ten Tires. In the first three months of Fiscal 1996,
the Company installed eleven new licensed dealer
programs, three of which were installed on a trial basis. During
that same time, the Company removed four licensed dealer
programs from operation.
Licensed dealer program costs in Fiscal 1995 were 62% less
than licensed dealer program costs for Fiscal 1994. The
cost reductions related to reductions in personnel and associated
expenses as a result of the loss of Sears as a licensed dealer
in Fiscal 1994. In addition, the Company incurred over $600,000 in
technology lease expense in Fiscal 1994 as a result of its
termination of a lease and license agreement with Ride Control
Systems, Inc., a company wholly-owned by R. Park Newton,
III and his wife (See Item 12. Certain Relationships and Related
Transactions).
Licensed dealer program revenue for Fiscal 1994 was $2,543,378
less than licensed dealer program revenue for the 12
months ended June 30, 1993 (Fiscal 1993). This decline in revenue
was also the result of Sears terminating its relationship
with the Company in Fiscal 1994. As of June 30, 1994, the Company
had a 166 licensed dealer programs in operation
compared to 1,351 licensed dealer programs, 1,226 of which were
Tire-Matchers, at June 30, 1993.
Commercial Real Estate Rental
As of June 30, 1995, the Company had two tenants at Imeson
Center. The lease with Laney & Duke began December 1,
1995. Laney & Duke currently occupies 1,293,000 square feet of
warehouse space, leaving approximately 199,000 square
feet of warehouse space unoccupied. This lease terminates December
31, 1995 and the Company is currently negotiating with
Laney & Duke to obtain a new lease beginning January 1, 1996.
Laney & Duke accounted for substantially all of the rental
revenue during Fiscal 1995. The second lease is with AOL for
92,000 square feet of office space beginning June 16, 1995
and terminating on June 15, 2002.
The Companys lease agreements are structured to include a base
minimum rental fee, a contingent rental fee to
reimburse the company for common area maintenance costs, insurance
and property taxes (CAM Charges), and a
requirement that the tenant pay for its own utilities. Future base
minimum rentals under non-cancelable leases as of June 30,
1995 is $1,452,973 for Fiscal 1996 and in excess of $750,000 per
year for each of the six fiscal years thereafter. In Fiscal
1995, rental revenue from commercial real estate leases was
$1,119,566, including $228,989 of contingent rentals.
The commercial real estate operating cost significantly
increased in 1995 as a result of the property being acquired
during the last half of Fiscal 1994. Additionally, the Company
incurred costs related to maintenance and upkeep of the
property. During fiscal 1995, the Company expended in excess of
$569,000 to make the warehouse space rentable. These
costs were offset, in part, by the salvage value received from the
disposal of the property removed. The net costs have been
capitalized and are being amortized over a ten-year period. As of
June 30, 1995, the Company still needed to prepare the
remaining 199,000 square feet of warehouse space for rent. The
Company is in the process of preparing the space and
anticipates that it will cost less than $100,000 to ready the space
for rent. During Fiscal 1995, the Company placed
$1,004,000 in escrow to be used by AOL for renovation. Subsequent
to June 30, 1995, the Company agreed to expend
approximately $35,000 in additional funds for renovations to the
office space. These costs have been capitalized and will be
amortized over the seven-year life of the lease. The Company
expects its commercial real estate operating costs to increase in
Fiscal 1996 as a result of operating the entire building for the
entire year. As part of the settlement agreement, Sears is
responsible for paying the property taxes on Imeson Center through
February of 1996. Therefore, the Company will begin to
incur significant additional costs for property taxes at that time.
The proposed property taxes for 1995 were $252,226. The
vast majority of these costs should be offset by contingent rentals
for CAM Charges.
Depreciation and amortization related to the commercial real
estate operations was $176,891 in Fiscal 1995 compared to
$27,753 in Fiscal 1994. The operating profit from the commercial
real estate rental operation was $235,317 in Fiscal 1995 as
compared to an operating loss of $294,784 in Fiscal 1994. There
were no commercial real estate operations prior to Fiscal
1994.
General and Administrative Costs
Corporate operating costs declined by 8% in Fiscal 1995 as
compared to Fiscal 1994. Gross salaries and consulting fees
accounted for $737,000 in Fiscal 1995 and $842,000 in Fiscal 1994.
During Fiscal 1994 and Fiscal 1995 several people were
directly employed or employed as consultants that are no longer
with the Company. The base salary and guaranteed bonuses
of the Companys current corporate staff is less than $525,000
annually. Operational accounting and legal fees were
$265,868 in Fiscal 1995 and $149,443 in Fiscal 1994. The reason for
the increase in Fiscal 1995 was primarily related to
accounting fees. Accounting fees incurred during Fiscal 1995
included the cost of auditing the June 30, 1993 and June 30,
1994 balance sheets as a result of the withdrawal by Ernst & Young
of its audit opinion on the Companys prior financial
statements. Accounting fees are anticipated to be significantly
reduced in Fiscal 1996. During Fiscal 1995, the Company was
assessed $223,000 in penalties for late payment of income tax. The
Company is attempting to have all or part of the penalty
abated. Based on managements expected savings in personnel costs,
professional services and penalties, corporate general
and administrative costs are expected to decline in Fiscal 1996.
Consolidated Operating Results
Net revenue of the Company declined 43% in Fiscal 1995, as
compared to Fiscal 1994, from $3,935,833 to $2,238,986.
The decline in revenue from licensed dealer programs was
significantly greater, but was offset by revenue from commercial
real estate operations that did not exist prior to Fiscal 1995.
Total operating costs declined from $6,439,545 to $4,108,972,
resulting in a reduction of the net operating loss from $2,503,712
to $1,869,986 in Fiscal 1995 as compared to Fiscal 1994,
respectively.
Fiscal 1994 operating costs were $1,855,010 less than Fiscal
1993. Most of this reduction was achieved by reduction in
depreciation and amortization expense of $1,136,557 in Fiscal 1994
as compared to Fiscal 1993. Decreases in licensed dealer
program costs and general and administrative costs of $985,484,
were offset by the commercial real estate operating expenses
in fiscal 1994 of $267,031. These cost reductions were achieved
despite the Company recording expenses of approximately
$631,000 in Fiscal 1994 ($110,000 in travel expenses and $521,000
in technology expense) related to the settlement with
Ride Control (See Item 12. Certain Relationships and Related
Transactions.) Because operating costs did not decline by as
much as revenue in Fiscal 1994 as compared to Fiscal 1993, the
operating loss of the Company increased from $1,815,347 in
Fiscal 1993 to $2,503,712 in Fiscal 1994.
As a result of the Settlement Agreement with Sears, the
Company recognized a one-time gain of $14,063,588 on the
transfer of the Tire Matcher licensed dealer programs and certain
intellectual property rights relating to Sears' future use of
the Tire Matching process in Fiscal 1994.
Professional fees related to litigation were $678,557 in
Fiscal 1995 compared to $1,425,516 in Fiscal 1994. This
represents a significant reduction in costs. As of the end of
fiscal 1995, the Company consolidated most of its litigation
efforts with one law firm. Management believes this will help
reduce litigation costs until such time as all litigation matters
can be resolved. See Note 15 in the accompanying financial
statements for a complete discussion of all outstanding material
litigation.
Interest and dividend income increased significantly in fiscal
1995 as compared to fiscal 1994. This is a result of
earnings on the proceeds from the Sears settlement. Shortly after
the proceeds from the Sears settlement were received, they
were invested through a brokerage account in various stocks. During
Fiscal 1994, the Company had realized gains from the
sale of stocks of $119,256. The Company also incurred unrealized
losses in the market value of $377,927. In the first quarter
of 1995, the value of the marketable securities had increased to
approximately their initial cost basis. At that time, all
marketable securities were sold. The Companys current policy is to
only invest in short-term debt securities issued by the
United States Government or its agencies to avoid the risk of
principal loss.
Interest expense for Fiscal 1995 was significantly reduced
compared to interest expense in Fiscal 1994. Fiscal 1994
interest expense was significantly less than interest expense in
Fiscal 1993. This reduction in interest expense is a result of the
elimination of outstanding indebtedness related to licensed dealer
programs in Fiscal 1994. (See the discussion regarding the
extraordinary item below.)
The loss on asset write down in Fiscal 1995 consisted of the
write off of $169,327 of costs incurred related to the
development of the improved balancer technology, the write down of
$189,387 for licensed dealer programs brought back
into work-in-process as a result of the termination of the Big Ten
Tires licensed dealer agreement, and the write off of
$89,803 in miscellaneous intangible assets. The loss on asset
write down in Fiscal 1994 resulted from the write down of
office furniture and equipment, the write off of the Companys
non-compete agreement with Mr. Marler, and the change in
the capitalization value of the Company's Combi-Matcher licensed
dealer programs. The loss on asset write down of $71,968
for Fiscal 1994 was substantially less than the Fiscal 1993 loss of
$1,615,518 which resulted from the devaluation of the
Company's Tire Matchers (which have since been transferred to
Sears) and from the cancellation of Tire-Matcher licensed
dealer programs.
During Fiscal 1994, the Company negotiated, with its two main
lenders, Mass Mutual Life Insurance Company
("Mass Mutual") and PNC Bank of Kentucky, Inc. ("PNC"), regarding
the satisfaction of its debt obligations to those
institutional lenders. The negotiated debt settlements allowed the
Company to extinguish $12,905,600 (Mass Mutual
$5,000,000 and PNC $7,905,600) of principal indebtedness and
$2,718,428 (Mass Mutual $1,562,500 and PNC $1,155,928)
of accrued interest in exchange for final payments totaling
$1,800,000. These settlements resulted in the Company's
recognition of a $8,485,028 extra-ordinary gain, net of taxes.
These settlements left the Company essentially free of any
long-term debt obligations. Furthermore, the settlement with Mass
Mutual resulted in a deferral of $2,438,000 in income
taxes resulting from the discharge of indebtedness.
Liquidity and Capital Resources
The cash provided by operating activities was $4,061,433 in
Fiscal 1995 compared to cash used by operating activities of
$9,680,156 in Fiscal 1994. While this increase of over $13 million
in cash provided by operating activities in Fiscal 1995
versus Fiscal 1994 is significant, it could be misleading. After
the Company finalized its settlement with Sears, it invested a
significant portion of the proceeds in stocks of publicly traded
companies. These transactions are treated as operating
activities, as opposed to the Companys current policy of investment
in debt securities backed by the United States
Government, which are treated as investing activities. For purposes
of this discussion, working capital from operations is
defined as cash provided by operating activities excluding the
purchase and proceeds from sale of trading securities and
changes in operating assets and liabilities. In Fiscal 1995, the
Companys operations used $1,177,310 in working capital
compared to $5,001,780 in Fiscal 1994. This represents a reduction
of cash operating costs $3.8 million greater than the
reduction in revenue. During Fiscal 1994, cash used by operating
activities was reduced by increasing current liabilities more
than $2.3 million. Fiscal 1995 cash provided by operating
activities was reduced as a result of an increase in current assets
of
$444,231 and a decrease in current liabilities of $396,803. During
Fiscal 1995, the Company also expended $724,465 on
operating costs that have been capitalized related to preparing the
Imeson Center facility for rent, broker commissions on the
leases that were obtained for Imeson Center, and development of the
Companys proprietary balancer system. These costs,
exclusive of the $169,327 written off at the end of the year
related to the proprietary balancer, will be amortized over the
period of the expected benefit.
Investing activities in Fiscal 1995 include transactions from
the Companys change in philosophy from investing excess
cash in common stock to investment in debt securities backed by the
United States Government. Purchases and maturity of
held-to-maturity securities represent the investment in US backed
debt securities. Property and equipment additions in Fiscal
1995 were significantly greater than Fiscal 1994. Improvements to
Imeson Center facility on behalf of tenants and acquisition
of other miscellaneous assets accounted for $1,307,885 of the
asset acquisitions. The purchase and renovation of the
Companys new automotive manufacturing facility in July of 1995
accounted for $518,571 of the acquisitions, with
$144,988 representing miscellaneous furnishings, equipment, and
vehicles acquired by the automotive and corporate
divisions. The balance of the acquisitions in Fiscal 1995 and the
majority of the acquisitions in Fiscal 1994, relate to licensed
dealer programs in service and licensed dealer programs in process.
Cash of $201,337, was provided by financing activities in
Fiscal 1995 compared to use of the $2.6 million by financing
activities in Fiscal 1994. Principal repayments of long-term debt
and capital leases in Fiscal 1994 primarily related to the
Companys settlement of outstanding principal and interest in excess
of $15.5 million. This resulted in an extraordinary gain
of $13,824,028, less taxes of $5,339,000 (See Note 12 of the
accompanying financial statements).
The Company did not have any material commitments for capital
expenditures as of June 30, 1995 other than for
ordinary expenses incurred during the usual course of business.
The Company is looking for additional tenants for Imeson
Center. It is possible that any new tenant will require the
Company to incur costs related to renovation of the property to
meet the tenants needs. Additionally, the Company is investigating
opportunities to develop or sell some of the out parcels of
the Imeson Center. The Companys automotive division is actively
seeking new licensed dealers for its AccuBalance service
using the Combi-Matcher technology. If successful, the Company
would be required to provide the licensed dealer
programs. As of June 30, 1995, the Company had 49 licensed dealer
programs available for installation. Although the
Company has not identified any specific acquisition opportunities,
management anticipates spending resources to locate
potential opportunities to expand the Companys business operations
into other areas. Any new business operation will likely
involve a substantial commitment of Company resources and a
significant degree of risk. The Company also has potential
liability related to litigation (See Note 15 of the accompanying
financial statements). Any of the above mentioned items
could require significant capital resources in excess of the
Companys liquidity, requiring it to raise additional capital
through
public or private debt or equity financing. The availability of
these capital sources will depend upon prevailing market
conditions, interest rates, and the then existing financial
position and results of operations of the Company. Therefore, no
assurances can be made by the Company that such additional capital
will be available.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The financial Statements of the Company as of June 30, 1995
and the Report of the Independent Certified Public
Accountants thereon are included in Appendix F to this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Officers and Directors
All directors hold office until the next annual meeting
of the stockholders or until their respective successors have
been duly elected and qualified. The officers of the Company serve
at the pleasure of the Board of Directors. The Board of
Directors has standing audit and compensation committees but no
standing nominating committee.
The Board of Directors established a Special Compensation
Committee, comprised solely of John L. Caskey. This
Special Compensation Committee was charged with reviewing and
approving or disapproving, on behalf of the full Board,
the recommendations of independent third-party compensation
consultants engaged by the Company to review the propriety
of remunerative payments made to certain officers, directors and
independent consultants in connection with the Company's
settlement with Sears and its institutional lenders. The Board of
Directors believed that John L. Caskey was sufficiently
independent to review such recommendations in a disinterested
manner even though Mr. Caskey has various business
relationships with certain of the officers and directors whose
compensation was subject to his review.
R. Park Newton and Aris Newton are brothers. R. Park Newton
and his wife, Francine, have advanced in excess of
$250,000 to All American Security, Inc., a company wholly-owned by
John L. Caskey, a member of the Company's Audit
and Compensation Committees and the sole member of the Special
Compensation Committee formed to review bonuses paid
to Mr. Newton as well as certain other officers and consultants of
the Company. As noted in Item 12. Certain Relationships
and Related Transactions, the compensation consultants were of the
opinion that the level of compensation paid to Mr.
Newton and certain Company consultants was fair and reasonable and
Mr. Caskey approved such bonuses.
Biographical information with respect to each of the Company's
executive officers and directors are set forth below.
R. Park Newton, III., Chairman of the Board of Directors (age
52): Mr. Newton has been a Director of the Company
since July 1986 and serves as a member of the Board's Compensation
Committee. Mr. Newton served as President and
Chief Executive Officer of the Company since its inception until
August 15, 1994, when he resigned those positions and
became Chairman of the Company's Board of Directors. Mr. Newton
served as the Companys Secretary and Treasurer after
the resignation of Douglas S. Gardner, the Companys previous
Secretary and Treasurer until September of 1995 when Mr.
Newton resigned from all officer positions of the Company and its
subsidiaries. Mr. Newton has been engaged in the
automotive equipment manufacturing and distributing business for
over 15 years. Mr. Newton served as President of
Autodynamics, Inc. since its inception in 1972. Autodynamics,
Inc., an entity wholly-owned by Mr. Newton's father, has
been engaged in the business of developing and marketing the
technology comprising the Tire Matcher. Ride Control
Systems, Inc. has also been engaged in the business of developing
and marketing the technology comprising the Tire
Matcher. Mr. Newton has been engaged in various private business
ventures during the past five years which have included,
among other things, investments in real estate. In connection with
certain unrelated business ventures Mr. Newton has been,
and currently is, involved in contract and business litigation. Mr.
Newton attended Clemson University. Mr. Newton is the
brother of Aris Newton, also a director of the Company.
W. Carey Webb , President and Chief Executive Officer (age
51): Mr. Webb was appointed President and Chief
Executive Officer of the Company on August 15, 1994. Under an
Agreement for Consulting Services, dated December 16,
1992, Mr. Webb acted as an independent economic consultant to the
Company with respect to matters associated with the
Confidential Settlement Agreement entered into with Sears. Prior
to August 1994, Mr. Webb served as General Manager to
TAW, Inc., a supplier of electrical components. Mr. Webb has also
served as an independent economic and management
consultant to various enterprises from 1991 to 1993 and prior,
thereto, served as Executive Vice-President of Precision
Enterprises, Inc., a entity that owns various automobile
dealerships. Precision Enterprises Tampa, Inc., a subsidiary of
Precision Enterprises, Inc., filed for Chapter 11 bankruptcy
protection during Mr. Webb's employment at its parent
corporation in January 1991. Previously, Mr. Webb spent
approximately 17 years at Linder Industrial Machinery, Inc. in
various management capacities. Mr. Webb received a bachelors
degree from Georgia Institute of Technology and a Masters
of Business Administration from Emory University.
W. Aris Newton, Director and President of Imeson Center, Inc.
(age 41): Mr. Newton has been a Director of the
Company since January 1992 and has served as an employee in
manufacturing and sales related capacities since 1988. Mr.
Newton is a member of the Board's audit committee. Mr. Newton
previously owned and operated Shoate Newton Fertilizer
Company from 1984 to 1988. Mr. Newton attended Clemson
University.
John L. Caskey, Director (age 50): Mr. Caskey has been a Director
of the Company since March 1993. Mr. Caskey is
a member of the Board's audit and compensation committees and is
the sole member of the special committee formed to
review bonuses to be paid to certain officers and former directors
of the Company. Mr. Caskey has served as President and
CEO of Casco, Inc. since June 1985. Casco Inc. is an investment
company that handles investments in mortgages, real estate,
joint ventures and emerging companies. Since July 1991, Mr. Caskey
has also served as President of All American Security
Inc., which provides home security for fire, health, and theft
through the use of monitoring and detection devices. Mr.
Caskey received a BA from the University of South Florida in 1972.
Timothy R. Barnes, Vice President, Secretary, Treasurer and
Chief Financial Officer (age 38): Mr. Barnes joined the
Company on August 7, 1995 as Vice President and Chief Financial
Officer. He was appointed Secretary/Treasurer on
September 27, 1995. Prior to joining the Company, Mr. Barnes served
as Senior Vice President, Secretary, Treasurer and
Chief Financial Officer of Medcross, Inc., a publicly-held company
providing outpatient health care services. He is a certified
public accountant and hold a Bachelor of Arts degree in Business
Administration (Accounting) from the University of South
Florida.
Scott A. Glasscock, General Manager of Automotive Division
(age 36): Mr. Glasscock was hired as General Manager of
the Companys automotive division in January 1995. Since 1984, Mr.
Glasscock served in various positions for Goulds
Pumps, Inc., where he was responsible for all aspects of customer
service, field service, and territory growth, among other
things. Mr. Glasscock has a Bachelor of Industrial Engineering
degree from the Georgia Institute of Technology.
B. Compliance of Officers and Directors with Section 16 of
the Exchange Act
Under Section 16 of the Securities Exchange Act of 1934, a
person who is an officer, director or beneficial owner of
more than ten percent of the Company's common stock is required to
file certain notification forms with the Securities and
Exchange Commission, in addition to providing copies of such
notification forms to the Company. Based upon a review of
the notices on Forms 3, 4, and 5 submitted to the Company during
its most recent fiscal year, the Company has ascertained
that certain of its current officers and directors were delinquent
in their Section 16 filings. W. Carey Webb timely filed a
Form 3 upon his appointment as President and Chief Executive
Officer of the Company. However, it was subsequently
determined that there was an error in the original filing. An
amended Form 3 was filed after the due date for the original
Form 3.
ITEM 10. EXECUTIVE COMPENSATION
The following discussion describes the components of total
compensation, including cash and non-cash compensation
awarded to, earned by or paid to W. Carey Webb , the Companys
President and Chief Executive Officer and R. Park
Newton, III, a director and Chairman of the Board, and former
President and Chief Executive Officer. No other executives of
the Company earned, were awarded or were paid cash or non-cash
compensation in excess of $100,000 during the Company's
fiscal year ended June 30, 1995. Accordingly, elements of those
executives compensation are not reported herein.
Summary Compensation Table
The following table sets forth all cash and non-cash
compensation earned by the named executives during the three fiscal
years ending June 30, 1995.
<CAPTION>
Long Term Compensation
Annual Compensation
Awards
Payouts
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Name and
Principal Position
Year
Salary<F1>
Bonus<F1>
Other Annual
Compensation<F2>
Restricted
Stock
Award(s)
Options
SARs
LTIP
Payouts
All Other
Compensation
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
W. Carey Webb
1995
172,500
169,635
17,075
0
250,000
0
0
President and Chief
1994
0
0
0
0
0
0
275,000<F4>
Executive Officer<F3>
1993
0
0
0
0
0
0
58,900<F4>
R. Park Newton
1995
180,000
0
18,376
0
0
0
Chairman of the
1994
122,675
857,325
14,255
0
200,000
0
1,172<F5>
Board
1993
94,000
0
14,378
0
0
0
894<F5>
<FN>
<F1> Amounts shown include cash and non-cash compensation
earned and received by executive officers as well as amounts
earned but deferred at the election of those officers.
<F2> Amounts shown include the cost of (i) Company provided
automobiles and (ii) Company paid social and business club
dues.
<F3> Mr. Webb was appointed President and Chief Executive Officer
effective August 15, 1994.
<F4> Represents compensation paid pursuant to a consulting
agreement with Mr. Webb prior to his appointment as President and
Chief Executive Officer (see Item 12. Certain Relationships and
Related Transactions).
<F5> Represents amounts paid by the Company for split-dollar
insurance premiums.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants Table
The following table sets forth certain information with
respect to the options granted during the last fiscal year to the
named executive.
<CAPTION>
Individual Grants
Name
Options/SARs
Granted (#)
Percent of Total
Options/SARs Granted
to Employees in Fiscal
Year
Exercise or
Base Price
($/Sh)
Expiration
Date
<S> <C> <C>
<C> <C>
W. Carey Webb
250,000<F1>
83.3%
$1.13
8/15/2004
R. Park Newton, III
0<F2>
0
N/A
N/A
<FN>
<F1> Options to acquire 100,000 shares vested immediately, whereas
the remaining options vested 50,000 share increments
when the average bid and asked prices for the Companys common stock
over a thirty period read, respectively, $2.00,
$4.00 and $6.00 per shares.
<F2> Options were awarded by the Special Compensation Committee,
but have not been issued since the full Board of Directors
must first amend the Rights Agreement governing the Company's
Series A Participating Preferred Stock Purchase Rights
plan in order to specifically allow the grant of the referenced
options to Mr. Newton. It is expected that these options will
be exercisable for a term of ten years at an exercise price of
$1.00 per share.
</FN>
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Values Table
The following table sets forth certain information with
respect to options exercised during fiscal 1995 by the named
executives and with respect to unexercised options held by each
such person at the end of fiscal 1995.
<CAPTION>
Shares Acquired
Value
Number of Unexercised
Options/SARs at FY-End (#)
Value of Unexercised In-the-
Money Options/SARs
at FY-End ($)<F1>
Name
on Exercise (#)
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
<S> <C> <C> <C>
<C> <C> <C>
W. Carey Webb
None
N/A
100,000
150,000
12,000
18,000
R. Park Newton, III
None
N/A
300,000
0<F2>
50000
0<F2>
<FN>
<F1> Based on closing bid prices of the Companys common stock of
$1.25 at June 30, 1995.
<F2> Mr. Newton has also been awarded, by the Company's Special
Compensation Committee, options to acquire 300,000
shares at an exercise price of $1.00 per share for a period of ten
years from the date of grant. However, such options have
not been granted as of the date of this report due to the
requirement that the Company's full Board of Directors take certain
actions prior to granting such options.
</FN>
</TABLE>
Long-Term Incentive Plan (LTIP) Awards Table
No awards were made under any long-term incentive plans during
fiscal 1995.
Compensation of Directors
<TABLE>
In April 1993, the Board of Directors adopted a policy whereby
directors of the Company receive a $500 monthly
allowance for attendance at Board of Director and Committee
meetings, including meetings of its audit and compensation
committees. Each director was paid $6,000 and $5,500 for services
rendered as a director during the years ended June 30,
1995 and 1994, respectively. While directors are entitled to
reimbursement for reasonable travel expenses incurred in
attending such meetings, no reimbursements were requested for
meetings held during the fiscal years ended June 30, 1995 or
1994.
Employment Contracts and Termination of Employment and
Change-in-control Arrangements
On March 8, 1994, R. Park Newton, III, the Company's former
President and Chief Executive Officer and currently
Chairman of the Board (a director position only) and a director,
entered into an employment agreement with the Company
having a term of five years and providing for base compensation of
$180,000 per year, an automobile allowance of $750 per
month, comprehensive medical coverage and other fringe benefits.
Effective September 27, 1995, Mr. Newtons
employment duties consist solely of rendering consulting services
to the Company, and Mr. Newton is no longer involved in
operational matters other than as a member of the Companys Board of
Directors and its Chairman. In the event R. Park
Newton's employment is terminated for cause, R. Park Newton will be
entitled to his accrued base salary and reimbursement
for any expenses through the date of termination. In the event R.
Park Newton is terminated without cause, R. Park Newton
will be entitled to his base salary accrued through the date of
termination and reimbursement for expenses accrued through
the date of termination, as well as all amounts of base salary and
fringe benefits which would have been payable during the
remainder of the five year term of his Employment Agreement.
Pursuant to his March 8, 1994 Employment Agreement, in
April 1994 the Company awarded R. Park Newton options to purchase
200,000 shares during an exercise period of ten years
for $1.00 per share. Further, the Employment Agreement contains a
non-compete provision under which R. Park Newton
may not compete with the Company during the term of the agreement
and, in the case of his termination for cause, for a
period of six months thereafter. R. Park Newton also agrees during
those same periods not to interfere with or seek to
employ any of the Company's employees.
R. Park Newton's employment agreement also contained
provisions granting R. Park Newton additional options and
certain bonus compensation, based in part upon the settlement of
the Company's relationship with Sears and the reduction of
the Company's institutional debt obligations. However, the
Company's Board of Directors by written consent executed
March 11, 1994 (and R. Park Newton by his execution of the written
consent) voided these elements of R. Park Newton's
employment contract. The Company retained Alexander & Alexander,
independent third party compensation consultants to
recommend to the Board of Directors the appropriate amount and
nature of bonuses to be paid to R. Park Newton. Alexander
& Alexander recommended that R. Park Newton receive a cash bonus of
$800,000 related to the Sears settlement and the
restructuring of the Company's institutional debt obligations and
advised that Mr. Newton's annual base salary of $180,000
was reasonable and appropriate. H.R. Management, Inc., a second
independent compensation consultant engaged by the
Company, concluded that such bonus amount was fair and reasonable.
Alexander & Alexander also recommended that the
Board of Directors grant R. Park Newton options exercisable over a
ten year period to acquire 300,000 shares at an exercise
price of $1.00 per share. Following the receipt of such
recommendations, John L. Caskey, in his capacity as the sole member
of the Special Compensation Committee of the Board of Directors,
determined that $800,000 should be paid to Mr. Newton
as a cash bonus and that an additional $57,325 should be paid to
Mr. Newton in order to retroactively adjust Mr. Newton's
base salary to $180,000 for the entire 1994 fiscal year. Further,
Mr. Caskey approved the grant of non-qualified stock options
to purchase 300,000 shares of the Company's common stock at an
exercise price of $1.00 per share, exercisable for a ten year
period following the date of grant; provided, however, that the
full Board of Directors must first amend the Rights Agreement
governing the Company's Series A Participating Preferred Stock
Purchase Rights plan in order to specifically allow the grant
of the referenced options to Mr. Newton. As such, the
non-qualified stock options approved by Mr. Caskey will not be
granted until the Rights Agreement is formally amended by the full
Board of Directors.
The Company entered into an Employment Agreement with W. Carey
Webb, whereby he became its President and Chief
Executive Officer, commencing August 15, 1994 and continuing for a
five year period. Mr. Webb's initial base salary is
$180,000 per year, although that compensation level will be
reviewed annually or more frequently, if appropriate, by the
Board of Directors or the Board's Compensation Committee. The
agreement also provides for a performance/incentive bonus
to be paid to Mr. Webb as determined by the Board of Directors or
its Compensation Committee. As a signing bonus
intended to induce Mr. Webb to accept the Company's offer of
employment, the Company paid $169,635 to Mr. Webb.
Additionally, the Company granted Mr. Webb non-qualified options to
acquire 250,000 shares of its common stock at an
exercise price per share of $1.13. Options to acquire 100,000
shares vested in full upon Mr. Webb's execution of his
Employment Agreement, whereas the remaining options vest in 50,000
share increments when the average bid and asked
prices for the Company's common stock over a thirty day period
reach, respectively, $2.00, $4.00 and $6.00 per share. Once
the foregoing options to acquire shares are vested, such options
are exercisable by Mr. Webb, in whole or in part. On August
15, 2004, the non-qualified options will expire. In the event Mr.
Webb's employment is terminated for cause, any options
which are not at that time vested will be subject to immediate
forfeiture. Conversely, in the event Mr. Webb is terminated
without cause or terminated following a defined "change in control"
of the Company, any options which are not vested at that
time will immediately become vested in full and thereafter be
exercisable by Mr. Webb until their termination on August 15,
2004.
Mr. Webb's Employment Agreement also obligated the Company to
reimburse Mr. Webb for his reasonable legal fees
incurred in connection with the negotiation and execution of his
Employment Agreement. Further, the Company agreed to
reimburse Mr. Webb for reasonable moving expenses incurred in
connection with his relocation to Tampa, Florida and to
reimburse Mr. Webb for the amount by which the net sales proceeds
of the sale of his Lakeland residence are less than the
appraised value of that residence. The Company's reimbursement
obligation to Mr. Webb, however, is limited to
reimbursement of an amount not exceeding $100,000. The Company
also agreed to provide Mr. Webb with an interest-free
loan in an amount not to exceed 20% of the purchase price in the
event he purchases a Tampa residence prior to the closing
of the sale of his Lakeland residence. If such an interest-free
loan is made, it will be repaid upon the earlier of the closing of
the sale of Mr. Webb's Lakeland residence or one year from the date
of purchase of his Tampa residence. Mr. Webb's
Employment Agreement also provides Mr. Webb with a Company
automobile and reimbursement of related operating
expenses, comprehensive medical coverage on Mr. Webb and his
dependents, life insurance, long-term disability insurance,
fees and expense for one downtown Tampa luncheon club and a country
club, and vacation time of at least three weeks
annually.
In the event Mr. Webb's employment is terminated for cause,
Mr. Webb will be entitled to his accrued base salary and
reimbursement for any expenses through the date of termination. In
the event Mr. Webb is terminated without cause, Mr.
Webb will be entitled to his base salary accrued through the date
of termination and reimbursement for expenses accrued
through the date of termination, as well as all amounts of base
salary and fringe benefits which would have been payable
during the remainder of the five year term of his Employment
Agreement.
Mr. Webb's Employment agreement also provides for certain
payments to Mr. Webb upon a "change of control" (as
defined in such agreement) of the Company, which payments may
constitute "parachute payments" under the Internal
Revenue Code of 1986, as amended. If within three years of a
"change of control" Mr. Webb's employment is terminated
without cause or if he elects to terminate his employment following
certain occurrences (e.g. his removal from the offices of
President or Chief Executive Officer, reduction in his
responsibilities below those generally assigned to the Company's
President and Chief Executive Officer or a Company-required
relocation outside of Tampa, Florida), Mr. Webb is allowed to
terminate the agreement and receive a one-time lump sum severance
payment equal to two and nine-tenths times the total
amount of the annual base salary payable to Mr. Webb upon the date
of the "change of control". Certain provisions limit and
adjust the severance benefits payable to Mr. Webb following a
"change of control" in the event counsel to the Company
determines that such payments would constitute "parachute payments"
within the meaning of the Internal Revenue Code of
1986, as amended. In the event the Internal Revenue Service
viewed such payments to Mr. Webb as "parachute payments,"
the excess of any such payments over a statutorily defined base
amount will generally not be deductible by the Company for
federal income tax purposes. Lastly, Mr. Webb's Employment
Agreement contains a non-compete provision under which
Mr. Webb may not compete with the Company during the term of the
agreement and, in the case of his termination for cause,
for a period of six months thereafter. Mr. Webb also agrees during
those same periods not to interfere with or seek to employ
any of the Company's employees.
In connection with Mr. Webb's Employment Agreement, the
Company also entered into an Indemnity Agreement under
which the Company agreed to indemnify and hold Mr. Webb harmless
against all expenses, judgments, fines, penalties, etc.
reasonably incurred by him in connection with his services to the
Company; provided, however, that such indemnification
only applies following a specific determination that Mr. Webb acted
in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company and
that such indemnification is otherwise proper under the
provisions of the Delaware General Corporation Law.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table below sets forth information, to the best of the
Company's knowledge, with respect to the total number of
shares of the Company's Common Stock beneficially owned by each
director, beneficial owner of more than five percent of
the Company's Common Stock and all directors and officers as a
group, as reported by each such person, as of August 31,
1995. Unless otherwise noted, all shares were held of record by
the named beneficial owner, with sole voting and investment
power. Percentages were calculated on the basis of the 4,666,866
shares of common stock outstanding as of August 31,
1995, plus any shares that person had a right to acquire pursuant
to options that were exercisable or would become
exercisable within 60 days.
<CAPTION>
Name and Address of Beneficial Owner
Shares of Common Stock
Beneficially Owned
Percentage of
Ownership
R. Park Newton, III
100 North Tampa Street, Suite 3575
Tampa, Florida 33602
<S> <C>
<C>
1,293,812<F1>
26.1%
ASX Investment
W 16650 N.W. 27th Avenue
Miami, Florida 33504
338,928
7.3%
J. Theodore Biesanz
4963 Bayshore Blvd.
Tampa, Florida 33611
325,000<F2>
6.8%
Charles A. Ross
3225 S. MacDill Avenue, #201
Tampa, Florida 33629
335,000<F3>
6.7%
Frederick & Arlene Schadt
W5913 Iliff Road
Monroe, Wisconsin 53566
255,200
5.5%
W. Carey Webb
2404 Hollingsworth Hill
Lakeland, Florida 33803
100,000<F4>
2.1%
John L. Caskey
PO Box 18682
Tampa, Florida 33679
74,700<F5>
1.6%
W. Aris Newton
99 Tradd Street
Charleston, South Carolina 29401
65,200<F6>
1.4%
All officers and directors as a group
(4 persons)
1,533,512<F7>
29.7%
<FN>
<F1> Mr. Newton is the record holder of 379,552 common shares,
either individually or jointly with his wife, is the beneficial
owner of 1,000 shares owned individually by his wife, and is the
beneficial owner, by virtue of his voting and disposition
power over 613,260 shares (i) held in trust for the benefit of
certain members of his family and (ii) shares held by Ride
Control Systems, Inc., a company wholly-owned by Mr. Newton and his
wife, Francine. Further, Mr. Newton is the holder
of warrants and options to acquire up to 300,000 shares of Company
common stock at exercise prices ranging from $1.00
to $7.43 per share. Mr. Newton has also been awarded, by the
Company's Special Compensation Committee, options to
acquire 300,000 shares at an exercise price of $1.00 per share for
a period of ten years from the date of grant. However,
such options have not been granted as of the date of this report
due to the requirement that the Company's full Board of
Directors take certain actions prior to granting such options.
Accordingly, the options to acquire 300,000 shares are not
reflected in this table.
<F2> Mr. Biesanz is the record holder of 230,000 shares of common
stock and holds options to purchase an additional 95,000
shares at exercise prices ranging from $5.63 to $6.25 per share.
<F3> Mr. Ross has the right to acquire beneficial ownership of
185,000 shares, at an exercise price of $1.70 per share, 50,000
shares, at an exercise price of $.53 per share, 50,000 shares at an
exercise price of $1.00 per share, and 50,000 shares at a
price of $5.74 per share under presently exercisable options. Mr.
Ross resigned as a director in August 1994.
<F4> Mr. Webb has the right to acquire up to 100,000 shares of
Company common stock, at an exercise price of $1.13 per share.
Mr. Webb also holds additional options to acquire up to 150,000
shares, although such options are not yet vested and
therefore are not included in the table.
<F5> Mr. Caskey is the record holder of 39,700 shares of Company
common stock, 11,500 of which he holds jointly with his
mother, Frances Caskey. He also has the right to acquire 35,000
shares at an exercise price of $1.00 per share, under
presently exercisable options.
<F6> Mr. Aris Newton is the record holder of 200 shares of Company
common stock and has the right to acquire beneficial
ownership of 5,000 shares, at an exercise price of $5.74 per share,
and 60,000 shares, at an exercise price of $1.00 per
share, under presently exercisable options.
<F7> Includes the shares referenced above as beneficially owned by
Messrs. R. Park Newton, W. Carey Webb , John L. Caskey,
and W. Aris Newton.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
<TABLE>
The Company entered into a number of consulting agreements
with certain of its officers, directors or independent
consultants (or entities controlled by such individuals) which, in
the aggregate, obligated the Company to pay substantial
sums, most of which have already been paid.
One of these consulting agreements was entered into by the
Company with Cross-Tec Market Systems, Inc. ("Cross-
Tec"), an entity primarily-owned by Charles A. Ross, a former
director of the Company. That agreement, dated as of January
15, 1993, provided for a monthly fee of $13,300 and was terminated
in July 1994. Cross-Tec and the Company were also
parties to a contingent compensation agreement, dated as of
December 16, 1992, providing for compensation to Cross-Tec
contingent upon the consideration received by the Company as a
result of its settlement with Sears and the restructuring of its
debt with its institutional lenders. This original agreement was
superseded by a new incentive compensation agreement dated
March 1, 1994. This new incentive compensation agreement also
provided for commission compensation based upon the
Sears settlement and the elimination of the institutional debt.
However, the Company's Board of Directors by written consent
executed March 11, 1994 (and Mr. Ross by his execution of the
written consent) voided the commission compensation
elements of Cross-Tec's incentive compensation agreement. The
Company subsequently retained Alexander & Alexander
and an independent third party compensation consultant to recommend
to the Board's Special Compensation Committee
(comprised solely of John L. Caskey) the appropriate amount and
nature of bonuses to be paid to Cross-Tec. Alexander &
Alexander recommended that Cross-Tec's bonus compensation should be
$536,480. H.R. Management, Inc., a second
independent compensation consultant engaged by the Company,
concluded that this amount is fair and reasonable. John L.
Caskey is the sole member of a Special Compensation Committee of
the Board charged with reviewing such compensation.
Mr. Caskey has approved the recommended compensation of
Cross-Tec and such amount has been paid by the Company
to Cross-Tec. During the fiscal year ended June 30, 1994, the
Company paid Cross-Tec $146,300 in consulting service fees
under the Consulting Agreement dated January 15, 1993, which
agreement has been terminated. The Company also paid Mr.
Ross, individually, $1,000 and $5,500 for his services as a
Director of the Company in fiscal 1995 and fiscal 1994,
respectively.
In January 1993, pursuant to the Company's January 15, 1993
consulting agreement with Cross-Tec, Mr. Ross was
issued options to purchase 50,000 shares of Company common stock at
an exercise price of $.53 per share in exchange for
consulting services rendered to the Company. In September 1991,
Mr. Ross was also issued an option to purchase 185,000
shares of common stock at $1.70 per share, exercisable for a ten
year period, in exchange for services rendered and in lieu of
certain consulting fees. On March 8, 1994, the Board of Directors
also granted Mr. Ross the option to purchase 50,000
shares of common stock with such options expiring ten years from
the date of the Board meeting and exercisable at a price of
$1.00 per share. As of June 30, 1995, Mr. Ross had options
enabling him to purchase 335,000 shares of Company common
stock at various exercise prices.
The Company also entered into an Agreement for Consulting
Services, dated December 16, 1992, W. Carey Webb , the
Company's recently-appointed Chief Executive Officer and President
(Mr. Webb's consulting agreement was entered into and
his consulting services were rendered prior to his appointment to
such capacities). Mr. Webb acted as an independent
economic consultant to the Company in determining the economic
losses realized by the Company as a result of Sears'
termination of its licensed dealer relationship with the Company.
This consulting arrangement provided for payment of
certain hourly fees regardless of whether a settlement was reached
with Sears. The commission component of this consulting
agreement was amended pursuant to a letter agreement, dated October
16, 1993, between Mr. Webb and the Company, such
that the commission paid under this arrangement was $275,000. The
Company entered into an employment agreement with
Mr. Webb effective August 15, 1994 (see Item 10. Executive
Compensation).
On March 8, 1994, R. Park Newton, III, the Company's former
President and Chief Executive Officer and currently
Chairman of the Board and a director, entered into an Employment
Agreement with the Company (see Item 10. Executive
Compensation).
Kerry F. Marler, a former director and former Vice-President
of the Company who resigned those positions effective
May 20, 1994, had entered into a consulting arrangement with the
Company in connection with the termination of his
employment relationship with the Company in September 1990. In
connection with the 1990 termination of Mr. Marler's
employment with the Company and the concurrent transformation of
his relationship with the Company to one of
consultancy, the Company also forgave certain obligations owed by
Mr. Marler to the Company, including a $60,000 loan.
Further, the Company granted Mr. Marler options to acquire 75,000
shares of Company common stock.
Mr. Marler entered into an incentive compensation agreement
with the Company in December 1992, providing for
contingent compensation based upon the settlement with Sears and
the Company's institutional lenders. This former
agreement was superseded by a new incentive compensation agreement
entered into by the Company with KFM Ventures,
Inc. and/or Amazing Systems, Inc. (entities wholly-owned by Mr.
Marler) and a new employment agreement, each of which
are dated March 1, 1994. The incentive compensation agreement with
Mr. Marler's controlled entities provided for certain
commission compensation to be paid to such entities depending upon
the settlement of the Company's relationship with Sears
and the reduction of the Company's debt obligations to its
institutional lenders. Mr. Marler's employment agreement
provided for base compensation of $159,000 annually, in addition
to certain automobile and expense allowances, medical
insurance and other fringe benefits. However, the Company's Board
of Directors by written consent executed March 11,
1994 (and Mr. Marler by his execution of the written consent)
voided the commission compensation and stock option
elements of Mr. Marler's employment and incentive compensation
contracts. The Company retained Alexander &
Alexander, an independent third party compensation consultant, to
recommend to the Board's Special Compensation
Committee (comprised solely of John L. Caskey) the appropriate
amount and nature of bonuses to be paid to Mr. Marler.
Alexander & Alexander recommended that Mr. Marler's bonus
compensation should be $536,480 (of which $300,000 has
been paid to Mr. Marler). H.R. Management, Inc., a second
independent compensation consultant engaged by the Company
concluded that this amount was fair and reasonable. Mr. Marler
contends that additional amounts are owed to him as bonus
compensation. Although approving in substance the bonus
compensation of $536,480 to Mr. Marler, John L. Caskey, in his
capacity as the sole member of the Special Compensation Committee
responsible for awarding such compensation, has
resolved that the Company will pay such amount only under
circumstances constituting full settlement of any and all disputes
between the Company and Mr. Marler and involving appropriate
offsets for the damages caused by Mr. Marler to the
Company (See Item 3. Legal Proceedings.)
During the fiscal year ended June 30, 1994, the Company paid
Mr. Marler or entities controlled by Mr. Marler $119,808
for consulting services, plus $300,000 which was advanced to Mr.
Marler (through entities he controls) against amounts
which the Company may pay to Mr. Marler (or entities controlled by
Mr. Marler) in accordance with the determinations of
John L. Caskey in his capacity as the sole member of the Special
Compensation Committee established by the Board of
Directors. The Company also paid Mr. Marler $5,000 for services as
a Director during the fiscal year ended June 30, 1994.
As of June 30, 1995, Mr. Marler owed the Company $37,000 under
a non-recourse, non-interest bearing loan, secured by
10,000 shares of the Company's common stock, which was entered into
in connection with the September 1990 consulting
agreement and which matured in September 1991. The Company has
also advanced the sum of $24,511 to Mr. Marler,
which sum is currently due. Mr. Marler also owes the Company
$74,087.70 from a loan which was initially made by R. Park
Newton as an inducement for Mr. Marler to accept his former
management position with the Company and which was
subsequently purchased by the Company from R. Park Newton. Mr.
Marler has denied that the referenced amounts
constituted a loan and denies any obligation to repay the Company.
Due to the litigation involving Mr. Marler, the Company
intends to offset amounts it may owe Mr. Marler under his incentive
compensation agreement, if any, by the amounts due and
owing from Mr. Marler to the Company. However, for accounting
purposes, the Company wrote off these amounts as a bad
debt expense in fiscal 1994.
The Company loaned R. Park Newton, III, the Company's Chairman
of the Board and a director (and former President
and Chief Executive Officer), $125,000 pursuant to a demand loan in
March 1990 at the variable interest rate of 1% over the
prime rate, adjusted annually. This loan was paid in full by R.
Park Newton in July 1994.
On July 1, 1987, as part of the financial consolidation of the
Company and its predecessor corporations, a lease and
license agreement was entered into by the Company and Ride Control
Systems, Inc., a South Carolina company wholly-
owned by R. Park Newton and his wife. Pursuant to this agreement,
the Company was obligated to pay Ride Control
Systems, Inc. $10,517.61 per month for the use of technology which
is a component of its Tire Matching technology.
Pursuant to periodic oral modifications to that agreement, the
Company from time to time paid less than the required monthly
amount to afford the Company additional working capital. R. Park
Newton has contended that the oral modifications
permitted the reduced payments, but that the unpaid amounts were an
accrued obligation of the Company to Ride Control.
The total amounts of such accrued obligation as of March 31, 1994
would have been $471,282.44 ("Accrued Fees"). The
Company, however, treated the oral modifications as if the
contractual obligation was reduced from $10,517 per month to the
amount actually paid in a particular month, with no obligation
being accrued for the difference between such amounts.
Additionally, since the intellectual property that is licensed
pursuant to the Ride Control agreement was sold by the Company
to Sears as part of the Sears settlement agreement (see Item 3.
Legal Proceedings), and since the Company was required by
the Sears agreement to transfer the Tire Matching technology free
and clear of all liens and encumbrances, the Company and
Ride Control agreed to a settlement pursuant to which Ride Control
disclaimed any rights to such technology in exchange for
the settlement payment described in the following paragraph.
Assuming that the Company agreed to pay Ride Control
additional fees of $225,216.98 (the amount that would have
been payable to Ride Control by the Company under the agreement for
the remaining life of the patents relating to the
technology, reduced to present value) the Company would be indebted
to Ride Control in the amount of $696,499.42. At
June 3, 1994, the sum of the payments against Accrued Fees and the
accrued interest on the above-referenced promissory
note equaled $345,627.06 (after subtracting $110,718, the amount
owed to R. Park Newton for unreimbursed business
expenses). R. Park Newton authorized such payments against Accrued
Fees based upon his belief that the aggregate amount
owed by the Company to Ride Control for Accrued Fees exceeded the
amount of the payments. Consequently, if the
Company, as contended by R. Park Newton, was liable to Ride Control
for Accrued Fees, and if credit was given to Ride
Control for the present value of future fees, the net due to Ride
Control, after subtracting the $345,627.06 amount already
paid as referenced above, would have been $350,872.36. The Board
of Directors, Ride Control, and R. Park Newton agreed
that the Company would pay Ride Control one-half of this net amount
in settlement of this matter and in termination of the
license agreement. The Company settled its obligation to Ride
Control by paying an additional $175,436.18 in fiscal 1995.
The Company agreed to acquire from R. Park Newton and his
wife for $74,087.70 the repayment rights pursuant to a
loan obligation from Kerry F. Marler, a former officer and
director, to R. Park Newton in the same amount. At the time the
loan was made, Mr. Marler orally agreed to repay this amount when
he received his incentive compensation bonus referenced
above. Mr. Marler denies that the referenced amounts constituted
a loan or are due and owing to the Company or R. Park
Newton.
The Company paid R. Park Newton $6,000 and $5,500 in director
fees in fiscal 1995 and fiscal 1994, respectively.
John L. Caskey, a director of the Company, was granted options
to purchase 35,000 shares of common stock at $1.00 per
share in March 1994 with such options expiring March 8, 2004. The
Company has paid Mr. Caskey $6,000 and $5,500 in
director fees in fiscal 1995 and fiscal 1994, respectively.
During its fiscal year ended June 30, 1994, the Company
entered into Indemnity Agreements with R. Park Newton, III,
John L. Caskey, Charles A. Ross and Aris W. Newton, under which the
Company agreed to indemnify and hold harmless
such individuals against all expense, judgments, fines, penalties,
etc. reasonably incurred by each in connection with their
services to the Company. However, such indemnification only
applies following a specific determination that such
individuals acted in good faith and in a manner which each
reasonably believed to be in the best interests of the Company.
The Board of Directors previously authorized the advance of costs
and expense incurred by R. Park Newton, III, the
Company's current Chairman of the Board and a director, as well as
those costs and expenses incurred by Douglas Gardner,
Richard Russell, Charles Ross, Richard W. Brewer, and George
Crook, all of whom are former officers, directors, employees
or agents of the Company in connection with the Securities and
Exchange Commission investigation referenced in Note 15 of
the financial statements. Such advances were conditioned on
repayment if it was ultimately determined that the person
whose behalf the advance was made did not meet the statutory
standards of conduct required for indemnification. Under
Delaware law, such person may only be indemnified to the extent
that they are determined to have acted in good faith and in
a manner reasonably believed by them to be in the best interest of
the Company. In connection with the Commission's
investigation (see "Item 3. Legal Proceedings), the Company's Board
of Directors engaged counsel to conduct an internal
investigation of the matters underlying the Commission's
investigation. Based upon such report and on the matters raised by
the Commission's investigation, the Board of Directors has
discovered no evidence that the referenced officers, directors,
employees and agents acted other than in good faith and in a manner
which they reasonably believed to have been in the best
interests of the Company in discharging their duties. Accordingly,
the Board of Directors has determined that the referenced
individuals are entitled to indemnification for costs and expenses
incurred in connection with the Commission investigation
referenced above.
The Company previously subleased office space and leased
automobiles in 1994 to All American Security, Inc., a
company which is owned by John Caskey, a director of the Company,
for approximately $15,000 a year. R. Park Newton
and his wife, Francine, have advanced in excess of $250,000 to All
American Security, Inc., a company wholly-owned by
John L. Caskey, a member of the Company's Audit and Compensation
Committees and the sole member of the Special
Compensation Committee formed to review bonuses paid to Mr. Newton
as well as certain other officers and consultants of
the Company.
The Company has acquired certain proprietary rights to its
Combi System TM7000 proprietary equipment, and pursuant
to the acquisition agreement is obligated to pay Lourens de Groot
a royalty fee equal to $80 per Combi-Matcher produced by
the Company. However, Mr. de Groot is and has been indebted to R.
Park Newton, the Company's former President and
Chief Executive Officer and current Chairman of the Board and a
director, and, in order to satisfy that obligation, has
assigned to Mr. Newton royalty fees due and owing from the Company
to himself. The maximum amount of such royalty
fees assigned to Mr. Newton is $28,320, of which $14,080 has been
paid as of June 30, 1993. The Company has accrued an
additional $4,240 in royalty fees during the years ended June 30,
1995 and 1994.
The Company employed Fred Schadt, a person who owns more than
5% of the Company's common stock, as President
of Imeson Center, Inc. for approximately three months (April 1994
to June 1994) at a salary of $10,000 a month. Mr. Schadt
is a party to a lawsuit filed by ASX Investment Corp. See Item 3.
Legal Proceedings.
R. Park Newton, the Company's President, Chief Executive
Officer and a director, is the brother of W. Aris Newton, a
director of the Company.
ITEM 12. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. Exhibits
<CAPTION>
Reg. S-B
Item No.
Description
Exhibit
Page No.
<S> <C>
<C>
3(a)
Articles of Incorporation
1
3(b)
By-laws
1
3(c)
Amendment to Certificate of Incorporation
1
3(d)
Certificates of Correction
4
3(e)
Amendment to Certificate of Incorporation
A
4(a)
Rights Agreement by and between the Company and Registrar and
Transfer Company dated April 18, 1994
4
10(a)
PNC Settlement and Release Agreement
2
10(b)
Mass Mutual Settlement and Release Agreement
2
10(c)
Consulting Agreement - Cross-Tec Market Systems, Inc.
2
10(d)
Sale-Leaseback Agreement of Office Equipment (Bank One)
2
10(e)
Licensing Agreement - de Groot
2
10(f)
Licensing Agreement - Ride Control Systems, Inc.
2
10(g)
Agreement for Consulting Services - Cross Tec Market Systems, Inc.
and
Chuck Ross
3
10(h)
Consulting Agreement - Harvey Moore
3
10(i)
Agreement for Consulting Services - Marler and Webb
3
10(j)
Amendment to PNC Settlement Agreement
3
10(k)
Confidential Memorandum of Understanding
3
10(l)
First Amendment to Settlement and Release Agreement
3
10(m)
Contract to Purchase - Rome Avenue Property
5
10(n)
Form of Indemnity Agreement (Newton, Caskey, Ross, A. Newton,
Webb)
5
10(o)
100 N. Tampa lease
5
10(p)
Webb Employment Agreement
5
10(q)
Confidential Settlement Agreement
5
10(r)
Newton Employment Agreement
5
10(s)
Assix Standard Agency Agreement with 4 Day Tire
B
10(t)
Assix Standard Agency Agreement with Michel Tire Company
C
10(u)
Assix Standard Agency Agreement with Tires by Wheel Works
D
10(v)
Warehouse Space Lease Agreement with Laney & Duke Terminal
Warehouse Company, Inc.
E
10(w)
Office Lease with America Online, Inc.
F
21
List of Subsidiaries of Registrant
H
</TABLE>
<TABLE>
1 Incorporated by reference to the Company's Registration
Statement on Form S-18, File No. 33-21786, filed in Atlanta,
Georgia.
2 Incorporated by reference to the Company's Form 10-KSB for the
year ended June 30, 1993 originally filed on November
5, 1993.
3 Incorporated by reference to the Company's Form 10-KSB/A2 for
the year ended June 30, 1993 originally filed on
February 20, 1994.
4 Incorporated by reference to the Company's Form 8-K dated April
18, 1994 and filed on April 28, 1994.
5 Incorporated by reference to the Companys Form 10-KSB for the
year ended June 30, 1994, originally filed on October
21, 1994
B. Reports on Form 8-K
On June 27, 1995, the Company filed a Current Report on Form
8-K reporting that the proposals to transfer the
Companys automotive services assets to a newly formed wholly-owned
subsidiary and the change of the Companys name
were approved at the annual shareholders meeting.
On July 6, 1995, the Company filed a Current Report on Form
8-K regarding the termination of its business relationship
with Big 10 Tires.
SIGNATURES
In accordance with Section 13 or 159d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized, this 11th day of October 1995.
EXCAL ENTERPRISES, INC.
/S/ W. CAREY WEBB ___
BY: W. Carey Webb
President and Chief Executive Officer
In accordance with the Exchange Act of 1934, as amended, this
report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
Date: October 12, 1995
/S/ R. PARK NEWTON, III___
R. Park Newton, III
Chairman of the Board & Board Member
Date: October 13, 1995
/S/ TIMOTHY R. BARNES
Timothy R. Barnes
Vice-President, Chief Financial Officer,
and Principal Accounting Officer
Date: October 12, 1995
/S/ ARIS NEWTON
Aris Newton
Vice-President and Board Member
Date: October 12, 1995
/S/ JOHN L. CASKEY
John L. Caskey
Board Member
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S>
<C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
F-1
CONSOLIDATED BALANCE SHEET
F-2
CONSOLIDATED STATEMENTS OF OPERATIONS
F-3
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
</TABLE>
<TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Excal Enterprises, Inc.
Tampa, Florida
We have audited the accompanying consolidated balance sheet of
Excal Enterprises, Inc. as of June 30, 1995 and the related
consolidated statements of operations and changes in retained
earnings (deficit) and cash flows for the years ended June 30,
1995 and 1994. These financial statements are the responsibility
of the Companys management. Our responsibility is to
express and 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 audits 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 consolidated
financial position of Excal Enterprises, Inc. as of June 30, 1995,
and the consolidated results of its operations and changes in
retained earnings (deficit) and its cash flows for the two years
then ended, in conformity with generally accepted accounting
principles.
PENDER NEWKIRK & COMPANY
Certified Public Accountants
Tampa, Florida
September 8, 1995, except for Note 15 as
to which the date is September 27, 1995
EXCAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
ASSETS
Current Assets
<S>
<C>
Cash and cash equivalents
$
1,073,694
Marketable securities
1,285,979
Accounts receivable - trade, less allowance for doubtful accounts
of $10,659
199,823
Accounts receivable - related parties, less allowance for doubtful
accounts of $9,782
27,560
Income tax receivable
631,153
Prepaid expenses and deposits
202,697
Deferred tax asset
244,000
Total current assets
3,664,906
Property, plant and equipment
Land
1,740,000
Construction in progress
1,004,055
Building
4,932,719
Licensed dealer programs
2,008,815
Furniture, fixtures, vehicles and equipment
716,951
10,402,540
Less accumulated depreciation and amortization
1,417,852
8,984,688
Licensed dealer programs in process
881,954
Total property, plant and equipment
9,866,642
Manufacturing technology, less accumulated amortization of $60,951
167,006
Capitalized Clearing Costs, less accumulated amortization of
$11,200
285,531
Commission Costs, less accumulated amortization of $32,518
225,889
Other intangible assets, less accumulated amortization of $233,274
22,127
Total Assets
$
14,232,101
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
1,085,160
Reserve for litigation
846,480
Current portion of long-term debt and obligations under capital
leases
60,632
Total current liabilities
1,992,272
Long-term debt and obligations under capital leases
72,023
Deferred tax liability
2,380,000
Commitments and contingencies
- - --
Stockholders' equity:
Preferred stock, $.01 par value, 7,500,000 shares authorized, no
shares issued and outstanding
- - --
Common stock, $.001 par value, 7,500,000 shares authorized,
4,713,866 shares issued, 4,666,866 shares
outstanding
4,713
Additional paid-in capital
5,820,533
Retained earnings
4,168,684
Less 47,000 shares of common stock held in treasury, shares at cost
(
206,124
)
Total stockholders' equity
9,787,806
Total Liabilities and Stockholders Equity
$
14,232,101
</TABLE>
<TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
CHANGES IN RETAINED EARNINGS (DEFICIT)
<CAPTION>
Year Ended June 30
1995
1994
<S>
<C> <C>
Licensed dealer program revenue
$
1,119,420
$
3,935,833
Commercial real estate rental revenue
1,119,566
- - --
Net revenue
2,238,986
3,935,833
Licensed dealer program costs
879,772
2,318,096
Commercial real estate operating costs
707,358
267,031
General and administrative costs
1,721,278
1,869,851
Depreciation and amortization
800,564
1,984,567
Total operating costs
4,108,972
6,439,545
Net operating loss
(
1,869,986
)
(
2,503,712
)
Other income (expense)
Gain on Sears settlement
- - --
14,063,588
Professional fees related to litigation
(
678,557
)
(
1,425,516
)
Dividend and interest income
203,735
99,971
Realized gain from sale of trading securities
249,376
119,256
Unrealized holding loss on trading securities
- - --
(
377,927
)
Interest expense
(
25,943
)
(
552,822
)
Loss on asset write-down
(
448,517
)
(
71,968
)
Gain (loss) on disposals of assets
(
18,578
)
163,758
Miscellaneous income
28,003
8,519
Net other income (expense)
(
690,481
)
12,026,859
Income (loss) before income taxes and extraordinary item
(
2,560,467
)
9,523,147
Income tax provision (benefit)
(
1,000,000
)
36,286
Income (loss) before extraordinary item
(
1,560,467
)
9,486,861
Extraordinary item, net of taxes
- - --
8,485,028
Net income (loss)
(
1,560,467
)
17,971,889
Retained earnings (deficit) - beginning of year
5,729,151
(
12,242,738
)
Retained earnings - end of year
$
4,168,684
$
5,729,151
Earnings (loss) per common and common equivalent share:
Continuing operations (after taxes)
$ (
.33
)
$
2.03
Extraordinary item
- - --
1.82
Primary earnings (loss) per common and common equivalent share
$ (
.33
)
$
3.85
Weighted average common and common equivalent shares outstanding
4,666,866
4,666,866
</TABLE>
<TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended June 30
1995
1994
Cash flows from operating activities:
<S>
<C> <C> <C> <C> <C>
Net income (loss)
$ (
1,560,467
)
$
17,971,889
Adjustments to reconcile net income (loss) to net cash provided
(used) by
operating activities:
Depreciation and amortization
800,564
1,984,567
Provision for uncollectable accounts receivable
(
144,126
)
135,499
Gain on Sears settlement
- - --
(
14,063,588
)
Gain on Debt settlement
- - --
(
13,824,028
)
Loss on write-down of assets
448,517
71,968
Loss (gain) on disposals of assets
18,578
(
163,758
)
Realized Gain on trading securities
(
249,376
)
(
119,256
)
Unrealized loss on trading securities
- - --
377,927
Purchase of trading securities
(
1,325,938
)
(
9,120,235
)
Proceeds from sale of trading securities
8,130,180
2,306,698
Provision for deferred income taxes
(
491,000
)
2,627,000
Decrease (increase) in operating assets:
Accounts receivable - trade
(
78,880
)
(
279,820
)
Accounts receivable - related parties
187,159
82,743
Income tax receivable
(
631,153
)
- - --
Prepaid expenses and deposits
78,643
(
46,997
)
Intangible assets
(
724,465
)
- - --
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities - trade
614,956
583,103
Accounts payable and accrued liabilities - related parties
(
942,235
)
879,768
Income taxes payable
(
44,524
)
44,524
Reserve for litigation
(
25,000
)
871,840
Net cash provided (used) by operating activities
4,061,433
(
9,680,156
)
Cash flows from investing activities:
Purchase of held-to-maturity securities
(
3,902,658
)
- - --
Maturity of held-to-maturity securities
2,616,679
- - --
Proceeds from sale of assets
27,067
12,594,608
Property and equipment additions
(
2,355,072
)
(
458,906
)
Net cash provided (used) by investing activities
(
3,613,984
)
12,135,702
Cash flows from financing activities:
Net borrowing of long-term debt
121,768
- - --
Principal repayments of long-term debt and capital leases
(
45,431
)
(
2,538,559
)
Note receivable repaid by (issued to) officers
125,000
(
74,088
)
Net cash provided (used) by financing activities
201,337
(
2,612,647
)
Increase (decrease) in cash
648,786
(
157,101
)
Cash, beginning of year
424,908
582,009
Cash, end of year
$
1,073,694
$
424,908
Supplemental disclosure of cash flow information
Interest paid
$
11,105
$
60,000
Income taxes paid
$
248,587
$
2,700,972
</TABLE>
<TABLE>
See Notes 10 and 12 regarding the exchange of property and
equipment for improved real property and the forgiveness of
debt.
The accompanying notes are an integral part of the consolidated
financial statements
NOTE 1 - BUSINESS
The Company, headquartered in Tampa, Florida, engages in two
distinct business operations: (i) its traditional, but
substantially reduced, automotive services operations and (ii) its
commercial real estate venture which is conducted by and
through Imeson Center, Inc., a wholly-owned subsidiary.
The Company's traditional business operations and the
historical source of substantially all of its revenue has been
ride-
related automotive services. The principal ride-related service the
Company presently markets is the AccuBalance
("AccuBalance") complete wheel balancing program using its Corvi
marketing program and Combi System TM7000 (the
"Combi-Matcher") through licensed dealers. The Company provides its
licensed agents with equipment, necessary training,
service and marketing support in order that they may sell the
Company's AccuBalance service to the general public in
exchange for certain payments to the Company for usage of its
proprietary service. It is the only name brand wheel balancing
program which restores the completed tire/wheel assembly to OEM
specifications. The AccuBalance process is designed to
satisfy the automobile owners demand for quality by meeting OEM
specifications. This added value service provides the
smoothest ride possible while improving tire life and overall
vehicle handling and performance.
On June 30, 1995, the Company transferred all of the assets
and liabilities related to its automotive services operations to
Assix Automotive, Inc., a newly-formed wholly-owned subsidiary.
The Company also changed its name from Assix
International, Inc. to Excal Enterprises, Inc. in June of 1995.
Imeson Center, Inc. owns, manages and leases a 1,676,000
square foot two story warehouse facility located on
approximately 74 acres in an industrial park in Duval County,
Florida.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently
applied in the preparation of the accompanying consolidated
financial statements follows:
Principles of Consolidation. The consolidated financial
statements include the accounts of the Company, Imeson Center,
Inc., a wholly-owned subsidiary, and Assix Automotive, Inc., a
wholly-owned subsidiary. The Company also has a 40%
ownership interest in Ride Control Europe. This entity is accounted
for on the equity method and has no material assets, no
liabilities, no income, and no expenses. The Company has no
investment in or goodwill associated with this entity.
Cash and Cash Equivalents. Cash and cash equivalents include
all cash balances and highly liquid investments with an
original maturity of three months or less.
Marketable Securities. During the year ended June 30, 1994,
the Company adopted Statement 115 of the Financial
Accounting Standards Board "Accounting for Certain Investments in
Debt and Equity Securities." Under this new
pronouncement, securities that have readily determinable fair value
should be classified into trading, held to maturity, and
available for sale. Equity securities are recorded at their fair
value, and gross unrealized holding gains and losses are
disclosed. For the purpose of determining the gain or loss on a
sale, the cost of securities sold is based on the average cost of
all shares of each such security held at the date of sale. At June
30, 1995, marketable securities consisted of US government
securities with a maturity of less than one year. These securities
are expected to be held to maturity and no unrealized
holding gains or losses existed at June 30, 1995.
Property, Plant and Equipment. Property, plant and equipment
are recorded at cost or appraised value at the date of
acquisition. Depreciation and amortization are calculated by using
the straight-line method over the estimated useful lives of
the assets, ranging generally from five to ten years for tangible
personal property and 40 years for real property and
improvements. Expenditures for maintenance and repairs are charged
to expense as incurred, and renewals and betterments
are capitalized. Gains or losses on disposals, except for Licensed
Dealer Programs removed from service, are credited or
charged to operations.
Licensed Dealer Programs utilizing the Combi-Matcher, removed
from retail tire service stores, are returned to Licensed
Dealer Programs in process at their net book value. The Company
capitalizes costs associated with remanufacturing of
Licensed Dealer Programs and reinstalling at new or existing
licensed dealer outlets. The Company accounts for Licensed
Dealer Programs at the lower of cost after installation or market
value (determined annually).
Intangible Assets. Costs incurred in conjunction with the
acquisition of the Combi-Matcher technology are amortized on
the straight-line basis over a period of 17 years. Organizational
costs incurred in the formation and registration of the
Company to do business in certain states are amortized over a term
of 60 months on the straight-line basis. There were no
additional costs incurred in 1995 or 1994. The Company capitalized
the cost, net of salvage recovery, of clearing the Imeson
Center facility to prepare it for lease. The net clearing cost
incurred in 1995 was $296,731 and is being amortized over 10
years. Commission costs represent the broker fees incurred related
to the leases obtained for Imeson Center. These costs are
amortized over the life of the leases. Other intangible assets
include organizational costs amortized over 60 months and non-
compete agreements amortized on the straight-line basis over the
life of the agreement.
Revenue Recognition. Licensed Dealer Program revenue includes
initial installation fees, monthly base fees, and usage
fees based upon the number of tires matched. Commercial real
estate rental revenue consists of base rent and common area
maintenance charges. The Company recognizes revenue from Licensed
Dealer Programs and rental income of Imeson Center
when it is earned.
Income taxes. During the year ended June 30, 1994, the
Company adopted Statement No. 109 of the Financial
Accounting Standards Board, "Accounting for Income Taxes." This
statement requires that deferred tax assets and liabilities
be recognized for the estimated future consequences attributable to
temporary differences between the financial statements
carrying amounts of existing assets and liabilities and their
respective income 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 reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount
expected to be realized. Under Statement No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized during the period that includes the enactment date.
Earnings per Share. Earnings per common and equivalent share
is based on the weighted average number of common
shares outstanding and the dilutive effect of common stock
equivalents consisting of stock options and warrants. Fully
diluted earnings per share are not presented because they
approximate earnings per common and equivalent share.
Reclassifications. Certain reclassifications have been made
to the financial statements in 1994 in order to conform to the
1995 presentation. None of the reclassifications affected the
financial position or results of operations.
NOTE 3 - MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash
and cash equivalents, marketable securities, and accounts
receivable. The Company maintains its cash and cash equivalents
with what it believes to be high credit quality financial
institutions and attempts to limit its exposure in any one
particular
instrument.
One lessee of the Companys real estate operation accounted for
$1,068,590 (95%) of the commercial real estate rental
revenue for fiscal 1995. The lease with this lessee expires
December 31, 1995. The Company is currently negotiating with
the lessee to obtain a new lease agreement.
One customer of the Companys automotive operation accounted
for more than 75% of licensed dealer program revenue
for fiscal 1994 while four other customers each accounted for more
than 10% of licensed dealer program revenue for fiscal
1995.
<CAPTION>
Year
ended June 30, 1995 Year ended June 30, 1994
Customer
Amount
% to Total
Amount
% to Total
<S> <C> <C>
<C> <C>
Sears
- - --
- - --
2,980,200
75.6%
Big 10 Tires
276,036
24.7%
266,220
6.8%
Dealer 3
266,330
23.8%
297,693
7.6%
Dealer 4
300,623
26.9%
282,700
7.2%
Dealer 5
121,887
10.9%
67,744
1.7%
</TABLE>
<TABLE>
In December 1994, Big 10 Tires initiated discussions regarding
its desire to alter its letter of intent/Agency arrangement,
which among other issues included the purchase of the Combi-Matcher
equipment from the Company. After months of
discussions, Big 10 Tires notified the Company pursuant to a letter
dated April 28, 1995 that it intended to terminate its
agreement with the Company effective as of May 28, 1995. However,
the agreement required a 60 day period for the
Company and Big 10 Tires to take steps to cure issues under the
Agreement before termination would be effective. The
Company was subsequently asked to remove its Combi-Matchers from
all of the Big 10 Tire stores and the Agency
arrangement was terminated effective June 30, 1995.
On February 24, 1994, Sears and the Company settled their
contract termination dispute by Sears paying $16,168,000 in
cash and transferring approximately 74 acres of Duval County,
Florida improved real property and personal property with a
total estimated fair market value (based on an MAI appraisal) of
$6,000,000 to the Company in exchange for certain patents,
trademarks, and 1,226 Tire Matchers .
NOTE 4 - LICENSED DEALER PROGRAMS IN PROCESS
Licensed dealer programs in process at June 30, 1995 consisted
of the following:
<S> <C> <C>
<C>
Raw materials
$
236,931
Work in process
155,423
Completed programs being installed, in transit,
used for demonstration, or not in service
489,600
$
881,954
</TABLE>
<TABLE>
NOTE 5 - LONG -TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
Long-term debt and obligations under capital leases at June
30, 1995 consisted of the following:
<S>
<C> <C> <C>
Notes payable with maturities ranging from 2 to 5 years and
interest rates ranging from 8.5% to 12.5%
$
108,079
Capitalized equipment leases
24,576
$
132,655
The following is a schedule by year of future note payments
and minimum lease payments under capital leases for years
subsequent to June 30, 1995:
1996
$
60,632
1997
34,210
1998
18,432
1999
15,977
Thereafter
3,404
Total payments under notes and capital leases
$
132,655
</TABLE>
<TABLE>
Property under capital leases consists of furniture and
machinery with a cost basis of $115,935 and accumulated
amortization of $92,748 as of June 30, 1995. Amortization expense
for property under capital leases is included in
depreciation and amortization.
NOTE 6 - COMMITMENTS
The Company incurred rent expense of $135,313 and $238,733 for
the years ended June 30, 1995 and 1994, respectively.
Future minimum lease payments under non-cancelable operating leases
for the corporate office space and automobiles as of
June 30, 1995 are as follows:
<S> <C>
1996
$ 55,209
1997
58,879
1998
60,023
1999
63,613
2000
73,400
The Company entered into an employment agreement in March 1994
with its then President, who is now Chairman of
the Board, that obligates the Company to pay him $180,000 a year
for five years, unless his employment is terminated for
due cause, plus he was awarded certain stock options.
The Company entered into an employment agreement with its
current President and Chief Executive Officer effective
August 15, 1995. The agreement obligates the Company to pay him
$180,000 a year for five years, unless his employment is
terminated for due cause, plus he was awarded certain stock
options. The agreement also provides for a lump sum severence
payment of up to 2.9 times his base salary upon the occurrence of
certain events after a change in control. The Company paid
the new President/CEO $100,000 after taxes as an inducement to
enter into the employment agreement. The agreement
provides for a $100,000 moving allowance, which includes
reimbursement for the sale of his house below its appraised
market value.
NOTE 7 - STOCKHOLDERS' EQUITY
Preferred Stock
On April 18, 1994, the Company's Board of Directors declared
a dividend distribution of one "Right" for each share of
common stock, par value $0.001 per share, of the Company (the
"Common Stock") outstanding as of April 29, 1994.
Distribution of the Rights is not taxable to shareholders and the
Rights expire after ten years. Each Right entitles the
registered holder to purchase from the Company one-hundredth
(1/100) of a share of Series A Participating Preferred Stock at
a Purchase Price of $10.00, subject to certain anti-dilution
adjustments (the "Exercise Price"). The terms and conditions of
the Rights are contained in a Rights Agreement, dated April 18,
1994, between the Company and Registrar and Transfer
Company, a corporation acting in the capacity of Rights Agent (and
which also serves as the Company's transfer agent). The
plan under which the Company's Board of Directors has declared a
distribution of the Rights, including the definitive terms
of the Rights and the Rights Agreement, are referred to hereinafter
as the "Rights Plan."
The Rights are not presently exercisable and are evidenced
only by the certificates representing shares of Common Stock
and are transferable only with the Common Stock. The Rights become
exercisable and separately transferable on the earlier
of (i) the tenth calendar day after the first public disclosure
that a person or group (including any affiliate or associate of
such person or group) has acquired beneficial ownership of 15% or
more of the outstanding Common Stock, or, in the case of a
person or group beneficially owning 15% or more of the outstanding
Common Stock on April 18, 1994, the date that such
person or group acquires any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or
made pro rata to all holders of Common Stock or upon exercise of
employee stock options pursuant to any employee benefit
plan approved by the Board of Directors) (such a person or group
being called an "Acquiring Person" and such date of first
public disclosure being called a "Share Acquisition Date") or (ii)
the tenth calendar day after the commencement of, or first
public disclosure of the intent of any person or group to commence,
a tender or exchange offer for 15% or more of the
outstanding Common Stock (the date on which the rights become
exercisable being called the "Distribution Date"). After the
Distribution Date, a holder of a Right (other than the Acquiring
Person, whose Rights become void) will have the right to
purchase, upon payment of the Exercise Price, 1/100th of a share of
Series A Preferred Stock, subject to certain adjustments.
Additionally, after a person becomes an Acquiring Person, each
Right will entitle its holder to purchase, at the Right's
Exercise Price, a number of shares of the Company's Common Stock
having a market value at that time of twice the Right's
Exercise Price. Rights held by the Acquiring Person will become
void and will not be exercisable to purchase shares at the
bargain purchase price. If the Company is acquired in a merger or
other business combination transaction after a person
becomes an Acquiring Person, each Right will entitle its holder to
purchase, at the Right's then-current Exercise Price, a
number of the Acquiring Person's common shares having a market
value at that time of twice the Right's exercise price.
The terms of the Preferred Stock purchasable upon exercise of
the Rights have been designed so that each 1/100th share
of Preferred Stock has economic rights substantially equivalent to
those of a share of Common Stock. Thus, each share of
Series A Preferred Stock will be entitled to receive, when and as
declared, a quarterly dividend at an annual rate equal to the
greater of $1.00 per share or one-hundredth times the cash dividend
declared on the Common Stock during the period from
January 1 through December 31 of the immediately preceding year.
In addition, the Series A Preferred Stock is entitled to
one hundred times any non-cash dividends (other than dividends
payable in Common Stock) declared on the Common Stock,
in like kind. In the event of the liquidation, dissolution or
winding up of the Company, the holders of Series A Preferred
Stock will be entitled to receive a liquidation payment in an
amount equal to the greater of $1.00 per share or one hundred
times the liquidation payment made per share of Common Stock. Each
share of Series A Preferred Stock will have one
hundred votes, voting together with the Common Stock.
Upon exercise of the Rights, the Series A Participating
Preferred Stock will be distributed to holders of the Rights upon
exercise thereof and payment of the Exercise Price (as defined in
the Rights Agreement). Absent an available exemption
from the registration requirements of the Securities Act of 1933,
as amended, registration of the Series A Participating
Preferred Stock will be required prior to such distribution under
the Securities Act of 1933, as amended, and applicable state
"blue sky" laws.
Options and Warrants
The Company has a stock option plan providing for the issuance
of up to 500,000 shares of the Company's common
stock pursuant to options granted under the Option Plan. Since
inception, the Company has issued additional options and
warrants to officers, directors, and unaffiliated third parties.
The Company has not recorded compensation expense relating to
any issuance of options or warrants since, in all instances, the
exercise price was greater than or equal to the market value of
the underlying shares of the Company's common stock on the dates of
grant.
During the fiscal year ended June 30, 1995, the Company issued
options to purchase 250,000 shares of common stock at
an exercise price of $1.13 to Carey Webb. In addition, options to
acquire 300,000 shares at an exercise price of $1.00 per
share were awarded to Park Newton but have not been issued because
of a requirement that the Board of Directors take
certain actions prior to granting such options.
During the fiscal year ended June 30, 1994, the Company issued
options to purchase common stock at an exercise price
of $1.00 as follows: 200,000 to Park Newton; 60,000 to Aris
Newton; 35,000 to John Caskey; and 50,000 to Charles Ross.
At June 30, 1995, options for the purchase of 756,000 shares
of common stock at prices ranging from $.53 to $6.27 per
share were outstanding. At June 30, 1995, warrants for the
purchase of 846,650 shares of common stock at prices ranging
from $1.00 to $8.00 per share were outstanding.
NOTE 8 - LICENSED DEALER PROGRAM REVENUE
The Companys automotive operations consist of providing
Licensed Dealer Programs to retail tire service stores on an
annual basis with cancellation clauses from 30 days up to one year.
The Company provides all equipment, training, service
and marketing support for the sale by licensed dealers of
AccuBalance services to the general public. Typically, the Company
charges licensed dealers a base fee ranging from $429 to $449 per
month plus a fee of $.25 per tire balanced using the
Combi-Matchers. The Company accounts for Licensed Dealer Programs
in a manner similar to operating leases. For the
periods ended June 30, 1995 and 1994, revenue relating to the
number of tires matched amounted to $323,467 and $912,395,
respectively. The Company also received $675,000, for the number of
tires matched, in the first six months of fiscal 1994
under an interim agreement with Sears. This revenue was classified
as revenue relating to matched tires.
NOTE 9 - COMMERCIAL REAL ESTATE RENTAL REVENUE
The Company, through its wholly-owned subsidiary Imeson
Center, Inc., leases improved real property located in
Jacksonville, Florida. The leases include a base rental fee, a
contingent rental fee to reimburse the Company for common area
maintenance costs, and a requirement that the tenants pay for their
utilities. The land and building had a carrying cost of
$7,158,204 and accumulated depreciation of $142,268 as of June 30,
1995. Minimum future rentals under noncancelable
leases as of June 30, 1995 are as follows:
1996 1997 1998
1999 2000 Thereafter
Total
$1,452,973 $ 754,419 $ 773,147 $
792,530 $ 812,592 $1,659,953
$6,245,614
During fiscal 1995, rental revenue included $228,989 of
contingent rentals.
NOTE 10 - GAIN ON SEARS SETTLEMENT
On February 24, 1994, the Company entered into a Settlement
Agreement with Sears under which Sears and the
Company mutually released each other from any and all claims
arising from the May 1989 Sears Licensed Tire Matching
Agreement. As part of the Settlement Agreement, Sears paid the
Company $16,168,000 in cash and transferred to the
Company approximately 74 acres of Duval County, Florida improved
real property and personal property (the "Property"),
which has been appraised at $6,000,000. The cash payments included
$1,218,600 in licensed dealer program revenue. In
turn, the Company transferred 1,226 Tire Matching machines and
patents pertaining to the Tire-Matching technology (which
had a net book value of $4,342,851) to Sears. The Company incurred
$2,542,961 in commissions and bonuses relating to this
settlement. This settlement generated a one-time gain of
$14,063,588, recognized in fiscal 1994.
NOTE 11 - ASSET WRITE-DOWNS
The Companys Licensed Dealer agreement with Big Ten Tire was
terminated effective June 30, 1995. The Companys
policy is to include the net book value of Dealer Licensed Programs
in work in process. The Company estimated that the
remaining net book value of the Dealer Licensed Programs plus the
cost of remanufacturing would be in excess of market
value. Therefore, the Company wrote down the net book value of the
Big Ten Tire Dealer Licensed Programs by $189,387
prior to placing them in work in process. The Company wrote off
miscellaneous costs related to patents, trademarks, and
other assets having a net book value of $89,803 at June 30, 1995.
During 1995, the Company incurred and capitalized
$169,327 in costs related to the development of an improved
balancer technology. Management elected to write off these
costs as of June 30, 1995 and will expense any future costs
incurred related to the refinement of the improved balancer
technology. During fiscal 1994, due to the termination of the
relationship with Sears, the Company wrote off the value of
parts inventories associated with the Tire-Matcher.
NOTE 12 - EXTRAORDINARY ITEM
In December 1989, the Company issued $5,000,000 of Senior
Subordinated Notes (the "notes") due in December 1997 to
Mass Mutual Life Insurance Company and certain of its affiliated
investors and loan participants ("Mass Mutual").
Following certain adjustments to the terms of the notes in light of
the Company's then-existing financial condition, Mass
Mutual and the Company entered into a Settlement and Release
Agreement, dated September 8, 1993, under which the
Company agreed to make three payments totaling $250,000 in exchange
for a discharge and release from liability on the
principal and interest due on the notes. The Company made the
referenced payments and, accordingly, the $5,000,000 of
Senior Subordinated Notes issued to Mass Mutual along with accrued
interest on those notes of $1,562,000 are now satisfied
and discharged. All deferred borrowing costs relating to the Mass
Mutual notes were written off in September 1993. This
resulted in the Company recognizing a one-time extraordinary gain
after taxes of $3,874,500, ($6,312,500 less deferred and
current taxes of $2,438,000) in the fiscal year ended June 30,
1994.
The Company entered into a Settlement and Release Agreement
with PNC Bank Kentucky, Inc. ("PNC"), dated
September 8, 1993 and subsequently amended, pursuant to which PNC
agreed to release the Company from liability with
respect to $7,905,600 of outstanding principal, and accrued
interest of $1,155,928, as of February 21, 1994, which the
Company was obligated to pay to PNC under a series of Credit
Agreements which provided for a combination of term and
revolving credit loans to the Company. As a condition to the
Settlement and Release Agreement with PNC, subsequently
amended, the Company made $635,000 in principal payments from
September 1993 to February 15, 1994, and the remaining
payment of $1,550,000 was made on February 24, 1994. In addition,
the Company made $60,000 in interest payments to
PNC for the year ended June 30, 1994. This resulted in the
Company recognizing a one-time extraordinary gain of
$4,610,528 ($7,511,528 less taxes of $2,901,000) in the year ended
June 30, 1994. The total extraordinary item recognized
for the year ended June 30, 1994 was $8,485,028 ($13,824,028 less
taxes of $5,339,000).
NOTE 13 - INCOME TAXES
The sources of significant temporary differences which gave
rise to deferred tax assets and liabilities as of June 30, 1995
are as follows:
Current deferred tax asset
<S> <C> <C>
<C>
Allowance for doubtful accounts
$
8,000
Capitalized lease expensed for tax
10,000
Accrued salaries and bonuses
226,000
Current deferred tax asset
$
244,000
Non-current deferred tax liability
Book basis of property, plant and equipment in excess of tax
$
425,000
Book basis of intangible assets in excess of tax
60,000
Book basis of investment in subsidiaries in excess of tax
1,937,000
Net operating loss carryforward
(
84,000
)
Tax capital loss carryforward
(
2,000
)
2,336,000
Valuation allowance for loss carryforwards
44,000
Non-current deferred tax liability
$
2,380,000
<CAPTION>
The components of the provision (benefit) for income taxes for
the years ended June 30, 1995 and 1994 were as follows:
1995
1994
<S> <C>
<C> <C> <C> <C> <C>
Current tax expense (benefit)
$ (
509,000
)
$
3,397,286
Benefit of operating loss carryforward
- - --
(
3,580,000
)
Deferred tax expense (benefit)
Current
(
244,000
)
- - --
Non-current
(
247,000
)
219,000
$ (
1,000,000
)
$
36,286
</TABLE>
<TABLE>
In 1994, current tax expense of $2,931,000 and deferred tax
expense of $2,408,000 were allocated to the extraordinary
item. As a result of the Tax Reform Act of 1986, a separate
parallel tax system was created called the Alternative Minimum
Tax (AMT) system. AMT is calculated separately from the regular US
Federal income tax and is based on a flat rate applied
to a broader tax base. The higher of the two taxes is paid. The
excess of the AMT over regular tax is a tax credit, which
generally can be carried forward indefinitely to reduce regular tax
liabilities of future years.
The difference between the provision (benefit) for income
taxes and the amounts obtained by applying the statutory US
Federal Income Tax rate to the income before taxes is as follows:
<CAPTION>
1995
1994
<S>
<C> <C> <C> <C> <C> <C>
Tax expense (benefit) at statutory rate
$ (
871,000
)
$
3,238,000
Increase (decreases) in taxes resulting from tax effects of:
State income taxes, net of federal tax benefit
(
181,000
)
335,000
Non-deductible expenses
241,000
- - --
Benefit of net operating loss carryforward
- - --
(
3,580,000
)
Increase in valuation allowance
44,000
- - --
Adjust prior year income tax estimate
(
175,000
)
- - --
Other
(
58,000
)
43,286
$ (
1,000,000
)
$
36,286
</TABLE>
<TABLE>
As of June 30, 1995, the Company had approximately a
$1,500,000 net operating loss carryforward for state tax purposes
and a $4,000 capital loss carryforward for both state and federal
purposes. The net operating loss carryforward expires in the
year 2010 and the capital loss carryforward expires in the year
2000. The Company recorded a $44,000 valuation allowance
in 1995 related to these carryforwards.
NOTE 14 - RELATED PARTIES
The Company's consulting agreement with Cross-Tec Market
Systems Inc., a company owned by one of the
Company's former directors, terminated on December 31, 1993.
Pursuant to an oral modification, the Company extended this
agreement and continued to pay Cross-Tec Market Systems, Inc.
$13,300 in monthly consulting fees until July 31, 1994
when the agreement was terminated. During the fiscal year ended
June 30, 1994 the Company paid $146,300 to Cross-Tec
Market Systems, Inc. In addition, the Company paid $119,808
individually to another former officer and director for
consulting services regarding the operations of the Company.
The Company entered into certain compensatory agreements with
related party consultants providing for payments
which were contingent upon the Sears settlement. During the fiscal
year ended June 30, 1994, the Company incurred
$2,542,961 of commissions and bonuses payable to R. Park Newton,
Cross-Tec, Kerry F. Marler, Asset Consultants, Inc.,
Carey Webb, and Harvey Moore. Independent compensation consultants
have reviewed certain of these commission
agreements for reasonableness.
On July 1, 1987, as part of the financial consolidation of the
Company and its predecessor corporations, a lease and
license agreement was entered into by the Company and Ride Control
Systems, Inc., ("Ride Control") a South Carolina
company wholly-owned by Park Newton and his wife. Pursuant to this
agreement, the Company was obligated to pay Ride
Control $10,517 per month for the use of technology which is a
component of its Tire Matching technology. Pursuant to
periodic oral modifications to that agreement, the Company from
time to time paid less than the required monthly amount to
afford the Company additional working capital. Park Newton
contended that the oral modifications permitted the reduced
payments, but that the unpaid amounts were an accrued obligation of
the Company to Ride Control and the total amount of
such accrued obligation as of March 31, 1994 was $471,282 ("Accrued
Fees"). The Company, however, treated the oral
modifications as if the contractual obligation was reduced from
$10,517 per month to the amount actually paid in a particular
month, with no obligation being accrued for the difference between
such amounts. Additionally, since the intellectual
property that is licensed pursuant to the Ride Control agreement
has been sold by the Company to Sears as part of the Sears
settlement agreement, and since the Company is required by the
Sears agreement to transfer the Tire Matching technology
free and clear of all liens and encumbrances, the Company and Ride
Control agreed to a settlement pursuant to which Ride
Control disclaimed any rights to such technology in exchange for
the settlement payment described in the following
paragraph. Assuming that the Company agreed to pay Ride Control
the Accrued Fees plus additional fees of $225,216,
(representing the amounts payable to Ride Control by the Company
under the agreement for the remaining life of the patents
relating to the technology, reduced to present value) the Company
would be indebted to Ride Control in the amount of
$696,498. As of June 3, 1994, the payments against Accrued Fees
and the accrued interest on the above-referenced
promissory note equaled $345,627 (after subtracting $110,718, the
amount owed to Park Newton for unreimbursed business
expenses). Park Newton authorized such payments against Accrued
Fees based upon his belief that the aggregate amount
owed by the Company to Ride Control for Accrued Fees exceeded the
amount of the payments. Consequently, if the
Company, as contended by Park Newton, is liable to Ride Control for
Accrued Fees, and if credit was given to Ride Control
for the present value of future fees, the net due to Ride Control,
after subtracting the $345,627 amount already paid as
referenced above, is $350,872. The Board of Directors, Ride
Control, and Park Newton agreed that the Company would pay
Ride Control one-half of this net amount in settlement of this
matter and in termination of the license agreement.
Consequently, the Company's settled obligation to Ride Control was
$175,436. This amount was subsequently paid after
June 30, 1994. The Company incurred expense of $601,395 in regard
to this agreement in the year ended June 30, 1994.
Ride Control used the monthly payments received from the
Company to make loan payments on $500,000 of
indebtedness owed to two unaffiliated financial institutions. This
indebtedness was collateralized by Ride Control's rights to
the patent leased to the Company. Ride Control became delinquent
in its payments on these loans. The financial institutions
maintained that the delinquency was partially due to reduced cash
flow as a result of reduced lease payments made by the
Company. NationsBank filed suit against both Ride Control Systems,
Inc. and the Company to recover past due amounts.
NationsBank maintained that since Ride Control Systems Inc. and the
Company are controlled by the same party that they
should be held jointly liable. As a result of a mediation
conference held on October 26, 1993, the Company agreed, without
admitting liability, to settle the referenced lawsuit by making a
payment of $20,000 to NationsBank and dismissing, with
prejudice, its own counterclaim against NationsBank. The Company
and NationsBank also agreed to release each other from
further liability. The required payment has been made by the
Company.
Ride Control had no assets and its only revenue was the lease
payments received from the Company. Ride Control's
only liabilities were the indebtedness to the two unaffiliated
financial institutions. As part of the February 24, 1994
settlement with Sears, the Company's rights in the lease and
license agreement with Ride Control was transferred to Sears as
discussed above.
During the fiscal year ended June 30, 1994, the Company also
entered into Indemnity Agreements with R. Park Newton,
III, John L. Caskey, Charles A. Ross and Aris W. Newton, under
which the Company agreed to indemnify and hold harmless
such individuals against all expense, judgments, fines, penalties,
etc. reasonably incurred by each in connection with their
services to the Company. However, such indemnification only
applies following a specific determination that such
individuals acted in good faith and in a manner which each
reasonably believed to be in the best interests of the Company.
The Board of Directors previously authorized the advance of costs
and expenses incurred by R. Park Newton, III, the
Company's current Chairman of the Board, Secretary, Treasurer and
a director, as well as those costs and expenses incurred
by Douglas Gardner, Richard Russell, Charles Ross, Richard W.
Brewer, and George Crook, all of whom are former officers,
directors, employees or agents of the Company, in connection with
the Securities and Exchange Commission
(Commission) investigation. Such advances were conditioned on
repayment if it was ultimately determined that the person
whose behalf the advance was made did not meet the statutory
standards of conduct required for indemnification. Under
Delaware law, a person may only be indemnified to the extent that
they are determined to have acted in good faith and in a
manner reasonably believed by them to be in the best interest of
the Company. In connection with the Commission's
investigation, the Company's Board of Directors engaged counsel to
conduct an internal investigation of the matters
underlying the Commission's investigation. Based upon such report
and on the matters raised by the Commission's
investigation, the Board of Directors discovered no evidence that
the referenced officers, directors, employees and agents
acted other than in good faith and in a manner which they
reasonably believed to have been in the best interests of the
Company in discharging their duties. Accordingly, the Board of
Directors has determined that the referenced individuals are
entitled to indemnification for costs and expenses incurred in
connection with the Commission investigation referenced
above. The Company accrued $455,000, for judgments and fines as of
June 30, 1994.
The above amounts are not necessarily indicative of amounts
which would have been incurred had comparable
transactions been entered into with independent parties.
NOTE 15 - LEGAL PROCEEDINGS
Other than the litigation described below, the Company is
aware of no other material legal proceedings, pending or
threatened, to which any director, officer or affiliate of the
Company, or any beneficial owner of more than 5% of the
Companys common stock is a party adverse to the Company or has a
material interest adverse to the Company or to which
the Company is a party or its property subject.
A. Securities and Exchange Commission Proceeding
On May 28, 1993, the United States Securities and Exchange
Commission ("the Commission") entered an Order
Directing Private Investigation and Designating Officers to Take
Testimony in the Matter of Assix International, Inc. ("the
Order"). The Order was based upon reports from Commission staff
personnel prepared as a result of an informal preliminary
investigation, apparently initiated in June 1992, regarding certain
of the Companys prior activities. The reports alleged that
the Company may have violated various provisions of the Securities
Exchange Act of 1934, as amended (the Exchange
Act) and rules promulgated thereunder by, among other reasons,
failing to report the loss of its principal customers in a
timely and accurate fashion and falsely reporting a material amount
of nonexistent revenue from one of those lost customers.
The reports also alleged that certain individuals, including the
Companys officers and directors, may have participated in
such violations or aided and abetted the suspected Company
violations. As a result of the investigation, the Commissions
Enforcement Division (the Enforcement Division) informed the
Company and certain of the current and former officers
and directors that it intended to recommend to the Commission that
the Company and such individuals be charged with
certain violations of the Exchange Act and the rules promulgated
thereunder. Additionally, it was alleged that Mr. Newton
traded Company securities before the foregoing information had been
disclosed, thereby violating the insider trading
provisions of the Securities Act of 1933 (the Securities Act) and
the Exchange Act.
In connection with the foregoing, the Companys Board of
Directors engaged counsel to conduct an internal
investigation into the matters underlying the Commissions reports.
Based upon the results of this investigation and its
knowledge of the Commissions reports, the Board of Directors has
discovered no evidence that the officers and directors of
the Company acted other than in good faith and in a manner in which
they believed to be in the best interests of the Company
in discharging their duties.
Thereafter, the Company and the Enforcement Division
tentatively reached a settlement agreement pursuant to which the
Company, while neither admitting nor denying violations of the
federal securities laws, would have consented to the entry of
a permanent injunction enjoining the Company from future violations
of the federal securities laws, but no monetary penalty
would have been assessed against the Company. However, in September
1994, the Enforcement Division withdrew its
recommendation that the Commission enter into the referenced
consent decree and commenced to investigate possible
additional violations of the federal securities laws involving the
valuation of real property received by the Company in its
contractual settlement with Sears, Roebuck & Co. (Sears).
On September 26, 1995, the Commission filed suit in the
Federal District Court for the Middle District of Florida (Civ.
No. 95-1583-CIV-T-23-B) against the Company, R. Park Newton, III,
Frederic S. Schadt, Charles A. Ross, Douglas S.
Gardner, George Crook, Richard I. Brewer, and J. Theodore Biesanz.
The complaint alleges that the Company, Mr. Newton
(former President and Chief Executive Officer), Mr. Ross (former
member of the Board of Directors), Mr. Crook (former
Chief Operating Officer), Mr. Gardner (former Secretary and
Treasurer) and Mr. Brewer (former Controller) violated certain
provisions of the Exchange Act and the rules thereunder.
Specifically, the complaint alleges that the Company and in various
instances those individuals: (i) during the fiscal years 1991
through 1993 concealed the loss of the Companys principal
customers as licensed dealers and filed false periodic reports
under the Exchange Act with respect thereto; and (ii) falsified
the Companys books and records in order to conceal the loss of its
principal customers, including using allegedly fictitious
invoices to deceive the Companys auditors.
The complaint also alleges that the Company understated the
value of a large piece of commercial real estate, known as
the Imeson Center, received by the Company in a contractual
settlement with Sears. Although the value was derived from
an independent MAI appraisal commissioned by the Company, such
appraisal is alleged by the Commission to be
unreasonably low and obtained through manipulation by Mr. Newton.
The Commission charges that such artificially low
appraisal was procured to understate the Companys income tax
liability. The Commission also alleges that the Company
and Mr. Newton failed to inform the auditors of other allegedly
material information bearing on the value of Imeson Center.
The Company recently became aware that on July 28, 1995, an
appraisal was completed on behalf of Harvey Moore in his
litigation against the Company, valuing the Imeson Center at
$18,225,000, an amount substantially above the value utilized
by the Company in its financial statements. The Company has
reviewed this appraisal and believes that it contains
significantly erroneous assumptions and conclusions.
The complaint also alleges that Mr. Newton, Mr. Schadt and Mr.
Biesanz violated certain provisions of the Securities
Act, the Exchange Act and the rules thereunder by engaging in
illegal insider trading in the Companys common stock. The
Commission contends that (i) Mr. Newton and Mr. Biesanz sold
Company stock while the Company was concealing the loss
of its principal customers; and (ii) Mr. Newton improperly
disclosed to Mr. Schadt material non-public information
concerning settlement negotiations between the Company and Sears,
and Mr. Schadt acquired Company common stock in
reliance on such non-public information. The complaint also
alleges that Mr. Newton failed to timely file with the
Commission required reports of his trading.
The Commission seeks (i) a permanent injunction against the
Company and the individual defendants enjoining them
from violating certain provisions of the federal securities laws;
(ii) an order permanently prohibiting Mr. Newton from
serving as an officer or director of a company whose securities are
publicly held and that is regulated by the Commission;
(iii) disgorgement by Messrs. Newton, Schadt and Biesanz of profits
resulting from the allegedly improper stock transactions;
(iv) an order requiring the Company to obtain a new appraisal for
Imeson Center and to restate its 1994 fiscal year financial
statements to reflect the new appraisal; and (v) an order requiring
the Company and Messrs. Newton, Ross, Crook, Gardner,
Brewer, and Schadt to pay civil penalties under the Securities
Enforcement Remedies and Penny Stock Performance Act of
1990. The Company intends to vigorously defend itself in this
action.
B. ASX Investment Corporation
On April 25, 1994, ASX Investment Corp., a Delaware
corporation (ASX Investment) which owns approximately
seven percent (7%) of the Companys issued and outstanding common
stock, filed a Complaint in the United States District
Court for the Eastern District of Pennsylvania against R. Park
Newton, III, Frederick Schadt, Arlene Schadt and the
Company. Mr. Steve Rosner subsequently joined the complaint as a
co-plaintiff. On September 13, 1994, the Pennsylvania
court transferred the action to the United States District Court
for the Middle District of Florida, Civil Action No. 94-1698,
CIV-T-25B.
In the complaint, as amended, the plaintiffs allege that the
Company's 1994 Proxy Statement contained numerous
misrepresentations, breach of fiduciary duty, fraud, mismanagement
and waste of corporate assets. The Florida District
Court has not yet ruled on motions to dismiss, for summary
judgment, for discovery sanctions, and for leave to seek
discovery from certain individual defendants. A case management
conference was held on April 4, 1995, and a case
management report was entered as a result of that meeting. No
action has been taken in this case since that time.
The Company and each of the individual defendants have denied
all of the foregoing allegations and each has indicated
an intention to vigorously defend their actions in the ASX
Investment litigation brought against them. Although it is
possible
that R. Park Newton, III may have one or more interests materially
adverse to the interests of the Company in this litigation,
Mr. Newton has denied the allegations made in this action and
intends to vigorously contest the allegations set forth in the
ASX Investment complaint.
C. Kerry F. Marler
On June 10, 1994, the Company filed a complaint against Kerry
F. Marler, in the Circuit Court of the Thirteenth Judicial
Circuit, in and for Hillsborough County, Florida, Case No.
94-03995. The Company is seeking damages for breach of
fiduciary duty and breach of employment agreement and is seeking a
declaratory judgment that Marlers March 1, 1994
employment agreement and incentive compensation agreement with the
Company superseded any prior agreements between
the parties. Marler, a former employee, director, officer, and
consultant of the Company, is believed to have divulged
confidential corporate information to ASX Investment Corp., in
violation of his fiduciary and contractual obligations. The
Company amended the Complaint on August 30, 1994 to join KFM
Venture, Inc. and Amazing Systems, Inc., two
corporations wholly-owned by Marler. Marler answered the amended
complaint and filed a counterclaim. There was a
significant delay during which Marlers counsel withdrew from the
case. Parts of Marlers counterclaim were dismissed on
August 10, 1995. Through his new attorney, Marler filed an amended
counterclaim against the Company on September 11,
1995 alleging causes of action against the Company for breach of
contract, violation of the Whistleblowers Act, defamation,
conversion, and violation of Chapter 772, Florida Statutes. A
response to the amended complaint is due in October. The
Company believes that most counts of the amended complaint contain
the same defects as the counterclaim that was
dismissed in August. The Company believes that the amounts owed to
Marler are subject to offset for the damages caused by
Marler to the Company and that it has committed no action that
would support an award of damages to Marler.
D. KFM Venture, Inc.
KFM Venture, Inc., a corporation wholly-owned by Kerry F. Marler,
filed a complaint on August 10, 1994 in the Thirteenth
Judicial Circuit, in and for Hillsborough County, Florida, Case No.
94-05485, alleging that it is owed money pursuant to an
incentive compensation agreement. KFM Venture alleges that the
agreement gives it the right to receive a bonus, based on
the value of certain real property received by the Company as a
result of services performed by Marler. Because the subject
matter of this suit is intertwined with the action described above,
the Company answered the complaint by denying that it
owes KFM Venture the sums claimed and moved to consolidate the case
with the previously filed action. The court denied
the Companys motion to consolidate and denied KFM Ventures motion
to set the case for trial. A substantial delay
occurred when KFM Ventures counsel withdrew from the case. On
August 31, 1995, new counsel appeared on behalf of
KFM Venture, but no action has occurred since that time.
E. Harvey Moore
Harvey Moore previously served as a consultant to the Company
under a letter agreement dated July 20, 1993. Mr.
Moore filed a complaint for declaratory judgment on February 15,
1994 in the Thirteenth Judicial Circuit, in and for
Hillsborough County, Florida, alleging that the Company failed to
compensate Moore for services rendered in negotiating a
settlement agreement between the Company and Sears. The parties
have engaged in discovery and participated in a
mediation on July 27, 1995, but were unable to reach an agreement.
Discovery is ongoing and this matter is scheduled for
trial the week of December 11, 1995.
F. NATIONSBANK
On February 27, 1995, NationsBank of Florida, N.A. filed a
complaint in the Circuit Court of the Thirteenth Judicial
Circuit, in and for Hillsborough County, Florida, Case No.
95-001369. NationsBank is seeking recovery of $220,267.57
transferred from R. Park Newton , III to the Company, plus
pre-judgment interest and taxable costs and expenses. On
December 15, 1993, a final judgment was entered in favor of
NationsBank against, among others, R. Park Newton, III. The
Company was a co-defendant in the lawsuit and had previously
settled with NationsBank. NationsBank contends that the
transfer of funds to the Company were fraudulent transfers,
voidable under Florida statutes, and therefore, they are entitled
to
recovery from the Company. R. Park Newton, III has agreed to
reimburse the Company for any costs or liabilities incurred as
a result of this litigation.
NOTE 16 - SEGMENT INFORMATION
The Companys operations consist of the automotive service
operation that markets the AccuBalance total wheel
balancing system and the Imeson Center commercial real estate
rental operation. Financial information of the reportable
segments for the year ended June 30, 1995 is as follows:
<CAPTION>
Auto
Imeson
Corporate
Total
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
$
1,119,420
$
1,119,566
$
- - --
$
2,238,986
Operating profit (loss)
$ (
308,545
)
$
235,317
$ (
1,796,758
)
$ (
1,869,986
)
Identifiable assets
$
2,880,414
$
7,908,894
$
3,442,793
$
14,232,101
Depreciation and amortization
$
548,193
$
176,891
$
75,480
$
800,564
Capital expenditures
$
940,207
$
1,307,885
$
106,980
$
2,355,072
8
F-15
</TABLE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ASSIX INTERNATIONAL, INC.
<TABLE>
ASSIX INTERNATIONAL, INC., a corporation organized and
existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation by the
unanimous written consent
of its members, filed with the minutes of the board, duly adopted
a resolution setting forth a
proposed amendment to the Certificate of Incorporation of the
Corporation, declaring said
amendment to be advisable and placing such amendment on the agenda
of the annual meeting
of the stockholders of the Corporation for consideration thereof.
The resolution setting forth the
proposed amendment is as follows:
RESOLVED, That Article I of the Corporation's
Certificate of
Incorporation be amended to read in its entirety as
follows:
"THE NAME OF THE CORPORATION SHALL BE "EXCAL
ENTERPRISES, INC."
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual
meeting of the stockholders of said corporation was duly called and
held, upon notice in
accordance with Section 222 of the General Corporation Law of the
State of Delaware at which
meeting the necessary number of shares as required by statute were
voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of
Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Assix International, Inc. has caused this
certificate to be
signed by R. Park Newton, III, its Chairman of the Board of
Directors, this 8th day of June,
1995.
/S/ R. PARK NEWTON,
III_______
R. Park Newton, III
Chairman of the Board of
Directors
<S> <C>
</TABLE>
ASSIX STANDARD AGENCY AGREEMENT
<TABLE>
THIS ASSIX STANDARD AGENCY AGREEMENT (the "Agreement") is made
and
entered into as of this 13th day of September, 1993 (the "Effective
Date"), by and between ASSIX
INTERNATIONAL, INC., a Delaware corporation ("Assix"), and 4DAY
TIRE a California
corporation ("Agent").
RECITALS
A. Assix has created a nationally recognized brand name
technically superior wheel balance
that brings the tire/wheel assembly in line with OEM
specifications.
B. Assix has developed and is the owner of a service program
of methods and processes for
wheel balancing (the "Program") and a training and certification
program for personnel utilizing
the Program.
C. Assix has valuable proprietary rights, including patents,
trademarks, service marks, trade
names, or trade dress, existing or arising at common law or by
statute, whether of not
registered or applied for, logos (collectively, the "Marks"),
copyrights, confidential
information, and know how embodied in and/or pertaining to the
Program and the materials
and equipment used therewith.
D. Assix had decided to offer tire/wheel assembly balancing
services ("wheel balancing") to
customers through the use of agents.
E. Agent is engaged in business as an automotive tire
retailer and is willing to be engaged by
Assix as an agent offering wheel balancing on behalf of Assix to
customers under the Program.
F. Subject to the terms of this Agreement, the parties have
agreed that Assix will allow Agent
to utilize the Program as its agent and will provide Agent with the
Program and the marketing
and technical advice and services necessary to fully implement the
Program.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and of other
good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged,
Assix and Agent agree as follows:
1. RECITALS AND EXHIBITS.
The parties acknowledged and agree that the recitals are true and
correct, and that by this
reference they are hereby incorporated into this Agreement. In
addition, any exhibits referred
to in this Agreement by this reference are hereby incorporated into
this Agreement.
2. RELATIONSHIP OF THE PARTIES.
The relationship created by this Agreement is that of principal and
agent. Subject to the terms
of this Agreement, Agent shall represent itself to be the legal
agent of Assix and shall have the
right and authority to bind Assix for purposes of the commitments
made by Assix for the
benefit of wheel balancing customers. Agent shall not have, nor
shall it hold itself out as
having, the power to make contracts in the name of, or binding on,
Assix, to pledge Assix's
credit, or to extend credit in Assix's name. Agent agrees to
indemnify and hold Assix harmless
in the event that any claims are made based upon any assertions of
authority by Agent to do any
of the aforesaid acts unless written authority has been expressed
in advance by Assix.
It is further understood and agreed that no individuals employed by
Agent shall be considered
to be employees of Assix, and Agents agrees this it shall be liable
for any and all expenses or
claims of whatsoever nature or kind arising against either Agent or
Assix because of the acts of
any of Agent's employees, agents, or servants, and indemnify,
defend, and hold harmless
Assix from any liability thereon.
Agent is not and shall not be considered to be a franchisee of
Assix for any purpose. Assix
does not represent or warrant the commercial or financial success
of Agent's business.
3. ASSIX OBLIGATIONS.
Assix hereby covenants and agrees to:
(a) Provide Agent with access to and use of the items listed in
Exhibit B, which are
necessary to implement the Program at Agent's location(s) (the
"Service Property");
(b) Allow Agent to use the Marks which accompany the Program to
the extent and in a
manner reasonably determined by Assix in order to effectively
market the Program at
Agent's location(s), provided, however, the Marks may be used by
Agent solely in
conjunction with the Program;
(c) Provide Agent's designated employees with the training and
technical advice necessary to
utilize the Program;
(d) Provide Agent with the training, marketing advice, and
marketing materials deemed
necessary by Assix in order for Agent to effectively market and
promote the Program;
(e) Keep Agent informed of any changes or advances in Program;
(f) Keep the Program and the Service Property in proper working
order during the term of
this Agreement, including the repair and replacement of Service
Property; provided,
however, that Assix reserves the right to determine the necessity
for replacements;
(g) Maintain the quality and performance characteristics of the
Service Property supplied to
Agent hereunder and make additions, deletions, and modifications
from time to time at
Assix's sole discretion based upon its determination as to the
materials and services that
will best enable Agent and Assix to benefit from the rights granted
in this Agreement;
(h) Deliver the Service Property to the ground floor entrance of
Agent's locations and
connect the Service Property in the place of installation. Upon
the termination of this
Agreement, in whole or in part, Assix shall disconnect the Service
Property, as
appropriate, and after it is moved to the ground floor entrance of
Agent's property by
Agent, remove the Service Property. In all events, Agent shall
reimburse Assix a final
fee for the cost of removal, freight, crating, and shipping of the
Service Property in an
amount equal to one Monthly Program Fee per Service Property unit;
(i) Obtain and pay all additional insurance (attributable solely
to the incremental risk
associated with Agent's implementation of the Program), additional
necessary licenses,
and all other additional permits required to permit Agent to offer
the Program at Agent's
location(s). Agent shall notify Assix promptly of any inspections
conducted by licensing
authorities and the results thereof; and
(j) Bear the risk of loss for defective equipment.
4. AGENT OBLIGATIONS.
Agent shall utilize the Program, as described in Exhibit A, the
Service Property, as described in
Exhibit B, and the trade names, trademarks, and service marks of
Assix (the "Marks") strictly
in accordance with the written instructions provided by Assix and
solely for the purpose of
implementing the Program on behalf of Assix at its locations(s).
Notwithstanding anything
contained in this Agreement to the contrary, Agent shall:
(a) Obtain and maintain continuously so long as this Agreement
shall remain in effect, all
licenses, permits, and authorizations necessary to Agent's
implementation of the
Program;
(b) Utilize the Marks strictly in connection with the prescribed
marketing, sale, and delivery
of all services under the Program, in accordance with Exhibit A.
Specifically, Agent
shall: (1) not impair, by act of by omission, the value of the
Marks, whether registered or
not; (2) use only the Marks designated by Assix; (3) not use
trademarks, trade names,
service marks, symbols, slogans, logos, or the like that are
confusingly similar to the
Marks; (4) use the Marks only in the names and forms authorized by
Assix; (5) not use
the Marks to incur any obligation or indebtedness on behalf of
either Agent or Assix; (6)
not use the Marks, or any word, name, or other symbol tending to be
confusingly similar
to the Marks, or part of Assix's corporate or other legal name,
including, without
limitation, in the name of any bank account of Agent, without the
express prior written
approval of Assix; (7) not in any manner represent that it has any
ownership interest in
the Marks; (8) not at any time apply for any copyright, trademark,
or patent registration
or protection with respect to any products or materials associated
with the Program and
the Service Property; and (9) immediately cease any pre-existing
use of the Marks that
conflicts with the terms of this Agreement;
(c) Display the name "Assix" and the Marks prominently in signage
located at the Agent's
location(s) in a manner which shall be clearly visible to customers
and shall reasonably
advertise and promote the name "Assix" and the Marks in connection
with such business,
subject, however, at all times to the supervision and control of
Assix. Every use of the
name "Assix" and the Marks in any display, advertisement,
promotion, or otherwise by
Agent shall be in a form and character approved in advance, in
writing, by a duly
authorized officer of Assix. Such utilization shall include,
without limitation, the display
of signage provided by Assix at each service location and the
display of the trade names,
trademarks, or service marks on all advertising and marketing
materials for the Program.
The size and number of signage to be displayed by Agent shall be
reasonable and
consistent with the other signage for automotive services at
Agent's location(s), subject to
the inspection and control by Assix;
(d) Use due care in the possession of the Service Property and the
performance of services
under the Program, including ensuring that there is sufficient
coverage at its location(s) in
time and manpower by personnel trained and certified in the
provision of wheel balancing
services under the Program;
(e) Use good faith in implementing the Program. Agent shall at
all times while this
Agreement remains in effect exert its best efforts to sell the
wheel balancing services
under the Program and shall not make any disparaging comments
regarding the Program
to customers or potential customers of the Program. Such best
efforts shall include,
without limitation, promoting the wheel balancing services to all
potential customers.
Agent further agrees to comply, on or before three (3) months prior
to each anniversary
date of the Effective Date of the Agreement, with Assix's
reasonable requests for
forecasts of Agent's volume and level of Program activity and to
contribute information
required by Assix to properly plan for Assix's support of the
Program and the Service
Property for the next succeeding year;
(f) Provide suitable electrical service and compressed air and
maintain the space and
environmental requirements designated by Assix;
(g) Make no alterations to the Program, nor make any repairs to
the Service Property, other
that those specifically set forth in Exhibit A or in writing by a
duly authorized officer of
Assix;
(h) Obtain written authorization from Assix prior to any movement
of any portion of the
Service Property;
(i) Provide an agent or employee to accompany Assix personnel
while such personnel are
training or advising Agent's personnel hereunder or servicing the
Program after Agent's
normal business hours;
(j) Maintain its business location(s) in an attractive, clean,
orderly, and sanitary condition;
(k) Charge such prices to retail customers for AccuBalance as the
agent and Assix shall
from time to time determine to be appropriate based on market
conditions. Such prices
shall be reviewed and communicated between the agent and Assix.
These should be
calculated in the following manner. A survey will be completed by
the agent and Assix to
determine the market competitive price of a standard wheel balance
and agent shall charge
a minimum of between $3.50 and $5.00 over the standard wheel
balance for
AccuBalance.
(l) Prepare and forward to Assix Central, 505 E. Jackson Street,
Suite 220, Tampa, FL
33602, fax (800) 753-5444, monthly reports, on or before 10th day
of the next
succeeding month, setting forth, on a region basis listing stores
individually: (i) the
number of tire/wheel assemblies standard balanced and AccuBalanced
by Agent and (ii)
the number of tires sold by Agent store, for the month in question;
(m) Upon termination of this Agreement, allow Assix to remove all
of the Service Property
from Agent's premises, return the Service Property to Assix in good
repair, condition,
and working order (ordinary wear and tear excepted), and cease use
of all the Marks,
copyrights, confidential information, and know-how used hereunder;
(n) Make no statement indicating or implying that performance of
the wheel balancing
services are other than as indicated in Assix's brochures, sales
literature, or training
materials, nor convey any proprietary information to anyone outside
of Agent's
organization;
(o) Make a reasonable effort to preserve the Marks against
dilution and promptly notify Assix
of any use, of which Agent has become aware, of marks which may be
confusingly
similar to the Marks; and
(p) Furnish to customers the warranty in the form set forth in
Exhibit A.
(q) In the event Assix sues Agent to enforce its rights under
Paragraph 4(b) of this
Agreement, the limitation on consequential damages found in
Paragraph 15 shall not
apply. In addition, Assix shall be entitled to recover from Agent
its reasonable attorneys
fees' and costs and all expenses incurred in accordance with
Paragraph 19.
5. COMPENSATION TO AGENT.
As compensation to Agent for Agent's services provided to Assix
under this Agreement, Assix
agrees to compensate Agent in accordance with Exhibit C.
6. INSURANCE.
(a) Assix, at its expense, hereby agrees and covenants that it
shall obtain and maintain during
the term of this Agreement the following policies of insurance
against claims, demands,
actions, liabilities, damages, losses, costs, and expenses arising
out of the subjects
covered by such policies of insurance:
(1) Worker's Compensation Insurance covering all costs, benefits,
and liability under
State Worker's Compensation and similar laws which may accrue in
favor of any
person employed by Assix, and Employer's Liability Insurance for
Assix
employees with limits not less than those required by the states in
which Agent does
business;
(2) Commercial General Liability Insurance covering Products
Liability, Completed
Operations, and Contractual Liability Insurance, specifically
endorsed to cover the
indemnity provisions of this Agreement, and coverage for Personal
Injury, with
limits of not less than $1,000,000.00 combined single limit for
bodily injury and
property damage per occurrence. To the extent that Agent provides
additional
general commercial liability insurance, it shall do so at its own
expense.
(3) Motor Vehicle Liability Insurance covering all owned vehicles
used by Assix
employees in connection with Agent's operations under this
Agreement with limits
of not less than $500,000.00 combined single limit for bodily
injury and property
damage per occurrence; and
(4) Excess Liability Insurance, including, without limitation,
coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal
Injury Insurance with limits of not less than $1,000,000.00.
(5) Casualty Insurance to cover the theft or destruction of
service property.
(b) Agent, as its expense, hereby agrees and covenants that is
shall obtain and maintain
during the term of this Agreement the following policies of
insurance adequate to fully
protect Assix as well as Agent from and against any and all claims,
demand, actions,
liabilities, damages, losses, costs, and expenses arising out of
the subjects covered by
such policies of insurance:
(1) Workers' Compensation Insurance covering all costs, benefits,
and liability under
State Workers' Compensation and similar laws which may accrue in
favor of any
person employed by Agent, and Employer's Liability Insurance for
Agent's
employees with limits not less than those required by the states in
which Agent does
business;
(2) Commercial General Liability Insurance listing Agent as the
primary insured and
Assix as an additional insured, including, without limitation,
coverage for Products
Liability, Completed Operations, and Contractual Liability
Insurance, specifically
endorsed to cover the indemnity provisions of this Agreement, and
coverage for
Personal Injury, with limits of not less than $1,000,000.00
combined single limit
for bodily injury and property damage per occurrence. To the
extent that Assix
provides additional general commercial liability insurance, it
shall do so at its own
expense.
(3) Motor Vehicle Liability Insurance with a Non-Ownership and
Hired Car Liability
Endorsement in the name of Agent covering all vehicles used by
Agent employees
in connection with Assix' operations under this Agreement with
limits of not less
than $500,000.00 combined single limit for bodily injury and
property damage per
occurrence; and
(4) Excess Liability Insurance, including, without limitation,
coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal
Injury Insurance with limits of not less than $1,000,000.00,
listing Agent as the
primary insured and Assix as an additional insured.
(5) Casualty Insurance to cover the theft or destruction of
Service Property.
7. TITLE TO PROGRAM AND SERVICE PROPERTY.
Title to and ownership of the Program, including the Marks,
copyrights, confidential
information, and know-how, shall at all times remain in Assix.
Nothing contained in this Agreement shall be construed as an
assignment or conveyance to
Agent of any right, title, or interest in and to the Marks,
copyrights, confidential information,
and know-how. Agent's use of the Marks, copyrights, confidential
information, and know-
how in any geographical area, including foreign countries, and in
any field for us shall not
create any ownership interest in Agent and shall inure to the
benefit of Assix.
All products, promotional advertising, packaging, and instructional
materials utilized in
connection with the Program and the Service Property shall contain
appropriate legends,
markings, and notices to give notice to the public of Assix's
right, title, and interest in the
Marks, copyrights, confidential information, and know-how.
Title to and ownership of the Service Property shall at all times
remain in Assix and Agent shall
have no property rights therein, but only the right to use the
Service Property as stated herein,
notwithstanding that the Service Property may now be, or hereafter
become, in any manner,
affixed or attached to, imbedded into, permanently resting on real
property or any building
thereon, or attached in any manner to that which is permanent by
means of cement, plaster,
nails, bolts, screws, or otherwise. Should Agent, during the term
of this Agreement, make,
own, or acquire rights to practice any patentable invention
relating to the Program or the
Service Property, then Agent agrees promptly to make full
disclosure thereof to Assix, and to
assign all rights it may have to any such patentable invention to
Assix. Any invention made by
an employee of Agent shall be deemed to have been made by Agent.
8. RECORDS AND INSPECTION.
(a) Agent shall keep records showing the date of purchase, the
purchase price, and the
identity and address or purchasers of any wheel balancing services
performed under the
Program, and shall permit Assix's duly authorized representative(s)
to examine Agent's
records, premises, and samples of wheel balancing services
performed under the
Program at any time during regular business hours to enable Assix
to determine whether
or not Agent is performing its obligations under this Agreement.
(b) Agent shall maintain and provide to Assix such financial
statements and books of account
as Assix may request from time to time, provided that such
statements and books of
account are necessary or useful for Assix to determine whether or
not Agent is
performing its obligations under this Agreement.
(c) Agent acknowledges that the goodwill and favorable reputation
associated with the Marks
are essential to the success of the Program. Accordingly, upon
reasonable notice to
Agent, Assix shall also be allowed access to the Program and
Service Property fro the
purpose of inspecting the Program and the Service Property to
assure that the quality
control provisions of this Agreement are being observed and/or to
perform necessary
maintenance or repairs.
9. WARRANTIES.
(a) Assix warrants that the Program will be provided as described
in Exhibit A, and the
Service Property will operate in substantial conformity with the
specifications and
documentation as to type, design, and capacity as described in
Exhibit B.
(b) EXCEPT AS SET FORTH HEREIN, ASSIX MAKES NO WARRANTIES EXCEPT
TO THE EXTENT REQUIRED BY LAW, EXPRESSED OR IMPLIED, WITH
RESPECT TO THE PROGRAM OR THE SERVICE PROPERTY, INCLUDING,
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. AGENT ACKNOWLEDGES THAT THE
PROGRAM AND THE SERVICE PROPERTY ARE OF THE TYPE, DESIGN, AND
CAPACITY SUITABLE FOR ITS PURPOSES.
10.INDEMNIFICATION.
(a) Notwithstanding anything to the contrary contained within this
Agreement, Assix shall
not be liable to Agent for damages of any type to third parties
which are caused, in whole
or in part, by the negligent or intentional acts, or any other acts
of omission or
commission, of Agent, its agents, or its employees. Agent shall
protect, indemnify,
defend, and hold harmless Assix, its agents, its employees, its
officers, its directors, and
its servants from and against any and all claims, actions,
liabilities, losses, costs, and
expenses (including reasonable attorneys' fees and costs), without
limitation, arising out
of or in connection with (i) any negligent or intentional acts, or
any other acts of omission
or commission, of Agent, its agents, or its employees; (ii) any
statement indicating or
implying that performance of the wheel balancing services are other
than as indicated in
Assix's brochures, sales literature, or training materials; (iii)
any actual or threatened
material breach of this Agreement by Agent; or (iv) any actual or
threatened material act of
omission or commission by Agent, its agents, or its employees, in
connection with this
Agreement. Assix shall give to Agent prompt written notification
of any claim against it
that it believes is subject to indemnification pursuant to this
provision. In the event Assix
shall fail to give Agent prompt written notification of any such
claim, which failure
results in material detriment to the defense of such claim, Agent's
indemnification
obligations in favor of Assix as to such claim, if any, shall be
come null and void and of
no further legal force or effect.
(b) Assix shall protect, indemnify, defend, and hold harmless
Agent, its agents, its
employees, its officers, its directors, and its servants from and
against any and all claims,
actions, liabilities, losses, costs, and expenses (including
reasonable attorneys' fees and
costs) arising out of or in connection with (i) any material
malfunctioning of the Service
Property; (ii) any actual or threatened material infringement of
any United States patent,
foreign letters patent, trade name, trademark, copyright, trade
secret, or any other
proprietary right with regard to Agent's utilization of the Program
or the Service
Property; (iii) any actual or threatened material breach of
warranty by Assix; (iv) any
actual or threatened material breach of this Agreement by Assix;
(v) any actual or
threatened material act of omission or commission by Assix, its
agents, or its employees,
in connection with this Agreement. Agent shall give Assix prompt
written notification of
any claim against it that it believes is subject to indemnification
pursuant to this provision.
In the event Agent shall fail to give Assix prompt written
notification of any such claim,
which failure results in material detriment to the defense of such
claim, Assix's
indemnification obligations in favor of Agent as to such claim, if
any, shall become null
and void and of no further legal force or effect.
(c) Assix shall have the sole control and authority over the
defense, settlement, or
compromise of any claim or legal proceeding that Agent believes is
subject to
indemnification pursuant to Subparagraph (b). If the Program or
the Service Property
becomes, or in the opinion of Assix is likely to become, the
subject of a claim of
infringement of a United States patent, foreign letters patent,m
trade name, trademark,
copyright, or trade secret, Assix may, in its sole discretion,
procure for Agent the right to
continue using the Program or the Service Property, or any part of
them so as to make
Agent's use of them noninfringing. If, during the pendency of any
claim or legal
proceeding against Agent or Assix pursuant to which Agent is
prevented from utilizing
the Program or the Service Property by court order, operation or
law, or any other
reason, Agent may, as its sole remedy, withhold payment of any sums
otherwise
required to be paid over to Assix by Agent pursuant to this
Agreement.
11.CHANGE OF OWNERSHIP OF AGENT.
In order to ensure Assix that Agent will comply with its
obligations hereunder to the
satisfaction of Assix, Agent acknowledges that Assix must know and
approve who in fact
controls Agent. Any Transfer of Control by Agent or any
Controlling Person may result in the
immediate termination of this Agreement, at the sole option of
Assix. Such cancellation can be
prevented by the agent seeking prior written consent.
For purposes of this Agreement:
(a) The term "Affiliate" shall mean any natural person or other
legal entity that, directly or
indirectly, controls, is controlled by, or is under common control
with, either Agent or
any Controlling Person;
(b) "Controlling Person" shall be any natural person or other
legal entity with a fifteen
percent (15%) or greater interest in Agent or an another entity
that has, directly or
indirectly, a fifteen percent (15%) or greater interest in Agent,
or otherwise has the power
to control, directly or indirectly, the management, direction, or
day-to-day operations of
Agent. Without limiting the generality of the foregoing, a natural
person or legal entity
shall be a "Controlling Person" of Agent if it owns a fifteen
percent (15%) or greater
interest in another entity that is either a Controlling Person of
Agent or that has an indirect
ownership interest in Agent through one or more intervening levels
of direct or indirect
subsidiaries. For example, if Agent is a wholly-owned subsidiary
of another corporation
that is, in turn, owned equally by three other corporations, each
of these three
corporations who have the power (indirectly) to affect the
day-to-day operations of Agent
shall be considered a Controlling Person for purposes of this
Agreement:
(c) The term "Transfer" shall mean any voluntary sale, pledge,
encumbrance, or other
transfer or disposition (other tan a pledge granted to a financial
institution providing
financing to the pledgor); and
(d) "Transfer of Control" of Agent shall mean (a) if Agent or any
direct or indirect
Controlling Person is a partnership, any change in the identity or
respective ownership of
the partners or any of them, (b) if Agent or any direct or indirect
Controlling Person is a
corporation, any Transfer of shares comprising fifteen percent
(15%) or more of the total
number of issued and outstanding shares of Agent or such
Controlling Person, or (c) the
Transfer or change in the direct or indirect control of, or the
Transfer or change in the
power to control, directly or indirectly, the management,
direction, or day-to-day
operations of Agent or of any direct Controlling Person; provided,
however, that the
death or determination of incompetency of a partner of any natural
person constituting a
Controlling Person of Agent shall not be a "Transfer of Control."
12.TERM AND TERMINATION.
(a) The term of this Agreement will commence on the Effective Date
stated above and shall
continue until otherwise terminated in accordance with this
Agreement.
(b) Either Assix or Agent shall have the right to terminate this
Agreement by giving written
notice of termination to the other party of no less than twelve
(12) months.
(c) Assix shall have the option and right to terminate this
Agreement:
(1) Effective upon giving notice to Agent:
(i) In the event Agent fails to perform or comply with any term or
provision of this Agreement, and such failure is not remedied to
Assix's satisfaction within one (1) month of written notice thereof
from Assix (or such longer period as applicable law may require),
or
in the event Agent repeatedly fails to perform or comply with one
or
more term or provision of this Agreement, whether or not such non-
compliance is corrected after notice; or
(ii) In the event Agent, upon two (2) weeks prior written notice,
shall fail
to duly pay all amounts due to Assix; or
(iii) Agent or any Controlling Person engages in any unethical
business
conduct that is reasonably likely to affect adversely the goodwill
or
reputation of Assix; or
(iv) In the event Agent introduces and/or supports any proceedings
challenging the validity of any of the Marks, copyrights,
confidential
information, know-how, patent applications, or other proprietary
rights, whether registered or not, of Assix; or
(v) Immediately following the agent providing any written notice
of
termination to Assix for any reason, the agent agrees to nominate
a
senior management participant for the purposeds of working with
Assix to determine the cause and the remedy for such termination.
Agent agrees to evaluate the resulting report concerning the
recommended cure for such reason for termination for a 30 day
period
and Assix and the agent agree to implement such recommendations.
Such agreement to not be unreasonably withheld.
(2) Effective without notice to Agent or further action of any
kind: In the event Agent
becomes insolvent or is subject to any bankruptcy, insolvency, or
similar
proceeding, makes an assignment for the benefit of creditors,
becomes unable to
pay its debts as they become due, goes into liquidation or winding
up, or in the
event a receiver is appointed for a substantial part of Agent's
assets; or
(3) At the option of Assix, after one (1) month's prior written
notice to Agent: In the
event of a decision by any government or agency thereof or any
tribunal which, in
the sole discretion of Assix, has the effect of preventing Assix
from realizing the
benefits of this Agreement or which might threaten the protection
of Assix's name,
reputation, or proprietary rights, including its marks, copyrights,
confidential
information, know-how, or any other information pertaining to the
Program or the
Service Property.
13.EFFECT OF TERMINATION.
In the event of the termination of this Agreement for any reason:
(a) Agent shall surrender and cease to exercise all rights granted
under this Agreement, cease
all use of the Program, the Service Property, and Assix's name and
Marks in any and all
connections, and refrain from representing any of its services
after termination as "Assix
services" or as being the "same as Assix", "similar to Assix", or
in any other way trading upon
the name "Assix" or the Marks.
(b) Termination of this Agreement shall not relieve Agent from its
obligation to pay to Assix all
moneys that may be due at the date of termination, without any
reduction or offset whatsoever.
(c) Agent shall immediately cease using and return within a period
of one (1) month following
the termination of this Agreement, all property of Assix,
including, without limitation, all
confidential and proprietary written materials (and all copies
thereof) received from Assix.
Such materials will be delivered in person to an Assix employee or
returned via courier service
to be signed for by the recipient.
(d) Agent shall be deemed to have transferred and conveyed to
Assix any trademarks, service
marks, trade names, good will, or other rights which may have been
obtained by Agent in
connection with its use of the Program or the Service Property or
which, notwithstanding the
intention of the parties not to create any such rights, may have
vested in Agent in connection
with Agent's authorized activities hereunder, and that Agent will
execute any instruments
requested by Assix in suitable form to accomplish or confirm the
foregoing. Any such
instrument of assignment, transfer, or conveyance shall be without
consideration other than the
mutual covenants and consideration provided for in this Agreement.
14.COMPLIANCE.
Each party shall in the conduct of its business and in the
performance of this Agreement
comply fully with all applicable Federal, State, and local laws,
ordinances, rules and
regulations.
15.CONSEQUENTIAL DAMAGES.
Neither party shall be liable to the other for any loss of profit
or any consequential or incidental
damages upon the breach of this Agreement, except as otherwise
provided herein.
16.SALES PROCEDURES.
Prices and terms of sale quoted by Agent for wheel balancing
services under the Program shall
be those prices and terms as are then in effect. Such prices and
terms may be revised by Assix
in its sole discretion, from time to time. Agent agrees that it
will not deviate from the
established price and sales policies without express authorization
in advance and in writing by
Assix.
17.NON-COMPETITION AND NON-SOLICITATION.
(a) During the term of this Agreement, Agent shall not offer any
other "tire flex correction
services" or services similar to the Program to any of its
customers. Additionally, in the
event this Agreement is terminated, Agent shall not offer any tire
flex correction services
or services similar to the Program to any of its customers at any
location(s) which is (are)
within a twenty-five (25) mile radius of any location(s) in which
Agent offered wheel
balancing services under the Program for a period of two (2) years
following the
termination of the Program.
(b) During the term of this Agreement, and for a period of two (2)
years following the
termination of this Agreement, Agent shall not entice, solicit for
hire, or hire away any of
Assix's then current or former personnel to work in any way in or
for any business that
is or may be, directly or indirectly, competitive with either Assix
or the Program.
18.SPECIFIC PERFORMANCE.
Agent agrees that damages at law will be an insufficient remedy to
Assix in the event of
Agent's breach of this Agreement, and that Assix shall be entitled,
upon application to a court
of competent jurisdiction, to obtain injunctive relief to enforce
the provisions of this
Agreement, which injunctive relief shall be in addition to any
other rights or remedies available
to Assix.
19.ATTORNEY'S FEES AND COSTS.
In the event that Assix is required to engage the services of legal
counsel to enforce its rights
under this Agreement against Agent, regardless of whether such
action results in litigation,
Assix shall be entitled to reasonable attorney's fees and costs
from Agent, which, in the event
of litigation, shall include fees and costs incurred at trial and
on appeal.
20.SEVERABILITY.
If all or any portion of any provision of this Agreement is held to
be void, unenforceable, or
illegal for any reason, such decision shall not affect the validity
or enforceability of all or any
of the remaining provision or provisions hereof, and this Agreement
shall be construed as if the
unenforceable or illegal provision had never been included.
21.WAIVER.
No term or provision hereof shall be deemed waived and no breach
excused, unless such
waiver or consent shall be in writing and signed by the party
claimed to have waived or
consented. Any consent by any party to, or waiver of, a breach by
the other, whether express
or implied, shall not constitute a consent to, waiver of, or excuse
for any other different or
subsequent breach.
22.ASSIGNMENT OF AGREEMENT.
This Agreement shall be binding upon the respective heirs, personal
representatives, and
successors of the parties. Assix may assign or delegate part or
all of this Agreement. Agent
acknowledges that is necessary for Assix to select its agents in a
manner that assures that an
Agent authorized to provide wheel balancing under the Program is
capable of fulfilling the
obligations pertaining thereto and, therefore, no assignment,
delegation, or transfer may be
made by Agent without the prior written consent of Assix. If Agent
transfers, assigns, or
attempts to transfer or assign this Agreement or any part thereof,
expressly or by operation of
law, without the prior written consent of Assix, then Assix, at its
option, may immediately
terminate this Agreement upon the provision of one (1) month's
advance written notice to
Agent.
23.CHOICE OF LAW; VENUE.
This Agreement shall be governed by and construed in accordance
with the laws of the State of
Florida. Exclusive venue for any litigation instituted hereunder
shall be Hillsborough County,
Florida.
24.PUBLICITY
Except as necessary to comply with applicable law, neither party
will issue any press release or
any publicity or advertising information related to this Agreement
without obtaining the other
party's advance written consent (which consent shall not be
unreasonably withheld).
25.NOTICES.
Any notice, communication, or demand required or permitted to be
given under this Agreement
will be sufficiently given or made for all purposes if delivered in
person, by facsimile
transmission, by reputable courier, or by certified mail, return
receipt requested, as follows:
(a) If to Assix: Mr. R. Park Newton, III with
copy to: James Landis,Esquire
President Foley, Lardner &
Hill
Assix International, Inc. One
TampaCity Center
505 East Jackson Street Suite 2900
Suite #220 Post Office
Box 3391
Tampa, Florida 33602
Tampa,Florida 33601
(b) If to Agent:
with copy to:
26.ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and understanding
between the parties with
respect to the subject matter hereof and merges all prior
discussions and agreements between
them. This Agreement shall not be supplemented, modified,d or
amended except by a written
instrument signed by the President of Assix and by a duly
authorized officer of Agent, and no
other person has or shall have the authority to supplement, modify,
or amend this Agreement in
another manner.
IN WITNESS WHEREOF, the parties have signed this Assix Standard
Agency Agreement this
13th day of September, 1993.
"ASSIX"
ATTEST: ASSIX INTERNATIONAL, INC.
By: /S/Douglas S. Gardner_____ By: /S/R. Park Newton,
III_____
Secretary President
[Corporate Seal]
"AGENT"
ATTEST:
By: /S/Ellen Jessen_________ By: /S/Donald W. Carr_________
Secretary
[Corporate Seal] Its: President________________
EXHIBIT A
DESCRIPTION OF ACCUBALANCE PROGRAM
AccuBalance Program Goals
The goals of the AccuBalance program are to:
1. Improve the consumer's perception of the quality of the Agent's
products and services by the Agent
providing a value-added, COMPLETE wheel balancing service in
conjunction with the consumer's
procurement, from the Agent, of:
[a] high-quality, aftermarket replacement tires and,
[b] ride-related services, such as alignments and
shocks/struts.
2. Increase the Agent's profitability potential by providing a
value-added, COMPLETE wheel balancing
service that exceeds the specifications of traditional wheel
balancing.
This service is more complete and consistent than the
specifications of traditional, after-market wheel
balancing and is similar to the demanding specifications of the new
car and automobile tires original
equipment manufacturer.
AccuBalance Program Elements
The AccuBalance Program is a comprehensive and consistent
discipline composed of six elements:
Element # 1. Service Property, designed, engineered and
manufactured to effectively measure and
balance, and if necessary, adjust passenger tire's and light-truck
tire's force variation of the tire's loaded
radial runout, then to balance the tire using the built in wheel
balancer.
SEE EXHIBIT "B"
Element # 2. A proprietary, AccuBalance Implementation system that
facilitates the on-time, on-
specification, on-budget installation of the entire program at all
the Agent's locations.
Element # 3. An in-store, Merchandising system that initially
trains and subsequently reinforces all Agent
personnel in the proper methods of selling, performing and
monitoring the financial achievements of the
AccuBalance service. This merchandising system consists of
promotional marketing material to maintain
the sales person's (or service advisor's/counter person's) emphasis
on the AccuBalance program and
provides on-site support and assistance, as deemed necessary by
Assix, to maintain the profitability targets
for AccuBalance. As necessary, the merchandising system also
contains consumer educational material
and promotional material to educate the consumer on the maintenance
requirements of wheel balancing.
Element # 4. A proprietary, Service Management system that assures
the wheel balancing service is
delivered to the consumer in a consistent manner within the
specifications of the automobile, the tire and the
wheel manufacturers and other manufacturers and providers of
ride-related products and services. This is
critical to the success of the Assix proven excellence objectives
and to the success of the entire AccuBalance
program. This service management system includes providing the
Agent's designated employees with
proper training and technical advice necessary to deliver the
5-step, COMPLETE Wheel Balance to the
consumer.
Element # 5. A proprietary, Profitability Measurement and
Monitoring system to track, report,
analyze and notify the Agent of their levels of achievement of the
mutually agreed profitability potential. The
system recognize Agent locations not achieving their full profit
potential as well as those that are exceeding
their financial objectives. The system identifies these
under-performing locations and dispatches a ASSIX
Merchandizing Specialist to assist the Agent in consistently
achieving the Agent's targeted financial
objectives.
Element # 6. A comprehensive Remedial Maintenance system for the
service property, including
engineering changes, deletions and modifications as ASSIX deems
necessary to maintain the service
property in proper working order.
ACCUBALANCE MARKET
ASSIX perceives that a large market exists for the AccuBalance,
COMPLETE wheel balancing service.
The sale of tire and ride-related services is effected primarily
through tire retailers with multiple dealer
outlets. The market for wheel balancing exceeds approximately $1
billion per year, based on approximately
150 million passenger tires, 25 million light truck tires, a
balance penetration rate of 100% and
approximately $6.00 per tire balance price.
The tire retailer shall sell the AccuBalance COMPLETE wheel balance
for $3.50/$5.00 per tire more than
the price of traditional, conventional or basic wheel balancing in
each of the Agent's market areas. This base
price for basic wheel balancing is contained as item # 34 in the
United States Consumer Price Index, which
measures approximately 289 urban areas each quarter. (A copy of the
quarter 3,1989, index is attached).
In the event the Agent uses a "National" price for their basic
wheel balancing, AccuBalance shall be sold
for $3.50 to $5.00 per tire more than that "National" price.
This calculation of market size for AccuBalance is further defined
by the amount of opportunities within
the retail business unit. The effectiveness of the AccuBalance
program is measured by the number of
AccuBalance sold in relation to the number of new tires sold in the
retail unit. the opportunities are based
on the level of tires sales and related tire-service work performed
in each retail establishment. As an
example:
Opportunities for sale of AccuBalance Number of
Penetration
Tires Available Available Percentage
New tires sold 2.5 100% 100%
Old tires on vehicle NOT REPLACED 1.5 50%
63%
Alignments - without tires sales 4.0
25%
40%
Shocks/Struts without tire sales 4.0
25%
40%
COMPLETE 243%
95% of the tires that are replaced are balanced. If a 50%
penetration of the balance of the available
penetrable market is achieved this equates to 1/2 of 143% or 71%.
Adding this to the 95%, the realistic rate
of selling AccuBalance is about 166% in relation to the number of
new tires sold.
DESCRIPTION OF PROGRAM ELEMENT # 1 - SERVICE PROPERTY
SEE EXHIBIT B
DESCRIPTION OF PROGRAM ELEMENT # 2 - IMPLEMENTATION
A PROPRIETARY, STEP-BY-STEP, ACCUBALANCE IMPLEMENTATION SYSTEM THAT
FACILITATES THE ON-TIME, ON-SPECIFICATION, ON-BUDGET INSTALLATION
OF THE
ENTIRE PROGRAM AT ALL THE AGENT'S LOCATIONS.
System Phase # 1 - Agent's Line Management Agreement
ASSIX AND THE AGENT'S executive management mutually agree on the
financial profitability goals and
the progression of their accomplishment though a series of
escalating "objectives" expressed as percentages
of tires receiving the AccuBalance process in relation to the total
number of passenger and appropriate light
truck tires that are sold and installed by the Agent.
The implementation time schedule is agreed in this step and the
number of programs to be installed are
estimated based on the number of tires sold in each of the Agent's
retail locations.
1. The financial goals and objectives are cascaded down through the
Agent's operational management
through a letter from the Executive Management level of the Agent.
2. The terms and conditions of the agreement between Assix and the
Agent are summarized in a letter that
cascades throughout the Agent's management hierarchy and is SIGNED
BY THE APPROPRIATE
MANAGEMENT LEVELS OF BOTH THE AGENT AND ASSIX. This letter serves
as one of support for
the entire program as agreed by Assix and the Agent.
In addition, these letters reinforce the key points of the Agent's
and Assix's agreement and endorses the P3
manual, as well as the proper methods of selling and performing the
proprietary, DART - Dealer
Action Response Trac and the information contained in the manual
containing the complete information
about the AccuBalance program is provided to the Agent's
operational locations at various times, as
approached.
This information is covered in detail and in person by an
authorized, Assix management individual with each
level of the Agent's LINE MANAGEMENT from the senior executive
management level through to the
operating management at the retail unit's level.
PROGRAM ELEMENT # 3 - PROGRAM MANAGERS
PROGRAM MANAGERS
Program Managers are dedicated merchandising support professionals.
They are responsible for
the successful implementation and continuance of the AccuBalance
program in their assigned
territory. Their duties include, but are not limited to:
1. Conducting additional training of new retail unit personnel
while reinforcing any previous
training performed during initial implementation with existing
personnel.
Sell the TOTAL Job. Including AccuBalance.
2. Ensuring that the AccuBalance sales techniques are being used
on a daily basis while selling
AccuBalance in the retail unit. This is accomplished through visits
by the Program Manager with
the retail unit manager. A Program Manager will be provided
direction as to where to spend his
time during a month based on the relative profitability performance
of the assigned retail units in
his territory.
3. Working directly with the retail unit management, sales and
service advisor personnel in
responding to a fall in the AccuBalance percentages with positive
corrective measures.
4. Monitoring the quality and placement of signage and quantity of
literature present within the
retail environment.
5. Building a positive and professional relationship with all
retail unit personnel.
6. Developing promotional programs from time to time that will
positively influence the success of
the AccuBalance program in that retail unit.
7. Briefing the retail unit manager on the degree of sales
personnel understanding and compliance
with the AccuBalance program.
PROGRAM ELEMENT # 4 -- AccuBalance Service
The AccuBalance service consists of 5 steps when a new tire is
purchased and 4 steps when balancing a
tire that is not being replaced.
Step # 1 - IF THE TIRE IS TO BE REPLACED: (Replacement tires)
Demount the old tire and mount the high-quality, replacement tire.
Using a machine called a Tire Changer, used tires are removed from
the rims.
1. The wheel covers and valve cores are removed carefully to
prevent damage - an authorized wheel cover
puller is used (other tools, such as a screwdrivers, are not
acceptable).
2. The lug nuts are carefully removed and placed in the wheel cover
or other convenient location where they
will not be lost or misplaced. Upon removal of the lug nuts, they
and the wheel studs are carefully
examined for damage.
All existing balance weights are removed prior to placing the old
wheel on the Tire Changer or on the
Service Property. If the tire is not replaced, the process
proceeds immediately to the Service Property
Combi.
The old wheels are mounted on the Tire Changer in a COMPLETELY
DEFLATED state.
3. The tire and rim assembly are separated in exact accordance with
the operating instructions of the
manufacturer of the Tire Changer. In the event that this is not
known, the training manuals of the Agent
and/or Assix are followed. Assix reserves the right to inspect
Agent manuals and make recommendations as
to the proper procedures. However, as a minimum the instructions
should contain the following:
[a]. The wheel must be centered on the cone and securely
tightened, BY HAND. If the stem is being
replaced, the old stem should be removed using an authorized value
stem removing tool.
[b]. In no event should the bead breaker shoe be allowed to
ride up over the edge of the rim.
[c]. The beads of the tire and the old, used and potentially
stressed rim should be well lubricated to
prevent further damage to the rim.
[d]. The operator should keep fingers, hands and forearms
clear of the forward travel of the
mount/demount tool, while the beads are being demounted. If the
tire has a tube, the mount/demount tool
should be well lubricated, with lubricant that meets Assix
specifications and the tube should be removed
prior to demounting the lower bead.
4. The new high-quality replacement tire is mounted on the old,
potentially stressed rim.
[a]. The rim is wire brushed to remove excess rubber particles
and/or scraps to insure a proper seal.
[b]. The new, valve stem and the beads of the tire are
properly lubricated using an Assix authorized
lubricant and stem tool.
[c]. The operator should keep fingers, hands and forearms
clear of the forward travel of the
mount/demount tool, while the beads are being mounted.
[d]. If the tire requires a tube, the tube must be inserted
before the top bead is put into place.
[e]. The tire beads should be properly seated, beginning to
hold air. At this point, the cone should
be loosened one full turn and the tire should be filled with small
amounts of air administered in short bursts
until the beads seat.
[f]. At all times while seating the beads of the tire, no part
of the operators body should be over the
tire.
[g]. Inflate the tire.. Never exceed 40 PSI, If the beads
are not properly seated by the time the
machine's air pressure reaches 40 PSI, the operator has been
unsuccessful in following the proper operating
procedures and the tire should be deflated, re-lubricated and
inflated again.
[h]. The machine's indicated pressure should be carefully
checked using an authorized ASSIX hand
gauge to assure that the tire is inflated to 35 p.s.i. This
prepares the tire for the next step of the 5-step
COMPLETE wheel balance.
STEP # 2 - Administering the Tire Matching Technology using the
service property.
The Combi is a patented machine that applies hydraulic pressure to
the rotating, inflated tire to simulate
actual driving conditions. The Combi detects the amount of flex
variation in the complete wheel assembly,
including the potentially stressed rims, and, if greater than the
manufacturers specifications, adjusts the
wheel assembly to conform to the following specifications:
Adherence to these specifications results in a more uniform tire
footprint while the car is being driven on the
road.
SYS-7000 COMBINATION MATCHER/BALANCER OPERATING
PROCEDURE
1. Remove the tire/wheel assembly from the car. Mark the wheel
position (i.e., RF, LF, RR,
LR) on the serial side of the tire.
2. Clean stones and loose debris from the tire tread.
3. Check inflation pressure in the tire and adjust to 35 P.S.I.
4. Mount the tire/wheel assembly onto the shaft of the Combi as
detailed in coning instructions.
a. Place spring on tire shaft.
b. Select proper size cone for rim center hole and place on
shaft.
c. Place tire & rim assembly on Combi shaft (lug bolt side out).
d. Place speed nut on shaft and tighten.
e. Front coning is required on some wheel styles. If so,
eliminate spring on shaft.
5. Open buffer cover. Start the machine by placing your finger
on "system start" (Combi only)
button on the panel. Very little pressure is required to operate
the controls. Begin in the
"fine" cycle. Combi will automatically choose the appropriate
cycle.
6. Align the roller assembly by unlocking lower black knob and
slide assembly to center of tire.
7. Align rasps to cover as much of the outside shoulder of the
tire as possible. Be sure that both
rasps contact the tire at the same time. Secure them in position.
8. Adjust the distance between the face of the rasps and the
tread surface to 1/8" preferably, and
a maximum of 1/4" by rotating the knurled knob of the roller
control assembly. Rotating the
control knob counterclockwise decreases the distance--clockwise
increases it.
Never buff the full circumference of the tire. Rasps must have
clearance to tire, except when
actually buffing selected portions of the tire.
9. The logic control will then decide if the assembly is good,
requires buffing, or must be
rejected.If the decision is "good" or "reject", the appropriate
light comes on, and the machine
shuts down (stops rasp and tire rotation and unloads tire). If the
decision is "buff" the
"match" light comes on and the Combi will determine the cycle
automatically.
9A. A slight deviation in the lateral overlap of the rasp may be
necessary to compensate for
variables in the tire tread surface to maintain a uniform distance
of the rasps to the tread.
10. The rasps will advance towards the tire whenever the force
variation signal exceeds the "low"
value (20 in the "Auto" buff cycle) after the delay, allowing that
portion of the tire
circumference to travel from the drum to the rasps. The rasps will
retract when the signal
drops below the low, value, again with the delay.
***NOTE*** If buffing is uneven, open the lid, and re-adjust. It
is not
necessary to stop the machine to readjust the rasps, simply open
the lid and adjust
when rotation stops.
***WARNING*** DO NOT ATTEMPT TO STOP THE RASPS IN ANY
MANNER-THEY WILL STOP WITHIN A FEW SECONDS.
11. The rasps should make smooth, even buffs, without pounding or
bouncing against the tire.
a. If the rasps pound on the tire, causing digging or
cupping, they are probably too far
away from the tire in the retracted position. Lift the lid, and
adjust the small roller so that the rasps
are closer to (but not touching) the tire in the retracted
position.
b. If the rasps bounce very lightly in a "hit and miss"
manner on the tire, the "buff"
pressure (air pressure, actuating the advance/retract mechanism) is
too low or too high.. Raise
pressure until bouncing ceases.
12. The buffing will continue until the low value (20) is achieved
or 3 minutes have elapsed,
whichever occurs first. If the low value is achieved, the "good"
light will come on.
Exceeding the time limit indicates the tire did not respond
adequately to the buffing. Check
for proper mounting of the tire and accurate positioning of rasps.
***NOTE***
The Combi is automatic, and you should not have to stand over it
while it completes the cycle.
However, occasionally you should look to be sure that your settings
are correct. Remember, the
machine will only do what you have instructed it to.
STEP # 4 - APPLYING MANUFACTURER'S RECOMMENDED AIR PRESSURE USING
THE
OWNER'S MANUAL OR BENNENT GARFIELD'S TIRE BOOK.
STEP # 5 - MOUNTING THE ENTIRE ASSEMBLY ON THE CAR WITH UNIFORM LUG
TIGHTNESS AND HAND TORQUING THE LUG NUTS TO THE MANUFACTURER'S
SPECIFICATIONS.
Proper procedures with reinstalling the wheels on the vehicle can
eliminate wheel rattles. Over tightening the
lug nuts can warp brake rotors, causing an unsafe condition when
the brakes are applied. Wheels may
become warped and mounting holes have become deformed or cracked
because of incorrect tightening
pressure.
All tightening should be begun by hand, using a torque-limiting
impact tool adjusted to the low setting and
just making the lug nuts "snug". The proper tightening pattern is
1-3-5-2-4 for a five bolt configuration and
1-3-4-2 for a four bolt configuration. Following this, the tire
should be thoroughly cleaned of any
manufacturer installed coating on the whitewall of the tires. The
wheel cover is then replaced using a rubber
hammer.
THESE FIVE STEPS COMPLETE THE ACCUBALANCE PROCESS AND ASSURE
THE CONSUMER OF THE TOTAL RIDE VALUE ASSOCIATED WITH THE NEW
TIRES, ALIGNMENT, STRUTS OR OTHER RIDE-RELATED SERVICE WORK.
PROGRAM ELEMENT # 5 - MONITORING AND MEASURING
SPECIFIC
CONCERN: Assix first identifies actual "opportunity" AGENT sites
and then directs the
manpower to the place where it will be of maximum benefit to the
Agent.
Physical visits by Assix field personnel are replaced by telephonic
contact and
status reviews.
OBJECTIVES: To develop a tracking/trending system to promptly
direct Assix field personnel
to statistically designated "opportunity" AGENT sites.
To analyze and report usage statistics to all AGENT'S on a
continuing periodic
basis.
To analyze and report usage statistics to all levels of Assix
management
personnel on a continuing periodic basis.
To make our AGENTS the most effective and profitable
marketeers of ride-
related products and services within the automobile aftermarket.
To achieve complete consumer satisfaction for our ride-related
products and
services.
C.A.R.D.S./TRACS PROGRAM
(Consistent, Achievement Reporting Discipline System -.
Tracking Recording Accounting Control Systems)
TRAC$ is on AGENT performance control, data collection,
profitability analysis reporting
system. The system's purpose is three-fold:
1. Collect, analyze and provide AccuBalance performance and trend
information to Assix's
current AGENT'S on a monthly basis;
2. Track and analyze incoming performance data on Assix's initial
implementations on a
weekly basis;
3. Provide detail and summary data/analysis to Assix personnel so
they can assist their
assigned AGENT'S in reaching their agreed objectives.
The system is primarily designed to spotlight under performing
stores but also highlights
stores that are well ahead of quota. The system is directed at
units made up of stores, districts,
regions and also on the national level.
PROGRAM ELEMENT # 6 - SCOPE OF PREVENTATIVE AND REMEDIAL
MAINTENANCE
SERVICE
ASSIX maintains all the Tire Matching System 7000 service property
through a field service
organization consisting of Service Property Specialists, a 1-800
support telephone network and a
dispatching system. Service property service is provided five days
per week; Monday through
Friday. Repairs are made on a "best efforts" basis generally not
longer than forty-eight (48) hours.
Response time begins when the call is received at by ASSIX Central
and the Service Property
Specialist is contacted. It terminates when the problem has been
resolved.
All incoming calls are received by the ASSIX Central dispatch team.
An experienced Technical
Support Representative is on hand to attempt to resolve simple
problems over the phone directly
with the retail unit personnel. This avoids unnecessary delays.
All calls received during a month
are summarized and evaluated to determine areas that may need
improvement.
ESCALATION PROCEDURE
Should any problem not be resolved within forty-eight (48) hours,
a set of escalation procedures
take effect:
If a problem is not resolved within forty-eight (48) hours, the
ASSIX Regional Manager is notified
by ASSIX Central. The ASSIX Regional Manager begins to assist in
taking corrective action.
Should the problem not be resolved within thirty-six (36) hours,
the National Service Manager is
notified and takes appropriate action as needed. If the problem is
not corrected within forty-eight
(48) hours, the National Operations Manager is notified. At that
time, the National Operations
Manager will determine the time remaining to resolve the problems
will notify the appropriate
Agent management with an estimated time of resolution. At this
point, depending upon the
severity of the problem, it may become necessary to ship new
service property as a major unit
replacement (MUR) to the retail unit. This decision will be made
by the President of ASSIX
International, Inc.
SERVICE PROPERTY SPECIALIST
Service Property Specialists are trained specifically to maintain
and repair the Tire Matching
System 7000 service property. They are responsible for the entire
Tire Matching System 7000
population in an assigned area. Their responsibilities include but
are not limited to:
1. Performing all repairs on a Tire Matching System 7000 within
a forty-eight (48) hour
period of time. Communicate with ASSIX Central when a service
property will not be
repaired within a forty-eight (48) hour period of time. (refer to
Escalation Procedure)
2. Maintain a compliment of spare parts in his van.
3. Provide additional training in the use of the Tire Matching
System 7000 to any new
employee in the back shop.
4. Complete call reports on all repairs and visits made to the
retail unit and obtain Agent
Management's written acknowledgement of the performance of such
service.
5. Build a positive and professional relationship with all retail
unit personnel.
6. Read, study and understand all aspects of the Tire Matching
System 7000 and attend
regularly scheduled Service Property training classes conducted by
ASSIX International, Inc.
at its locations
THE AGENCY RELATIONSHIP
ASSIX Responsibilities
1. ASSIX will supply each location with the AccuBalance Service
Property in the proper
numbers to adequately deliver the COMPLETE wheel balance. This
will be accomplished
without the Agent making any capital investment in the service
property.
2. ASSIX will install the AccuBalance Service Property when the
Agent has located air supply
and power outlet within five feet of recommended service property
location.
3. ASSIX will spend time in each retail unit location to train
Agent personnel on the operation
and sales of the AccuBalance Program. This is done by providing an
AccuBalance for each
employee's car, holding retail unit training meetings and working
in the retail unit with all
sales and service personnel for up to 4 days or until Agent is
satisfied every auto center
employee is trained and the program has been installed to meet the
Agent's and Assix's
objectives.
4. ASSIX will furnish Agent with materials it deems necessary to
support the sale of the
AccuBalance COMPLETE WHEEL BALANCE.
5. ASSIX will service the Tire Matching System 7000 service
property, including all parts
and correct any problems caused by normal wear, through its
coordinated service network.
6. ASSIX will retrain new retail unit personnel periodically or
as needed to increase
AccuBalance sales to the targeted levels. ASSIX will check
periodically on the Agent's
service property operating procedures.
7. ASSIX will provide Agent with an analysis of the AccuBalance
profit potential within each
of their retail units on a monthly basis; during the initial
implementation, this will be done
weekly.
8. ASSIX will continue the day-to-day follow-up until the
mutually agreed, target financial
objective for AccuBalance-to-tires-sold is reached. Following this
level of achievement,
follow-up will be on an as-needed basis.
The benefits of this program will mean increased revenue and
profits, provide a program with no
capital outlay, and give the consumer a tangible added value
service.
Agent's Responsibilities
1. Provide a letter from Agent senior management to operating
line management of the Agent's
retail operations and management indicating support of the
implementation of the program.
2. Provide a letter of introduction from Agent, to Region
Managers, and other management,
indicating the establishment of goals and objectives for the
AccuBalance brand of the
COMPLETE WHEEL BALANCE program implementation.
3. Provide a designated management person with whom ASSIX can
coordinate the program;
this individual will have the authority to implement actions
essential to the program's
success.
4. Provide ASSIX the performance statistics for the AccuBalance
brand of the COMPLETE
WHEEL BALANCE program, including number of new tires sold, number
of standard
balances and number of AccuBalance performed. These will be faxed
weekly to 1-800-
753-5444 or telephoned in to 1-800-999-2133 during the trial
implementation, so ASSIX and
Agent can monitor sales results. Also, monthly reports will be
used for any appropriate fee
billings per tire.
5. Each retail unit will install the proper electrical and air
outlets, prior to AccuBalance being
installed.
6. Require all retail unit personnel to attend a training meeting
on AccuBalance in each retail
unit location. Management attendance is required in all meetings.
The meeting size will be
such that all personnel will have the ability to ask questions, and
receive full information
concerning the program. A series of special sessions will be held
for all persons involved in
the actual selling of the AccuBalance service.
7. All retail unit personnel will receive the AccuBalance brand
of the COMPLETE WHEEL
BALANCE during the initial installation period, at no cost to them
or to Assix.
8. Use of AccuBalance identification materials as supplied and
directed by ASSIX.
9. Install the AccuBalance System Combi
10. Agent shall clearly differentiate between a traditional,
standard, basic, old style wheel balance
and the AccuBalance COMPLETE wheel balance. The warranty for the
AccuBalance
shall be at least 4 times as attractive to the consumer as the
warranty for the traditional,
standard, basic, old style wheel balance. This means that the
warranty for the "old style" will
not exceed 3,000 miles and the warranty for the AccuBalance
COMPLETE wheel balance
would be 10,000 miles.
11. Instruct all tire sales personnel to offer AccuBalance on each
selling opportunity, including
ride-related services such as alignment, strut sales, etc. in
accordance with the selling
procedures as agreed by Agent and ASSIX.
12. ASSIX will be notified by Agent when new personnel are hired
so additional training can be
provided by ASSIX.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent, to
revise this Exhibit.
This concludes Exhibit "A"
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
EXHIBIT "B"
SERVICE PROPERTY
1. Combination Matcher/Balance System
2. Quick Lock Adapter
3. Rasp T. Handle (1)
4. #6979-00 Backplated/sleeve (1)
5. #6080-00 Spring Backplate (1)
6. #6081-00 Cone #1 (1)
7. #6082-00 Cone #2 (1)
8. #6083-00 Cone #3 (1)
9. #6087-00 Top Plate (1)
10. #6090-00 Spacer (Large) (1)
11. #6091-00 Spacer (Small) (1)
12. #6092-00 Wing Nut (1)
13. Misc. Mounting Plates/Bolts (4)
14. Miscellaneous advertising materials that Assix considers
necessary as
printed material, signs, banners, etc
Assix reserves the right, upon provision of thirty (30) days
advance written
notice to Agent, to revise this Exhibit..
EXHIBIT C
COMPENSATION DUE TO AGENT
GROSS REVENUE FROM PROGRAM LESS ASSIX FEES SHOWN BELOW AS
DUE AND PAYABLE OF THE SPECIFIC SCHEDULE OF INVOICING AS
SET FORTH.
1. Monthly Service Fee per Program $429.00
The first monthly service fee will be invoiced upon completion
of training and installation
acceptance and pro-rated at a cost of $14.33 per calendar day
remaining in the month after the
date of installation acceptance by the Agent.
Subsequent monthly service fees will be invoiced in advance on
approximately the twentieth
(20th) day of the prior month.
2. Usage Fee per Tire $.25
The usage fee will be invoiced on approximately the twentieth
day of the month, based on
tires serviced during the prior month. Agents will submit to Assix
Central on the last
working day of each month the number of tires serviced with revenue
collected under the
Program in such month. In the event this information is not
received by Assix within ten
(10) days of the end of the month, the usage fees due shall be
estimated by Assix and
invoiced accordingly.
3. Assix may increase the above fees (Initial, Monthly Service
Fee per program and Usage Fee
per tire serviced), upon thirty (30) days prior written notice to
Agent following the
anniversary date. Any increase will apply on the effective date as
specified in such notice.
4. Invoices shall be due in full upon receipt.
FOLLOWING THE AGENT BEING CURRENT IN AMOUNTS DUE TO
ASSIX, the balance of all revenues generated by Agent following
the
payment of all amounts due Assix shall be retained by Agent for its
own
account as compensation under this agreement.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent,
to revise this Exhibit.
MODIFICATION OF ASSIX STANDARD AGENCY AGREEMENT
Irrespective of any contradictory language or provisions
contained in the foregoing Assix
Standard Agency Agreement entered into between the undersigned, the
following provisions shall
apply and govern the parties:
1. The Agent, 4 Day Tire Stores, shall have final approval and
determination of the prices
to be charged its customers for services rendered using AccuBalance
equipment
owned by Assix International and installed at 4 Day Tire Store
locations.
2. Any revisions of the provisions in Exhibits A or B by Assix
shall be made only upon
no less than twelve (12) months written notice to Agent, 4 Day Tire
Stores.
3. The Assix Standard Agency Agreement aforesaid may be
terminated only by either
party giving notice to the other party of no less than twelve (12)
months.
4. Twelve months after the effective date of this Agreement, the
amount due to Assix
under Exhibit C may be increased if Agent is notified sixty (60)
days before the twelve
month period expires. Any increase for the monthly service fee
under this section will
not exceed 5%.
IN WITNESS WHEREOF, the parties have signed this Modification
of Assix Standard
Agency Agreement this 13th day of September, 1993.
"ASSIX"
ATTEST: ASSIX INTERNATIONAL, INC.
By: /S/Douglas S. Gardner_____ By: /S/R. Park Newton,
III_______
Secretary President
[ Corporate Seal ]
"AGENT"
ATTEST: 4day TIRE STORES
By: /S/Ellen Jessen__________ By: /S/Donald W. Carr_____
Secretary President
[ Corporate Seal ]
<S> <C>
</TABLE>
ASSIX STANDARD AGENCY AGREEMENT
<TABLE>
THIS ASSIX STANDARD AGENCY AGREEMENT (the "Agreement") is made
and
entered into as of this 20th day of January, 1993 (the "Effective
Date"), by and between ASSIX
INTERNATIONAL, INC., a Delaware corporation ("Assix"), and MICHEL
TIRE COMPANY,
an Ohio corporation ("Agent").
RECITALS
A. Assix has created a nationally recognized brand name
technically superior wheel
balance that brings the tire/wheel assembly in line with OEM
specifications.
B. Assix has developed and is the owner of a service program
of methods and processes
for wheel balancing (the "Program") and a training and
certification program for personnel utilizing
the Program.
C. Assix has valuable proprietary rights, including patents,
trademarks, service marks,
trade names, or trade dress, existing or arising at common law or
by statute, whether of not
registered or applied for, logos (collectively, the "Marks"),
copyrights, confidential information,
and know how embodied in and/or pertaining to the Program and the
materials and equipment used
therewith.
D. Assix had decided to offer tire/wheel assembly balancing
services ("wheel balancing")
to customers through the use of agents.
E. Agent is engaged in business as an automotive tire
retailer and is willing to be engaged
by Assix as an agent offering wheel balancing on behalf of Assix to
customers under the Program.
F. Subject to the terms of this Agreement, the parties have
agreed that Assix will allow
Agent to utilize the Program as its agent and will provide Agent
with the Program and the
marketing and technical advice and services necessary to fully
implement the Program.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and of
other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged,
Assix and Agent agree as follows:
1. RECITALS AND EXHIBITS.
The parties acknowledged and agree that the recitals are
true and correct, and that by
this reference they are hereby incorporated into this Agreement.
In addition, any exhibits referred
to in this Agreement by this reference are hereby incorporated into
this Agreement.
2. RELATIONSHIP OF THE PARTIES.
The relationship created by this Agreement is that of
principal and agent. Subject to
the terms of this Agreement, Agent shall represent itself to be the
legal agent of Assix and shall
have the right and authority to bind Assix for purposes of the
commitments made by Assix for the
benefit of wheel balancing customers. Agent shall not have, nor
shall it hold itself out as having,
the power to make contracts in the name of, or binding on, Assix,
to pledge Assix's credit, or to
extend credit in Assix's name. Agent agrees to indemnify and hold
Assix harmless in the event
that any claims are made based upon any assertions of authority by
Agent to do any of the
aforesaid acts unless written authority has been expressed in
advance by Assix.
It is further understood and agreed that no individuals
employed by Agent shall be
considered to be employees of Assix, and Agents agrees this it
shall be liable for any and all
expenses or claims of whatsoever nature or kind arising against
either Agent or Assix because of
the acts of any of Agent's employees, agents, or servants, and
indemnify, defend, and hold
harmless Assix from any liability thereon.
Agent is not and shall not be considered to be a
franchisee of Assix for any
purpose. Assix does not represent or warrant the commercial or
financial success of Agent's
business.
3. ASSIX OBLIGATIONS.
Assix hereby covenants and agrees to:
(a) Provide Agent with access to and use of the items listed
in Exhibit B, which are
necessary to implement the Program at Agent's location(s) (the
"Service Property");
(b) Allow Agent to use the Marks which accompany the Program
to the extent and in a
manner reasonably determined by Assix in order to effectively
market the Program at Agent's
location(s), provided, however, the Marks may be used by Agent
solely in conjunction with the
Program;
(c) Provide Agent's designated employees with the training
and technical advice necessary
to utilize the Program;
(d) Provide Agent with the training, marketing advice, and
marketing materials deemed
necessary by Assix in order for Agent to effectively market and
promote the Program;
(e) Keep Agent informed of any changes or advances in
Program;
(f) Keep the Program and the Service Property in proper
working order during the term of
this Agreement, including the repair and replacement of Service
Property; provided, however, that
Assix reserves the right to determine the necessity for
replacements;
(g) Maintain the quality and performance characteristics of
the Service Property supplied to
Agent hereunder and make additions, deletions, and modifications
from time to time at Assix's sole
discretion based upon its determination as to the materials and
services that will best enable Agent
and Assix to benefit from the rights granted in this Agreement;
(h) Deliver the Service Property to the ground floor entrance
of Agent's locations and
connect the Service Property in the place of installation. Upon
the termination of this Agreement,
in whole or in part, Assix shall disconnect the Service Property,
as appropriate, and after it is
moved to the ground floor entrance of Agent's property by Agent,
remove the Service Property.
In the event of termination of this Agreement by Agent, Agent shall
reimburse Assix a
final fee for the cost of removal, freight, crating, and shipping
of the Service Property in an
amount equal to one Monthly Program Fee per Service Property unit;
(i) Obtain and pay all additional insurance (attributable
solely to the incremental risk
associated with Agent's implementation of the Program), additional
necessary licenses, and all
other additional permits required to permit Agent to offer the
Program at Agent's location(s).
Agent shall notify Assix promptly of any inspections conducted by
licensing authorities and the
results thereof; and
(j) Bear the risk of loss for defective equipment.
4. AGENT OBLIGATIONS.
Agent shall utilize the Program, as described in Exhibit
A, the Service Property, as
described in Exhibit B, and the trade names, trademarks, and
service marks of Assix (the "Marks")
strictly in accordance with the written instructions provided by
Assix and solely for the purpose of
implementing the Program on behalf of Assix at its locations(s).
Notwithstanding anything
contained in this Agreement to the contrary, Agent shall:
(a) Obtain and maintain continuously so long as this
Agreement shall remain in effect, all
licenses, permits, and authorizations necessary to Agent's
implementation of the Program;
(b) Utilize the Marks strictly in connection with the
prescribed marketing, sale, and delivery
of all services under the Program, in accordance with Exhibit A.
Specifically, Agent shall: (1) not
impair, by act of by omission, the value of the Marks, whether
registered or not; (2) use only the
Marks designated by Assix in connection with the program; (3) not
use trademarks, trade
names, service marks, symbols, slogans, logos, or the like that are
confusingly similar to the
Marks; (4) use the Marks only in the names and forms authorized by
Assix; (5) not use the Marks
to incur any obligation or indebtedness on behalf of either Agent
or Assix; (6) not use the Marks,
or any word, name, or other symbol tending to be confusingly
similar to the Marks, or part of
Assix's corporate or other legal name, including, without
limitation, in the name of any bank
account of Agent, without the express prior written approval of
Assix; (7) not in any manner
represent that it has any ownership interest in the Marks; (8) not
at any time apply for any
copyright, trademark, or patent registration or protection with
respect to any products or materials
associated with the Program and the Service Property; and (9)
immediately cease any pre-existing
use of the Marks that conflicts with the terms of this Agreement;
(c) Display the name "Assix" and the Marks prominently in
signage located at the Agent's
location(s) in a manner which shall be clearly visible to customers
and shall reasonably advertise
and promote the name "Assix" and the Marks in connection with such
business, subject, however,
at all times to the supervision and control of Assix. Every use of
the name "Assix" and the Marks
in any display, advertisement, promotion, or otherwise by Agent
shall be in a form and character
approved in advance, in writing, by a duly authorized officer of
Assix. Such utilization shall
include, without limitation, the display of signage provided by
Assix at each service location and
the display of the trade names, trademarks, or service marks on all
advertising and marketing
materials for the Program. The size and number of signage to be
displayed by Agent shall be
reasonable and consistent with the other signage for automotive
services at Agent's location(s),
subject to the inspection and control by Assix;
(d) Use due care in the possession of the Service Property
and the performance of services
under the Program, including ensuring that there is sufficient
coverage at its location(s) in time and
manpower by personnel trained and certified in the provision of
wheel balancing services under the
Program;
(e) Use good faith in implementing the Program. Agent shall
at all times while this
Agreement remains in effect exert its best efforts to sell the
wheel balancing services under the
Program and shall not make any disparaging comments regarding the
Program to customers or
potential customers of the Program. Such best efforts shall
include, without limitation, promoting
the wheel balancing services to all potential customers. Agent
further agrees to comply, on or
before three (3) months prior to each anniversary date of the
Effective Date of the Agreement, with
Assix's reasonable requests for forecasts of Agent's volume and
level of Program activity and to
contribute information required by Assix to properly plan for
Assix's support of the Program and
the Service Property for the next succeeding year;
(f) Provide suitable electrical service and compressed air
and maintain the space and
environmental requirements designated by Assix;
(g) Make no alterations to the Program, nor make any repairs
to the Service Property,
other that those specifically set forth in Exhibit A or in writing
by a duly authorized officer of
Assix;
(h) Obtain written authorization from Assix prior to any
movement of any portion of the
Service Property;
(i) Provide and agent or employee to accompany Assix
personnel while such personnel are
training or advising Agent's personnel hereunder or servicing the
Program after Agent's normal
business hours;
(j) Maintain its business location(s) in an attractive,
clean, orderly, and sanitary condition;
(k) Charge such prices to retail customers for AccuBalance as
the agent and Assix shall
from time to time determine to be appropriate based on market
conditions. Such prices shall be
reviewed and communicated between the agent and Assix. These
should be calculated in the
following manner. A survey will be completed by the agent and
Assix to determine the market
competitive price of a standard wheel balance and agent shall
charge a minimum of between $3.50
and $5.00 over the standard wheel balance for AccuBalance.
(l) Prepare and forward to Assix Central, 505 E. Jackson
Street, Suite 220, Tampa, FL
33602, fax (800) 753-5444, monthly reports, on or before 10th day
of the next succeeding month,
setting forth, on a region basis listing stores individually: (i)
the number of tire/wheel assemblies
standard balanced and AccuBalanced by Agent and (ii) the number of
tires sold by Agent store,
for the month in question;
(m) Upon termination of this Agreement, allow Assix to remove
all of the Service Property
from Agent's premises, return the Service Property to Assix in good
repair, condition, and
working order (ordinary wear and tear excepted), and cease use of
all the Marks, copyrights,
confidential information, and know-how used hereunder;
(n) In the event that the agent is using the complimentary
product (TM6000), the agent will
provide wheel-balancers which meet industry standards for use in
connection with the Program.
Any new or replacement wheel-balancers which Agent subsequently
adds to its location(s) shall
have quality and performance characteristics at least as good as
the wheel-balancers currently
utilized by Agent;
(o) Make no statement indicating or implying that performance
of the wheel balancing
services are other than as indicated in Assix's brochures, sales
literature, or training materials, nor
convey any proprietary information to anyone outside of Agent's
organization;
(p) Make a reasonable effort to preserve the Marks against
dilution and promptly notify
Assix of any use, of which Agent has become aware, of marks which
may be confusingly similar
to the Marks; and
(q) Furnish to customers the warranty in the form set forth
in Exhibit A.
(r) In the event Assix sues Agent to enforce its rights under
Paragraph 4(b) of this
Agreement, the limitation on consequential damages found in
Paragraph 15 shall not apply. In
addition, Assix shall be entitled to recover from Agent its
reasonable attorneys fees' and costs and
all expenses incurred in accordance with Paragraph 19.
5. COMPENSATION TO AGENT.
As compensation to Agent for Agent's services provided to
Assix under this
Agreement, Assix agrees to compensate Agent in accordance with
Exhibit C.
6. INSURANCE.
(a) Assix, at its expense, hereby agrees and covenants
that it shall obtain and
maintain during the term of this Agreement the following policies
of insurance against claims,
demands, actions, liabilities, damages, losses, costs, and expenses
arising out of the subjects
covered by such policies of insurance:
(1) Worker's Compensation Insurance covering all costs,
benefits, and liability
under State Worker's Compensation and similar laws which may accrue
in favor of any person
employed by Assix, and Employer's Liability Insurance for Assix
employees with limits not less
than those required by the states in which Agent does business;
(2) Commercial General Liability Insurance covering
Products Liability,
Completed Operations, and Contractual Liability Insurance,
specifically endorsed to cover the
indemnity provisions of this Agreement, and coverage for Personal
Injury, with limits of not less
than $1,000,000.00 combined single limit for bodily injury and
property damage per occurrence.
To the extent that Agent provides additional general commercial
liability insurance, it shall do so at
its own expense.
(3) Motor Vehicle Liability Insurance covering all owned
vehicles used by Assix
employees in connection with Agent's operations under this
Agreement with limits of not less than
$500,000.00 combined single limit for bodily injury and property
damage per occurrence; and
(4) Excess Liability Insurance, including, without
limitation, coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal Injury Insurance
with limits of not less than $5,000,000.00.
(b) Agent, as its expense, hereby agrees and covenants
that is shall obtain and
maintain during the term of this Agreement the following policies
of insurance adequate to fully
protect Assix as well as Agent from and against any and all claims,
demand, actions, liabilities,
damages, losses, costs, and expenses arising out of the subjects
covered by such policies of
insurance:
(1) Workers' Compensation Insurance covering all costs,
benefits, and liability
under State Workers' Compensation and similar laws which may accrue
in favor of any person
employed by Agent, and Employer's Liability Insurance for Agent's
employees with limits not less
than those required by the states in which Agent does business;
(2) Commercial General Liability Insurance listing Agent
as the primary insured
and Assix as an additional insured, including, without limitation,
coverage for Products Liability,
Completed Operations, and Contractual Liability Insurance,
specifically endorsed to cover the
indemnity provisions of this Agreement, and coverage for Personal
Injury, with limits of not less
than $1,000,000.00 combined single limit for bodily injury and
property damage per occurrence.
To the extent that Assix provides additional general commercial
liability insurance, it shall do so at
its own expense.
(3) Motor Vehicle Liability Insurance with a
Non-Ownership and Hired Car
Liability Endorsement in the name of Agent covering all vehicles
used by Agent employees in
connection with Assix' operations under this Agreement with limits
of not less than $500,000.00
combined single limit for bodily injury and property damage per
occurrence; and
(4) Excess Liability Insurance, including, without
limitation, coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal Injury Insurance
with limits of not less than $5,000,000.00, listing Agent as the
primary insured and Assix as an
additional insured.
7. TITLE TO PROGRAM AND SERVICE PROPERTY.
Title to and ownership of the Program, including the
Marks, copyrights,
confidential information, and know-how, shall at all times remain
in Assix.
Nothing contained in this Agreement shall be construed as
an assignment or
conveyance to Agent of any right, title, or interest in and to the
Marks, copyrights, confidential
information, and know-how. Agent's use of the Marks, copyrights,
confidential information, and
know-how in any geographical area, including foreign countries, and
in any field for us shall not
create any ownership interest in Agent and shall inure to the
benefit of Assix.
All products, promotional advertising, packaging, and
instructional materials
utilized in connection with the Program and the Service Property
shall contain appropriate legends,
markings, and notices to give notice to the public of Assix's
right, title, and interest in the Marks,
copyrights, confidential information, and know-how.
Title to and ownership of the Service Property shall at
all times remain in Assix and
Agent shall have no property rights therein, but only the right to
use the Service Property as stated
herein, notwithstanding that the Service Property may now be, or
hereafter become, in any
manner, affixed or attached to, imbedded into, permanently resting
on real property or any building
thereon, or attached in any manner to that which is permanent by
means of cement, plaster, nails,
bolts, screws, or otherwise. Should Agent, during the term of this
Agreement, make, own, or
acquire rights to practice any patentable invention relating to the
Program or the Service Property,
then Agent agrees promptly to make full disclosure thereof to
Assix, and to assign all rights it may
have to any such patentable invention to Assix. Any invention made
by an employee of Agent
shall be deemed to have been made by Agent.
8. RECORDS AND INSPECTION.
(a) Agent shall keep records showing the date of
purchase, the purchase
price, and the identity and address or purchasers of any wheel
balancing services performed under
the Program, and shall permit Assix's duly authorized
representative(s) to examine Agent's
invoices reflecting the above listed information, premises, and
samples of wheel
balancing services performed under the Program at any time during
regular business hours to
enable Assix to determine whether or not Agent is performing its
obligations under this Agreement.
(b) Delete
(c) Agent acknowledges that the goodwill and
favorable reputation
associated with the Marks are essential to the success of the
Program. Accordingly, upon
reasonable notice to Agent, Assix shall also be allowed access to
the Program and Service Property
fro the purpose of inspecting the Program and the Service Property
to assure that the quality
control provisions of this Agreement are being observed and/or to
perform necessary maintenance
or repairs.
9. WARRANTIES.
(a) Assix warrants that the Program will be provided as
described in Exhibit A, and
the Service Property will operate in substantial conformity with
the specifications and
documentation as to type, design, and capacity as described in
Exhibit B.
(b) EXCEPT AS SET FORTH HEREIN, ASSIX MAKES NO
WARRANTIES
EXCEPT TO THE EXTENT REQUIRED BY LAW, EXPRESSED OR IMPLIED, WITH
RESPECT TO THE PROGRAM OR THE SERVICE PROPERTY, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. AGENT ACKNOWLEDGES THAT THE PROGRAM AND THE
SERVICE PROPERTY ARE OF THE TYPE, DESIGN, AND CAPACITY SUITABLE FOR
ITS
PURPOSES.
10. INDEMNIFICATION.
(a) Notwithstanding anything to the contrary
contained within this
Agreement, Assix shall not be liable to Agent for damages of any
type to third parties which are
caused, in whole or in part, by the negligent or intentional acts,
or any other acts of omission or
commission, of Agent, its agents, or its employees. Agent shall
protect, indemnify, defend, and
hold harmless Assix, its agents, its employees, its officers, its
directors, and its servants from and
against any and all claims, actions, liabilities, losses, costs,
and expenses (including reasonable
attorneys' fees and costs), without limitation, arising out of or
in connection with (i) any negligent
or intentional acts, or any other acts of omission or commission,
of Agent, its agents, or its
employees; (ii) any statement indicating or implying that
performance of the wheel balancing
services are other than as indicated in Assix's brochures, sales
literature, or training materials; (iii)
any actual or threatened material breach of this Agreement by
Agent; or (iv) any actual or threatened
material act of omission or commission by Agent, its agents, or its
employees, in connection with
this Agreement. Assix shall give to Agent prompt written
notification of any claim against it that it
believes is subject to indemnification pursuant to this provision.
In the event Assix shall fail to
give Agent prompt written notification of any such claim, which
failure results in material detriment
to the defense of such claim, Agent's indemnification obligations
in favor of Assix as to such
claim, if any, shall be come null and void and of no further legal
force or effect.
(b) Assix shall protect, indemnify, defend, and
hold harmless Agent, its
agents, its employees, its officers, its directors, its
shareholders, and its servants from and against
any and all claims, actions, liabilities, losses, costs, and
expenses (including reasonable attorneys'
fees and costs) arising out of or in connection with (i) any
material malfunctioning of the Service
Property; (ii) any actual or threatened material infringement of
any United States patent, foreign
letters patent, trade name, trademark, copyright, trade secret, or
any other proprietary right with
regard to Agent's utilization of the Program or the Service
Property; (iii) any actual or threatened
material breach of warranty by Assix; (iv) any actual or threatened
material breach of this
Agreement by Assix; (v) any actual or threatened material act of
omission or commission by Assix,
its agents, or its employees, in connection with this Agreement.
Agent shall give Assix prompt
written notification of any claim against it that it believes is
subject to indemnification pursuant to
this provision. In the event Agent shall fail to give Assix prompt
written notification of any such
claim, which failure results in material detriment to the defense
of such claim, Assix's
indemnification obligations in favor of Agent as to such claim, if
any, shall become null and void
and of no further legal force or effect.
(c) Assix shall have the sole control and authority
over the defense,
settlement, or compromise of any claim or legal proceeding that
Agent believes is subject to
indemnification pursuant to Subparagraph (b). If the Program or
the Service Property becomes, or
in the opinion of Assix is likely to become, the subject of a claim
of infringement of a United States
patent, foreign letters patent trade name, trademark, copyright, or
trade secret, Assix may, in its
sole discretion, procure for Agent the right to continue using the
Program or the Service Property,
or any part of them so as to make Agent's use of them
noninfringing. If, during the pendency of
any claim or legal proceeding against Agent or Assix pursuant to
which Agent is prevented from
utilizing the Program or the Service Property by court order,
operation or law, or any other reason,
Agent may, as its sole remedy, withhold payment of any sums
otherwise required to be paid over
to Assix by Agent pursuant to this Agreement.
11. CHANGE OF OWNERSHIP OF AGENT.
In order to ensure Assix that Agent will comply with
its obligations
hereunder to the satisfaction of Assix, Agent acknowledges that
Assix must know and approve
who in fact controls Agent. Any Transfer of Control by Agent or
any Controlling Person may
result in the immediate termination of this Agreement, at the sole
option of Assix. Such
cancellation can be prevented by the agent seeking prior written
consent.
For purposes of this Agreement:
(1) The term "Affiliate" shall mean any natural
person or other legal
entity that, directly or indirectly, controls, is controlled by, or
is under common control with, either
Agent or any Controlling Person;
(2) "Controlling Person" shall be any natural
person or other legal entity
with a fifteen percent (15%) or greater interest in Agent or an
another entity that has, directly or
indirectly, a fifteen percent (15%) or greater interest in Agent,
or otherwise has the power to
control, directly or indirectly, the management, direction, or
day-to-day operations of Agent.
Without limiting the generality of the foregoing, a natural person
or legal entity shall be a
"Controlling Person" of Agent if it owns a fifteen percent (15%) or
greater interest in another entity
that is either a Controlling Person of Agent or that has an
indirect ownership interest in Agent
through one or more intervening levels of direct or indirect
subsidiaries. For example, if Agent is a
wholly-owned subsidiary of another corporation that is, in turn,
owned equally by three other
corporations, each of these three corporations who have the power
(indirectly) to affect the day-to-
day operations of Agent shall be considered a Controlling Person
for purposes of this Agreement:
(3) The term "Transfer" shall mean any voluntary
sale, pledge,
encumbrance, or other transfer or disposition (other than a gift,
sale, pledge encumbrance, or other
transfer between the Agent's present shareholders or a pledge
granted to a financial institution
providing financing to the pledgor); and
(4) "Transfer of Control" of Agent shall mean (a)
if Agent or any direct
or indirect Controlling Person is a partnership, any change in the
identity or respective ownership
of the partners or any of them, (b) if Agent or any direct or
indirect Controlling Person is a
corporation, any Transfer of shares comprising fifteen percent
(15%) or more of the total number
of issued and outstanding shares of Agent or such Controlling
Person, or (c) the Transfer or
change in the direct or indirect control of, or the Transfer or
change in the power to control,
directly or indirectly, the management, direction, or day-to-day
operations of Agent or of any direct
Controlling Person; provided, however, that the death or
determination of incompetency of a
partner of any natural person constituting a Controlling Person of
Agent shall not be a "Transfer of
Control."
12. TERM AND TERMINATION.
(a) The term of this Agreement will commence on the
Effective Date
stated above and shall continue until otherwise terminated in
accordance with this Agreement.
(b) Either Assix or Agent shall have the right to
terminate this
Agreement by giving written notice of termination to the other
party of no less than twelve (12)
months.
(c) Assix shall have the option and right to
terminate this Agreement:
(1) Effective upon giving notice to Agent:
(i) In the event Agent fails to perform or comply
with any term or
provision of this Agreement, and such failure is not remedied to
Assix's satisfaction within one (1)
month of written notice thereof from Assix (or such longer period
as applicable law may require),
or in the event Agent repeatedly fails to perform or comply with
one or more term or provision of
this Agreement, whether or not such non-compliance is corrected
after notice; or
(ii) In the event Agent, upon two (2) weeks prior
written notice, shall
fail to duly pay all amounts due to Assix; or
(iii) Agent or any Controlling Person engages in
any unethical business
conduct that is reasonably likely to affect adversely the goodwill
or reputation of Assix; or
(iv) In the event Agent introduces and/or supports
any proceedings
challenging the validity of any of the Marks, copyrights,
confidential information, know-how,
patent applications, or other proprietary rights, whether
registered or not, of Assix; or
(v) Immediately following the agent providing any
written notice of
termination to Assix for any reason, the agent agrees to nominate
a senior management participant
for the purposes of working with Assix to determine the cause and
the remedy for such
termination. Agent agrees to evaluate the resulting report
concerning the recommended cure for
such reason for termination for a 30 day period and Assix and the
agent agree to implement such
recommendations. Such agreement to not be unreasonably withheld.
(2) Effective without notice to Agent or further
action of any kind: In
the event Agent becomes insolvent or is subject to any bankruptcy,
insolvency, or similar
proceeding, makes an assignment for the benefit of creditors,
becomes unable to pay its debts as
they become due, goes into liquidation or winding up, or in the
event a receiver is appointed for a
substantial part of Agent's assets; or
(3) At the option of Assix, after one (1) month's
prior written notice to
Agent: In the event of a decision by any government or agency
thereof or any tribunal which, in
the sole discretion of Assix, has the effect of preventing Assix
from realizing the benefits of this
Agreement or which might threaten the protection of Assix's name,
reputation, or proprietary
rights, including its marks, copyrights, confidential information,
know-how, or any other
information pertaining to the Program or the Service Property.
(d) Agent shall have the option and right to
terminate this Agreement:
(1) Effective two (2) months following giving
notice to Assix:
(i) In the event Assix unbundles the Service
Program for any person or
or legal entity without offering to terminate this Agreement and
offer the Agent a similar
arrangement; or
(ii) In the event any of Agent's competitors, within
a twenty-five (25)
mile radius of one of Agent's locations in Cincinnati, Louisville
or Toledo, only, begins offering
the Assix program or AccuBalance other than Sears retail tire
outlets; or
(iii) In the event Assix fails to perform or
comply with any term or
provision of this agreement, and such failure is not remedied to
Agent's satisfaction within one (1)
month of written notice thereof from Agent (or such longer period
as applicable law may require),
or in the event Assix repeatedly fails to perform or comply with
one or more term or provision of
this Agreement, whether or not such non-compliance is corrected
after notice; or
(iv) In the event Agent determines that due to its
then current market
conditions the reinstitution of a lifetime balance product is
necessary to compete in any of its
markets and Assix refuses to allow Agent to market a lifetime
balance product under the terms of
this agreement within one (1) month following written notice
thereof from Agent to Assix; or
(v) In the event Agent determines that due to its
then current market
condition the price differential between a regular balance and
AccuBalance needs to be lower than
$3.50 to compete in any of its markets, and Assix refuses to allow
the reduction in the differential
under the terms of this Agreement within one (1) month following
written notice thereof from
Agent to Assix; or
(vi) In the event of a material change in the
ownership or management
structure of Assix.
(2) Effective immediately upon giving notice to
Assix:
(i) In the event Assix becomes insolvent or is
subject to any
bankruptcy, insolvency or similar proceeding, makes an assignment
for the benefit of creditors,
becomes unable to pay its debts as they become due, goes into
liquidation or winding up, or in the
event a receiver is appointed for any part of Assix's assets; or
(ii) In the event Assix notifies Agent of a price
increase under the terms
of this agreement and, within seven (7) days of said notice, Agent
gives Assix written notice of its
non-acceptance of the amount of the increase.
13. EFFECT OF TERMINATION.
In the event of the termination of this Agreement
for any reason:
(a) Agent shall surrender and cease to exercise all
rights granted under
this Agreement, cease all use of the Program, the Service Property,
and Assix's name and Marks
in any and all connections, and refrain from representing any of
its services after termination as
"Assix services" or as being the "same as Assix", "similar to
Assix", or in any other way trading
upon the name "Assix" or the Marks.
(b) Termination of this Agreement shall not relieve
Agent from its
obligation to pay to Assix all moneys that may be due at the date
of termination, without any
reduction or offset whatsoever.
(c) Agent shall immediately cease using and return
within a period of
one (1) month following the termination of this Agreement, all
property of Assix, including,
without limitation, all confidential and proprietary written
materials (and all copies thereof) received
from Assix. Such materials will be delivered in person to an Assix
employee or returned via
courier service to be signed for by the recipient.
(d) Agent shall be deemed to have transferred and
conveyed to Assix
any trademarks, service marks, trade names, good will, or other
rights which may have been
obtained by Agent in connection with its use of the Program or the
Service Property or which,
notwithstanding the intention of the parties not to create any such
rights, may have vested in Agent
in connection with Agent's authorized activities hereunder, and
that Agent will execute any
instruments requested by Assix in suitable form to accomplish or
confirm the foregoing. Any such
instrument of assignment, transfer, or conveyance shall be without
consideration other than the
mutual covenants and consideration provided for in this Agreement.
14. COMPLIANCE.
Each party shall in the conduct of its business and
in the performance of this
Agreement comply fully with all applicable Federal, State, and
local laws, ordinances, rules and
regulations.
15. CONSEQUENTIAL DAMAGES.
Neither party shall be liable to the other for any
loss of profit or any
consequential or incidental damages upon the breach of this
Agreement, except as otherwise
provided herein.
16. SALES PROCEDURES.
(A) Prices and terms of sale quoted by Agent for
wheel balancing
services under the Program shall be those prices and terms as are
then in effect. Such prices and
terms may be revised by Assix in its sole discretion, from time to
time. Agent agrees that it will
not deviate from the established price and sales policies without
express authorization in advance
and in writing by Assix excepting shall be permitted to run special
promotions for wheel balancing
services, such promotions not to last longer than thirty (30) days.
(B) Agent may, without obtaining the express
written authorization of
Assix, quote and sell the wheel balancing services under the
program at a price equal to or greater
than that charged by any of Agents' competitors using the Program
or equipment manufactured by
Assix.
17. NON-COMPETITION AND NON-SOLICITATION.
(a) During the term of this Agreement, Agent shall
not offer any other
"tire flex correction services" or services similar to the Program
to any of its customers.
Additionally, in the event this Agreement is terminated, Agent
shall not offer any tire flex
correction services or services similar to the Program to any of
its customers at any location(s)
which is (are) within a twenty-five (25) mile radius of any
location(s) in which Agent offered
wheel balancing services under the Program for a period of two (2)
years following the termination
of the Program.
(b) During the term of this Agreement, and for a
period of two (2) years
following the termination of this Agreement, Agent shall not
entice, solicit for hire, or hire away
any of Assix's then current personnel to work in any way in or for
any business that is or may be,
directly or indirectly, competitive with either Assix or the
Program.
18. SPECIFIC PERFORMANCE.
Agent agrees that damages at law will be an
insufficient remedy to Assix in
the event of Agent's breach of this Agreement, and that Assix shall
be entitled, upon application to
a court of competent jurisdiction, to obtain injunctive relief to
enforce the provisions of this
Agreement, which injunctive relief shall be in addition to any
other rights or remedies available to
Assix.
19. ATTORNEY'S FEES AND COSTS.
In the event that Assix or Agent is required to
engage the services of legal
counsel to enforce its rights under this Agreement, regardless of
whether such action results in
litigation, the prevailing party shall be entitled to reasonable
attorney's fees and costs from other,
which, in the event of litigation, shall include fees and costs
incurred at trial and on appeal.
20. SEVERABILITY.
If all or any portion of any provision of this
Agreement is held to be void,
unenforceable, or illegal for any reason, such decision shall not
affect the validity or enforceability
of all or any of the remaining provision or provisions hereof, and
this Agreement shall be
construed as if the unenforceable or illegal provision had never
been included.
21. WAIVER.
No term or provision hereof shall be deemed waived
and no breach
excused, unless such waiver or consent shall be in writing and
signed by the party claimed to have
waived or consented. Any consent by any party to, or waiver of, a
breach by the other, whether
express or implied, shall not constitute a consent to, waiver of,
or excuse for any other different or
subsequent breach.
22. ASSIGNMENT OF AGREEMENT.
This Agreement shall be binding upon the respective
heirs, personal
representatives, and successors of the parties. Assix may assign
or delegate part or all of this
Agreement. Agent acknowledges that is necessary for Assix to
select its agents in a manner that
assures that an Agent authorized to provide wheel balancing under
the Program is capable of
fulfilling the obligations pertaining thereto and, therefore, no
assignment, delegation, or transfer
may be made by Agent without the prior written consent of Assix.
If Agent transfers, assigns, or
attempts to transfer or assign this Agreement or any part thereof,
expressly or by operation of law,
without the prior written consent of Assix, then Assix, at its
option, may immediately terminate
this Agreement upon the provision of one (1) month's advance
written notice to Agent.
23. CHOICE OF LAW; VENUE.
This Agreement shall be governed by and construed in
accordance with the
laws of the State of Florida. Exclusive venue for any litigation
instituted hereunder shall be
Hillsborough County, Florida.
24. PUBLICITY
Except as necessary to comply with applicable law,
neither party will issue
any press release or any publicity or advertising information
related to this Agreement without
obtaining the other party's advance written consent (which consent
shall not be unreasonably
withheld).
25. NOTICES.
Any notice, communication, or demand required or
permitted to be given
under this Agreement will be sufficiently given or made for all
purposes if delivered in person, by
facsimile transmission, by reputable courier, or by certified mail,
return receipt requested, as
follows:
(a) If to Assix: Mr. R. Park Newton, III with
copy to: James M. Landis,
President Foley, Lardner & Hill
Assix International, Inc. One
Tampa CityCenter
505 East Jackson Street Suite 2900
Suite #220 Post Office
Box 3391
Tampa, Florida 33602
Tampa,Florida 33601
(b) If to Agent: Anthony J. Michel,
President
Michel Tire Co.
PO Box 23055
Cincinnati, Ohio 45223
with copy to: Timothy A. Michel
Bonke, Henkel, Haverkamp, Smith
& Riehl Co., C.P.A.
5956 Glenway Avenue
Cincinnati, Ohio 45238
26. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and
understanding between
the parties with respect to the subject matter hereof and merges
all prior discussions and
agreements between them. This Agreement shall not be supplemented,
modified or amended
except by a written instrument signed by the President of Assix and
by a duly authorized officer of
Agent, and no other person has or shall have the authority to
supplement, modify, or amend this
Agreement in another manner.
IN WITNESS WHEREOF, the parties have signed this
Assix Standard
Agency Agreement this 20th day of January, 1993.
"ASSIX"
ATTEST: ASSIX INTERNATIONAL, INC.
By: /S/Douglas S. Gardner___ By: /S/R. Park Newton, III____
Secretary President
[Corporate Seal]
"AGENT"
ATTEST: MICHEL TIRE CO.______________
By: /S/Roberta A. Michel____ By: /S/Anthony J. Michel_______
[Corporate Seal] Its: President_________________
EXHIBIT A
DESCRIPTION OF ACCUBALANCE PROGRAM
AccuBalance Program Goals
The goals of the AccuBalance program are to:
1. Improve the consumer's perception of the quality of the Agent's
products and services by the Agent
providing a value-added, COMPLETE wheel balancing service in
conjunction with the consumer's
procurement, from the Agent, of:
[a] high-quality, aftermarket replacement tires and,
[b] ride-related services, such as alignments and
shocks/struts.
2. Increase the Agent's profitability potential by providing a
value-added, COMPLETE wheel balancing
service that exceeds the specifications of traditional wheel
balancing.
This service is more complete and consistent than the
specifications of traditional, after-market wheel
balancing and is similar to the demanding specifications of the new
car and automobile tires original
equipment manufacturer.
AccuBalance Program Elements
The AccuBalance Program is a comprehensive and consistent
discipline composed of six elements:
Element # 1. Service Property, designed, engineered and
manufactured to effectively measure and
balance, and if necessary, adjust passenger tire's and light-truck
tire's force variation of the tire's loaded
radial runout, then to balance the tire using the built in wheel
balancer.
SEE EXHIBIT "B"
Element # 2. A proprietary, AccuBalance Implementation system that
facilitates the on-time, on-
specification, on-budget installation of the entire program at all
the Agent's locations.
Element # 3. An in-store, Merchandising system that initially
trains and subsequently reinforces all Agent
personnel in the proper methods of selling, performing and
monitoring the financial achievements of the
AccuBalance service. This merchandising system consists of
promotional marketing material to maintain
the sales person's (or service advisor's/counter person's) emphasis
on the AccuBalance program and
provides on-site support and assistance, as deemed necessary by
Assix, to maintain the profitability targets
for AccuBalance. As necessary, the merchandising system also
contains consumer educational material
and promotional material to educate the consumer on the maintenance
requirements of wheel balancing.
Element # 4. A proprietary, Service Management system that assures
the wheel balancing service is
delivered to the consumer in a consistent manner within the
specifications of the automobile, the tire and the
wheel manufacturers and other manufacturers and providers of
ride-related products and services. This is
critical to the success of the Assix proven excellence objectives
and to the success of the entire AccuBalance
program. This service management system includes providing the
Agent's designated employees with
proper training and technical advice necessary to deliver the
5-step, COMPLETE Wheel Balance to the
consumer.
Element # 5. A proprietary, Profitability Measurement and
Monitoring system to track, report,
analyze and notify the Agent of their levels of achievement of the
mutually agreed profitability potential. The
system recognize Agent locations not achieving their full profit
potential as well as those that are exceeding
their financial objectives. The system identifies these
under-performing locations and dispatches a ASSIX
Merchandizing Specialist to assist the Agent in consistently
achieving the Agent's targeted financial
objectives.
Element # 6. A comprehensive Remedial Maintenance system for the
service property, including
engineering changes, deletions and modifications as ASSIX deems
necessary to maintain the service
property in proper working order.
ACCUBALANCE MARKET
ASSIX perceives that a large market exists for the AccuBalance,
COMPLETE wheel balancing service.
The sale of tire and ride-related services is effected primarily
through tire retailers with multiple dealer
outlets. The market for wheel balancing exceeds approximately $1
billion per year, based on approximately
150 million passenger tires, 25 million light truck tires, a
balance penetration rate of 100% and
approximately $6.00 per tire balance price.
The tire retailer shall sell the AccuBalance COMPLETE wheel balance
for $3.50/$5.00 per tire more than
the price of traditional, conventional or basic wheel balancing in
each of the Agent's market areas. This base
price for basic wheel balancing is contained as item # 34 in the
United States Consumer Price Index, which
measures approximately 289 urban areas each quarter. (A copy of the
quarter 3,1989, index is attached).
In the event the Agent uses a "National" price for their basic
wheel balancing, AccuBalance shall be sold
for $3.50 to $5.00 per tire more than that "National" price.
This calculation of market size for AccuBalance is further defined
by the amount of opportunities within
the retail business unit. The effectiveness of the AccuBalance
program is measured by the number of
AccuBalance sold in relation to the number of new tires sold in the
retail unit. the opportunities are based
on the level of tires sales and related tire-service work performed
in each retail establishment. As an
example:
Opportunities for sale of AccuBalance Number of
Penetration
Tires Available Available Percentage
New tires sold 2.5 100%
Old tires on vehicle NOT REPLACED 1.5 50%
63%
Alignments - without tires sales 4.0
25% 40%
Shocks/Struts without tire sales 4.0
25% 40%
COMPLETE 243%
95% of the tires that are replaced are balanced. If a 50%
penetration of the balance of the available
penetrable market is achieved this equates to 1/2 of 143% or 71%.
Adding this to the 95%, the realistic rate
of selling AccuBalance
is about 166% in relation to the number of new tires sold.
DESCRIPTION OF PROGRAM ELEMENT # 1 - SERVICE PROPERTY
SEE EXHIBIT B
DESCRIPTION OF PROGRAM ELEMENT # 2 - IMPLEMENTATION
A PROPRIETARY, STEP-BY-STEP, ACCUBALANCE IMPLEMENTATION SYSTEM THAT
FACILITATES THE ON-TIME, ON-SPECIFICATION, ON-BUDGET INSTALLATION
OF THE
ENTIRE PROGRAM AT ALL THE AGENT'S LOCATIONS.
System Phase # 1 - Agent's Line Management Agreement
ASSIX AND THE AGENT'S executive management mutually agree on the
financial profitability goals and
the progression of their accomplishment though a series of
escalating "objectives" expressed as percentages
of tires receiving the AccuBalance process in relation to the total
number of passenger and appropriate light
truck tires that are sold and installed by the Agent.
The implementation time schedule is agreed in this step and the
number of programs to be installed are
estimated based on the number of tires sold in each of the Agent's
retail locations.
[a] The financial goals and objectives are cascaded down through
the Agent's operational management
through a letter from the Executive Management level of the Agent.
[b] The terms and conditions of the agreement between Assix and the
Agent are summarized in a letter that
cascades throughout the Agent's management hierarchy and is SIGNED
BY THE APPROPRIATE
MANAGEMENT LEVELS OF BOTH THE AGENT AND ASSIX. This letter serves
as one of support for
the entire program as agreed by Assix and the Agent.
In addition, these letters reinforce the key points of the Agent's
and Assix's agreement and endorses the P3
manual, as well as the proper methods of selling and performing the
proprietary, DART - Dealer
Action Response Trac and the information contained in the manual
containing the complete information
about the AccuBalance program is provided to the Agent's
operational locations at various times, as
approached.
This information is covered in detail and in person by an
authorized, Assix management individual with each
level of the Agent's LINE MANAGEMENT from the senior executive
management level through to the
operating management at the retail unit's level.
PROGRAM ELEMENT # 3 - PROGRAM MANAGERS
PROGRAM MANAGERS
Program Managers are dedicated merchandising support professionals.
They are responsible for
the successful implementation and continuance of the AccuBalance
program in their assigned
territory. Their duties include, but are not limited to:
1.) Conducting additional training of new retail unit personnel
while reinforcing any previous
training performed during initial implementation with existing
personnel.
Sell the TOTAL Job. Including AccuBalance.
2.) Ensuring that the AccuBalance sales techniques are being used
on a daily basis while selling
AccuBalance in the retail unit. This is accomplished through visits
by the Program Manager with
the retail unit manager. A Program Manager will be provided
direction as to where to spend his
time during a month based on the relative profitability performance
of the assigned retail units in
his territory.
3.) Working directly with the retail unit management, sales and
service advisor personnel in
responding to a fall in the AccuBalance percentages with positive
corrective measures.
4.) Monitoring the quality and placement of signage and quantity
of literature present within the
retail environment.
5.) Building a positive and professional relationship with all
retail unit personnel.
6.) Developing promotional programs from time to time that will
positively influence the success
of the AccuBalance program in that retail unit.
7.) Briefing the retail unit manager on the degree of sales
personnel understanding and compliance
with the AccuBalance program.
PROGRAM ELEMENT # 4 -- AccuBalance Service
The AccuBalance service consists of 5 steps when a new tire is
purchased and 4 steps when balancing a
tire that is not being replaced.
Step # 1 - IF THE TIRE IS TO BE REPLACED: (Replacement tires)
Demount the old tire and mount the high-quality, replacement tire.
Using a machine called a Tire Changer, used tires are removed from
the rims.
a. The wheel covers and valve cores are removed carefully to
prevent damage - an authorized wheel cover
puller is used (other tools, such as a screwdrivers, are not
acceptable).
b. The lug nuts are carefully removed and placed in the wheel cover
or other convenient location where they
will not be lost or misplaced. Upon removal of the lug nuts, they
and the wheel studs are carefully
examined for damage.
All existing balance weights are removed prior to placing the old
wheel on the Tire Changer or on the
Service Property. If the tire is not replaced, the process
proceeds immediately to the Service Property
Combi.
The old wheels are mounted on the Tire Changer in a COMPLETELY
DEFLATED state.
c. The tire and rim assembly are separated in exact accordance with
the operating instructions of the
manufacturer of the Tire Changer. In the event that this is not
known, the training manuals of the Agent
and/or Assix are followed. Assix reserves the right to inspect
Agent manuals and make recommendations as
to the proper procedures. However, as a minimum the instructions
should contain the following:
1. The wheel must be centered on the cone and securely
tightened, BY HAND. If the stem is being
replaced, the old stem should be removed using an authorized value
stem removing tool.
2. In no event should the bead breaker shoe be allowed to ride
up over the edge of the rim.
3. The beads of the tire and the old, used and potentially
stressed rim should be well lubricated to
prevent further damage to the rim.
4. The operator should keep fingers, hands and forearms clear
of the forward travel of the
mount/demount tool, while the beads are being demounted. If the
tire has a tube, the mount/demount tool
should be well lubricated, with lubricant that meets Assix
specifications and the tube should be removed
prior to demounting the lower bead.
d. The new high-quality replacement tire is mounted on the old,
potentially stressed rim.
1. The rim is wire brushed to remove excess rubber particles
and/or scraps to insure a proper seal.
2. The new, valve stem and the beads of the tire are properly
lubricated using an Assix authorized
lubricant and stem tool.
3. The operator should keep fingers, hands and forearms clear
of the forward travel of the
mount/demount tool, while the beads are being mounted.
4. If the tire requires a tube, the tube must be inserted
before the top bead is put into place.
5. The tire beads should be properly seated, beginning to hold
air. At this point, the cone should be
loosened one full turn and the tire should be filled with small
amounts of air administered in short bursts
until the beads seat.
6. At all times while seating the beads of the tire, no part
of the operators body should be over the
tire.
7. Inflate the tire.. Never exceed 40 PSI, If the beads are
not properly seated by the time the
machine's air pressure reaches 40 PSI, the operator has been
unsuccessful in following the proper operating
procedures and the tire should be deflated, re-lubricated and
inflated again.
8. The machine's indicated pressure should be carefully
checked using an authorized ASSIX hand
gauge to assure that the tire is inflated to 35 p.s.i. This
prepares the tire for the next step of the 5-step
COMPLETE wheel balance.
STEP # 2 - Administering the Tire Matching Technology using the
service property.
The Combi is a patented machine that applies hydraulic pressure to
the rotating, inflated tire to simulate
actual driving conditions. The Combi detects the amount of flex
variation in the complete wheel assembly,
including the potentially stressed rims, and, if greater than the
manufacturers specifications, adjusts the
wheel assembly to conform to the following specifications:
Adherence to these specifications results in a more uniform tire
footprint while the car is being driven on the
road.
SYS-7000 COMBINATION MATCHER/BALANCER OPERATING
PROCEDURE
1. Remove the tire/wheel assembly from the car. Mark the wheel
position (i.e., RF, LF, RR, LR)
on the serial side of the tire.
2. Clean stones and loose debris from the tire tread.
3. Check inflation pressure in the tire and adjust to 35 P.S.I.
4. Mount the tire/wheel assembly onto the shaft of the Combi as
detailed in coning instructions.
a. Place spring on tire shaft.
b. Select proper size cone for rim center hole and place on
shaft.
c. Place tire & rim assembly on Combi shaft (lug bolt side out).
d. Place speed nut on shaft and tighten.
e. Front coning is required on some wheel styles. If so,
eliminate spring on shaft.
5. Open buffer cover. Start the machine by placing your finger on
"system start" (Combi only)
button on the panel. Very little pressure is required to operate
the controls. Begin in the "fine"
cycle. Combi will automatically choose the appropriate cycle.
6. Align the roller assembly by unlocking lower black knob and
slide assembly to center of tire.
7. Align rasps to cover as much of the outside shoulder of the
tire as possible. Be sure that both
rasps contact the tire at the same time. Secure them in position.
8. Adjust the distance between the face of the rasps and the tread
surface to 1/8" preferably, and a
maximum of 1/4" by rotating the knurled knob of the roller control
assembly. Rotating the control
knob counterclockwise decreases the distance--clockwise increases
it.
Never buff the full circumference of the tire. Rasps must have
clearance to tire, except when
actually buffing selected portions of the tire.
9. The logic control will then decide if the assembly is good,
requires buffing, or must be
rejected.If the decision is "good" or "reject", the appropriate
light comes on, and the machine shuts
down (stops rasp and tire rotation and unloads tire). If the
decision is "buff" the "match" light
comes on and the Combi will determine the cycle automatically.
9A. A slight deviation in the lateral overlap of the rasp may be
necessary to compensate for
variables in the tire tread surface to maintain a uniform distance
of the rasps to the tread.
10. The rasps will advance towards the tire whenever the force
variation signal exceeds the "low"
value (20 in the "Auto" buff cycle) after the delay, allowing that
portion of the tire circumference to
travel from the drum to the rasps. The rasps will retract when the
signal drops below the low,
value, again with the delay.
***NOTE*** If buffing is uneven, open the lid, and re-adjust. It
is not necessary to stop the
machine to readjust the rasps, simply open the lid and adjust when
rotation stops.
***WARNING*** DO NOT ATTEMPT TO STOP THE RASPS IN ANY MANNER-THEY
WILL STOP WITHIN A FEW SECONDS.
11. The rasps should make smooth, even buffs, without pounding or
bouncing against the tire.
a. If the rasps pound on the tire, causing digging or
cupping, they are probably too far
away from the tire in the retracted position. Lift the lid, and
adjust the small roller so that the rasps
are closer to (but not touching) the tire in the retracted
position.
b. If the rasps bounce very lightly in a "hit and miss"
manner on the tire, the "buff"
pressure (air pressure, actuating the advance/retract mechanism) is
too low or too high.. Raise
pressure until bouncing ceases.
12. The buffing will continue until the low value (20) is achieved
or 3 minutes have elapsed,
whichever occurs first. If the low value is achieved, the "good"
light will come on. Exceeding the
time limit indicates the tire did not respond adequately to the
buffing. Check for proper mounting
of the tire and accurate positioning of rasps.
NOTE***
The Combi is automatic, and you should not have to stand over it
while it completes the cycle.
However, occasionally you should look to be sure that your settings
are correct. Remember, the
machine will only do what you have instructed it to.
STEP # 4 - APPLYING MANUFACTURER'S RECOMMENDED AIR PRESSURE USING
THE
OWNER'S MANUAL OR BENNENT GARFIELD'S TIRE BOOK.
STEP # 5 - MOUNTING THE ENTIRE ASSEMBLY ON THE CAR WITH UNIFORM LUG
TIGHTNESS AND HAND TORQUING THE LUG NUTS TO THE MANUFACTURER'S
SPECIFICATIONS.
Proper procedures with reinstalling the wheels on the vehicle can
eliminate wheel rattles. Over tightening the
lug nuts can warp brake rotors, causing an unsafe condition when
the brakes are applied. Wheels may
become warped and mounting holes have become deformed or cracked
because of incorrect tightening
pressure.
All tightening should be begun by hand, using a torque-limiting
impact tool adjusted to the low setting and
just making the lug nuts "snug". The proper tightening pattern is
1-3-5-2-4 for a five bolt configuration and
1-3-4-2 for a four bolt configuration. Following this, the tire
should be thoroughly cleaned of any
manufacturer installed coating on the whitewall of the tires. The
wheel cover is then replaced using a rubber
hammer.
THESE FIVE STEPS COMPLETE THE ACCUBALANCE PROCESS AND ASSURE
THE CONSUMER OF THE TOTAL RIDE VALUE ASSOCIATED WITH THE NEW
TIRES, ALIGNMENT, STRUTS OR OTHER RIDE-RELATED SERVICE WORK.
PROGRAM ELEMENT # 5 - MONITORING AND MEASURING
SPECIFIC
CONCERN: Assix first identifies actual "opportunity" AGENT sites
and then directs the
manpower to the place where it will be of maximum benefit to the
Agent.
Physical visits by Assix field personnel are replaced by telephonic
contact and
status reviews.
OBJECTIVES: To develop a tracking/trending system to promptly
direct Assix field personnel
to statistically designated "opportunity" AGENT sites.
To analyze and report usage statistics to all AGENT'S on a
continuing periodic
basis.
To analyze and report usage statistics to all levels of Assix
management
personnel on a continuing periodic basis.
To make our AGENTS the most effective and profitable
marketeers of ride-
related products and services within the automobile aftermarket.
To achieve complete consumer satisfaction for our ride-related
products and
services.
C.A.R.D.S./TRACS PROGRAM
(Consistent, Achievement Reporting Discipline System -.
Tracking Recording Accounting Control Systems)
TRAC$ is on AGENT performance control, data collection,
profitability analysis reporting
system. The system's purpose is three-fold:
1. Collect, analyze and provide AccuBalance performance and trend
information to Assix's
current AGENT'S on a monthly basis;
2. Track and analyze incoming performance data on Assix's initial
implementations on a
weekly basis;
3. Provide detail and summary data/analysis to Assix personnel so
they can assist their
assigned AGENT'S in reaching their agreed objectives.
The system is primarily designed to spotlight under performing
stores but also highlights
stores that are well ahead of quota. The system is directed at
units made up of stores, districts,
regions and also on the national level.
PROGRAM ELEMENT # 6 - SCOPE OF PREVENTATIVE AND REMEDIAL
MAINTENANCE
SERVICE
ASSIX maintains all the Tire Matching System 7000 service property
through a field service
organization consisting of Service Property Specialists, a 1-800
support telephone network and a
dispatching system. Service property service is provided five days
per week; Monday through
Friday. Repairs are made on a "best efforts" basis generally not
longer than forty-eight (48) hours.
Response time begins when the call is received at by ASSIX Central
and the Service Property
Specialist is contacted. It terminates when the problem has been
resolved.
All incoming calls are received by the ASSIX Central dispatch team.
An experienced Technical
Support Representative is on hand to attempt to resolve simple
problems over the phone directly
with the retail unit personnel. This avoids unnecessary delays.
All calls received during a month
are summarized and evaluated to determine areas that may need
improvement.
ESCALATION PROCEDURE
Should any problem not be resolved within forty-eight (48) hours,
a set of escalation procedures
take effect:
If a problem is not resolved within forty-eight (48) hours, the
ASSIX Regional Manager is notified
by ASSIX Central. The ASSIX Regional Manager begins to assist in
taking corrective action.
Should the problem not be resolved within thirty-six (36) hours,
the National Service Manager is
notified and takes appropriate action as needed. If the problem is
not corrected within forty-eight
(48) hours, the National Operations Manager is notified. At that
time, the National Operations
Manager will determine the time remaining to resolve the problems
will notify the appropriate
Agent management with an estimated time of resolution. At this
point, depending upon the
severity of the problem, it may become necessary to ship new
service property as a major unit
replacement (MUR) to the retail unit. This decision will be made
by the President of ASSIX
International, Inc.
SERVICE PROPERTY SPECIALIST
Service Property Specialists are trained specifically to maintain
and repair the Tire Matching
System 7000 service property. They are responsible for the entire
Tire Matching System 7000
population in an assigned area. Their responsibilities include but
are not limited to:
1.) Performing all repairs on a Tire Matching System 7000 within
a forty-eight (48) hour period
of time. Communicate with ASSIX Central when a service property
will not be repaired within a
forty-eight (48) hour period of time. (refer to Escalation
Procedure)
2.) Maintain a compliment of spare parts in his van.
3.) Provide additional training in the use of the Tire Matching
System 7000 to any new
employee in the back shop.
4.) Complete call reports on all repairs and visits made to the
retail unit and obtain Agent
Management's written acknowledgement of the performance of such
service.
5.) Build a positive and professional relationship with all retail
unit personnel.
6.) Read, study and understand all aspects of the Tire Matching
System 7000 and attend
regularly scheduled Service Property training classes conducted by
ASSIX International, Inc. at its
locations
THE AGENCY RELATIONSHIP
ASSIX Responsibilities
1. ASSIX will supply each location with the AccuBalance Service
Property in the proper
numbers to adequately deliver the COMPLETE wheel balance. This
will be accomplished
without the Agent making any capital investment in the service
property.
2. ASSIX will install the AccuBalance Service Property when the
Agent has located air supply
and power outlet within five feet of recommended service property
location.
3. ASSIX will spend time in each retail unit location to train
Agent personnel on the operation
and sales of the AccuBalance Program. This is done by providing an
AccuBalance for each
employee's car, holding retail unit training meetings and working
in the retail unit with all
sales and service personnel for up to 4 days or until Agent is
satisfied every auto center
employee is trained and the program has been installed to meet the
Agent's and Assix's
objectives.
4. ASSIX will furnish Agent with materials it deems necessary to
support the sale of the
AccuBalance COMPLETE WHEEL BALANCE.
5. ASSIX will service the Tire Matching System 7000 service
property, including all parts and
correct any problems caused by normal wear, through its
coordinated service network.
6. ASSIX will retrain new retail unit personnel periodically or
as needed to increase
AccuBalance sales to the targeted levels. ASSIX will check
periodically on the Agent's
service property operating procedures.
7. ASSIX will provide Agent with an analysis of the AccuBalance
profit potential within each
of their retail units on a monthly basis; during the initial
implementation, this will be done
weekly.
8. ASSIX will continue the day-to-day follow-up until the
mutually agreed, target financial
objective for AccuBalance-to-tires-sold is reached. Following this
level of achievement,
follow-up will be on an as-needed basis.
The benefits of this program will mean increased revenue and
profits, provide a program
with no capital outlay, and give the consumer a tangible added
value service.
Agent's Responsibilities
1. Provide a letter from Agent senior management to operating
line management of the Agent's
retail operations and management indicating support of the
implementation of the program.
2. Provide a letter of introduction from Agent, to Region
Managers, and other management,
indicating the establishment of goals and objectives for the
AccuBalance brand of the
COMPLETE WHEEL BALANCE program implementation.
3. Provide a designated management person with whom ASSIX can
coordinate the program; this
individual will have the authority to implement actions essential
to the program's success.
4. Provide ASSIX the performance statistics for the AccuBalance
brand of the COMPLETE
WHEEL BALANCE program, including number of new tires sold, number
of standard
balances and number of AccuBalance performed. These will be faxed
weekly to 1-800-753-
5444 or telephoned in to 1-800-999-2133 during the trial
implementation, so ASSIX and
Agent can monitor sales results. Also, monthly reports will be
used for any appropriate fee
billings per tire.
5. Each retail unit will install the proper electrical and air
outlets, prior to AccuBalance being
installed.
6. Require all retail unit personnel to attend a training meeting
on AccuBalance in each retail
unit location. Management attendance is required in all meetings.
The meeting size will be
such that all personnel will have the ability to ask questions, and
receive full information
concerning the program. A series of special sessions will be held
for all persons involved in
the actual selling of the AccuBalance service.
7. All retail unit personnel will receive the AccuBalance brand
of the COMPLETE WHEEL
BALANCE during the initial installation period, at no cost to them
or to Assix..
8. Use of AccuBalance identification materials as supplied and
directed by ASSIX.
9. Install the AccuBalance System Combi
10. Agent shall clearly differentiate between a traditional,
standard, basic, old style wheel balance
and the AccuBalance COMPLETE wheel balance. The warranty for the
AccuBalance shall
be at least 4 times as attractive to the consumer as the warrantee
for the traditional, standard,
basic, old style wheel balance. This means that the warrantee for
the "old style" will not
exceed 3,000 miles and the warrantee for the AccuBalance COMPLETE
wheel balance
would be between 12,000 and, preferably, 15,000 miles. In no event
shall the warrantee for
the AccuBalance be less than one year. Eliminate "lifetime
balance" and all forms of "life of
the tire" and "balance at will" warrantees on standard type
balance.*
11. Instruct all tire sales personnel to offer AccuBalance on each
selling opportunity, including
ride-related services such as alignment, strut sales, etc. in
accordance with the selling
procedures as agreed by Agent and ASSIX.
12. ASSIX will be notified by Agent when new personnel are hired
so additional training can be
provided by ASSIX.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent, to
revise this Exhibit.
* for trade old style, etc. balances
This concludes Exhibit "A"
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
EXHIBIT "B"
SERVICE PROPERTY
1. Combination Matcher/Balance System
2. Quick Lock Adapter
3. Rasp T. Handle (1)
4. #6979-00 Backplated/sleeve (1)
5. #6080-00 Spring Backplate (1)
6. #6081-00 Cone #1 (1)
7. #6082-00 Cone #2 (1)
8. #6083-00 Cone #3 (1)
9. #6087-00 Top Plate (1)
10. #6090-00 Spacer (Large) (1)
11. #6091-00 Spacer (Small) (1)
12. #6092-00 Wing Nut (1)
13. Misc. Mounting Plates/Bolts (4)
14. Miscellaneous advertising materials that Assix considers
necessary as
printed material, signs, banners, etc
Assix reserves the right, upon provision of thirty (30) days
advance written
notice to Agent, to revise this Exhibit..
EXHIBIT C
COMPENSATION DUE TO AGENT
GROSS REVENUE FROM PROGRAM LESS ASSIX FEES SHOWN BELOW AS
DUE AND PAYABLE OF THE SPECIFIC SCHEDULE OF INVOICING AS
SET FORTH.
1. Two months rent due at time of installation $858.00
The above fee will be invoiced upon completion of
implementation of the program at the
Agent's location. Each program includes one piece of service
property and other items as
described in Exhibit A. In the event that more than one program is
installed at a single, retail
location, Agent will be billed only one initial fee per month until
the total number of initial
fees due for such location are billed.
2. Monthly Service Fee per Program $429.00
The first monthly service fee will be invoiced upon completion
of training and installation
acceptance and pro-rated at a cost of $14.33 per calendar day
remaining in the month after the
date of installation acceptance by the Agent.
Subsequent monthly service fees will be invoiced in advance on
approximately the twentieth
(20th) day of the prior month.
3. Usage Fee per Tire $.25
Agent shall pay usage fees only on tires sold upon which an
AccuBalance fee was received
by Agent. Agent shall not be responsible for a usage fee per tire
on any standard balance
done on Agent's other tire balancing equipment nor on "no need-no
charge" balance checks
done on the Assix equipment, unless revenue to Agent results.
The usage fee will be invoiced on approximately the twentieth
day of the month, based on
tires serviced during the prior month. Agents will submit to Assix
Central on the last
working day of each month the number of tires serviced with revenue
collected under the
Program in such month. In the event this information is not
received by Assix within ten
(10) days of the end of the month, the usage fees due shall be
estimated by Assix and
invoiced accordingly.
4. Assix may increase the above fees (Initial, Monthly Service
Fee per program and Usage Fee
per tire serviced), upon thirty (30) days prior written notice to
Agent following the
anniversary date. Any increase will apply on the effective date as
specified in such notice.
5. Invoices shall be due in full upon receipt.
FOLLOWING THE AGENT BEING CURRENT IN AMOUNTS DUE TO
ASSIX, the balance of all revenues generated by Agent following
the
payment of all amounts due Assix shall be retained by Agent for its
own
account as compensation under this agreement.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent,
to revise this Exhibit.
<S> <C>
</TABLE>
ASSIX STANDARD AGENCY AGREEMENT
<TABLE>
THIS ASSIX STANDARD AGENCY AGREEMENT (the "Agreement") is made
and
entered into as of this 31st day of January, 1994 (the "Effective
Date"), by and between ASSIX
INTERNATIONAL, INC., a Delaware corporation ("Assix"), and TIRES BY
WHEEL WORKS,
a California corporation ("Agent").
RECITALS
A. Assix has created a nationally recognized brand name
technically superior wheel
balance that brings the tire/wheel assembly in line with OEM
specifications.
B. Assix has developed and is the owner of a service program
of methods and processes
for wheel balancing (the "Program") and a training and
certification program for personnel utilizing
the Program.
C. Assix has valuable proprietary rights, including patents,
trademarks, service marks,
trade names, or trade dress, existing or arising at common law or
by statute, whether of not
registered or applied for, logos (collectively, the "Marks"),
copyrights, confidential information,
and know how embodied in and/or pertaining to the Program and the
materials and equipment used
therewith.
D. Assix had decided to offer tire/wheel assembly balancing
services ("wheel balancing")
to customers through the use of agents.
E. Agent is engaged in business as an automotive tire
retailer and is willing to be engaged
by Assix as an agent offering wheel balancing on behalf of the
relationship between Assix and
Wheel Works to customers under the Program.
F. Subject to the terms of this Agreement, the parties have
agreed that Assix will allow
Agent to utilize the Program as its agent and will provide Agent
with the Program and the
marketing and technical advice and services necessary to fully
implement the Program.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and of
other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged,
Assix and Agent agree as follows:
1. RECITALS AND EXHIBITS.
The parties acknowledged and agree that the recitals are
true and correct, and that by
this reference they are hereby incorporated into this Agreement.
In addition, any exhibits referred
to in this Agreement by this reference are hereby incorporated into
this Agreement.
2. RELATIONSHIP OF THE PARTIES.
The relationship created by this Agreement is that of
principal and agent. Subject to
the terms of this Agreement, Agent shall represent itself to be the
legal agent of Assix and shall
have the right and authority to bind Assix for purposes of the
commitments made by Assix for the
benefit of wheel balancing customers. Agent shall not have, nor
shall it hold itself out as having,
the power to make contracts in the name of, or binding on, Assix,
to pledge Assix's credit, or to
extend credit in Assix's name. Agent agrees to indemnify and hold
Assix harmless in the event
that any claims are made based upon any assertions of authority by
Agent to do any of the
aforesaid acts unless written authority has been expressed in
advance by Assix.
It is further understood and agreed that no individuals
employed by Agent shall be
considered to be employees of Assix, and Agents agrees this it
shall be liable for any and all
expenses or claims of whatsoever nature or kind arising against
either Agent or Assix because of
the acts of any of Agent's employees, agents, or servants, and
indemnify, defend, and hold
harmless Assix from any liability thereon.
Agent is not and shall not be considered to be a
franchisee of Assix for any
purpose. Assix does not represent or warrant the commercial or
financial success of Agent's
business.
3. ASSIX OBLIGATIONS.
Assix hereby covenants and agrees to:
(a) Provide Agent with access to and use of the items listed
in Exhibit B, which are
necessary to implement the Program at Agent's location(s) (the
"Service Property");
(b) Allow Agent to use the Marks which accompany the Program
to the extent and in a
manner reasonably determined by Assix in order to effectively
market the Program at Agent's
location(s), provided, however, the Marks may be used by Agent
solely in conjunction with the
Program;
(c) Provide Agent's designated employees with the training
and technical advice necessary
to utilize the Program;
(d) Provide Agent with the training, marketing advice, and
marketing materials deemed
necessary by Assix in order for Agent to effectively market and
promote the Program;
(e) Keep Agent informed of any changes or advances in
Program;
(f) Keep the Program and the Service Property in proper
working order during the term of
this Agreement, including the repair and replacement of Service
Property; provided, however, that
Assix reserves the right to determine the necessity for
replacements;
(g) Maintain the quality and performance characteristics of
the Service Property supplied to
Agent hereunder and make additions, deletions, and modifications
from time to time at Assix's sole
discretion based upon its determination as to the materials and
services that will best enable Agent
and Assix to benefit from the rights granted in this Agreement;
(h) Deliver the Service Property to the ground floor entrance
of Agent's locations and
connect the Service Property in the place of installation. Upon
the termination of this Agreement,
in whole or in part, Assix shall disconnect the Service Property,
as appropriate, and after it is
moved to the ground floor entrance of Agent's property by Agent,
remove the Service Property at
no charge to the Agent. In the event of termination of this
Agreement by Agent, Agent
shall reimburse Assix a final fee for the cost of removal, freight,
crating, and shipping of the
Service Property in an amount equal to one Monthly Program Fee per
Service Property unit;
(i) Obtain and pay all additional insurance (attributable
solely to the incremental risk
associated with Agent's implementation of the Program), additional
necessary licenses, and all
other additional permits required to permit Agent to offer the
Program at Agent's location(s).
Agent shall notify Assix promptly of any inspections conducted by
licensing authorities and the
results thereof; and
(j) Bear the risk of loss for defective equipment.
(k) The assigned Assix Account Manager will be compensated in
accordance with standard
bonus programs designed to provide consistent incentive for
achieving Agent profitability above
that of stated goals and objectives.
4. AGENT OBLIGATIONS.
Agent shall utilize the Program, as described in Exhibit
A, the Service Property, as
described in Exhibit B, and the trade names, trademarks, and
service marks of Assix (the "Marks")
strictly in accordance with the written instructions provided by
Assix and solely for the purpose of
implementing the Program on behalf of Assix at its locations(s).
Notwithstanding anything
contained in this Agreement to the contrary, Agent shall:
(a) Obtain and maintain continuously so long as this
Agreement shall remain in effect, all
licenses, permits, and authorizations necessary to Agent's
implementation of the Program;
(b) Utilize the Marks strictly in connection with the
prescribed marketing, sale, and delivery
of all services under the Program, in accordance with Exhibit A.
Specifically, Agent shall: (1) not
impair, by act of by omission, the value of the Marks, whether
registered or not; (2) use only the
Marks designated by Assix in connection with the program to include
special arrangements
agreed by Assix and Agent, ie. (TPP, etc); (3) not use
trademarks, trade names, service marks,
symbols, slogans, logos, or the like that are confusingly similar
to the Marks; (4) use the Marks
only in the names and forms authorized by Assix; (5) not use the
Marks to incur any obligation or
indebtedness on behalf of either Agent or Assix; (6) not use the
Marks, or any word, name, or
other symbol tending to be confusingly similar to the Marks, or
part of Assix's corporate or other
legal name, including, without limitation, in the name of any bank
account of Agent, without the
express prior written approval of Assix; (7) not in any manner
represent that it has any ownership
interest in the Marks; (8) not at any time apply for any copyright,
trademark, or patent registration
or protection with respect to any products or materials associated
with the Program and the Service
Property; and (9) immediately cease any pre-existing use of the
Marks that conflicts with the terms
of this Agreement;
(c) Display the name "Assix" and the Marks prominently in
signage located at the Agent's
location(s) in a manner which shall be clearly visible to customers
and shall reasonably advertise
and promote the name "Assix" and the Marks in connection with such
business, subject, however,
at all times to the supervision of Assix. Every use of the name
"Assix" and the Marks in any
display, advertisement, promotion, or otherwise by Agent shall be
in a form and character
approved in advance, in writing, by a duly authorized officer of
Assix. Such utilization shall
include, without limitation, the display of signage provided by
Assix at each service location and
the display of the trade names, trademarks, or service marks on all
advertising and marketing
materials for the Program. The size and number of signage to be
displayed by Agent shall be
reasonable and consistent with the other signage for automotive
services at Agent's location(s),
subject to the inspection and control by Assix;
(d) Use due care in the possession of the Service Property
and the performance of services
under the Program, including ensuring that there is sufficient
coverage at its location(s) in time and
manpower by personnel trained and certified in the provision of
wheel balancing services under the
Program;
(e) Use good faith in implementing the Program. Agent shall
at all times while this
Agreement remains in effect exert its best efforts to sell the
wheel balancing services under the
Program and shall not make any disparaging comments regarding the
Program to customers or
potential customers of the Program. Such best efforts shall
include, without limitation, promoting
the wheel balancing services to all potential customers. Agent
further agrees to comply, on or
before three (3) months prior to each anniversary date of the
Effective Date of the Agreement, with
Assix's reasonable requests for forecasts of Agent's volume and
level of Program activity and to
contribute information required by Assix to properly plan for
Assix's support of the Program and
the Service Property for the next succeeding year;
(f) Provide suitable electrical service and compressed air
and maintain the space and
environmental requirements designated by Assix;
(g) Make no alterations to the Program, nor make any repairs
to the Service Property,
other that those specifically set forth in Exhibit A or in writing
by a duly authorized officer of
Assix;
(h) Obtain authorization from Assix prior to any movement of
any portion of the Service
Property;
(i) Provide an agent or employee to accompany Assix personnel
while such personnel are
training or advising Agent's personnel hereunder or servicing the
Program after Agent's normal
business hours;
(j) Maintain its business location(s) in an attractive,
clean, orderly, and sanitary condition;
(k) Charge such prices to retail customers for AccuBalance as
the agent and Assix shall
from time to time determine to be appropriate based on market
conditions. Such prices shall be
reviewed and communicated between the agent and Assix. These
should be calculated in the
following manner. A survey will be completed by the agent and
Assix to determine the market
competitive price of a standard wheel balance and agent shall
charge a minimum of between $3.50
and $5.00 over the standard wheel balance for AccuBalance.
(l) Prepare and forward to Assix Central, 505 E. Jackson
Street, Suite 220, Tampa, FL
33602, fax (800) 753-5444, monthly reports, on or before 10th day
of the next succeeding month,
setting forth, on a region basis listing stores individually: (i)
the number of tire/wheel assemblies
standard balanced and AccuBalanced by Agent and (ii) the number of
tires sold by Agent store,
for the month in question(Unless otherwise agreed by Assix and
Agent);
(m) Upon termination of this Agreement, allow Assix to remove
all of the Service Property
from Agent's premises, return the Service Property to Assix in good
repair, condition, and
working order (ordinary wear and tear excepted), and cease use of
all the Marks, copyrights, and
confidential information used hereunder;
(n) In the event that the agent is using the complimentary
product (TM6000), the agent will
provide wheel-balancers which meet industry standards for use in
connection with the Program.
Any new or replacement wheel-balancers which Agent subsequently
adds to its location(s) shall
have quality and performance characteristics at least as good as
the wheel-balancers currently
utilized by Agent;
(o) Make no statement indicating or implying that performance
of the wheel balancing
services are other than as indicated in Assix's brochures, sales
literature, or training materials, nor
convey any proprietary information to anyone outside of Agent's
organization;
(p) Make a reasonable effort to preserve the Marks against
dilution and promptly notify
Assix of any use, of which Agent has become aware, of marks which
may be confusingly similar
to the Marks; and
(q) Furnish to customers the warranty in the form set forth
in Exhibit A.
(r) In the event Assix sues Agent to enforce its rights under
Paragraph 4(b) of this
Agreement, the limitation on consequential damages found in
Paragraph 15 shall not apply. In
addition, Assix shall be entitled to recover from Agent its
reasonable attorneys fees' and costs and
all expenses incurred in accordance with Paragraph 19.
(s) Assix will honor confidentiality of all strategic
information supplied by Agent.
5. COMPENSATION TO AGENT.
As compensation to Agent for Agent's services provided to
Assix under this
Agreement, Assix agrees to compensate Agent in accordance with
Exhibit C.
6. INSURANCE.
(a) Assix, at its expense, hereby agrees and covenants
that it shall obtain and
maintain during the term of this Agreement the following policies
of insurance against claims,
demands, actions, liabilities, damages, losses, costs, and expenses
arising out of the subjects
covered by such policies of insurance:
(1) Worker's Compensation Insurance covering all costs,
benefits, and liability
under State Worker's Compensation and similar laws which may accrue
in favor of any person
employed by Assix, and Employer's Liability Insurance for Assix
employees with limits not less
than those required by the states in which Agent does business;
(2) Commercial General Liability Insurance covering
Products Liability,
Completed Operations, and Contractual Liability Insurance,
specifically endorsed to cover the
indemnity provisions of this Agreement, and coverage for Personal
Injury, with limits of not less
than $1,000,000.00 combined single limit for bodily injury and
property damage per occurrence.
To the extent that Agent provides additional general commercial
liability insurance, it shall do so at
its own expense.
(3) Motor Vehicle Liability Insurance covering all owned
vehicles used by Assix
employees in connection with Agent's operations under this
Agreement with limits of not less than
$500,000.00 combined single limit for bodily injury and property
damage per occurrence; and
(4) Excess Liability Insurance, including, without
limitation, coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal Injury Insurance
with limits of not less than $1,000,000.00.
(b) Agent, as its expense, hereby agrees and covenants
that is shall obtain and
maintain during the term of this Agreement the following policies
of insurance adequate to fully
protect Assix as well as Agent from and against any and all claims,
demand, actions, liabilities,
damages, losses, costs, and expenses arising out of the subjects
covered by such policies of
insurance:
(1) Workers' Compensation Insurance covering all costs,
benefits, and liability
under State Workers' Compensation and similar laws which may accrue
in favor of any person
employed by Agent, and Employer's Liability Insurance for Agent's
employees with limits not less
than those required by the states in which Agent does business;
(2) Commercial General Liability Insurance listing Agent
as the primary insured
and Assix as an additional insured, including, without limitation,
coverage for Products Liability,
Completed Operations, and Contractual Liability Insurance,
specifically endorsed to cover the
indemnity provisions of this Agreement, and coverage for Personal
Injury, with limits of not less
than $1,000,000.00 combined single limit for bodily injury and
property damage per occurrence.
To the extent that Assix provides additional general commercial
liability insurance, it shall do so at
its own expense.
(3) Motor Vehicle Liability Insurance with a
Non-Ownership and Hired Car
Liability Endorsement in the name of Agent covering all vehicles
used by Agent employees in
connection with Assix' operations under this Agreement with limits
of not less than $500,000.00
combined single limit for bodily injury and property damage per
occurrence; and
(4) Excess Liability Insurance, including, without
limitation, coverage for Blanket
Contractual Liability, Products Liability, Completed Operations,
and Personal Injury Insurance
with limits of not less than $1,000,000.00, listing Agent as the
primary insured and Assix as an
additional insured.
7. TITLE TO PROGRAM AND SERVICE PROPERTY.
Title to and ownership of the Program, including the
Marks, copyrights, and
confidential information, shall at all times remain in Assix.
Nothing contained in this Agreement shall be construed as
an assignment or
conveyance to Agent of any right, title, or interest in and to the
Marks, copyrights, confidential
information, and know-how. Agent's use of the Marks, copyrights,
and confidential information,
in any geographical area, including foreign countries, and in any
field for us shall not create any
ownership interest in Agent and shall inure to the benefit of
Assix.
All products, promotional advertising, packaging, and
instructional materials
utilized in connection with the Program and the Service Property
shall contain appropriate legends,
markings, and notices to give notice to the public of Assix's
right, title, and interest in the Marks,
copyrights, and confidential information.
Title to and ownership of the Service Property shall at
all times remain in Assix and
Agent shall have no property rights therein, but only the right to
use the Service Property as stated
herein, notwithstanding that the Service Property may now be, or
hereafter become, in any
manner, affixed or attached to, imbedded into, permanently resting
on real property or any building
thereon, or attached in any manner to that which is permanent by
means of cement, plaster, nails,
bolts, screws, or otherwise. Should Agent, during the term of this
Agreement, make, own, or
acquire rights to practice any patentable invention relating to the
Program or the Service Property,
then Agent agrees promptly to make full disclosure thereof to
Assix, and to assign all rights it may
have to any such patentable invention to Assix. Any invention made
by an employee of Agent
shall be deemed to have been made by Agent.
8. RECORDS AND INSPECTION.
(a) Agent shall keep records showing the date of
purchase, the purchase
price, and the identity and address or purchasers of any wheel
balancing services performed under
the Program, and shall permit Assix's duly authorized
representative(s) to examine Agent's
invoices reflecting the above listed information, premises, and
samples of wheel
balancing services performed under the Program at any time during
regular business hours to
enable Assix to determine whether or not Agent is performing its
obligations under this Agreement.
(b) Agent acknowledges that the goodwill and
favorable reputation
associated with the Marks are essential to the success of the
Program. Accordingly, upon
reasonable notice to Agent, Assix shall also be allowed access to
the Program and Service Property
fro the purpose of inspecting the Program and the Service Property
to assure that the quality
control provisions of this Agreement are being observed and/or to
perform necessary maintenance
or repairs.
9. WARRANTIES.
(a) Assix warrants that the Program will be provided as
described in Exhibit A, and
the Service Property will operate in substantial conformity with
the specifications and
documentation as to type, design, and capacity as described in
Exhibit B.
(b) EXCEPT AS SET FORTH HEREIN, ASSIX MAKES NO
WARRANTIES
EXCEPT TO THE EXTENT REQUIRED BY LAW, EXPRESSED OR IMPLIED, WITH
RESPECT TO THE PROGRAM OR THE SERVICE PROPERTY, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. AGENT ACKNOWLEDGES THAT THE PROGRAM AND THE
SERVICE PROPERTY ARE OF THE TYPE, DESIGN, AND CAPACITY SUITABLE FOR
ITS
PURPOSES.
10. INDEMNIFICATION.
(a) Notwithstanding anything to the contrary
contained within this
Agreement, Assix shall not be liable to Agent for damages of any
type to third parties which are
caused, in whole or in part, by the negligent or intentional acts,
or any other acts of omission or
commission, of Agent, its agents, or its employees. Agent shall
protect, indemnify, defend, and
hold harmless Assix, its agents, its employees, its officers, its
directors, and its servants from and
against any and all claims, actions, liabilities, losses, costs,
and expenses (including reasonable
attorneys' fees and costs), without limitation, arising out of or
in connection with (i) any negligent
or intentional acts, or any other acts of omission or commission,
of Agent, its agents, or its
employees; (ii) any statement indicating or implying that
performance of the wheel balancing
services are other than as indicated in Assix's brochures, sales
literature, or training materials; (iii)
any actual or threatened material breach of this Agreement by
Agent; or (iv) any actual or threatened
material act of omission or commission by Agent, its agents, or its
employees, in connection with
this Agreement. Assix shall give to Agent prompt written
notification of any claim against it that it
believes is subject to indemnification pursuant to this provision.
In the event Assix shall fail to
give Agent prompt written notification of any such claim, which
failure results in material detriment
to the defense of such claim, Agent's indemnification obligations
in favor of Assix as to such
claim, if any, shall be come null and void and of no further legal
force or effect.
(b) Assix shall protect, indemnify, defend, and
hold harmless Agent, its
agents, its employees, its officers, its directors, its
shareholders, and its servants from and against
any and all claims, actions, liabilities, losses, costs, and
expenses (including reasonable attorneys'
fees and costs) arising out of or in connection with (i) any
material malfunctioning of the Service
Property; (ii) any actual or threatened material infringement of
any United States patent, foreign
letters patent, trade name, trademark, copyright, trade secret, or
any other proprietary right with
regard to Agent's utilization of the Program or the Service
Property; (iii) any actual or threatened
material breach of warranty by Assix; (iv) any actual or threatened
material breach of this
Agreement by Assix; (v) any actual or threatened material act of
omission or commission by Assix,
its agents, or its employees, in connection with this Agreement.
Agent shall give Assix prompt
written notification of any claim against it that it believes is
subject to indemnification pursuant to
this provision. In the event Agent shall fail to give Assix prompt
written notification of any such
claim, which failure results in material detriment to the defense
of such claim, Assix's
indemnification obligations in favor of Agent as to such claim, if
any, shall become null and void
and of no further legal force or effect.
(c) Assix shall have the sole control and authority
over the defense,
settlement, or compromise of any claim or legal proceeding that
Agent believes is subject to
indemnification pursuant to Subparagraph (b). If the Program or
the Service Property becomes, or
in the opinion of Assix is likely to become, the subject of a claim
of infringement of a United States
patent, foreign letters patent trade name, trademark, copyright, or
trade secret, Assix may, in its
sole discretion, procure for Agent the right to continue using the
Program or the Service Property,
or any part of them so as to make Agent's use of them
noninfringing. If, during the pendency of
any claim or legal proceeding against Agent or Assix pursuant to
which Agent is prevented from
utilizing the Program or the Service Property by court order,
operation or law, or any other reason,
Agent may, as its sole remedy, withhold payment of any sums
otherwise required to be paid over
to Assix by Agent pursuant to this Agreement.
11. CHANGE OF OWNERSHIP OF AGENT.
In order to ensure Assix that Agent will comply with
its obligations
hereunder to the satisfaction of Assix, Agent acknowledges that
Assix must know and approve
who in fact controls Agent. Any Transfer of Control by Agent or
any Controlling Person may
result in the immediate termination of this Agreement, at the sole
option of Assix. Such
cancellation can be prevented by the agent seeking prior written
consent.
For purposes of this Agreement:
(1) The term "Affiliate" shall mean any natural
person or other legal
entity that, directly or indirectly, controls, is controlled by, or
is under common control with, either
Agent or any Controlling Person;
(2) "Controlling Person" shall be any natural
person or other legal entity
with a fifteen percent (15%) or greater interest in Agent or an
another entity that has, directly or
indirectly, a fifteen percent (15%) or greater interest in Agent,
or otherwise has the power to
control, directly or indirectly, the management, direction, or
day-to-day operations of Agent.
Without limiting the generality of the foregoing, a natural person
or legal entity shall be a
"Controlling Person" of Agent if it owns a fifteen percent (15%) or
greater interest in another entity
that is either a Controlling Person of Agent or that has an
indirect ownership interest in Agent
through one or more intervening levels of direct or indirect
subsidiaries. For example, if Agent is a
wholly-owned subsidiary of another corporation that is, in turn,
owned equally by three other
corporations, each of these three corporations who have the power
(indirectly) to affect the day-to-
day operations of Agent shall be considered a Controlling Person
for purposes of this Agreement:
(3) The term "Transfer" shall mean any voluntary
sale, pledge,
encumbrance, or other transfer or disposition (other than a gift,
sale, pledge encumbrance, or other
transfer between the Agent's present shareholders or a pledge
granted to a financial institution
providing financing to the pledgor); and
(4) "Transfer of Control" of Agent shall mean (a)
if Agent or any direct
or indirect Controlling Person is a partnership, any change in the
identity or respective ownership
of the partners or any of them, (b) if Agent or any direct or
indirect Controlling Person is a
corporation, any Transfer of shares comprising fifteen percent
(15%) or more of the total number
of issued and outstanding shares of Agent or such Controlling
Person, or (c) the Transfer or
change in the direct or indirect control of, or the Transfer or
change in the power to control,
directly or indirectly, the management, direction, or day-to-day
operations of Agent or of any direct
Controlling Person; provided, however, that the death or
determination of incompetency of a
partner of any natural person constituting a Controlling Person of
Agent shall not be a "Transfer of
Control."
12. TERM AND TERMINATION.
(a) The term of this Agreement will commence on the
Effective Date
stated above and shall continue for sixty (60) months, unless
otherwise terminated in accordance
with this Agreement.
(b) Either Assix or Agent shall have the right to
terminate this
Agreement by giving written notice of termination to the other
party of no less than twelve (12)
months.
(c) Assix shall have the option and right to
terminate this Agreement:
(1) Effective upon giving notice to Agent:
(i) In the event Agent fails to perform or comply
with any term or
provision of this Agreement, and such failure is not remedied to
Assix's satisfaction within one (1)
month of written notice thereof from Assix (or such longer period
as applicable law may require),
or in the event Agent repeatedly fails to perform or comply with
one or more term or provision of
this Agreement, whether or not such non-compliance is corrected
after notice; or
(ii) In the event Agent, upon two (2) weeks prior
written notice, shall
fail to duly pay all amounts due to Assix; or
(iii) Agent or any Controlling Person engages in
any unethical business
conduct that is reasonably likely to affect adversely the goodwill
or reputation of Assix; or
(iv) In the event Agent introduces and/or supports
any proceedings
challenging the validity of any of the Marks, copyrights,
confidential information, know-how,
patent applications, or other proprietary rights, whether
registered or not, of Assix; or
(v) Immediately following the agent providing any
written notice of
termination to Assix for any reason, the agent agrees to nominate
a senior management participant
for the purposes of working with Assix to determine the cause and
the remedy for such
termination. Agent agrees to evaluate the resulting report
concerning the recommended cure for
such reason for termination for a 30 day period and Assix and the
agent agree to implement such
recommendations. Such agreement to not be unreasonably withheld.
(2) Effective without notice to Agent or further
action of any kind: In
the event Agent becomes insolvent or is subject to any bankruptcy,
insolvency, or similar
proceeding, makes an assignment for the benefit of creditors,
becomes unable to pay its debts as
they become due, goes into liquidation or winding up, or in the
event a receiver is appointed for a
substantial part of Agent's assets; or
(3) At the option of Assix, after one (1) month's
prior written notice to
Agent: In the event of a decision by any government or agency
thereof or any tribunal which, in
the sole discretion of Assix, has the effect of preventing Assix
from realizing the benefits of this
Agreement or which might threaten the protection of Assix's name,
reputation, or proprietary
rights, including its marks, copyrights, confidential information,
know-how, or any other
information pertaining to the Program or the Service Property.
(4) Assix agrees not to install a "new agent",
without first obtaining written
consent from Agent, within fifteen (15) miles of the San Jose, CA
city limits for a period not to
exceed the term of this agreement. In return, Agent agrees to
make every effort to maintain a
consistent performance level, (AccuBalance to Tires Sold) at or
above the 115% mark. Agent
understands that any rights of exclusivity granted herein will be
revoked in the event Agent
performance is below 115% for three consecutive months.
(d) Agent shall have the option and right to
terminate this Agreement:
(1) Effective twelve (12) months following giving
notice to Assix:
(i) In the event Assix fails to perform or comply
with any term or
provision of this agreement, and such failure is not remedied to
Agent's satisfaction within one (1)
month of written notice thereof from Agent (or such longer period
as applicable law may require),
or in the event Assix repeatedly fails to perform or comply with
one or more term or provision of
this Agreement, whether or not such non-compliance is corrected
after notice; or
(ii) In the event of a material change in the
ownership of Assix.
(iii) In the event Assix refuses to remain
"competitive" with duplicate
programs, or to offer similar Agent arrangements.
(2) Effective immediately upon giving notice to
Assix:
(i) In the event Assix becomes insolvent or is
subject to any
bankruptcy, insolvency or similar proceeding, makes an assignment
for the benefit of creditors,
becomes unable to pay its debts as they become due, goes into
liquidation or winding up, or in the
event a receiver is appointed for any part of Assix's assets; or
13. EFFECT OF TERMINATION.
In the event of the termination of this Agreement
for any reason:
(a) Agent shall surrender and cease to exercise all
rights granted under
this Agreement, cease all use of the Program, the Service Property,
and Assix's name and Marks
in any and all connections, and refrain from representing any of
its services after termination as
"Assix services" or as being the "same as Assix", "similar to
Assix", or in any other way trading
upon the name "Assix" or the Marks.
(b) Termination of this Agreement shall not relieve
Agent from its
obligation to pay to Assix all moneys that may be due at the date
of termination, without any
reduction or offset whatsoever.
(c) Agent shall immediately cease using and return
within a period of
one (1) month following the termination of this Agreement, all
property of Assix, including,
without limitation, all confidential and proprietary written
materials (and all copies thereof) received
from Assix. Such materials will be delivered in person to an Assix
employee or returned via
courier service to be signed for by the recipient.
(d) Agent shall be deemed to have transferred and
conveyed to Assix
any trademarks, service marks, trade names, good will, or other
rights which may have been
obtained by Agent in connection with its use of the Program or the
Service Property or which,
notwithstanding the intention of the parties not to create any such
rights, may have vested in Agent
in connection with Agent's authorized activities hereunder, and
that Agent will execute any
instruments requested by Assix in suitable form to accomplish or
confirm the foregoing. Any such
instrument of assignment, transfer, or conveyance shall be without
consideration other than the
mutual covenants and consideration provided for in this Agreement.
14. COMPLIANCE.
Each party shall in the conduct of its business and
in the performance of this
Agreement comply fully with all applicable Federal, State, and
local laws, ordinances, rules and
regulations.
15. CONSEQUENTIAL DAMAGES.
Neither party shall be liable to the other for any
loss of profit or any
consequential or incidental damages upon the breach of this
Agreement, except as otherwise
provided herein.
16. SALES PROCEDURES.
(A) Prices and terms of sale quoted by Agent for
wheel balancing
services under the Program shall be those prices and terms as are
then in effect. Such prices and
terms may be revised by Assix in its sole discretion, from time to
time. Agent agrees that it will
not deviate from the established price and sales policies without
express authorization in advance
and in writing by Assix excepting shall be permitted to run special
promotions for wheel balancing
services, such promotions not to last longer than thirty (30) days.
(B) Agent may, without obtaining the express
written authorization of
Assix, quote and sell the wheel balancing services under the
program at a price equal to or greater
than that charged by any of Agents' competitors using the Program
or equipment manufactured by
Assix.
17. NON-COMPETITION AND NON-SOLICITATION.
(a) During the term of this Agreement, Agent shall
not offer any other
"tire flex correction services" or services similar to the Program
to any of its customers.
Additionally, in the event this Agreement is terminated, Agent
shall not offer any tire flex
correction services or services similar to the Program to any of
its customers at any location(s)
which is (are) within a twenty-five (25) mile radius of any
location(s) in which Agent offered
wheel balancing services under the Program for a period of two (2)
years following the termination
of the Program.
(b) During the term of this Agreement, and for a
period of two (2) years
following the termination of this Agreement, Agent shall not
entice, solicit for hire, or hire away
any of Assix's then current personnel to work in any way in or for
any business that is or may be,
directly or indirectly, competitive with either Assix or the
Program.
18. SPECIFIC PERFORMANCE.
Agent agrees that damages at law will be an
insufficient remedy to Assix in
the event of Agent's breach of this Agreement, and that Assix shall
be entitled, upon application to
a court of competent jurisdiction, to obtain injunctive relief to
enforce the provisions of this
Agreement, which injunctive relief shall be in addition to any
other rights or remedies available to
Assix.
19. ATTORNEY'S FEES AND COSTS.
In the event that Assix or Agent is required to
engage the services of legal
counsel to enforce its rights under this Agreement, regardless of
whether such action results in
litigation, the prevailing party shall be entitled to reasonable
attorney's fees and costs from other,
which, in the event of litigation, shall include fees and costs
incurred at trial and on appeal.
20. SEVERABILITY.
If all or any portion of any provision of this
Agreement is held to be void,
unenforceable, or illegal for any reason, such decision shall not
affect the validity or enforceability
of all or any of the remaining provision or provisions hereof, and
this Agreement shall be
construed as if the unenforceable or illegal provision had never
been included.
21. WAIVER.
No term or provision hereof shall be deemed waived
and no breach
excused, unless such waiver or consent shall be in writing and
signed by the party claimed to have
waived or consented. Any consent by any party to, or waiver of, a
breach by the other, whether
express or implied, shall not constitute a consent to, waiver of,
or excuse for any other different or
subsequent breach.
22. ASSIGNMENT OF AGREEMENT.
This Agreement shall be binding upon the respective
heirs, personal
representatives, and successors of the parties. Assix may assign
or delegate part or all of this
Agreement. Agent acknowledges that is necessary for Assix to
select its agents in a manner that
assures that an Agent authorized to provide wheel balancing under
the Program is capable of
fulfilling the obligations pertaining thereto and, therefore, no
assignment, delegation, or transfer
may be made by Agent without the prior written consent of Assix.
If Agent transfers, assigns, or
attempts to transfer or assign this Agreement or any part thereof,
expressly or by operation of law,
without the prior written consent of Assix, then Assix, at its
option, may immediately terminate
this Agreement upon the provision of one (1) month's advance
written notice to Agent.
23. CHOICE OF LAW; VENUE.
This Agreement shall be governed by and construed in
accordance with the
laws of the State of Florida. Exclusive venue for any litigation
instituted hereunder shall be
Hillsborough County, Florida.
24. PUBLICITY
Except as necessary to comply with applicable law,
neither party will issue
any press release or any publicity or advertising information
related to this Agreement without
obtaining the other party's advance written consent (which consent
shall not be unreasonably
withheld).
25. NOTICES.
Any notice, communication, or demand required or
permitted to be given
under this Agreement will be sufficiently given or made for all
purposes if delivered in person, by
facsimile transmission, by reputable courier, or by certified mail,
return receipt requested, as
follows:
(a) If to Assix: Mr. R. Park Newton, III with
copy to: James M. Landis,
President Foley, Lardner & Hill
Assix International, Inc. One
Tampa CityCenter
505 East Jackson Street Suite 2900
Suite #220 Post Office
Box 3391
Tampa, Florida 33602
Tampa,Florida 33601
(b) If to Agent:
with copy to:
26. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and
understanding between
the parties with respect to the subject matter hereof and merges
all prior discussions and
agreements between them. This Agreement shall not be supplemented,
modified or amended
except by a written instrument signed by the President of Assix and
by a duly authorized officer of
Agent, and no other person has or shall have the authority to
supplement, modify, or amend this
Agreement in another manner.
IN WITNESS WHEREOF, the parties have signed this
Assix Standard
Agency Agreement this 31st day of January, 1994.
"ASSIX"
ATTEST: ASSIX INTERNATIONAL, INC.
By: /S/Douglas S. Gardner By: /S/R. Park Newton, III
Secretary President
[Corporate Seal]
"AGENT"
ATTEST: TIRES BY WHEEL WORKS
By: /S/Rick L. Sutherland By: /S/Mike
Hexner___________
Secretary
[Corporate Seal] Its: CEO____________________
EXHIBIT A
DESCRIPTION OF ACCUBALANCE PROGRAM
AccuBalance Program Goals
The goals of the AccuBalance program are to:
1. Improve the consumer's perception of the quality of the Agent's
products and services by the Agent
providing a value-added, COMPLETE wheel balancing service in
conjunction with the consumer's
procurement, from the Agent, of:
[a] high-quality, aftermarket replacement tires and,
[b] ride-related services, such as alignments and
shocks/struts.
2. Increase the Agent's profitability potential by providing a
value-added, COMPLETE wheel balancing
service that exceeds the specifications of traditional wheel
balancing.
This service is more complete and consistent than the
specifications of traditional, after-market wheel
balancing and is similar to the demanding specifications of the new
car and automobile tires original
equipment manufacturer.
AccuBalance Program Elements
The AccuBalance Program is a comprehensive and consistent
discipline composed of six elements:
Element # 1. Service Property, designed, engineered and
manufactured to effectively measure and
balance, and if necessary, adjust passenger tire's and light-truck
tire's force variation of the tire's loaded
radial runout, then to balance the tire using the built in wheel
balancer.
SEE EXHIBIT "B"
Element # 2. A proprietary, AccuBalance Implementation system that
facilitates the on-time, on-
specification, on-budget installation of the entire program at all
the Agent's locations.
Element # 3. An in-store, Merchandising system that initially
trains and subsequently reinforces all Agent
personnel in the proper methods of selling, performing and
monitoring the financial achievements of the
AccuBalance service. This merchandising system consists of
promotional marketing material to maintain
the sales person's (or service advisor's/counter person's) emphasis
on the AccuBalance program and
provides on-site support and assistance, as deemed necessary by
Assix, to maintain the profitability targets
for AccuBalance. As necessary, the merchandising system also
contains consumer educational material
and promotional material to educate the consumer on the maintenance
requirements of wheel balancing.
Element # 4. A proprietary, Service Management system that assures
the wheel balancing service is
delivered to the consumer in a consistent manner within the
specifications of the automobile, the tire and the
wheel manufacturers and other manufacturers and providers of
ride-related products and services. This is
critical to the success of the Assix proven excellence objectives
and to the success of the entire
AccuBalance program. This service management system includes
providing the Agent's designated
employees with proper training and technical advice necessary to
deliver the 5-step, COMPLETE Wheel
Balance to the consumer.
Element # 5. A proprietary, Profitability Measurement and
Monitoring system to track, report,
analyze and notify the Agent of their levels of achievement of the
mutually agreed profitability potential. The
system recognize Agent locations not achieving their full profit
potential as well as those that are exceeding
their financial objectives. The system identifies these
under-performing locations and dispatches a ASSIX
Merchandising Specialist to assist the Agent in consistently
achieving the Agent's targeted financial
objectives.
Element # 6. A comprehensive Remedial Maintenance system for the
service property, including
engineering changes, deletions and modifications as ASSIX deems
necessary to maintain the service
property in proper working order.
ACCUBALANCE MARKET
ASSIX perceives that a large market exists for the AccuBalance,
COMPLETE wheel balancing service.
The sale of tire and ride-related services is effected primarily
through tire retailers with multiple dealer
outlets. The market for wheel balancing exceeds approximately $1
billion per year, based on approximately
150 million passenger tires, 25 million light truck tires, a
balance penetration rate of 100% and
approximately $6.00 per tire balance price.
The tire retailer shall sell the AccuBalance COMPLETE wheel balance
for $3.50/$5.00 per tire more than
the price of traditional, conventional or basic wheel balancing in
each of the Agent's market areas. This base
price for basic wheel balancing is contained as item # 34 in the
United States Consumer Price Index, which
measures approximately 289 urban areas each quarter.
In the event the Agent uses a "National" price for their basic
wheel balancing, AccuBalance shall be sold
for $3.50 to $5.00 per tire more than that "National" price.
This calculation of market size for AccuBalance is further defined
by the amount of opportunities within
the retail business unit. The effectiveness of the AccuBalance
program is measured by the number of
AccuBalance sold in relation to the number of new tires sold in the
retail unit. the opportunities are based
on the level of tires sales and related tire-service work performed
in each retail establishment. As an
example:
Opportunities for sale of AccuBalance Number of
Penetration
Tires Available Available Percentage
New tires sold 2.5 100%
Old tires on vehicle NOT REPLACED 1.5 50%
63%
Alignments - without tires sales 4.0
25% 40%
Shocks/Struts without tire sales 4.0
25% 40%
COMPLETE 243%
95% of the tires that are replaced are balanced. If a 50%
penetration of the balance of the available
penetrable market is achieved this equates to 1/2 of 143% or 71%.
Adding this to the 95%, the realistic rate
of selling AccuBalance
is about 166% in relation to the number of new tires sold.
DESCRIPTION OF PROGRAM ELEMENT # 1 - SERVICE PROPERTY
SEE EXHIBIT B
DESCRIPTION OF PROGRAM ELEMENT # 2 - IMPLEMENTATION
A PROPRIETARY, STEP-BY-STEP, ACCUBALANCE IMPLEMENTATION SYSTEM THAT
FACILITATES THE ON-TIME, ON-SPECIFICATION, ON-BUDGET INSTALLATION
OF THE
ENTIRE PROGRAM AT ALL THE AGENT'S LOCATIONS.
System Phase # 1 - Agent's Line Management Agreement
ASSIX AND THE AGENT'S executive management mutually agree on the
financial profitability goals and
the progression of their accomplishment though a series of
escalating "objectives" expressed as percentages
of tires receiving the AccuBalance process in relation to the total
number of passenger and appropriate light
truck tires that are sold and installed by the Agent.
The implementation time schedule is agreed in this step and the
number of programs to be installed are
estimated based on the number of tires sold in each of the Agent's
retail locations.
[a] The financial goals and objectives are cascaded down through
the Agent's operational management
through a letter from the Executive Management level of the Agent.
[b] The terms and conditions of the agreement between Assix and the
Agent are summarized in a letter that
cascades throughout the Agent's management hierarchy and is SIGNED
BY THE APPROPRIATE
MANAGEMENT LEVELS OF BOTH THE AGENT AND ASSIX. This letter serves
as one of support for
the entire program as agreed by Assix and the Agent.
In addition, these letters reinforce the key points of the Agent's
and Assix's agreement and endorses the P3
manual, as well as the proper methods of selling and performing the
proprietary, DART - Dealer
Action Response Trac and the information contained in the manual
containing the complete information
about the AccuBalance program is provided to the Agent's
operational locations at various times, as
approached.
This information is covered in detail and in person by an
authorized, Assix management individual with each
level of the Agent's LINE MANAGEMENT from the senior executive
management level through to the
operating management at the retail unit's level.
PROGRAM ELEMENT # 3 - ACCOUNT MANAGERS
ACCOUNT MANAGERS
Account Managers are dedicated Assix merchandising support
professionals. They are responsible
for the successful implementation and continuance of the
AccuBalance program in their assigned
territory. Their duties include, but are not limited to:
1.) Conducting additional training of new retail unit personnel
while reinforcing any previous
training performed during initial implementation and follow up for
the life of the account.
Sell the TOTAL Job. Including AccuBalance.
2.) Ensuring that the AccuBalance sales techniques are being used
on a daily basis while selling
AccuBalance in the retail unit. This is accomplished through visits
by the Account Manager with
the retail unit manager. An Account Manager will be provided
direction as to where to spend his
time during a month based on the relative profitability performance
of the assigned retail units in
his territory.
3.) Working directly with the retail unit management, sales and
service personnel in responding to
a fall in the AccuBalance percentages with positive corrective
measures.
4.) Monitoring the quality and placement of signage and quantity
of literature present within the
retail environment.
5.) Building a positive and professional relationship with all
retail unit personnel.
6.) Developing promotional programs from time to time that will
positively influence the success
of the AccuBalance program in that retail unit.
7.) Briefing the retail unit manager on the degree of sales
personnel understanding and compliance
with the AccuBalance program.
PROGRAM ELEMENT # 4 -- AccuBalance Service
The AccuBalance service consists of 5 steps when a new tire is
purchased and 4 steps when balancing a
tire that is not being replaced.
Step # 1 - IF THE TIRE IS TO BE REPLACED: (Replacement tires)
Demount the old tire and mount the high-quality, replacement tire.
Using a machine called a Tire Changer, used tires are removed from
the rims.
a. The wheel covers and valve cores are removed carefully to
prevent damage - an authorized wheel cover
puller is used (other tools, such as a screwdrivers, are not
acceptable).
b. The lug nuts are carefully removed and placed in the wheel cover
or other convenient location where they
will not be lost or misplaced. Upon removal of the lug nuts, they
and the wheel studs are carefully
examined for damage.
All existing balance weights are removed prior to placing the old
wheel on the Tire Changer or on the
Service Property. If the tire is not replaced, the process
proceeds immediately to the Service Property
Combi.
The old wheels are mounted on the Tire Changer in a COMPLETELY
DEFLATED state.
c. The tire and rim assembly are separated in exact accordance with
the operating instructions of the
manufacturer of the Tire Changer. In the event that this is not
known, the training manuals of the Agent
and/or Assix are followed. Assix reserves the right to inspect
Agent manuals and make recommendations as
to the proper procedures. However, as a minimum the instructions
should contain the following:
1. The wheel must be centered on the cone and securely
tightened, BY HAND. If the stem is being
replaced, the old stem should be removed using an authorized value
stem removing tool.
2. In no event should the bead breaker shoe be allowed to ride
up over the edge of the rim.
3. The beads of the tire and the old, used and potentially
stressed rim should be well lubricated to
prevent further damage to the rim.
4. The operator should keep fingers, hands and forearms clear
of the forward travel of the
mount/demount tool, while the beads are being demounted. If the
tire has a tube, the mount/demount tool
should be well lubricated, with lubricant that meets Assix
specifications and the tube should be removed
prior to demounting the lower bead.
d. The new high-quality replacement tire is mounted on the old,
potentially stressed rim.
1. The rim is wire brushed to remove excess rubber particles
and/or scraps to insure a proper seal.
2. The new, valve stem and the beads of the tire are properly
lubricated using an Assix authorized
lubricant and stem tool.
3. The operator should keep fingers, hands and forearms clear
of the forward travel of the
mount/demount tool, while the beads are being mounted.
4. If the tire requires a tube, the tube must be inserted
before the top bead is put into place.
5. The tire beads should be properly seated, beginning to hold
air. At this point, the cone should be
loosened one full turn and the tire should be filled with small
amounts of air administered in short bursts
until the beads seat.
6. At all times while seating the beads of the tire, no part
of the operators body should be over the
tire.
7. Inflate the tire.. Never exceed 40 PSI, If the beads are
not properly seated by the time the
machine's air pressure reaches 40 PSI, the operator has been
unsuccessful in following the proper operating
procedures and the tire should be deflated, re-lubricated and
inflated again.
8. The machine's indicated pressure should be carefully
checked using an authorized ASSIX hand
gauge to assure that the tire is inflated to 35 p.s.i. This
prepares the tire for the next step of the 5-step
COMPLETE wheel balance.
STEP # 2 - Administering the Tire Matching Technology using the
service property.
The Combi is a patented machine that applies hydraulic pressure to
the rotating, inflated tire to simulate
actual driving conditions. The Combi detects the amount of flex
variation in the complete wheel assembly,
including the potentially stressed rims, and, if greater than the
manufacturers specifications, adjusts the
wheel assembly to conform to the following specifications:
Adherence to these specifications results in a more uniform tire
footprint while the car is being driven on the
road.
SYS-7000 COMBINATION MATCHER/BALANCER OPERATING
PROCEDURE
1. Remove the tire/wheel assembly from the car. Mark the wheel
position (i.e., RF, LF, RR, LR)
on the serial side of the tire.
2. Clean stones and loose debris from the tire tread.
3. Check inflation pressure in the tire and adjust to 35 P.S.I.
4. Mount the tire/wheel assembly onto the shaft of the Combi as
detailed in coning instructions.
a. Place spring on tire shaft.
b. Select proper size cone for rim center hole and place on
shaft.
c. Place tire & rim assembly on Combi shaft (lug bolt side out).
d. Place speed nut on shaft and tighten.
e. Front coning is required on some wheel styles. If so,
eliminate spring on shaft.
5. Open buffer cover. Start the machine by placing your finger on
"system start" (Combi only)
button on the panel. Very little pressure is required to operate
the controls. Begin in the "fine"
cycle. Combi will automatically choose the appropriate cycle.
6. Align the roller assembly by unlocking lower black knob and
slide assembly to center of tire.
7. Align rasps to cover as much of the outside shoulder of the
tire as possible. Be sure that both
rasps contact the tire at the same time. Secure them in position.
8. Adjust the distance between the face of the rasps and the tread
surface to 1/8" preferably, and a
maximum of 1/4" by rotating the knurled knob of the roller control
assembly. Rotating the control
knob counterclockwise decreases the distance--clockwise increases
it.
Never buff the full circumference of the tire. Rasps must have
clearance to tire, except when
actually buffing selected portions of the tire.
9. The logic control will then decide if the assembly is good,
requires buffing, or must be
rejected.If the decision is "good" or "reject", the appropriate
light comes on, and the machine shuts
down (stops rasp and tire rotation and unloads tire). If the
decision is "buff" the "match" light
comes on and the Combi will determine the cycle automatically.
9A. A slight deviation in the lateral overlap of the rasp may be
necessary to compensate for
variables in the tire tread surface to maintain a uniform distance
of the rasps to the tread.
10. The rasps will advance towards the tire whenever the force
variation signal exceeds the "low"
value (20 in the "Auto" buff cycle) after the delay, allowing that
portion of the tire circumference to
travel from the drum to the rasps. The rasps will retract when the
signal drops below the low,
value, again with the delay.
***NOTE*** If buffing is uneven, open the lid, and re-adjust. It
is not necessary to stop the
machine to readjust the rasps, simply open the lid and adjust when
rotation stops.
***WARNING*** DO NOT ATTEMPT TO STOP THE RASPS IN ANY MANNER-THEY
WILL STOP WITHIN A FEW SECONDS.
11. The rasps should make smooth, even buffs, without pounding or
bouncing against the tire.
a. If the rasps pound on the tire, causing digging or
cupping, they are probably too far
away from the tire in the retracted position. Lift the lid, and
adjust the small roller so that the rasps
are closer to (but not touching) the tire in the retracted
position.
b. If the rasps bounce very lightly in a "hit and miss"
manner on the tire, the "buff"
pressure (air pressure, actuating the advance/retract mechanism) is
too low or too high.. Raise
pressure until bouncing ceases.
12. The buffing will continue until the low value (20) is achieved
or 3 minutes have elapsed,
whichever occurs first. If the low value is achieved, the "good"
light will come on. Exceeding the
time limit indicates the tire did not respond adequately to the
buffing. Check for proper mounting
of the tire and accurate positioning of rasps.
NOTE***
The Combi is automatic, and you should not have to stand over it
while it completes the cycle.
However, occasionally you should look to be sure that your settings
are correct. Remember, the
machine will only do what you have instructed it to.
STEP # 4 - APPLYING MANUFACTURER'S RECOMMENDED AIR PRESSURE USING
THE
OWNER'S MANUAL OR BENNENT GARFIELD'S TIRE BOOK.
STEP # 5 - MOUNTING THE ENTIRE ASSEMBLY ON THE CAR WITH UNIFORM LUG
TIGHTNESS AND HAND TORQUING THE LUG NUTS TO THE MANUFACTURER'S
SPECIFICATIONS.
Proper procedures with reinstalling the wheels on the vehicle can
eliminate wheel rattles. Over tightening the
lug nuts can warp brake rotors, causing an unsafe condition when
the brakes are applied. Wheels may
become warped and mounting holes have become deformed or cracked
because of incorrect tightening
pressure.
All tightening should be begun by hand, using a torque-limiting
impact tool adjusted to the low setting and
just making the lug nuts "snug". The proper tightening pattern is
1-3-5-2-4 for a five bolt configuration and
1-3-4-2 for a four bolt configuration. Following this, the tire
should be thoroughly cleaned of any
manufacturer installed coating on the whitewall of the tires. The
wheel cover is then replaced using a rubber
hammer.
THESE FIVE STEPS COMPLETE THE ACCUBALANCE PROCESS AND ASSURE
THE CONSUMER OF THE TOTAL RIDE VALUE ASSOCIATED WITH THE NEW
TIRES, ALIGNMENT, STRUTS OR OTHER RIDE-RELATED SERVICE WORK.
PROGRAM ELEMENT # 5 - MONITORING AND MEASURING
SPECIFIC
CONCERN: Assix first identifies actual "opportunity" AGENT sites
and then directs the
manpower to the place where it will be of maximum benefit to the
Agent.
Physical visits by Assix field personnel are replaced by telephonic
contact and
status reviews.
OBJECTIVES: To develop a tracking/trending system to promptly
direct Assix field personnel
to statistically designated "opportunity" AGENT sites.
To analyze and report usage statistics to all AGENT'S on a
continuing periodic
basis.
To analyze and report usage statistics to all levels of Assix
management
personnel on a continuing periodic basis.
To make our AGENTS the most effective and profitable
marketeers of ride-
related products and services within the automobile aftermarket.
To achieve complete consumer satisfaction for our ride-related
products and
services.
C.A.R.D.S./TRACS PROGRAM
(Consistent, Achievement Reporting Discipline System -.
Tracking Recording Accounting Control Systems)
TRAC$ is on AGENT performance control, data collection,
profitability analysis reporting
system. The system's purpose is three-fold:
1. Collect, analyze and provide AccuBalance performance and trend
information to Assix's
current AGENT'S on a monthly basis;
2. Track and analyze incoming performance data on Assix's initial
implementations on a
weekly basis;
3. Provide detail and summary data/analysis to Assix personnel so
they can assist their
assigned AGENT'S in reaching their agreed objectives.
The system is primarily designed to spotlight under performing
stores but also highlights
stores that are well ahead of quota. The system is directed at
units made up of stores, districts,
regions and also on the national level.
PROGRAM ELEMENT # 6 - SCOPE OF PREVENTATIVE AND REMEDIAL
MAINTENANCE
SERVICE
ASSIX maintains all the COMBI System 7000 service property through
a field service
organization consisting of Service Property Specialists, a 1-800
support telephone network and a
dispatching system. Service property service is provided five days
per week; Monday through
Friday. Repairs are made on a "best efforts" basis generally not
longer than forty-eight (48) hours.
Response time begins when the call is received at by ASSIX Central
and the Service Property
Specialist is contacted. It terminates when the problem has been
resolved.
All incoming calls are received by the ASSIX Central dispatch team.
An experienced Technical
Support Representative is on hand to attempt to resolve simple
problems over the phone directly
with the retail unit personnel. This avoids unnecessary delays.
All calls received during a month
are summarized and evaluated to determine areas that may need
improvement.
ESCALATION PROCEDURE
Should any problem not be resolved within forty-eight (48) hours,
a set of escalation procedures
take effect:
If a problem is not resolved within forty-eight (48) hours, the
ASSIX Regional Manager is notified
by ASSIX Central. The ASSIX Regional Manager begins to assist in
taking corrective action.
Should the problem not be resolved within thirty-six (36) hours,
the National Service Manager is
notified and takes appropriate action as needed. If the problem is
not corrected within forty-eight
(48) hours, the National Operations Manager is notified. At that
time, the National Operations
Manager will determine the time remaining to resolve the problems
will notify the appropriate
Agent management with an estimated time of resolution. At this
point, depending upon the
severity of the problem, it may become necessary to ship new
service property as a major unit
replacement (MUR) to the retail unit. This decision will be made
by the President of ASSIX, Inc.
SERVICE PROPERTY SPECIALIST
Service Property Specialists are trained specifically to maintain
and repair the COMBI System
7000 service property. They are responsible for the entire COMBI
System 7000 population in an
assigned area. Their responsibilities include but are not limited
to:
1.) Performing all repairs on a COMBI System 7000 within a
forty-eight (48) hour period of
time. Communicate with ASSIX Central when a service property will
not be repaired within a
forty-eight (48) hour period of time. (refer to Escalation
Procedure)
2.) Maintain a compliment of spare parts in his van.
3.) Provide additional training in the use of the COMBI System
7000 to any new employee in
the back shop.
4.) Complete call reports on all repairs and visits made to the
retail unit and obtain Agent
Management's written acknowledgement of the performance of such
service.
5.) Build a positive and professional relationship with all retail
unit personnel.
6.) Read, study and understand all aspects of the COMBI System
7000 and attend regularly
scheduled Service Property training classes conducted by ASSIX
International, Inc. at its locations
THE AGENCY RELATIONSHIP
ASSIX Responsibilities
1. ASSIX will supply each location with the AccuBalance Service
Property in the proper
numbers to adequately deliver the COMPLETE wheel balance. This
will be accomplished
without the Agent making any capital investment in the service
property.
2. ASSIX will install the AccuBalance Service Property when the
Agent has located air supply
and power outlet within five feet of recommended service property
location.
3. ASSIX will spend time in each retail unit location to train
Agent personnel on the operation
and sales of the AccuBalance Program. This is done by providing an
AccuBalance for each
employee's car, holding retail unit training meetings and working
in the retail unit with all
sales and service personnel for up to 4 days or until Agent is
satisfied every auto center
employee is trained and the program has been installed to meet the
Agent's and Assix's
objectives.
4. ASSIX will furnish Agent with materials it deems necessary to
support the sale of the
AccuBalance COMPLETE WHEEL BALANCE.
5. ASSIX will service the COMBI System 7000 service property,
including all parts and
correct any problems caused by normal wear, through its
coordinated service network.
6. ASSIX will retrain new retail unit personnel periodically or
as needed to increase
AccuBalance sales to the targeted levels. ASSIX will check
periodically on the Agent's
service property operating procedures.
7. ASSIX will provide Agent with an analysis of the AccuBalance
profit potential within each
of their retail units on a monthly basis; during the initial
implementation, this will be done
weekly.
8. ASSIX will continue the day-to-day follow-up until the
mutually agreed, target financial
objective for AccuBalance-to-tires-sold is reached. Following this
level of achievement,
follow-up will be on an as-needed basis.
The benefits of this program will mean increased revenue and
profits, provide a
program with no capital outlay, and give the consumer a
tangible added value
service.
Agent's Responsibilities
1. Provide a letter from Agent senior management to operating
line management of the Agent's
retail operations and management indicating support of the
implementation of the program.
2. Provide a letter of introduction from Agent, to
Regional/District Managers, and other
management, indicating the establishment of goals and objectives
for the AccuBalance brand
of the COMPLETE WHEEL BALANCE program implementation.
3. Provide a designated management person with whom ASSIX can
coordinate the program; this
individual will have the authority to implement actions essential
to the program's success.
4. Provide ASSIX the performance statistics for the AccuBalance
brand of the COMPLETE
WHEEL BALANCE program, including number of new tires sold, number
of standard
balances and number of AccuBalance performed (Unless otherwise
agreed by Assix and
Agent), so ASSIX and Agent can monitor sales results. Also,
monthly reports will be used
for any appropriate fee billings per tire.
5. Each retail unit will install the proper electrical and air
outlets, prior to AccuBalance being
installed.
6. Require all retail unit personnel to attend a training meeting
on AccuBalance in each retail
unit location. Management attendance is required in all meetings.
The meeting size will be
such that all personnel will have the ability to ask questions, and
receive full information
concerning the program. A series of special sessions will be held
for all persons involved in
the actual selling of the AccuBalance service.
7. All retail unit personnel will receive the AccuBalance brand
of the COMPLETE WHEEL
BALANCE during the initial installation period, at no cost to them
or to Assix..
8. Use of AccuBalance identification materials as supplied and
directed by ASSIX.
9. Facilitate installation of the AccuBalance COMBI System 7000
10. Agent shall clearly differentiate between a traditional,
standard, basic, old style wheel balance
and the AccuBalance COMPLETE wheel balance. The warranty for the
AccuBalance shall
be at least 4 times as attractive to the consumer as the warrantee
for the traditional, standard,
basic, old style wheel balance. This means that the warrantee for
the "old style" will not
exceed 3,000 miles and the warrantee for the AccuBalance COMPLETE
wheel balance
would be between 12,000 and, preferably, 15,000 miles. In no event
shall the warrantee for
the AccuBalance be less than one year. Eliminate current
"lifetime balance" and all forms of
"life of the tire" and "balance at will" warrantees on the standard
type balance.*
11. Instruct all tire sales personnel to offer AccuBalance on each
selling opportunity, including
ride-related services such as alignment, strut sales, etc. in
accordance with the selling
procedures (CORVI) as agreed by Agent and ASSIX.
12. ASSIX will be notified by Agent when new personnel are hired
so additional training can be
provided by ASSIX.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent, to
revise this Exhibit.
* for trade old style, etc. balances
This concludes Exhibit "A"
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
EXHIBIT "B"
SERVICE PROPERTY
1. Combination Matcher/Balance System
2. Quick Lock Adapter
3. Rasp T. Handle (1)
4. #6979-00 Backplated/sleeve (1)
5. #6080-00 Spring Backplate (1)
6. #6081-00 Cone #1 (1)
7. #6082-00 Cone #2 (1)
8. #6083-00 Cone #3 (1)
9. #6087-00 Top Plate (1)
10. #6090-00 Spacer (Large) (1)
11. #6091-00 Spacer (Small) (1)
12. #6092-00 Wing Nut (1)
13. Misc. Mounting Plates/Bolts (4)
14. Miscellaneous advertising materials that Assix considers
necessary as
printed material, signs, banners, etc
Assix reserves the right, upon provision of thirty (30) days
advance written
notice to Agent, to revise this Exhibit..
EXHIBIT C
COMPENSATION DUE TO AGENT
GROSS REVENUE FROM PROGRAM LESS ASSIX FEES SHOWN BELOW AS
DUE AND PAYABLE OF THE SPECIFIC SCHEDULE OF INVOICING AS
SET FORTH.
1. Initial Fee per Program $300.00
The above fee will be invoiced upon completion of
implementation of the program at the
Agent's location. Each program includes items as described in
Exhibit A. In the event that
more than one program is installed at a single, retail location,
Agent will be billed only one
initial fee per month until the total number of initial fees due
for such location are billed.
2. Installation of Service Property (per set of Service
Property) $558.00
3. Usage Fee Per AccuBalance Sold to 115% AB to TS $ .65
"Usage fee" will apply to any revenued AccuBalance, upgrades
inclusive.
The usage fee per AccuBalance sold fee will be invoiced upon
completion of training and
installation.
Agent shall pay usage fees only on tires sold upon which an
AccuBalance fee was received
by Agent, up to 115% AB to TS. Agent shall not be responsible
for a usage fee per tire on
any standard balance done on Agent's other tire balancing equipment
nor on "no need-no
charge" balance checks done on the Assix equipment, unless revenue
to Agent results.
The usage fee will be invoiced on approximately the twentieth
day of the month, based on
tires serviced during the prior month. Agents will submit to Assix
Central on the last
working day of each month the number of tires serviced, and
AccuBalance performed with
revenue collected under the Program in such month. In the event
this information is not
received by Assix within ten (10) days of the end of the month, the
usage fees due shall be
estimated by Assix and invoiced accordingly.
4. Assix may increase the above fees to a maximum of 5% (Initial
per program and Usage Fee
per tire serviced), upon thirty (30) days prior written notice to
Agent following the
anniversary date. Any increase will apply on the effective date as
specified in such notice.
Invoices shall be due in full upon receipt.
FOLLOWING THE AGENT BEING CURRENT IN AMOUNTS DUE TO
ASSIX, the balance of all revenues generated by Agent following
the
payment of all amounts due Assix shall be retained by Agent for its
own
account as compensation under this agreement.
Assix reserves the right, upon provision of thirty (30) days
advance written notice to Agent,
to revise this Exhibit.
<S> <C>
</TABLE>
Lease for First Floor Space
WAREHOUSE SPACE LEASE AGREEMENT
THIS WAREHOUSE SPACE LEASE AGREEMENT ("Lease") is made as of
December 1, 1994, by and between JACKSONVILLE CENTER, INC., a
Florida corporation, whose address is 808 N. Rome Avenue, Tampa,
Florida 33606 ("Landlord"), and LANEY & DUKE TERMINAL WAREHOUSE
COMPANY, INC., a Florida corporation, whose address is 1560 Jessie
Street, Jacksonville, Florida 32218 ("Tenant").
W I T N E S S E T H:
ARTICLE 1.
LEASED PREMISES
The Landlord hereby leases and rents unto the Tenant and the
Tenant hereby hires and takes from the Landlord the following
described property ("Leased Premises"):
Approximately 596,676 square feet of space designated as
Sections 1.2, 1.3, 1.4, 1.5, 1.6 and 1.7, and
constituting a portion of a building (the "Building")
included in facility known as One Imeson Center (the
"Property"), located at One Imeson Park Boulevard,
Building 100, Jacksonville, Florida 32210. The legal
description of the Property and a Site Plan depicting the
location of the Leased Premises are attached hereto as
Exhibit A. During the Term (as herein defined), Tenant
shall also be entitled to (i) the exclusive use of that
portion of the parking lot located on the Property
labeled on the Site Plan as "Tenant Parking," and (ii)
the non-exclusive use, in conjunction with Landlord and
other tenants of the Property, of the access drive shown
on the Site Plan.
ARTICLE 2.
TERM
Section 2.1 Base Term. The base term of this Lease shall be
thirteen (13) months commencing on December 1, 1994, and ending on
December 31, 1995, unless renewed or extended as provided herein,
on the terms and conditions as set forth herein.
Section 2.2 Options to Renew. Landlord shall provide Tenant
with one (1) three (3) month option to renew this Lease, provided
Tenant is not in default under this Lease and Tenant gives Landlord
one hundred twenty (120) days' prior written notice of Tenant's
intent to exercise the renewal option. The base rent will be the
same as the base term. The base term and, if Tenant's renewal
option is properly and timely exercised, the renewal term are
together referred to herein as the "Term".
ARTICLE 3.
RENT AND OTHER CHARGES
Section 3.1 Base Rent. Tenant hereby covenants and agrees to
pay Base Rent of $111,876.75 per month for each and every month
during the Term payable in advance commencing on December 1, 1994
and continuing on the first day of each and every month during the
Term in lawful United States currency, together with any and all
sales or use taxes levied upon the use or occupancy of the Leased
Premises and any rent or other charges payable hereunder. Base
Rent shall be paid without set off or deduction to Landlord at its
address above or such other address as Landlord directs in writing.
To defray the additional expenses involved in collecting and
handling delinquent payments, if any, Base Rent or other payment
due under this Lease is not received by Landlord within ten (10)
days of the due date of such payment, Tenant shall pay in addition
to such payment a late charge equal to 5% of the payment which is
past due. Tenant acknowledges that this charge is made to
compensate Landlord for additional costs incurred by Landlord as a
result of Tenant's failure to pay when due, and is not a payment
for the extension of the rent due date. Landlord's failure to
insist upon the payment of the late charge shall not be deemed a
waiver of Landlord's right to collect such late charge for any
future delinquencies.
Section 3.2 Additional Rent. All charges payable by Tenant
under the terms of this Lease other than Base Rent are called
"Additional Rent." Unless this Lease provides otherwise, all
Additional Rent shall be paid with the next monthly installment of
Base Rent. The term "rent" shall mean Base Rent and Additional
Rent.
Section 3.3 Operating Expenses. In addition to Base Rent
payable under paragraph 3.1 above, Tenant agrees to pay as
Additional Rent its pro-rata share of the "Operating Expenses"
(hereinafter defined) for the Building and, to the extent
applicable, to the Property. The pro-rata share of Operating
Expenses ("Share") to be paid by Tenant shall be 34.79% (596,676
divided by 1,715,000) of the Operating Expenses. Tenant's Share of
Operating Expenses shall include no less than $.40 per square foot
per year (which amount consists of $.23 per square foot for Real
Property Taxes [as herein defined], $.07 per square foot for
insurance and $.10 per square foot for common area maintenance
charges) and an additional amount for Tenant's use of the telephone
system in the Building. Landlord shall deliver monthly invoices to
Tenant for Tenant's Share of Operating Expenses, and such invoices
shall be due and payable within ten (10) days of receipt. From
time to time during the Term, Landlord shall send a statement of
Operating Expenses to Tenant for any portion of the Term that has
expired providing in reasonable detail a statement of all Operating
Expenses incurred in the operation of the Property along with the
amount representing Tenant's Share thereof. Tenant shall be given
a credit against its Share of future Operating Expenses payable for
any overpayment of Operating Expense that have been paid up to the
time of said statement. If Tenant has underpaid, then the balance
due shall be paid to Landlord by Tenant within thirty (30) days of
the date of said statement unless the statement is rendered at the
end of the Term in which case any overage due the Landlord will be
paid by check at the time the Leased Premises are delivered to
Landlord by Tenant. Concurrent with the invoice described above,
Landlord shall also provide an estimate of the Operating Expenses
and a statement of the estimated monthly Operating Expense payable
by Tenant as additional rent under the terms of this Lease.
Tenant's liability for its Share of Operating Expenses shall
commence on the date of Tenant's actual occupancy of the Leased
Premises, without regard to the date the payment of Base Rent
commences.
"Operating Expenses" shall mean all expenses incurred by
Landlord, including but not limited to, Real Property Taxes (as
hereinafter defined), Insurance Premiums (as hereinafter defined),
Security Services (as hereinafter defined), compliance with
governmental and quasi-governmental requirements, lighting,
landscaping, an allowance for Landlord's overhead costs, and the
cost of all water and sewer, electrical and all other utilities
charges that are not separately metered to tenants. However,
"Operating Expenses" shall exclude all expenses incurred by
Landlord in performance of its obligations under Section 5.3 below.
Furthermore, the term "Operating Expenses" does not include the
cost of any capital improvement to the Building or the Property
other than the reasonable amortized cost of capital improvements
which result in the reduction of Operating Expenses. Moreover, the
term "Operating Expenses" shall not include repairs, restoration or
other work occasioned by fire, windstorm, or other casualty, income
and franchise taxes of Landlord, expenses incurred in leasing to or
procuring of tenants, leasing commissions, expenses for the
renovation of space for new tenants, interest or principal on any
mortgage or indebtedness of Landlord, or depreciation allowance or
expense.
If the nature of Tenant's business within the Leased Premises
is such that additional costs are incurred by Landlord for
insurance, cleaning, or other Operating Expenses, Tenant agrees to
pay as additional rent to Landlord on demand the amount of such
additional costs.
Section 3.4 Taxes.
A. Definition of "Real Property Taxes". "Real Property
Taxes" means: (i) any fee, license fee, license tax, business
license fee, commercial rental tax, levy, charge, assessment
(including all special assessments), penalty or tax imposed by any
taxing authority against the Building, the Property or land upon
which the Property is located; (ii) any tax on the Landlord's
right to receive, or the receipt of, rent or income from the
Property or against Landlord's business of leasing the Property;
(iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property
by any governmental agency; and (iv) any charge or fee replacing
any tax previously included within the definition of real property
tax. "Real Property Taxes" does not, however, include Landlord's
federal or state income, franchise, inheritance or estate taxes.
B. Joint Assessment. If the Property is not separately
assessed, Tenant's Share of Real Property Taxes payable shall be
determined by Landlord from the assessor's worksheets or other
reasonably available information.
C. Personal Property Taxes.
(i) Tenant shall pay all taxes charged against
trade fixtures, furnishings, equipment or any other personal
property belonging to Tenant. Tenant shall use its best efforts to
have personal property taxes assessed separately from the Property.
(ii) If any of Tenant's personal property is
taxed with the Property, Tenant shall pay Landlord the taxes on the
personal property within fifteen (15) days after Tenant receives a
written statement from Landlord for such personal property taxes.
Section 3.5 Utilities. Tenant shall pay, directly to the
appropriate supplier, the cost of all telephone and refuse disposal
services supplied to the Leased Premises (other than the charge for
use of the existing telephone system in the Building as set forth
in Section 3.3). With respect to all other services or utilities,
Landlord shall make a reasonable determination of Tenant's share of
the cost of such utilities and services and Tenant shall pay such
share to Landlord.
Section 3.6 Insurance.
A. Liability Insurance. During the Term, Tenant shall
maintain a policy of comprehensive public liability insurance with
an insurer licensed in Florida and rated "A" or better by A. M.
Best and naming Landlord as an additional insured, at Tenant's sole
cost and expense, insuring Landlord against liability arising out
of the ownership, use, occupancy or maintenance of the Leased
Premises and Property and containing a cross-liability endorsement
and a severability of interests clause. The initial amount of such
insurance shall be at least $5,000,000 per occurrence and
$5,000,000 aggregate coverage. Such coverage requirement does not
constitute any recommendation by Landlord as to appropriate limits
of coverage, but is merely Landlord's minimum requirement.
B. Hazard Insurance. During the Term, Landlord shall
maintain policies of insurance covering loss of or damage to the
Property in such amount or percentage of replacement value as
Landlord or its insurance advisor deems reasonable in relation to
the age, location, type of construction and physical conditions of
the Property and the availability of such insurance at reasonable
rates. Tenant shall, at Tenant's sole cost and expense, maintain
insurance coverage for Tenant's fixtures, equipment or building
improvements installed by Tenant in or on the Property for the full
replacement value thereof. Tenant shall not do or permit to be
done anything which invalidates any such insurance policies.
C. Payment of Premiums; Insurance Policies. As part of
Operating Expenses, as described in Section 3.3 of this Lease,
Tenant shall pay its share of "Insurance Premiums" for the
insurance policies maintained by Landlord on the Building or on the
Property, as the case may be. Tenant shall pay for any increase in
the Insurance Premiums caused by Tenant's acts, omissions, use or
occupancy of the Property.
D. Workers' Compensation. Tenant shall carry workers'
compensation coverage in the minimum required statutory amount
insuring all eligible employees of Tenant on the Property.
E. Tenant's Insurance Policies. The amount of any
insurance coverage required to be carried by Tenant hereunder shall
not limit Tenant's liability nor relieve Tenant of any obligation
hereunder. Landlord shall be listed as additional insured and/or
loss payee on each such policy, as appropriate. Each policy shall
contain a provision which prohibits cancellation or modification of
the policy except upon thirty (30) days' prior written notice to
Landlord. Tenant shall deliver a copy of each such policy or
certificate (or a renewal thereof) to Landlord prior to the
Commencement Date and shall deliver to Landlord a copy of a
replacement policy or certificate thirty (30) days prior to the
expiration of any policy during the Term. If Tenant fails to
maintain such policy, Landlord may elect to maintain such insurance
at Tenant's expense, to be paid by Tenant upon presentation of
Landlord's bill therefor.
Section 3.7 Security. Landlord shall contract with an
independent contractor to provide security services for the
Property (the "Security Services"). Such security services shall
be for 24 hours per day or such lesser period as Landlord and
Tenant may agree and shall include appropriate operation by the
independent contractor of the guard shack located on the Property.
Tenant agrees and acknowledges that Landlord shall have no
liability for any act or negligence of such independent contractor
and that Landlord has agreed to enter into such contract for
Security Services as an accommodation to Tenant. Notwithstanding
Tenant's Share of Operating Expenses, as defined in Section 3.3,
Tenant shall pay as Additional Rent eighty percent (80%) of the
cost of the Security Services, or in the event that Landlord enters
into one or more other leases with third parties for portions of
the Property, such lesser proportion of the cost of the Security
Services as Landlord and Tenant may agree based on the relative
benefit from the Security Services derived by Landlord, Tenant and
other third-party tenants of the Property.
ARTICLE 4.
USE OF PROPERTY
Section 4.1 Permitted Uses. Tenant may use the Property only
for the following Permitted Use so long as such use is in
compliance with all applicable governmental laws, ordinances, rules
and regulations: warehouse operations and distribution.
Section 4.2 Manner of Use. Tenant shall not cause or permit
the Leased Premises, Building or Property to be used in any way
which constitutes a violation of any law, ordinance, or
governmental regulation or order, or which annoys or interferes
with the rights of tenants of the development of which the Leased
Premises, Building and Property are a part, or which constitutes a
nuisance or waste. Tenant shall obtain and pay for all permits
required for Tenant's occupancy of the Leased Premises, Building
and Property for the Permitted Use and shall promptly take all
actions necessary to comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements regulating
the use by Tenant of the Leased Premises, Building and Property,
including, without limitation, the Occupational Safety and Health
Act and the Americans with Disabilities Act of 1990.
Section 4.3 Hazardous Substances. Tenant agrees not to
generate, store, use, treat or dispose of, nor to allow, suffer or
permit the generation, storage, use treatment or disposal of, any
"Hazardous Waste" or "Hazardous Substance" (as those terms are
defined in Resource Conversation and Recovery Act, 42 U.S.C.
Section 6901 et seq., as amended ("RCRA") or the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq., as amended ("CERCLA"), and any rules and
regulations now or hereafter promulgated under either of such acts)
or any pollutant or other contaminant on, in, from or about the
Leased Premises, Building or the Property, except in strict
accordance with applicable laws and regulations and following
notice of same to Landlord. Tenant shall and hereby does indemnify
and hold Landlord harmless from and against any and all loss,
damages, expenses, fees, claims, costs and liabilities (including,
but not limited to, attorney's fee and costs of litigation) arising
out of or in any manner related to the "release" or "threatened
release" of, and for any clean-up responsibility imposed upon owner
under any federal, state or local law, ordinance, rule or
regulations now or hereafter in effect, with respect to, any
"Hazardous Waste" or "Hazardous Substance", or any pollutant, or
other contaminant or environmental condition on, in, from or about
the Leased Premises, Building or the Property of any portion
thereof, which release or threatened release or pollutant or
environmental condition arises out of or is in any manner related
to use or occupancy of the Leased Premises, Building or Property by
Tenant, its agents or lessees.
Section 4.4 Signs and Auctions. Tenant shall not place any
signs upon the outside walls or roof of the Leased Premises or
Building except with the written consent of the Landlord. Any and
all approved signs placed on or within the Leased Premises,
Building or Property by Tenant shall be maintained in compliance
with the rules and regulations governing such signs as promulgated
by Landlord from time to time, and the Tenant shall be responsible
to Landlord for any damage caused by installation, use, or
maintenance of said signs. Tenant agrees upon removal of said
signs to repair all damage incident to such removal. Tenant shall
not conduct or permit any auctions or sheriff's sales at the Leased
Premises, Building or Property.
Section 4.5 Indemnity. Tenant shall indemnify Landlord
against and hold Landlord harmless from any and all costs, claims,
actions, damages or liability including expenses in connection with
loss of life, personal injury loss or damage including property
damage, arising from: (a) Tenant's use of the Leased Premises,
Building or Property; (b) the conduct of Tenant's business or
anything else done or permitted by Tenant to be done in or about
the Leased Premises, Building or Property; (c) any breach or
default in the performance of Tenant's obligations under this
Lease; (d) any misrepresentation or breach of warranty by Tenant
under this Lease; or (e) other acts or omissions of Tenant. Tenant
shall defend Landlord against any such cost, claim, action, damage
or liability at Tenant's expense with counsel reasonably acceptable
to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in
connection with any such claim.
Section 4.6 Landlord's Access. Landlord or its agents may
enter the Leased Premises at all reasonable times to show the
Leased Premises to potential buyers, investors or tenants or other
parties or for any other purpose Landlord deems necessary.
Landlord shall give Tenant prior notice of such entry, except in
the case of an emergency. Landlord may place customary "For Sale"
or "For Lease" signs on the Leased Premises, Building or Property
as Landlord deems necessary.
Section 4.7 Quiet Possession. If Tenant pays the rent and
complies with all other terms of this Lease, Tenant may occupy and
enjoy the Leased Premises for the full Term, subject to the
provisions of this Lease.
Section 4.8 Rules and Regulations. Tenant shall also comply
with Landlord's reasonable rules and regulations respecting the
management, care and safety of the Property, including parking
areas, landscaped areas, walkways, hallways and other facilities
provided for the common use and convenience of other occupants.
ARTICLE 5.
CONDITION OF LEASED PREMISES; MAINTENANCE,
REPAIRS AND ALTERATIONS
Section 5.1 Acceptance of Leased Premises. Tenant
acknowledges that it has thoroughly inspected the Leased Premises
and Tenant hereby accepts the Leased Premises in their existing
condition with all faults, subject to the performance by Landlord
of the obligations described on Exhibit B attached hereto and made
a part hereof and Landlord's obligations under Section 5.3.
Landlord makes no warranties or representations whatsoever as to
the fitness of the Leased Premises for a particular purpose.
Section 5.2 Exemption of Landlord from Liability. Landlord
shall not be liable for any damage or injury to the person,
business (or any loss or income therefrom), goods, wares,
merchandise or other property of Tenant or to Tenant's employees,
invitees, customers or any other person in or about the Leased
Premises, Building or Property, whether such damage or injury is
caused by or results from: (a) fire, steam, electricity, water, gas
or rain; (b) the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures of any other cause; (c) conditions arising in or
about the Leased Premises, Building or Property or from other
sources or places; or (d) any act or omission of any other tenant
of the Property. Landlord shall not be liable for any such damage
or injury even though it is the cause of, or, though the means of
repairing such damage or injury are not accessible to Tenant.
Notwithstanding the foregoing, nothing in this Section 5.2 shall
relieve Landlord from liability for Landlord's gross negligence or
Landlord's failure to perform its obligations under this Lease.
Section 5.3 Landlord's Obligations. Subject to the
provisions of Article 6 regarding damage, destruction and
condemnation, and except for damage caused by any act or omission
of Tenant, Landlord shall at its expense keep the foundation, roof
and structural portions of exterior walls of the Building in good
order, condition and repair. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the
surfaces of walls. Landlord shall not be obligated to make any
repairs under this Section 5.3 until a reasonable time after
receipt of a written notice from Tenant specifying the need for
such repairs.
Section 5.4 Tenant's Obligations.
A. Subject to the provisions of Article 6 regarding
damage, destruction and condemnation and subject to the items
existing on the date of this Lease as specified on Exhibit C
attached hereto and made a part hereof for which items Tenant shall
have no maintenance or repair responsibility, Tenant shall at its
expense throughout the Term maintain in good order, condition and
repair the Leased Premises, including, but not limited to,
nonstructural, interior, exterior, landscaped areas, systems and
equipment, electric lights, lamps, doors, floor coverings, truck
doors, plumbing work, and fixtures. Landlord shall use reasonable
efforts to extend to Tenant the benefit from warranties on such
items, if any, that have been made by Landlord's contractors or
vendors. If any portion of the Leased Premises or any system or
equipment in the Leased Premises which Tenant is obligated to
repair cannot be fully repaired, Tenant shall promptly replace the
same, regardless of whether the benefit of such replacement extends
beyond the Term. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions or
walls caused by Tenant's acts or omissions or occurring in
connection with Tenant's use and possession of the Leased Premises.
Landlord and Tenant intend that, at all times during the Term,
Tenant shall maintain the Leased Premises in an attractive, first
class and fully operative condition.
B. All of Tenant's obligations to maintain and repair
shall be accomplished at Tenant's sole expense. If Tenant fails to
maintain and repair the Leased Premises as required by this Section
5.04, Landlord may, on ten (10) days' prior notice (except that no
notice shall be required in case of emergency), enter the Leased
Premises and perform such maintenance or repair on behalf of the
Tenant. In such cases, Tenant shall reimburse Landlord immediately
upon demand for all costs incurred in performing such maintenance
or repair.
Section 5.5 Alterations, Additions, and Improvements.
A. Tenant shall not make any alterations, additions, or
improvements to the Leased Premises, Building or Property without
Landlord's prior written consent. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and
amount satisfactory to Landlord for any alterations, additions or
improvements that Landlord approves. Tenant shall promptly remove
any alterations, additions, or improvements constructed in
violation of this subparagraph of Section 5.5 upon Landlord's
written request. All alterations, addition and improvements will
be accomplished in a good and workmanlike manner at Tenant's sole
expense, in conformity with all applicable laws and regulations by
a licensed and bonded contractor approved in advance by Landlord.
Upon completion of any such work, Tenant shall provide Landlord
with "as built" plans, copies of all construction contracts, and
proof of payment for all labor and materials.
B. Tenant shall pay when due all claims for labor and
materials furnished to the Leased Premises, Building or Property.
Tenant shall give Landlord at least ten (10) days' prior written
notice of the commencement of any work on the Leased Premises,
Building or Property. The fee interest of Landlord in the Leased
Premises, the Building and the Property shall not be subject to
liens for improvements made by Tenant. Landlord and Tenant agree
that Tenant will not have authority to create or suffer any lien
for labor or materials on Landlord's interest in the Leased
Premises, the Building or the Property, and all contractors,
subcontractors, materialmen, mechanics, laborers and others
contracting with Tenant, and/or any subtenant of Tenant and/or any
other occupant(s) of the Leased Premises, for the construction,
installation, alteration or repair of any improvements to the
Leased Premises are hereby charged with notice that they must look
only to Tenant and to Tenant's interest in the Leased Premises to
secure the payment of any charges for work done and/or materials
furnished at the Leased Premises. Notwithstanding the foregoing,
if, for whatever reason, any mechanic's or other lien shall be
filed against the Leased Premises or any other part of the Building
or the Property, purporting to be for labor or material furnished
or to be furnished at the request of Tenant or anyone claiming
under Tenant, then Tenant shall at its expense cause such lien to
be discharged of record by payment, bond or otherwise as allowed by
law, within ten (10) days after the filing thereof. If Tenant
shall fail to cause the lien to be discharged of record within such
ten (10) day period, Tenant shall be in Default under this Lease
and (without waiving such Default) Landlord, in addition to any
other rights and remedies it may have under this Lease, may, but
shall not be obligated to, cause such lien to be discharged by
payment, bond or otherwise, without investigation as to the
validity thereof or as to any offsets or defenses thereto, and
Tenant shall, within ten (10) days after request, reimburse
Landlord for all amounts paid and incurred, including attorneys'
fees and interest thereon at the rate of 18% per annum or such
higher rate as may be permitted by law, from the respective dates
of Landlord's payments. For adequate separate consideration
received on the execution hereof, on request Tenant also shall
otherwise indemnify, protect, defend and hold harmless Landlord and
its agents against any claim or damage resulting therefrom or in
any way connected therewith. Landlord may elect to record and post
notices of non-responsibility on the Leased Premises, the Building
or Property, with respect to any such liens.
Section 5.6 Condition Upon Termination. Upon the termination
of the Lease, Tenant shall surrender the Leased Premises to
Landlord, broom clean and in the same condition as received except
for ordinary wear and tear which Tenant was not otherwise obligated
to remedy under any provision of this Lease. However, Tenant shall
not be obligated to repair any damage which Landlord is required to
repair under Article 6. In addition, Landlord may require Tenant
to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the termination of the
Lease and to restore the Leased Premises, Building or Property to
its prior condition all at Tenant's expense. All alterations,
additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered
to Landlord upon the termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be
removed without material damage to the Leased Premises or Property.
Tenant shall repair, at Tenant's expense, any damage to the Leased
Premises, Building or Property caused by the removal of any such
machinery or equipment. In no event, however, shall Tenant remove
any of the following materials or equipment without Landlord's
prior written consent: any power wiring or power panels; lighting
or lighting fixtures; wall coverings; drapes, blinds or other
window coverings; carpets or other floor coverings; heaters, air
conditioners, or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating
equipment and decorations.
ARTICLE 6.
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1 Partial Damage to Leased Premises or Property.
A. Tenant shall notify Landlord in writing immediately
upon the occurrence of any damage to the Leased Premises, Building
or Property.
B. If the Leased Premises, Building or Property are
only partially damaged and if the proceeds received by Landlord
from insurance policies carried by it with respect to the Leased
Premises, Building and Property are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord
shall repair the damage within a reasonable time. If the insurance
proceeds received by Landlord are not available to Landlord or
sufficient to pay the entire cost of repair, or if the damage was
due to a cause not covered by insurance policies which Landlord
maintains, Landlord may elect either to (a) repair the damage as
soon as reasonably possible in which case this Lease shall remain
in full force and effect so long as Landlord diligently pursues
said repairs, or (b) terminate this Lease as of the date the damage
occurred. Landlord shall notify Tenant within ninety (90) days
after receipt of notice of the occurrence of the damage whether
Landlord elects to repair the damage or terminate this Lease. If
Landlord elects to terminate the Lease, Tenant may elect to
continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Leased Premises, Building and
Property. Tenant shall pay the cost of such repairs, except that,
upon satisfactory completion of such repairs, Landlord shall
deliver to Tenant any insurance proceeds received by Landlord for
the damage repaired by Tenant. Tenant shall give Landlord written
notice of such election within ten (10) days after receiving
Landlord's termination notice.
Section 6.2 Total or Substantial Destruction. If the Leased
Premises or Property is totally or substantially destroyed by any
cause whatsoever, or if the Building is substantially destroyed
(even though the Leased Premises or Property is not totally or
substantially destroyed), at Landlord's option this Lease shall
terminate as of the date the destruction occurred regardless of
whether Landlord receives any insurance proceeds. Landlord shall
notify Tenant of such election within thirty (30) days after the
occurrence of such total or substantial destruction.
Section 6.3 Temporary Reduction of Rent. If the Leased
Premises is destroyed or damaged and Landlord or Tenant repairs or
restores the Leased Premises pursuant to the provisions of this
Article 6, the Base Rent payable during the period of such damage,
repair and/or restoration shall be reduced according to the
percentage of the Leased Premises that is rendered wholly
untenantable. Except for such possible reduction in Base Rent,
Tenant shall not be entitled to any compensation, reduction, or
reimbursement from Landlord as a result of any damage, destruction,
repair, or restoration of or to the Leased Premises, Building or
Property.
Section 6.4 Waiver. Tenant waives the protection of any
statute, code, or judicial decision which grants a Tenant the right
to terminate a lease in the event of substantial destruction of the
Leased Premises, Building or the Property. Tenant agrees that the
provisions of Section 6.2 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial
or total destruction to the Leased Premises, Building or Property.
Section 6.5 Condemnation. If all of any portion of the
Leased Premises is taken under the power of eminent domain or sold
under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or
sold on the date the condemning authority takes title or
possession, whichever occurs first. If more than twenty percent
(20%) of the floor area of the Leased Premises is taken, either
Landlord or Tenant may terminate this Lease as of the date the
condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of
written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority takes
possession). If neither Landlord nor Tenant terminates this Lease,
this Lease shall remain in effect as to the portion of the Leased
Premises not taken, except that the Base Rent shall be reduced in
proportion to the reduction in the floor area of the Leased
Premises. Any Condemnation award or payment shall be distributed
in the following order: (a) first, to any ground lessor, mortgagee
or beneficiary under a deed of trust encumbering the Property, the
amount of its interest in the Property; (b) second, to Tenant only
the amount of any award specifically designated for loss of or
damage to Tenant's trade fixtures or removable personal property,
and tenant improvements paid for by Tenant; and (c) third, to
Landlord, the remainder of such award, whether as compensation for
reduction in the value of the leasehold, the taking of the fee, or
otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Leased Premises caused by the Condemnation,
except that Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority.
If the severance damages received by Landlord are not sufficient to
pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord's expense.
ARTICLE 7.
ASSIGNMENT AND SUBLETTING
Section 7.1 Landlord's Consent Required. Tenant shall not
mortgage or assign its interest under this Lease or sublet the
Leased Premises of any portion thereof without the prior written
consent of Landlord, which consent shall not unreasonably be
withheld. No assignment or subletting shall relieve Tenant of its
obligations under this Lease.
ARTICLE 8.
DEFAULTS; REMEDIES
Section 8.1 Defaults.
A. Events of Default. The happening of any of the
following listed events shall constitute a breach of this Lease and
event of default ("Default") by Tenant:
1. Tenant fails to pay any rent payable under this
Lease on or before the due date thereof;
2. Tenant fails to fully and properly perform any
act required of it in the performance of this Lease, or otherwise
fails to comply with any term or provision hereof within fifteen
(15) days' written notice;
3. Tenant or any of its creditors files any
petition or pleading to declare Tenant a bankrupt of the
adjudication in bankruptcy of Tenant under any bankruptcy law or
act;
4. The appointment by any court or under any law
of a receiver, trustee, or other custodian of the property, assets,
or business of Tenant;
5. The assignment by Tenant of all or any part of
its property or assets for the benefit of its creditors;
6. The levy, execution, attachment or taking of
property, assets or of the leasehold interest of Tenant by process
of law or otherwise in satisfaction of any judgment, debt or claim;
or
7. Any event of Default under that certain
Warehouse Space Lease Agreement of even date herewith by and
between Landlord and Tenant for Sections 2.6 and 2.8 in the
Building.
Section 8.2 Remedies.
A. Remedies. Upon the happening of any Default,
Landlord, if it shall so elect, may (i) terminate this Lease and
resume possession of the Leased Premises for Landlord's own
purposes; (ii) collect each installment of rent when the same
matures; (iii) accelerate rents for the remainder of the Term of
this Lease; (iv) extend such sums or perform such actions as it
deems advisable to cure such Default and hold Tenant liable for the
cost thereof, and (v) enter the Leased Premises with process of law
and terminate Tenant's right of possession and release the Leased
Premises to any person, firm, or corporation, and upon such terms
and conditions as Landlord may deem advisable, as agent of Tenant
or otherwise, for whatever rent it can obtain, in which event
Tenant shall remain liable for the rent reserved herein, and all
other obligations hereunder. Landlord shall apply the proceeds of
such re-leasing (i) first to the payment of expenses that Landlord
may incur in the entering and re-leasing, and (ii) then to the
payment of the rent due by Tenant and the fulfillment of Tenant's
covenants and obligations hereunder. In this case of any
deficiency, Tenant shall remain liable. Tenant agrees that
Landlord may file suit to recover any sums due to Landlord under
this section from time to time and that such suit or recovery of
any amount due Landlord, or election to terminate Tenant's right to
possession only without terminating lease, Landlord may at its
option enter into the Leased Premises, remove Tenant's signs and
other evidences of tenancy, and take and hold possession; provided,
however, that such entry and taking shall not terminate this Lease
or release Tenant in whole or in part from Tenant's obligation to
pay rent hereunder for the full term or for any other obligation of
Tenant under this Lease.
B. Attorneys' Fees and Costs. In the event that
Landlord or Tenant fail to perform any of the covenants and
conditions of this Lease and it becomes necessary for either party
to employ an attorney or other agent to enforce any of the
provisions of this Lease, whether suit be brought or not, the
prevailing party shall be entitled to recover its reasonable
attorneys' fees and all costs, including such fees and costs on
appeal or in bankruptcy, from the other party.
C. No Waiver by Landlord. Nothing herein contained
shall be deemed to be a waiver by Landlord of its statutory lien to
rent, and the remedies, rights and privileges of Landlord in the
case of Default of Tenant as set forth above shall not be
exclusive, and in addition thereto, Landlord may also exercise and
enforce all its rights at law or in equity which it may otherwise
have as a result of Tenant's Default hereunder. Landlord is herein
specifically granted all of the rights of a secured creditor under
the Uniform Commercial Code with respect to the property in which
Landlord has been granted a security interest by Tenant.
ARTICLE 9.
PROTECTION OF LENDERS
Section 9.1 Subordination. This Lease shall be subject and
subordinate at all times to the terms of any ground or underlying
leases which now exist or may hereafter be executed affecting the
Leased Premises under which Landlord shall claim, and to the liens
of any mortgages or deeds of trust in any amount or amounts
whatsoever now or hereafter existing encumbering the Leased
Premises, Building or Property, without the necessity of having
further instruments executed by the Tenant to effect such
subordination. So long as the Tenant shall pay the rent due and
comply with, abide by, and discharge the terms, conditions,
covenants, and obligations on its part to be kept and performed
hereunder, the peaceable possession of Tenant in and to the Leased
Premises for the Term shall not be disturbed in the event of the
foreclosure of any such mortgage or deed of trust or in the event
of a termination of any ground or underlying leases affecting the
Leased Premises.
Section 9.2 Attornment. If Landlord's interest in the
Property is acquired by any ground lessor, beneficiary under a deed
of trust, mortgagee, or purchaser at a foreclosure sale, Tenant
shall attorn to the transferee of or successor to Landlord's
interest in the Leased Premises or Property and recognize such
transferee or successor as Landlord under this Lease. Tenant
waives the protection of any statute or rule of law which gives or
purports to give Tenant any right to terminate this Lease or
surrender possession of the Leased Premises or Property upon the
transfer of Landlord's interest.
Section 9.3 Signing of Documents. Tenant shall sign and
deliver any instrument or documents necessary or appropriate to
evidence or confirm any such attornment and subordination. Such
documents may contain such provisions as are customarily required
by any ground lessor or deed of trust holder or mortgagee. Tenant
hereby makes, constitutes and irrevocably appoints Landlord, or any
transferee or successor of Landlord, the Tenant's attorney-in-fact
to execute and deliver any such instrument or document if Tenant
fails to do so within ten (10) days of receiving a written request
therefor.
Section 9.4 Estoppel Certificates. Tenant shall from time to
time, upon not less than ten (10) days' prior written request by
Landlord or any mortgagee or ground lessor of the Property, deliver
to Landlord or such mortgagee or ground lessor a statement in
writing certifying: (1) that this Lease is unmodified and in full
force and effect or, if there have been modifications, that this
Lease, as modified, is in full force and effect; (2) the amount of
Base Rent then payable under this Lease and the date to which rent
has been paid; (3) that Landlord is not in default under this
Lease, or, if in default, a detailed description of such
default(s); (4) that Tenant is or is not in possession of the
Leased Premises, as the case may be; and (5) such other information
as may be requested.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
Section 10.1 Waiver of Subrogation. Landlord and Tenant each
hereby waive any and all rights of recovery against the other, or
against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of
others under its control, if such loss or damage is covered by any
insurance policy in force (whether or not described in the Lease)
at the time of such loss or damage. Upon obtaining the policies of
insurance described herein, Landlord and Tenant shall give notice
to the insurance carrier or carriers of the foregoing mutual waiver
of subrogation.
Section 10.2 Landlord's Liability: Certain Duties.
A. As used in the Lease, the term "Landlord" means only
the current owner or owners of the fee title to the Leased
Premises, Building or Property or the leasehold estate under a
ground lease of the Leased Premises, Building or Property at the
time in question. Each Landlord is obligated to perform the
obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers
its title or interest is relieved of all liability with respect to
the obligations of Landlord under this Lease to be performed on or
after the date of transfer, provided that such transfer is not for
the primary purpose of avoiding such obligations. However, each
Landlord shall deliver to its transferee all funds previously paid
by Tenant if such funds have not yet been applied under the terms
of this Lease. Tenant agrees that it shall look solely to the
estate and property of the Landlord in the Property for collection
of any judgment (or other judicial process) requiring the payment
of money by Landlord of its obligations under this Lease subject to
the prior rights of any ground or underlying holder of any mortgage
covering the Property or Landlord's interest therein.
B. Landlord shall not be in default under this Lease
unless Landlord (or such ground lessor, mortgagee or beneficiary)
fails to cure or diligently pursue a cure of such nonperformance
within thirty (30) days after receipt of Tenant's notice or such
longer time as is reasonably necessary provided that such cure is
commenced within such thirty (30) days period and thereafter
pursued with reasonable diligence.
Section 10.3 Security Deposit. Upon the execution of this
Lease, Tenant shall deposit with Landlord a letter of credit in the
amount of $111,876.75 in form and content and issued by a bank
satisfactory to Landlord in Landlord's sole and unrestricted
discretion (the "Letter of Credit") to secure the faithful
performance by Tenant of all the terms, covenants and conditions in
this Lease on the part of Tenant to be fulfilled, kept, observed
and performed, including without limitation, such terms, covenants
and conditions which become applicable upon expiration or
termination of the Term. In the event of any Default and without
prejudice to any other remedy or remedies which Landlord may have
on account thereof, Landlord may draw upon or demand payment on the
Letter of Credit to the full extent of the credit regardless of the
amount required to cure such Default, whereupon Landlord shall
apply all or a portion of the proceeds of the Letter of Credit to
cure such Default. Landlord shall deliver to Tenant a copy of any
such written demand. Upon such application, Tenant shall pay
Landlord the amount so applied, which shall be added to the
balance, if any, of such proceeds from the Letter of Credit, as a
security deposit so that the amount of Landlord's security shall be
restored to $111,876.75, with the understanding that (a) such
security deposit or any portion thereof not previously applied, or
from time to time such other portions thereof, may be applied to
the curing of any default that may then exist, without prejudice to
any other remedy or remedies which Landlord may have on account
thereof, and upon such application, Tenant shall pay Landlord on
demand the amount so applied, which shall be added to the security
deposit so the same shall be restored to the original $111,876.75
amount; (b) that should the Leased Premises be conveyed by Landlord
the security deposit or any portion thereof not previously applied
may be turned over to Landlord's grantee, and if the same be turned
over as aforesaid, Tenant hereby releases Landlord from any and all
liability with respect to the security deposit and/or its
application or return, and Tenant agrees to look to such grantee
for such application or return; (c) that Landlord or its successor
shall not be obligated to hold the security deposit as a separate
fund, but on the contrary may commingle the same with its other
funds; (d) that if Tenant shall faithfully fulfill, keep, and
perform and observe all of the covenants, conditions, and
agreements in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, performed and observed, the security
deposit or the part or portion thereof not previously applied or
the Letter of Credit, if not drawn upon to the full extent of the
credit, shall be returned to the Tenant without interest no later
than thirty (30) days after the expiration of the Term of this
Lease or any renewal or extension thereof, provided Tenant has
vacated the Leased Premises and surrendered possession thereof to
Landlord at the expiration of said term or any extension or renewal
thereof as provided herein; (e) in the event that Landlord
terminates this Lease or Tenant's right to possession, Landlord may
apply the security deposit and/or proceeds from the Letter of
Credit against all damages suffered to the date of such termination
and/or may retain the security deposit and/or proceeds from the
Letter of Credit to apply against such damages as may be suffered
or shall accrue thereafter by reason of Tenant's default; and (f)
in the event any bankruptcy, insolvency, reorganization or other
credit-debtor proceedings shall be instituted by or against Tenant,
or its successors or assigns, the security deposit and/or proceeds
from the Letter of Credit shall be deemed to be applied first to
the payment of any rents and/or other charges due Landlord for all
periods prior to the institution of such proceedings, and the
balance, if any, may be retained or paid to Landlord in partial
liquidation of Landlord's damages.
Section 10.4 Severability. A determine by a court of
competent jurisdiction that any provision of this Lease or any part
thereof is illegal or unenforceable shall not cancel or invalidate
the remainder of such provision or this Lease, which shall remain
in full force and effect.
Section 10.5 Interpretation. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this
Lease and are not a part of the terms or provisions of this Lease.
Whenever required by the context of this Lease, the singular shall
include the plural and the plural shall include the singular. The
masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions
of Tenant the term "Tenant" shall include Tenant's agents,
employees, contractors, invitees, successors or others using the
Leased Premises, Building or Property with Tenant's expressed or
implied permission.
Section 10.6 Incorporation of Prior Agreements;
Modifications. This Lease is the only agreement between the
parties pertaining to the lease of the Leased Premises, Building or
Property and no other agreements are effective. All amendments to
this Lease shall be in writing and signed by all parties. Any
other attempted amendment shall be void.
Section 10.7 Notices. All notices required or permitted
under this Lease shall be in writing and shall be personally
delivered or sent by certified mail, return receipt requested,
postage prepaid. Notices to Tenant and Landlord shall be delivered
to the party's respective address specified above. All notices
shall be effective upon delivery or attempted delivery. Either
party may change its notice address upon written notice to the
other party. Written notice of any Default with respect to
Tenant's duties and obligations hereunder shall be given by
Landlord to:
Sara Lee Knit Products Division
Sara Lee Corporation
Post Office Box 3019
Winston-Salem, North Carolina 27105
Attn: Doris Drayton
With an informational copy to:
Fagel & Haber
140 South Dearborn Street
14th Floor
Chicago, Illinois 60603
Attn: Howard M. Berrington, Esquire
Sara Lee Corporation shall have the right, but not the obligation,
to cure any such Default in its sole discretion within ten (10)
days after such notice is deposited in a U.S. Postal Service
receptacle, postage prepaid and properly addressed.
Section 10.8 Radon Gas Notice. 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 your county public health unit.
Section 10.9 Waivers. All waivers must be in writing and
signed by the waiving party. Landlord's failure to enforce any
provision of this Lease or its acceptance of rent shall not be a
waiver and shall not prevent Landlord from enforcing that provision
or any other provision of this Lease in the future. No restrictive
endorsement or statement on a payment check from Tenant or in a
letter accompanying a payment check shall be binding on Landlord.
Landlord may, with or without notice to Tenant, negotiate such
check without being bound to the conditions of such restrictive
endorsement or statement.
Section 10.10 No Recordation. Tenant shall not record this
Lease or memorandum of this Lease.
Section 10.11 Joint and Several Liability. All parties
signing this Lease as Tenant shall be jointly and severally liable
for all obligations of Tenant.
Section 10.12 Force Majeure. If Landlord cannot perform any
of its obligations due to events beyond Landlord's control, the
time provided for performing such obligations shall be extended by
a period of time equal to the duration of such events. Events
beyond Landlord's control include, but are not limited to, acts of
God, war, civil commotion, labor disputes, strikes, fire, floor or
other casualty, shortages of labor or material, government
regulation or restriction and weather conditions.
Section 10.13 Execution of Lease. This Lease may be executed
in counterparts, and, when all counterpart documents are executed,
the counterparts shall constitute a single binding instrument. The
delivery of this Lease by Landlord to Tenant shall not be deemed to
be an offer and shall be binding upon either party until executed
and delivered to both parties.
Section 10.14 Holding Over. Any holding over by the Tenant
after the expiration of this Lease shall be construed as a Tenancy
at Sufferance, unless such occupancy is with the prior written
consent of the Landlord, in which event the Tenant will be a tenant
from month to month, upon the same terms and conditions of this
Lease. Acceptance by the Landlord of rent after such termination
shall not constitute a renewal.
Section 10.15 Time. Time is of the essence of this Lease.
ARTICLE 11.
BROKERS
Tenant covenants, represents and warrants that Tenant had no
dealings or negotiations with any broker or agent other than
Phoenix Realty Group, Inc. in connection with the consummation of
this Lease. Landlord agrees to pay all commissions due to Phoenix
Realty Group, Inc. Tenant and Landlord covenant and agree to hold
each other harmless and indemnify each other from and against any
and all costs, expenses (including reasonable attorneys' fees
before trial, at trial, on appeal and in bankruptcy) or liability
for any compensation, commissions, or charges claimed by any broker
or agent with respect to this Lease or the negotiation thereof.
ARTICLE 12.
CONFIDENTIALITY
Tenant and its officers, directors, employees, agents and
representatives shall not disclose the subject matter or terms of
the transaction contemplated by this Lease unless prior written
consent to such disclosure is obtained from Landlord, which consent
may be withheld at Landlord's sole discretion.
ARTICLE 13.
EXHIBITS
All exhibits attached hereto shall be deemed to be a part
hereof and are hereby incorporated.
ARTICLE 14.
COLLATERAL ASSIGNMENT
Tenant shall collaterally assign all its rights under this
Lease to Sara Lee Knit Products ("SLKP"), which is a division of
Sara Lee Corporation, a Maryland corporation ("SLC"), to secure
Tenant's obligations under that certain Warehouse Services
Agreement dated effective as of December 1, 1994, by and between
Tenant and SLKP. Landlord hereby acknowledges and consents to such
collateral assignment provided that if SLKP shall exercise its
rights under the collateral assignment, SLKP or an assignee of SLKP
("Assignee") shall be required, within the ten (10) day notice and
cure period described in Section 10.7 and prior to taking
possession of the Leased Premises, to assume in writing all duties
and obligations of Tenant under this Lease accruing or arising from
and after the date of assumption of this Lease and to provide
assurances satisfactory to Landlord that all obligations of SLKP
under this Lease are obligations of SLC. In the event SLKP or its
Assignee shall not have assumed this Lease and provided such
assurances within the ten (10) day notice and cure period or the
Default specified in Landlord's written notice to SLC shall not
have been cured within the time period allowed by Landlord, neither
SLC nor SLKP shall have any further rights with respect to this
Lease. If SLKP elects to appoint an Assignee to assume this Lease,
such Assignee shall have a net worth of no less than Five Million
Dollars ($5,000,000.00) and shall be approved by Landlord in
writing, which approval shall not unreasonably be withheld or
delayed. In no event shall SLKP be construed as the tenant under
this Lease prior to SLKP's assumption of this Lease, nor shall SLKP
be liable for any of Tenant's duties and obligations under this
Lease accruing or arising prior to SLKP's assumption of this Lease.
IN WITNESS WHEREOF, Tenant and Landlord have caused this Lease
to be duly executed in duplicate as of the date first above written
by their respective duly authorized officers or agents.
Signed, sealed and delivered
in the presence of: LANDLORD:
JACKSONVILLE CENTER, INC., a
Florida corporation
/S/ W. CAREY WEBB_____________ By:__/S/ ARIS NEWTON__________
Name:_W. Carey Webb___________ Name:_Aris Newton__________
Title:_President___________
/S/ R. PARK NEWTON____________
Name:_R. Park Newton__________
TENANT:
LANEY & DUKE TERMINAL WAREHOUSE
COMPANY, INC., a Florida
corporation
/S/ W. Carey Webb_____________ By:_/S/ THOMAS DUKE___________
Name:_W. Carey Webb___________ Name:_Thomas Duke__________
Title:_President___________
/S/ R. PARK NEWTON____________
Name:_R. Park Newton__________
2257-004-240298.08
EXHIBIT A
LEGAL DESCRIPTION AND SITE PLAN OF PROPERTY
EXHIBIT B
IMPROVEMENTS
Landlord's Work: Prior to commencement of the Term,
Landlord will, at Landlord's sole cost
and expense, clean the mezzanine office
in section 1.2 and the restroom/break
room areas in sections 1.2, 1.3, 1.5 and
1.7.
Tenant Improvements: Notwithstanding the provisions of Section
5.5, Landlord will allow locations to be
painted on the floors of the Leased
Premises and guard rails installed for
the area under the mezzanine in Section
1.3.
EXHIBIT C
EXCEPTED ITEMS
Lease for Second Floor Space
WAREHOUSE SPACE LEASE AGREEMENT
THIS WAREHOUSE SPACE LEASE AGREEMENT ("Lease") is made as of
December 1, 1994, by and between JACKSONVILLE CENTER, INC., a
Florida corporation, whose address is 808 N. Rome Avenue, Tampa,
Florida 33606 ("Landlord"), and LANEY & DUKE TERMINAL WAREHOUSE
COMPANY, INC., a Florida corporation, whose address is 1560 Jessie
Street, Jacksonville, Florida 32218 ("Tenant").
W I T N E S S E T H:
ARTICLE 1.
LEASED PREMISES
The Landlord hereby leases and rents unto the Tenant and the
Tenant hereby hires and takes from the Landlord the following
described property ("Leased Premises"):
Approximately 198,144 square feet of space designated as
Sections 2.6 and 2.8, and constituting a portion of a
building (the "Building") included in facility known as
One Imeson Center (the "Property"), located at One Imeson
Park Boulevard, Building 100, Jacksonville, Florida
32210. The legal description of the Property and a Site
Plan depicting the location of the Leased Premises are
attached hereto as Exhibit A. During the Term (as herein
defined), Tenant shall also be entitled to (i) the
exclusive use of that portion of the parking lot located
on the Property labeled on the Site Plan as "Tenant
Parking," and (ii) the non-exclusive use, in conjunction
with Landlord and other tenants of the Property, of the
access drive shown on the Site Plan.
ARTICLE 2.
TERM
Section 2.1 Base Term. The base term of this Lease shall be
eleven (11) months commencing on February 1, 1995, and ending on
December 31, 1995, unless renewed or extended as provided herein,
on the terms and conditions as set forth herein.
Section 2.2 Options to Renew. Landlord shall provide Tenant
with one (1) three (3) month option to renew this Lease, provided
Tenant is not in default under this Lease and Tenant gives Landlord
one hundred twenty (120) days' prior written notice of Tenant's
intent to exercise the renewal option. The base rent will be the
same as the base term. The base term and, if Tenant's renewal
option is properly and timely exercised, the renewal term are
together referred to herein as the "Term".
ARTICLE 3.
RENT AND OTHER CHARGES
Section 3.1 Base Rent. Tenant hereby covenants and agrees to
pay Base Rent of $37,152.00 per month for each and every month
during the Term payable in advance commencing on February 1, 1995
and continuing on the first day of each and every month during the
Term in lawful United States currency, together with any and all
sales or use taxes levied upon the use or occupancy of the Leased
Premises and any rent or other charges payable hereunder. Base
Rent shall be paid without set off or deduction to Landlord at its
address above or such other address as Landlord directs in writing.
To defray the additional expenses involved in collecting and
handling delinquent payments, if any, Base Rent or other payment
due under this Lease is not received by Landlord within ten (10)
days of the due date of such payment, Tenant shall pay in addition
to such payment a late charge equal to 10% of the payment which is
past due. Tenant acknowledges that this charge is made to
compensate Landlord for additional costs incurred by Landlord as a
result of Tenant's failure to pay when due, and is not a payment
for the extension of the rent due date. Landlord's failure to
insist upon the payment of the late charge shall not be deemed a
waiver of Landlord's right to collect such late charge for any
future delinquencies. Notwithstanding anything in this Lease to
the contrary, provided that no Default shall have occurred with
respect to Tenant's obligations hereunder, Tenant shall be entitled
to an abatement of all Base Rent (but not Additional Rent [as
herein defined]) during the Term. In the event of any Default
hereunder at any time during the Term, Tenant shall automatically
be and become liable for payment of all Base Rent and, without
limiting Landlord's right to exercise any remedy or remedies to
which Landlord is entitled hereunder in the event of a Default,
Tenant shall pay all such Base Rent theretofore and thereafter
accruing during the Term upon Landlord's demand. Except for such
abatement of Base Rent, all other terms and conditions of this
Lease shall be in full force and effect, including without
limitation Tenant's obligations to pay all Additional Rent
hereunder.
Section 3.2 Additional Rent. All charges payable by Tenant
under the terms of this Lease other than Base Rent are called
"Additional Rent." Unless this Lease provides otherwise, all
Additional Rent shall be paid with the next monthly installment of
Base Rent. The term "rent" shall mean Base Rent and Additional
Rent.
Section 3.3 Operating Expenses. In addition to Base Rent
payable under paragraph 3.1 above, Tenant agrees to pay as
Additional Rent its pro-rata share of the "Operating Expenses"
(hereinafter defined) for the Building and, to the extent
applicable, to the Property. The pro-rata share of Operating
Expenses ("Share") to be paid by Tenant shall be 11.55% (198,144
divided by 1,715,000) of the Operating Expenses. Tenant's Share of
Operating Expenses shall include no less than $.40 per square foot
per year (which amount consists of $.23 per square foot for Real
Property Taxes [as herein defined], $.07 per square foot for
insurance and $.10 per square foot for common area maintenance
charges) and an additional amount for Tenant's use of the telephone
system in the Building. Landlord shall deliver monthly invoices to
Tenant for Tenant's Share of Operating Expenses, and such invoices
shall be due and payable within ten (10) days of receipt. From
time to time during the Term, Landlord shall send a statement of
Operating Expenses to Tenant for any portion of the Term that has
expired providing in reasonable detail a statement of all Operating
Expenses incurred in the operation of the Property along with the
amount representing Tenant's Share thereof. Tenant shall be given
a credit against its Share of future Operating Expenses payable for
any overpayment of Operating Expense that have been paid up to the
time of said statement. If Tenant has underpaid, then the balance
due shall be paid to Landlord by Tenant within thirty (30) days of
the date of said statement unless the statement is rendered at the
end of the Term in which case any overage due the Landlord will be
paid by check at the time the Leased Premises are delivered to
Landlord by Tenant. Concurrent with the invoice described above,
Landlord shall also provide an estimate of the Operating Expenses
and a statement of the estimated monthly Operating Expense payable
by Tenant as additional rent under the terms of this Lease.
Tenant's liability for its Share of Operating Expenses shall
commence on the date of Tenant's actual occupancy of the Leased
Premises, without regard to the date the payment of Base Rent
commences.
"Operating Expenses" shall mean all expenses incurred by
Landlord, including but not limited to, Real Property Taxes (as
hereinafter defined), Insurance Premiums (as hereinafter defined),
Security Services (as hereinafter defined), compliance with
governmental and quasi-governmental requirements, lighting,
landscaping, an allowance for Landlord's overhead costs, and the
cost of all water and sewer, electrical and all other utilities
charges that are not separately metered to tenants. However,
"Operating Expenses" shall exclude all expenses incurred by
Landlord in performance of its obligations under Section 5.3 below.
Furthermore, the term "Operating Expenses" does not include the
cost of any capital improvement to the Building or the Property
other than the reasonable amortized cost of capital improvements
which result in the reduction of Operating Expenses. Moreover, the
term "Operating Expenses" shall not include repairs, restoration or
other work occasioned by fire, windstorm, or other casualty, income
and franchise taxes of Landlord, expenses incurred in leasing to or
procuring of tenants, leasing commissions, expenses for the
renovation of space for new tenants, interest or principal on any
mortgage or indebtedness of Landlord, or depreciation allowance or
expense.
If the nature of Tenant's business within the Leased Premises
is such that additional costs are incurred by Landlord for
insurance, cleaning, or other Operating Expenses, Tenant agrees to
pay as additional rent to Landlord on demand the amount of such
additional costs.
Section 3.4 Taxes.
A. Definition of "Real Property Taxes". "Real Property
Taxes" means: (i) any fee, license fee, license tax, business
license fee, commercial rental tax, levy, charge, assessment
(including all special assessments), penalty or tax imposed by any
taxing authority against the Building, the Property or land upon
which the Property is located; (ii) any tax on the Landlord's
right to receive, or the receipt of, rent or income from the
Property or against Landlord's business of leasing the Property;
(iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property
by any governmental agency; and (iv) any charge or fee replacing
any tax previously included within the definition of real property
tax. "Real Property Taxes" does not, however, include Landlord's
federal or state income, franchise, inheritance or estate taxes.
B. Joint Assessment. If the Property is not separately
assessed, Tenant's Share of Real Property Taxes payable shall be
determined by Landlord from the assessor's worksheets or other
reasonably available information.
C. Personal Property Taxes.
(i) Tenant shall pay all taxes charged against
trade fixtures, furnishings, equipment or any other personal
property belonging to Tenant. Tenant shall use its best efforts to
have personal property taxes assessed separately from the Property.
(ii) If any of Tenant's personal property is
taxed with the Property, Tenant shall pay Landlord the taxes on the
personal property within fifteen (15) days after Tenant receives a
written statement from Landlord for such personal property taxes.
Section 3.5 Utilities. Tenant shall pay, directly to the
appropriate supplier, the cost of all telephone and refuse disposal
services supplied to the Leased Premises (other than the charge for
use of the existing telephone system in the Building as set forth
in Section 3.3). With respect to all other services or utilities,
Landlord shall make a reasonable determination of Tenant's share of
the cost of such utilities and services and Tenant shall pay such
share to Landlord.
Section 3.6 Insurance.
A. Liability Insurance. During the Term, Tenant shall
maintain a policy of comprehensive public liability insurance with
an insurer licensed in Florida and rated "A" or better by A. M.
Best and naming Landlord as an additional insured, at Tenant's sole
cost and expense, insuring Landlord against liability arising out
of the ownership, use, occupancy or maintenance of the Leasgw
Premises and Property and containing a cross-liability endorsement
and a severability of interests clause. The initial amount of such
insurance shall be at least $5,000,000 per occurrence and
$5,000,000 aggregate coverage. Such coverage requirement does not
constitute any recommendation by Landlord as to appropriate limits
of coverage, but is merely Landlord's minimum requirement.
B. Hazard Insurance. During the Term, Landlord shall
maintain policies of insurance covering loss of or damage to the
Property in such amount or percentage of replacement value as
Landlord or its insurance advisor deems reasonable in relation to
the age, location, type of construction and physical conditions of
the Property and the availability of such insurance at reasonable
rates. Tenant shall, at Tenant's sole cost and expense, maintain
insurance coverage for Tenant's fixtures, equipment or building
improvements installed by Tenant in or on the Property for the full
replacement value thereof. Tenant shall not do or permit to be
done anything which invalidates any such insurance policies.
C. Payment of Premiums; Insurance Policies. As part of
Operating Expenses, as described in Section 3.3 of this Lease,
Tenant shall pay its share of "Insurance Premiums" for the
insurance policies maintained by Landlord on the Building or on the
Property, as the case may be. Tenant shall pay for any increase in
the Insurance Premiums caused by Tenant's acts, omissions, use or
occupancy of the Property.
D. Workers' Compensation. Tenant shall carry workers'
compensation coverage in the minimum required statutory amount
insuring all eligible employees of Tenant on the Property.
E. Tenant's Insurance Policies. The amount of any
insurance coverage required to be carried by Tenant hereunder shall
not limit Tenant's liability nor relieve Tenant of any obligation
hereunder. Landlord shall be listed as additional insured and/or
loss payee on each such policy, as appropriate. Each policy shall
contain a provision which prohibits cancellation or modification of
the policy except upon thirty (30) days' prior written notice to
Landlord. Tenant shall deliver a copy of each such policy or
certificate (or a renewal thereof) to Landlord prior to the
Commencement Date and shall deliver to Landlord a copy of a
replacement policy or certificate thirty (30) days prior to the
expiration of any policy during the Term. If Tenant fails to
maintain such policy, Landlord may elect to maintain such insurance
at Tenant's expense, to be paid by Tenant upon presentation of
Landlord's bill therefor.
Section 3.7 Security. Landlord shall contract with an
independent contractor to provide security services for the
Property (the "Security Services"). Such security services shall
be for 24 hours per day or such lesser period as Landlord and
Tenant may agree and shall include appropriate operation by the
independent contractor of the guard shack located on the Property.
Tenant agrees and acknowledges that Landlord shall have no
liability for any act or negligence of such independent contractor
and that Landlord has agreed to enter into such contract for
Security Services as an accommodation to Tenant. Notwithstanding
Tenant's Share of Operating Expenses, as defined in Section 3.3,
Tenant shall pay as Additional Rent eighty percent (80%) of the
cost of the Security Services, or in the event that Landlord enters
into one or more other leases with third parties for portions of
the Property, such lesser proportion of the cost of the Security
Services as Landlord and Tenant may agree based on the relative
benefit from the Security Services derived by Landlord, Tenant and
other third-party tenants of the Property.
ARTICLE 4.
USE OF PROPERTY
Section 4.1 Permitted Uses. Tenant may use the Property only
for the following Permitted Use so long as such use is in
compliance with all applicable governmental laws, ordinances, rules
and regulations: warehouse operations and distribution.
Section 4.2 Manner of Use. Tenant shall not cause or permit
the Leased Premises, Building or Property to be used in any way
which constitutes a violation of any law, ordinance, or
governmental regulation or order, or which annoys or interferes
with the rights of tenants of the development of which the Leased
Premises, Building and Property are a part, or which constitutes a
nuisance or waste. Tenant shall obtain and pay for all permits
required for Tenant's occupancy of the Leased Premises, Building
and Property for the Permitted Use and shall promptly take all
actions necessary to comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements regulating
the use by Tenant of the Leased Premises, Building and Property,
including, without limitation, the Occupational Safety and Health
Act and the Americans with Disabilities Act of 1990.
Section 4.3 Hazardous Substances. Tenant agrees not to
generate, store, use, treat or dispose of, nor to allow, suffer or
permit the generation, storage, use treatment or disposal of, any
"Hazardous Waste" or "Hazardous Substance" (as those terms are
defined in Resource Conversation and Recovery Act, 42 U.S.C.
Section 6901 et seq., as amended ("RCRA") or the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq., as amended ("CERCLA"), and any rules and
regulations now or hereafter promulgated under either of such acts)
or any pollutant or other contaminant on, in, from or about the
Leased Premises, Building or the Property, except in strict
accordance with applicable laws and regulations and following
notice of same to Landlord. Tenant shall and hereby does indemnify
and hold Landlord harmless from and against any and all loss,
damages, expenses, fees, claims, costs and liabilities (including,
but not limited to, attorney's fee and costs of litigation) arising
out of or in any manner related to the "release" or "threatened
release" of, and for any clean-up responsibility imposed upon owner
under any federal, state or local law, ordinance, rule or
regulations now or hereafter in effect, with respect to, any
"Hazardous Waste" or "Hazardous Substance", or any pollutant, or
other contaminant or environmental condition on, in, from or about
the Leased Premises, Building or the Property of any portion
thereof, which release or threatened release or pollutant or
environmental condition arises out of or is in any manner related
to use or occupancy of the Leased Premises, Building or Property by
Tenant, its agents or lessees.
Section 4.4 Signs and Auctions. Tenant shall not place any
signs upon the outside walls or roof of the Leased Premises or
Building except with the written consent of the Landlord. Any and
all approved signs placed on or within the Leased Premises,
Building or Property by Tenant shall be maintained in compliance
with the rules and regulations governing such signs as promulgated
by Landlord from time to time, and the Tenant shall be responsible
to Landlord for any damage caused by installation, use, or
maintenance of said signs. Tenant agrees upon removal of said
signs to repair all damage incident to such removal. Tenant shall
not conduct or permit any auctions or sheriff's sales at the Leased
Premises, Building or Property.
Section 4.5 Indemnity. Tenant shall indemnify Landlord
against and hold Landlord harmless from any and all costs, claims,
actions, damages or liability including expenses in connection with
loss of life, personal injury loss or damage including property
damage, arising from: (a) Tenant's use of the Leased Premises,
Building or Property; (b) the conduct of Tenant's business or
anything else done or permitted by Tenant to be done in or about
the Leased Premises, Building or Property; (c) any breach or
default in the performance of Tenant's obligations under this
Lease; (d) any misrepresentation or breach of warranty by Tenant
under this Lease; or (e) other acts or omissions of Tenant. Tenant
shall defend Landlord against any such cost, claim, action, damage
or liability at Tenant's expense with counsel reasonably acceptable
to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in
connection with any such claim.
Section 4.6 Landlord's Access. Landlord or its agents may
enter the Leased Premises at all reasonable times to show the
Leased Premises to potential buyers, investors or tenants or other
parties or for any other purpose Landlord deems necessary.
Landlord shall give Tenant prior notice of such entry, except in
the case of an emergency. Landlord may place customary "For Sale"
or "For Lease" signs on the Leased Premises, Building or Property
as Landlord deems necessary.
Section 4.7 Quiet Possession. If Tenant pays the rent and
complies with all other terms of this Lease, Tenant may occupy and
enjoy the Leased Premises for the full Term, subject to the
provisions of this Lease.
Section 4.8 Rules and Regulations. Tenant shall also comply
with Landlord's rules and regulations respecting the management,
care and safety of the Property, including parking areas,
landscaped areas, walkways, hallways and other facilities provided
for the common use and convenience of other occupants.
ARTICLE 5.
CONDITION OF LEASED PREMISES; MAINTENANCE,
REPAIRS AND ALTERATIONS
Section 5.1 Acceptance of Leased Premises. Tenant
acknowledges that it has thoroughly inspected the Leased Premises
and Tenant hereby accepts the Leased Premises in their existing
condition with all faults, subject to the performance by Landlord
of the obligations described on Exhibit B attached hereto and made
a part hereof and Landlord's obligations under Section 5.3.
Landlord makes no warranties or representations whatsoever as to
the fitness of the Leased Premises for a particular purpose.
Section 5.2 Exemption of Landlord from Liability. Landlord
shall not be liable for any damage or injury to the person,
business (or any loss or income therefrom), goods, wares,
merchandise or other property of Tenant or to Tenant's employees,
invitees, customers or any other person in or about the Leased
Premises, Building or Property, whether such damage or injury is
caused by or results from: (a) fire, steam, electricity, water, gas
or rain; (b) the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures of any other cause; (c) conditions arising in or
about the Leased Premises, Building or Property or from other
sources or places; or (d) any act or omission of any other tenant
of the Property. Landlord shall not be liable for any such damage
or injury even though it is the cause of, or, though the means of
repairing such damage or injury are not accessible to Tenant.
Notwithstanding the foregoing, nothing in this Section 5.2 shall
relieve Landlord from liability for Landlord's gross negligence or
Landlord's failure to perform its obligations under this Lease.
Section 5.3 Landlord's Obligations. Subject to the
provisions of Article 6 regarding damage, destruction and
condemnation, and except for damage caused by any act or omission
of Tenant, Landlord shall at its expense keep the foundation, roof
and structural portions of exterior walls of the Building in good
order, condition and repair. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the
surfaces of walls. Landlord shall not be obligated to make any
repairs under this Section 5.3 until a reasonable time after
receipt of a written notice from Tenant specifying the need for
such repairs.
Section 5.4 Tenant's Obligations.
A. Subject to the provisions of Article 6 regarding
damage, destruction and condemnation and subject to the items
existing on the date of this Lease as specified on Exhibit C
attached hereto and made a part hereof for which items Tenant shall
have no maintenance or repair responsibility, Tenant shall at its
expense throughout the Term maintain in good order, condition and
repair the Leased Premises, including, but not limited to,
nonstructural, interior, exterior, landscaped areas, systems and
equipment, electric lights, lamps, doors, floor coverings, truck
doors, plumbing work, and fixtures. Landlord shall use reasonable
efforts to extend to Tenant the benefit from warranties on such
items, if any, that have been made by Landlord's contractors or
vendors. If any portion of the Leased Premises or any system or
equipment in the Leased Premises which Tenant is obligated to
repair cannot be fully repaired, Tenant shall promptly replace the
same, regardless of whether the benefit of such replacement extends
beyond the Term. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions or
walls caused by Tenant's acts or omissions or occurring in
connection with Tenant's use and possession of the Leased Premises.
Landlord and Tenant intend that, at all times during the Term,
Tenant shall maintain the Leased Premises in an attractive, first
class and fully operative condition.
B. All of Tenant's obligations to maintain and repair
shall be accomplished at Tenant's sole expense. If Tenant fails to
maintain and repair the Leased Premises as required by this Section
5.04, Landlord may, on ten (10) days' prior notice (except that no
notice shall be required in case of emergency), enter the Leased
Premises and perform such maintenance or repair on behalf of the
Tenant. In such cases, Tenant shall reimburse Landlord immediately
upon demand for all costs incurred in performing such maintenance
or repair.
Section 5.5 Alterations, Additions, and Improvements.
A. Tenant shall not make any alterations, additions, or
improvements to the Leased Premises, Building or Property without
Landlord's prior written consent. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and
amount satisfactory to Landlord for any alterations, additions or
improvements that Landlord approves. Tenant shall promptly remove
any alterations, additions, or improvements constructed in
violation of this subparagraph of Section 5.5 upon Landlord's
written request. All alterations, addition and improvements will
be accomplished in a good and workmanlike manner at Tenant's sole
expense, in conformity with all applicable laws and regulations by
a licensed and bonded contractor approved in advance by Landlord.
Upon completion of any such work, Tenant shall provide Landlord
with "as built" plans, copies of all construction contracts, and
proof of payment for all labor and materials.
B. Tenant shall pay when due all claims for labor and
materials furnished to the Leased Premises, Building or Property.
Tenant shall give Landlord at least ten (10) days' prior written
notice of the commencement of any work on the Leased Premises,
Building or Property. The fee interest of Landlord in the Leased
Premises, the Building and the Property shall not be subject to
liens for improvements made by Tenant. Landlord and Tenant agree
that Tenant will not have authority to create or suffer any lien
for labor or materials on Landlord's interest in the Leased
Premises, the Building or the Property, and all contractors,
subcontractors, materialmen, mechanics, laborers and others
contracting with Tenant, and/or any subtenant of Tenant and/or any
other occupant(s) of the Leased Premises, for the construction,
installation, alteration or repair of any improvements to the
Leased Premises are hereby charged with notice that they must look
only to Tenant and to Tenant's interest in the Leased Premises to
secure the payment of any charges for work done and/or materials
furnished at the Leased Premises. Notwithstanding the foregoing,
if, for whatever reason, any mechanic's or other lien shall be
filed against the Leased Premises or any other part of the Building
or the Property, purporting to be for labor or material furnished
or to be furnished at the request of Tenant or anyone claiming
under Tenant, then Tenant shall at its expense cause such lien to
be discharged of record by payment, bond or otherwise as allowed by
law, within ten (10) days after the filing thereof. If Tenant
shall fail to cause the lien to be discharged of record within such
ten (10) day period, Tenant shall be in Default under this Lease
and (without waiving such Default) Landlord, in addition to any
other rights and remedies it may have under this Lease, may, but
shall not be obligated to, cause such lien to be discharged by
payment, bond or otherwise, without investigation as to the
validity thereof or as to any offsets or defenses thereto, and
Tenant shall, within ten (10) days after request, reimburse
Landlord for all amounts paid and incurred, including attorneys'
fees and interest thereon at the rate of 18% per annum or such
higher rate as may be permitted by law, from the respective dates
of Landlord's payments. For adequate separate consideration
received on the execution hereof, on request Tenant also shall
otherwise indemnify, protect, defend and hold harmless Landlord and
its agents against any claim or damage resulting therefrom or in
any way connected therewith. Landlord may elect to record and post
notices of non-responsibility on the Leased Premises, the Building
or Property, with respect to any such liens.
Section 5.6 Condition Upon Termination. Upon the termination
of the Lease, Tenant shall surrender the Leased Premises to
Landlord, broom clean and in the same condition as received except
for ordinary wear and tear which Tenant was not otherwise obligated
to remedy under any provision of this Lease. However, Tenant shall
not be obligated to repair any damage which Landlord is required to
repair under Article 6. In addition, Landlord may require Tenant
to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the termination of the
Lease and to restore the Leased Premises, Building or Property to
its prior condition all at Tenant's expense. All alterations,
additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered
to Landlord upon the termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be
removed without material damage to the Leased Premises or Property.
Tenant shall repair, at Tenant's expense, any damage to the Leased
Premises, Building or Property caused by the removal of any such
machinery or equipment. In no event, however, shall Tenant remove
any of the following materials or equipment without Landlord's
prior written consent: any power wiring or power panels; lighting
or lighting fixtures; wall coverings; drapes, blinds or other
window coverings; carpets or other floor coverings; heaters, air
conditioners, or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating
equipment and decorations.
ARTICLE 6.
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1 Partial Damage to Leased Premises or Property.
A. Tenant shall notify Landlord in writing immediately
upon the occurrence of any damage to the Leased Premises, Building
or Property.
B. If the Leased Premises, Building or Property are
only partially damaged and if the proceeds received by Landlord
from insurance policies carried by it with respect to the Leased
Premises, Building and Property are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord
shall repair the damage within a reasonable time. If the insurance
proceeds received by Landlord are not available to Landlord or
sufficient to pay the entire cost of repair, or if the damage was
due to a cause not covered by insurance policies which Landlord
maintains, Landlord may elect either to (a) repair the damage as
soon as reasonably possible in which case this Lease shall remain
in full force and effect so long as Landlord diligently pursues
said repairs, or (b) terminate this Lease as of the date the damage
occurred. Landlord shall notify Tenant within ninety (90) days
after receipt of notice of the occurrence of the damage whether
Landlord elects to repair the damage or terminate this Lease. If
Landlord elects to terminate the Lease, Tenant may elect to
continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Leased Premises, Building and
Property. Tenant shall pay the cost of such repairs, except that,
upon satisfactory completion of such repairs, Landlord shall
deliver to Tenant any insurance proceeds received by Landlord for
the damage repaired by Tenant. Tenant shall give Landlord written
notice of such election within ten (10) days after receiving
Landlord's termination notice.
Section 6.2 Total or Substantial Destruction. If the Leased
Premises or Property is totally or substantially destroyed by any
cause whatsoever, or if the Building is substantially destroyed
(even though the Leased Premises or Property is not totally or
substantially destroyed), at Landlord's option this Lease shall
terminate as of the date the destruction occurred regardless of
whether Landlord receives any insurance proceeds. Landlord shall
notify Tenant of such election within thirty (30) days after the
occurrence of such total or substantial destruction.
Section 6.3 Temporary Reduction of Rent. If the Leased
Premises is destroyed or damaged and Landlord or Tenant repairs or
restores the Leased Premises pursuant to the provisions of this
Article 6, the Base Rent payable during the period of such damage,
repair and/or restoration shall be reduced according to the
percentage of the Leased Premises that is rendered wholly
untenantable. Except for such possible reduction in Base Rent,
Tenant shall not be entitled to any compensation, reduction, or
reimbursement from Landlord as a result of any damage, destruction,
repair, or restoration of or to the Leased Premises, Building or
Property.
Section 6.4 Waiver. Tenant waives the protection of any
statute, code, or judicial decision which grants a Tenant the right
to terminate a lease in the event of substantial destruction of the
Leased Premises, Building or the Property. Tenant agrees that the
provisions of Section 6.2 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial
or total destruction to the Leased Premises, Building or Property.
Section 6.5 Condemnation. If all of any portion of the
Leased Premises is taken under the power of eminent domain or sold
under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or
sold on the date the condemning authority takes title or
possession, whichever occurs first. If more than twenty percent
(20%) of the floor area of the Leased Premises is taken, either
Landlord or Tenant may terminate this Lease as of the date the
condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of
written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority takes
possession). If neither Landlord nor Tenant terminates this Lease,
this Lease shall remain in effect as to the portion of the Leased
Premises not taken, except that the Base Rent shall be reduced in
proportion to the reduction in the floor area of the Leased
Premises. Any Condemnation award or payment shall be distributed
in the following order: (a) first, to any ground lessor, mortgagee
or beneficiary under a deed of trust encumbering the Property, the
amount of its interest in the Property; (b) second, to Tenant only
the amount of any award specifically designated for loss of or
damage to Tenant's trade fixtures or removable personal property,
and tenant improvements paid for by Tenant; and (c) third, to
Landlord, the remainder of such award, whether as compensation for
reduction in the value of the leasehold, the taking of the fee, or
otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Leased Premises caused by the Condemnation,
except that Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority.
If the severance damages received by Landlord are not sufficient to
pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord's expense.
ARTICLE 7.
ASSIGNMENT AND SUBLETTING
Section 7.1 Landlord's Consent Required. Tenant shall not
mortgage or assign its interest under this Lease or sublet the
Leased Premises of any portion thereof without the prior written
consent of Landlord, which consent shall not unreasonably be
withheld. No assignment or subletting shall relieve Tenant of its
obligations under this Lease.
ARTICLE 8.
DEFAULTS; REMEDIES
Section 8.1 Defaults.
A. Events of Default. The happening of any of the
following listed events shall constitute a breach of this Lease and
event of default ("Default") by Tenant:
1. Tenant fails to pay any rent payable under this
Lease on or before the due date thereof;
2. Tenant fails to fully and properly perform any
act required of it in the performance of this Lease, or otherwise
fails to comply with any term or provision hereof within fifteen
(15) days' written notice;
3. Tenant or any of its creditors files any
petition or pleading to declare Tenant a bankrupt of the
adjudication in bankruptcy of Tenant under any bankruptcy law or
act;
4. The appointment by any court or under any law
of a receiver, trustee, or other custodian of the property, assets,
or business of Tenant;
5. The assignment by Tenant of all or any part of
its property or assets for the benefit of its creditors;
6. The levy, execution, attachment or taking of
property, assets or of the leasehold interest of Tenant by process
of law or otherwise in satisfaction of any judgment, debt or claim;
or
7. Any event of Default under the Additional Lease
(as defined in Article 14).
Section 8.2 Remedies.
A. Remedies. Upon the happening of any Default,
Landlord, if it shall so elect, may (i) terminate this Lease and
resume possession of the Leased Premises for Landlord's own
purposes; (ii) collect each installment of rent when the same
matures; (iii) accelerate rents for the remainder of the Term of
this Lease; (iv) extend such sums or perform such actions as it
deems advisable to cure such Default and hold Tenant liable for the
cost thereof, and (v) enter the Leased Premises with process of law
and terminate Tenant's right of possession and release the Leased
Premises to any person, firm, or corporation, and upon such terms
and conditions as Landlord may deem advisable, as agent of Tenant
or otherwise, for whatever rent it can obtain, in which event
Tenant shall remain liable for the rent reserved herein, and all
other obligations hereunder. Landlord shall apply the proceeds of
such re-leasing (i) first to the payment of expenses that Landlord
may incur in the entering and re-leasing, and (ii) then to the
payment of the rent due by Tenant and the fulfillment of Tenant's
covenants and obligations hereunder. In this case of any
deficiency, Tenant shall remain liable. Tenant agrees that
Landlord may file suit to recover any sums due to Landlord under
this section from time to time and that such suit or recovery of
any amount due Landlord, or election to terminate Tenant's right to
possession only without terminating lease, Landlord may at its
option enter into the Leased Premises, remove Tenant's signs and
other evidences of tenancy, and take and hold possession; provided,
however, that such entry and taking shall not terminate this Lease
or release Tenant in whole or in part from Tenant's obligation to
pay rent hereunder for the full term or for any other obligation of
Tenant under this Lease.
B. Attorneys' Fees and Costs. In the event that
Landlord or Tenant fail to perform any of the covenants and
conditions of this Lease and it becomes necessary for either party
to employ an attorney or other agent to enforce any of the
provisions of this Lease, whether suit be brought or not, the
prevailing party shall be entitled to recover its reasonable
attorneys' fees and all costs, including such fees and costs on
appeal or in bankruptcy, from the other party.
C. No Waiver by Landlord. Nothing herein contained
shall be deemed to be a waiver by Landlord of its statutory lien to
rent, and the remedies, rights and privileges of Landlord in the
case of Default of Tenant as set forth above shall not be
exclusive, and in addition thereto, Landlord may also exercise and
enforce all its rights at law or in equity which it may otherwise
have as a result of Tenant's Default hereunder. Landlord is herein
specifically granted all of the rights of a secured creditor under
the Uniform Commercial Code with respect to the property in which
Landlord has been granted a security interest by Tenant.
ARTICLE 9.
PROTECTION OF LENDERS
Section 9.1 Subordination. This Lease shall be subject and
subordinate at all times to the terms of any ground or underlying
leases which now exist or may hereafter be executed affecting the
Leased Premises under which Landlord shall claim, and to the liens
of any mortgages or deeds of trust in any amount or amounts
whatsoever now or hereafter existing encumbering the Leased
Premises, Building or Property, without the necessity of having
further instruments executed by the Tenant to effect such
subordination. So long as the Tenant shall pay the rent due and
comply with, abide by, and discharge the terms, conditions,
covenants, and obligations on its part to be kept and performed
hereunder, the peaceable possession of Tenant in and to the Leased
Premises for the Term shall not be disturbed in the event of the
foreclosure of any such mortgage or deed of trust or in the event
of a termination of any ground or underlying leases affecting the
Leased Premises.
Section 9.2 Attornment. If Landlord's interest in the
Property is acquired by any ground lessor, beneficiary under a deed
of trust, mortgagee, or purchaser at a foreclosure sale, Tenant
shall attorn to the transferee of or successor to Landlord's
interest in the Leased Premises or Property and recognize such
transferee or successor as Landlord under this Lease. Tenant
waives the protection of any statute or rule of law which gives or
purports to give Tenant any right to terminate this Lease or
surrender possession of the Leased Premises or Property upon the
transfer of Landlord's interest.
Section 9.3 Signing of Documents. Tenant shall sign and
deliver any instrument or documents necessary or appropriate to
evidence or confirm any such attornment and subordination. Such
documents may contain such provisions as are customarily required
by any ground lessor or deed of trust holder or mortgagee. Tenant
hereby makes, constitutes and irrevocably appoints Landlord, or any
transferee or successor of Landlord, the Tenant's attorney-in-fact
to execute and deliver any such instrument or document if Tenant
fails to do so within ten (10) days of receiving a written request
therefor.
Section 9.4 Estoppel Certificates. Tenant shall from time to
time, upon not less than ten (10) days' prior written request by
Landlord or any mortgagee or ground lessor of the Property, deliver
to Landlord or such mortgagee or ground lessor a statement in
writing certifying: (1) that this Lease is unmodified and in full
force and effect or, if there have been modifications, that this
Lease, as modified, is in full force and effect; (2) the amount of
Base Rent then payable under this Lease and the date to which rent
has been paid; (3) that Landlord is not in default under this
Lease, or, if in default, a detailed description of such
default(s); (4) that Tenant is or is not in possession of the
Leased Premises, as the case may be; and (5) such other information
as may be requested.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
Section 10.1 Waiver of Subrogation. Landlord and Tenant each
hereby waive any and all rights of recovery against the other, or
against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of
others under its control, if such loss or damage is covered by any
insurance policy in force (whether or not described in the Lease)
at the time of such loss or damage. Upon obtaining the policies of
insurance described herein, Landlord and Tenant shall give notice
to the insurance carrier or carriers of the foregoing mutual waiver
of subrogation.
Section 10.2 Landlord's Liability: Certain Duties.
A. As used in the Lease, the term "Landlord" means only
the current owner or owners of the fee title to the Leased
Premises, Building or Property or the leasehold estate under a
ground lease of the Leased Premises, Building or Property at the
time in question. Each Landlord is obligated to perform the
obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers
its title or interest is relieved of all liability with respect to
the obligations of Landlord under this Lease to be performed on or
after the date of transfer, provided that such transfer is not for
the primary purpose of avoiding such obligations. However, each
Landlord shall deliver to its transferee all funds previously paid
by Tenant if such funds have not yet been applied under the terms
of this Lease. Tenant agrees that it shall look solely to the
estate and property of the Landlord in the Property for collection
of any judgment (or other judicial process) requiring the payment
of money by Landlord of its obligations under this Lease subject to
the prior rights of any ground or underlying holder of any mortgage
covering the Property or Landlord's interest therein.
B. Landlord shall not be in default under this Lease
unless Landlord (or such ground lessor, mortgagee or beneficiary)
fails to cure or diligently pursue a cure of such nonperformance
within thirty (30) days after receipt of Tenant's notice or such
longer time as is reasonably necessary provided that such cure is
commenced within such thirty (30) days period and thereafter
pursued with reasonable diligence.
Section 10.3 Severability. A determine by a court of
competent jurisdiction that any provision of this Lease or any part
thereof is illegal or unenforceable shall not cancel or invalidate
the remainder of such provision or this Lease, which shall remain
in full force and effect.
Section 10.4 Interpretation. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this
Lease and are not a part of the terms or provisions of this Lease.
Whenever required by the context of this Lease, the singular shall
include the plural and the plural shall include the singular. The
masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions
of Tenant the term "Tenant" shall include Tenant's agents,
employees, contractors, invitees, successors or others using the
Leased Premises, Building or Property with Tenant's expressed or
implied permission.
Section 10.5 Incorporation of Prior Agreements;
Modifications. This Lease is the only agreement between the
parties pertaining to the lease of the Leased Premises, Building or
Property and no other agreements are effective. All amendments to
this Lease shall be in writing and signed by all parties. Any
other attempted amendment shall be void.
Section 10.6 Notices. All notices required or permitted
under this Lease shall be in writing and shall be personally
delivered or sent by certified mail, return receipt requested,
postage prepaid. Notices to Tenant and Landlord shall be delivered
to the party's respective address specified above. All notices
shall be effective upon delivery or attempted delivery. Either
party may change its notice address upon written notice to the
other party. Written notice of any Default with respect to
Tenant's duties and obligations hereunder shall be given by
Landlord to:
Sara Lee Knit Products Division
Sara Lee Corporation
Post Office Box 3019
Winston-Salem, North Carolina 27105
Attn: Doris Drayton
With an informational copy to:
Fagel & Haber
140 South Dearborn Street
14th Floor
Chicago, Illinois 60603
Attn: Howard M. Berrington, Esquire
Sara Lee Corporation shall have the right, but not the obligation,
to cure any such Default in its sole discretion within ten (10)
days after such notice is deposited in a U.S. Postal Service
receptacle, first class mail postage prepaid and properly
addressed.
Section 10.7 Radon Gas Notice. 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 your county public health unit.
Section 10.8 Waivers. All waivers must be in writing and
signed by the waiving party. Landlord's failure to enforce any
provision of this Lease or its acceptance of rent shall not be a
waiver and shall not prevent Landlord from enforcing that provision
or any other provision of this Lease in the future. No restrictive
endorsement or statement on a payment check from Tenant or in a
letter accompanying a payment check shall be binding on Landlord.
Landlord may, with or without notice to Tenant, negotiate such
check without being bound to the conditions of such restrictive
endorsement or statement.
Section 10.9 No Recordation. Tenant shall not record this
Lease or memorandum of this Lease.
Section 10.10 Joint and Several Liability. All parties
signing this Lease as Tenant shall be jointly and severally liable
for all obligations of Tenant.
Section 10.11 Force Majeure. If Landlord cannot perform any
of its obligations due to events beyond Landlord's control, the
time provided for performing such obligations shall be extended by
a period of time equal to the duration of such events. Events
beyond Landlord's control include, but are not limited to, acts of
God, war, civil commotion, labor disputes, strikes, fire, floor or
other casualty, shortages of labor or material, government
regulation or restriction and weather conditions.
Section 10.12 Execution of Lease. This Lease may be executed
in counterparts, and, when all counterpart documents are executed,
the counterparts shall constitute a single binding instrument. The
delivery of this Lease by Landlord to Tenant shall not be deemed to
be an offer and shall be binding upon either party until executed
and delivered to both parties.
Section 10.13 Holding Over. Any holding over by the Tenant
after the expiration of this Lease shall be construed as a Tenancy
at Sufferance, unless such occupancy is with the prior written
consent of the Landlord, in which event the Tenant will be a tenant
from month to month, upon the same terms and conditions of this
Lease. Acceptance by the Landlord of rent after such termination
shall not constitute a renewal.
Section 10.14 Time. Time is of the essence of this Lease.
ARTICLE 11.
BROKERS
Tenant covenants, represents and warrants that Tenant had no
dealings or negotiations with any broker or agent other than
Phoenix Realty Group, Inc. in connection with the consummation of
this Lease. Landlord agrees to pay all commissions due to Phoenix
Realty Group, Inc. Tenant and Landlord covenant and agree to hold
each other harmless and indemnify each other from and against any
and all costs, expenses (including reasonable attorneys' fees
before trial, at trial, on appeal and in bankruptcy) or liability
for any compensation, commissions, or charges claimed by any broker
or agent with respect to this Lease or the negotiation thereof.
ARTICLE 12.
CONFIDENTIALITY
Tenant and its officers, directors, employees, agents and
representatives shall not disclose the subject matter or terms of
the transaction contemplated by this Lease unless prior written
consent to such disclosure is obtained from Landlord, which consent
may be withheld at Landlord's sole discretion.
ARTICLE 13.
EXHIBITS
All exhibits attached hereto shall be deemed to be a part
hereof and are hereby incorporated.
ARTICLE 14.
CONDITION PRECEDENT
The effectiveness of this Lease is conditioned upon Landlord's
and Tenant's entering into that certain Warehouse Space Lease
Agreement for Sections 1.2, 1.3, 1.4, 1.5, 1.6 and 1.7 in the
Building on the terms and conditions set forth therein (the
"Additional Lease") by no later than November 30, 1994. In the
event that the Additional Lease shall not have been entered into by
such date, this Lease shall automatically terminate and be of no
further force or effect.
ARTICLE 15.
EXPANSION OPTION
Provided that no continuing event of Default exists with
respect to Tenant's duties and obligations hereunder, Tenant shall
have the option (the "Expansion Space Option") to lease one (1),
two (2) or all of Sections 2.2, 2.4 and 2.7 of the Building
(collectively, the "Expansion Space"; each such section of
Expansion Space is separately referred to as a "section"), as
depicted on Exhibit A, constituting approximately 96,768 square
feet of space, on the same terms and conditions set forth herein
(including without limitation Section 2.1, Section 2.2 and the Base
Rent abatement provisions in Section 3.1) except that monthly Base
Rent for such Expansion Space shall be $18,144.00 per section
(subject to the abatement of Base Rent provisions set forth in
Section 3.1) and Tenant's Share of the Operating Expenses for the
Expansion Space shall be 5.64% (96,768 divided by 1,715,000) of the
Operating Expenses per section, plus an additional amount for
Tenant's use of the telephone system in the Building, plus all
applicable sales and use taxes and all other Additional Rent. The
Expansion Space Option for all three (3) sections shall be
exercised, if at all, by written notice delivered to Landlord by no
later than February 28, 1995 (the "Option Exercise Deadline"). In
the event that Landlord shall not have received Tenant's written
notice of Tenant's exercise of the Expansion Space Option for all
three (3) sections by no later than the Option Exercise Deadline,
the Expansion Space Option for all three (3) sections shall
automatically terminate and be of no further force or effect. The
Expansion Space Option may be exercised as to one (1), two (2) or
all three (3) of the sections and may be exercised at one or more
times prior to the Option Exercise Deadline, provided that (i)
Tenant shall not be entitled to exercise the Expansion Space Option
for Section 2.2 or Section 2.7 until the Expansion Space Option for
Section 2.4 shall have been timely and properly exercised and (ii)
after Tenant's timely and proper exercise of its Expansion Space
Option for Section 2.4, Landlord may determine, in Landlord's sole
and unrestricted discretion, whether any subsequent exercise by
Tenant of its Expansion Space Option shall apply first to Section
2.2 or Section 2.7. Tenant shall not be entitled to exercise its
Expansion Space Option for less than an entire section. Any
Expansion Space Option exercised by Tenant shall be effective upon
subsequent written notice by Landlord that each section for which
the Expansion Space Option has been exercised is available for
occupancy, which notice shall be delivered, or deemed to be
delivered, no later than the thirtieth (30th) day after the date of
Landlord's receipt of Tenant's exercise notice as to Section 2.4
and Section 2.7 and no later than the ninetieth (90th) day after
the date of Landlord's receipt of Tenant's exercise notice as to
Section 2.2.
ARTICLE 16.
RIGHT OF FIRST REFUSAL
Upon expiration of the Expansion Space Option and provided
that Landlord shall have entered into one or more binding
agreements for all space within Sections 2.1, 2.3 and 2.5 of the
Building upon terms and conditions acceptable to Landlord in
Landlord's sole and unrestricted discretion, Tenant shall have the
right during the Term to lease the Expansion Space or portion
thereof on the same terms and conditions as those of any bona fide
offer received by and acceptable to Landlord. Before entering into
any lease of or agreement to lease the Expansion Space or portion
thereof, Landlord shall notify Tenant in writing of the terms and
conditions of such offer, and Tenant shall have five (5) days after
receipt of such notice within which to exercise such right of first
refusal by written notice to Landlord. Failure by Tenant to
exercise such right of first refusal within said five (5) day
period shall automatically terminate Tenant's right of first
refusal as to the offer of which Tenant has received written
notice, but Tenant's failure to exercise its right of first refusal
on one or more occasions shall not affect Tenant's right to
exercise its right of first refusal as to subsequent offers to
lease the Expansion Space.
ARTICLE 17.
COLLATERAL ASSIGNMENT
Tenant shall collaterally assign all its rights under this
Lease to Sara Lee Knit Products ("SLKP"), which is a division of
Sara Lee Corporation, a Maryland corporation ("SLC"), to secure
Tenant's obligations under that certain Warehouse Services
Agreement dated effective as of December 1, 1994, by and between
Tenant and SLKP. Landlord hereby acknowledges and consents to such
collateral assignment provided that if SLKP shall exercise its
rights under the collateral assignment, SLKP or an assignee of SLKP
("Assignee") shall be required, within the ten (10) day notice and
cure period described in Section 10.6 and prior to taking
possession of the Leased Premises, to assume in writing all duties
and obligations of Tenant under this Lease accruing or arising from
and after the date of assumption of this Lease and to provide
assurances satisfactory to Landlord that all obligations of SLKP
under this Lease are obligations of SLC. In the event SLKP or its
Assignee shall not have assumed this Lease and provided such
assurances within the ten (10) day notice and cure period or the
Default specified in Landlord's written notice to SLC shall not
have been cured within the time period allowed by Landlord, neither
SLC nor SLKP shall have any further rights with respect to this
Lease. If SLKP elects to appoint an Assignee to assume this Lease,
such Assignee shall have a net worth of no less than Five Million
Dollars ($5,000,000.00) and shall be approved by Landlord in
writing, which approval shall not unreasonably be withheld or
delayed. In no event shall SLKP be construed as the tenant under
this Lease prior to SLKP's assumption of this Lease, nor shall SLKP
be liable for any of Tenant's duties and obligations under this
Lease accruing or arising prior to SLKP's assumption of this Lease.
IN WITNESS WHEREOF, Tenant and Landlord have caused this Lease
to be duly executed in duplicate as of the date first above written
by their respective duly authorized officers or agents.
Signed, sealed and delivered
in the presence of: LANDLORD:
JACKSONVILLE CENTER, INC., a
Florida corporation
/S/ W. CAREY WEBB_____________ By:__/S/ ARIS NEWTON__________
Name:_W. Carey Webb___________ Name:_Aris Newton__________
Title:_President___________
/S/ R. PARK NEWTON____________
Name:_R. Park Newton__________
TENANT:
LANEY & DUKE TERMINAL WAREHOUSE
COMPANY, INC., a Florida
corporation
/S/ W. CAREY WEBB_____________ By:__/S/ THOMAS DUKE__________
Name:_W. Carey Webb___________ Name:_Thomas Duke__________
Title:_President___________
/S/ R. PARK NEWTON____________
Name:_R. Park Newton__________
EXHIBIT A
LEGAL DESCRIPTION AND SITE PLAN OF PROPERTY
EXHIBIT B
IMPROVEMENTS
Landlord's Work: Prior to commencement of the Term,
Landlord will, at Landlord's sole cost
and expense, clean the restroom/break
room areas in Section 2.6.
Tenant Improvements: Notwithstanding the provisions of Section
5.5, Landlord will allow locations to be
painted on the floors of the Leased
Premises.
EXHIBIT C
EXCEPTED ITEMS
EXHIBIT D
RULES AND REGULATIONS
Tenant's use of the Leased Premises shall be subject at all
times during the Term to rules and regulations adopted by Landlord
governing the use of the parking areas, driveways, passageways,
exterior of the Building, lighting and other matters affecting
other tenants in and the general management and appearance of the
Property. Tenant agrees to comply with all such rules and
regulations upon notice to Tenant from Landlord, and Tenant's
failure to so comply shall constitute a material Default hereunder,
in respect of which Landlord shall have all rights and remedies.
Without limiting the foregoing, Tenant expressly agrees as follows:
A. All deliveries to or from the Leased Premises shall be
done only through the appropriate entrances to the Leased Premises.
B. Tenant shall pay the cost of removal of any of Tenant's
refuse and garbage and maintain all loading areas in a clean manner
satisfactory to Landlord.
C. No radio or television aerial or other device shall be
erected on the roof or exterior walls of the Building without first
obtaining in each instance Landlord's consent in writing. Any
aerial or device installed without such written consent shall be
subject to removal at Tenant's expense without notice at any time.
D. No loud speakers, televisions, phonographs, radios, tape
players or other devices shall be used in a manner so as to be
heard or seen outside of the Leased Premises without the prior
written consent of Landlord.
E. Tenant shall keep the Leased Premises at a temperature
sufficiently high to prevent freezing of water in pipes and
fixtures.
F. The plumbing facilities shall not be used for any other
purpose than that for which they are constructed; no foreign
substance of any kind shall be thrown therein, and the expense of
any breakage, stoppage, or damage resulting from a violation of
this provision shall be borne by Tenant.
G. Tenant, at its expense, shall contract with an
exterminator for termite and pest extermination services covering
the Leased Premises, as required in Landlord's sole judgment
reasonably exercised.
H. Tenant shall not burn any trash or garbage of any kind on
or about the Property.
I. Tenant shall keep and maintain the Leased Premises in a
neat and clean condition.
J. Tenant shall take no action which would violate
Landlord's labor contracts, if any, affecting the Property, nor
create any work stoppage, picketing, labor disruption or dispute,
or any interference with the business of Landlord or other tenant
or occupant in the Property or with the rights and privileges of
any customer or other person(s) lawfully in and upon the Property.
K. Tenant shall pay before delinquency all license or permit
fees and charges of similar nature for the conduct of any business
in the Leased Premises.
L. Tenant shall not perform any act or carry on any practice
which may damage, mar or deface the Leased Premises or any other
part of the Property.
M. Tenant shall not place a load on any floor in the Leased
Premises, or in any area of the Building, exceeding the floor load
allowed by Landlord.
N. Landlord shall not be responsible for any loss or damage
occurring to any property owned by Tenant.
O. Tenant shall keep the outside areas immediately adjoining
the Leased Premises (including without limitation the sidewalks)
clear and free from snow, ice, dirt and rubbish, and Tenant shall
not place, suffer or permit any obstructions or merchandise in such
areas.
Landlord may amend or add any rules and regulations from time
to time, and Tenant shall comply with same immediately upon receipt
of notice thereof.
OFFICE LEASE
Between
JACKSONVILLE CENTER, INC.,
Landlord,
and
AMERICA ONLINE, INC.,
Tenant
<PAGE>
TABLE OF CONTENTS
1. Lease of Premises . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
3. Base Rent . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Additional Rent . . . . . . . . . . . . . . . . . . . . . 8
5. Use of Premises . . . . . . . . . . . . . . . . . . . . . 10
6. Tenant Improvements and Delivery of Possession. . . . . . 11
7. Services. . . . . . . . . . . . . . . . . . . . . . . . . 13
8. Condition and Care of Premises; Landlord's and Tenant's
Maintenance Obligations and Landlord's Refurbishment. . . 14
9. Surrender of Premises . . . . . . . . . . . . . . . . . . 16
10. Holding Over. . . . . . . . . . . . . . . . . . . . . . . 16
11. Rules and Regulations . . . . . . . . . . . . . . . . . . 17
12. Rights Reserved to Landlord . . . . . . . . . . . . . . . 17
13. Alterations . . . . . . . . . . . . . . . . . . . . . . . 18
14. Assignment and Subletting . . . . . . . . . . . . . . . . 18
15. Waiver of Certain Claims; Indemnity by Tenant and
Landlord. . . . . . . . . . . . . . . . . . . . . . . . . 20
16. Damage or Destruction by Casualty . . . . . . . . . . . . 21
17. Eminent Domain. . . . . . . . . . . . . . . . . . . . . . 22
18. Default; Rights and Remedies. . . . . . . . . . . . . . . 23
19. Subordination.. . . . . . . . . . . . . . . . . . . . . . 26
20. Mortgagee Protection. . . . . . . . . . . . . . . . . . . 27
21. Insurance and Subrogation . . . . . . . . . . . . . . . . 28
22. Nonwaiver.. . . . . . . . . . . . . . . . . . . . . . . . 29
23. Estoppel Certificate. . . . . . . . . . . . . . . . . . . 30
24. Corporate Authority . . . . . . . . . . . . . . . . . . . 30
25. Real Estate Brokers . . . . . . . . . . . . . . . . . . . 30
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 30
27. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 31
28. Landlord. . . . . . . . . . . . . . . . . . . . . . . . . 32
29. Title and Covenant Against Liens. . . . . . . . . . . . . 32
30. Signage . . . . . . . . . . . . . . . . . . . . . . . . . 32
31. Exculpatory Provisions. . . . . . . . . . . . . . . . . . 33
32. Hazardous Substances. . . . . . . . . . . . . . . . . . . 33
33. Radon Gas . . . . . . . . . . . . . . . . . . . . . . . . 34
34. Competitors . . . . . . . . . . . . . . . . . . . . . . . 34
35. Tenant's Supplemental Equipment . . . . . . . . . . . . . 34
36. ADA Requirements. . . . . . . . . . . . . . . . . . . . . 37
37. Contingencies . . . . . . . . . . . . . . . . . . . . . . 37
Exhibit A Premises
Exhibit A-1 Premises depicting Phase 1 Space and Phase 2 Space
Exhibit A-2 Site Plan Showing Tenant's Parking Area
Exhibit A-3 Temporary Space
Exhibit B Rules and Regulations
Exhibit C Annual and Monthly Base Rent
Exhibit D Description of the Plans
<PAGE>
OFFICE LEASE
THIS OFFICE LEASE (the "Lease"), made effective as of May 17,
1995 (the "Effective Date"), by and between JACKSONVILLE CENTER,
INC., a Florida corporation ("Landlord"), and AMERICA ONLINE, INC.,
a Delaware corporation ("Tenant").
WITNESSETH:
1. Lease of Premises; Option to Extend Term.
(a) Premises; Term. Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, the premises as outlined on
the floor plan attached hereto as Exhibit A (herein called
"Premises") on the first floor of the office building located at
One
Imeson Park Boulevard, Jacksonville, Florida, and known as One
Imeson
Place (herein called "Building"), which Premises is comprised of
the
"Phase 1 Space" and the "Phase 2 Space," both as shown on the floor
plan attached hereto as Exhibit A-1, for a term (herein called
"Initial Term") of seven (7) Lease Years (the term "Lease Year" is
defined below) commencing on the date(s) on which Landlord shall
deliver to Tenant possession of the Phase 1 Space of the Premises
or portions thereof in accordance with Section 6 hereof (herein
called "Commencement Date"), and ending seven (7) Lease Years
thereafter (herein called "Expiration Date"), unless sooner
terminated as provided herein, paying as rent therefor the sums
hereinafter provided, without any setoff, abatement, counterclaim
or deduction whatsoever except as specifically provided herein.
The
Premises shall also be deemed to include Tenant's exclusive right
to use up to 1,000 standard parking spaces within the area labeled
"Tenant's Parking Area" on the site plan attached hereto as Exhibit
A-2; provided, however, that Landlord reserves the right to
restripe
and/or reconfigure (but not relocate) Tenant's Parking Area from
time
to time so long as Tenant's Parking Area at all times includes no
less than 1,000 standard parking spaces and that any such
restriping
or reconfiguration does not unduly inconvenience Tenant and
Tenant's
employees, contractors and invitees or materially and adversely
affect Tenant's business. For purposes of this Section, "standard
parking spaces" shall mean parking spaces sufficiently large to
meet
the requirements of applicable code, including a sufficient number
of handicap spaces to meet the requirements of applicable code.
Tenant and Tenant's employees shall be entitled to park in all
areas
of the parking lot serving the Building not reserved for use by
other
tenants of the Building or otherwise restricted by Landlord from
time
to time in Landlord's sole discretion.
(b) Tenant's Option to Extend the Term. Provided that
Tenant is not in default of any term, condition or covenant
contained
in this Lease beyond any applicable grace or cure period at the
time
of exercise of the option to extend the Term, Tenant shall have the
option of renewing the term of this Lease for one (1) additional
period of three (3) Lease Years (the "Renewal Term") on the same
terms and conditions as provided herein. The Annual Base Rent and
Monthly Base Rent for the Renewal Term shall be as provided on
Exhibit C attached hereto and made a part hereof. (The Initial
Term
and the Renewal Term, if Tenant's renewal option is properly and
timely exercised, are together referred to herein as the "Term.")
Notice of the exercise of such option shall be given by Tenant to
Landlord in writing not later than two hundred seventy (270) days
prior to the expiration of the Initial Term. In the event that
Tenant shall fail to give timely and proper written notice of its
intent to exercise such option, Tenant shall be deemed irrevocably
to have waived any right to extend the Term.
2. Definitions. As used in this Lease:
(a) "Annual Base Rent" shall mean such amounts as are
listed on Exhibit C attached hereto and made a part hereof.
(b) "Monthly Base Rent" shall mean such amounts as are
listed on Exhibit C attached hereto and made a part hereof.
(c) "Permitted Use" shall mean general office uses,
including, but not limited to, a call center for technical customer
support, for billing and sales support and for such other related
office uses as are necessary to conduct Tenant's business. Tenant
may furnish the breakrooms within the Premises with refrigerators,
microwave ovens, dishwashers and other typical kitchen appliances,
other than conventional ovens, stoves, hot plates or other
appliances
that Landlord reasonably determines may create a safety risk.
(d) "Brokers" shall mean Phoenix Realty Group, Inc., as
Landlord's agent, and Locations for Lease, Inc., as Tenant's agent.
(e) "Initial Monthly Estimate" shall mean Seven Thousand
Three Hundred Ten and 56/100 Dollars ($7,310.56), which amount is
equal to the Rentable Area of the Premises multiplied by $.07917.
Notwithstanding the foregoing, until delivery of possession of the
Phase 2 Space to Tenant in accordance with the terms and provisions
of this Lease, the "Initial Monthly Estimate" shall mean Four
Thousand Two Hundred Eighty-Six and 58/100 Dollars ($4,286.58),
which
amount is equal to the Phase 1 Space Rentable Area multiplied by
$.07917.
(f) "Rentable Area of the Building" shall mean the sum
of the rentable areas on all floors of the Building computed by
measuring to the center line of the exterior wall on each entire
floor, excluding all common and public areas in the Building. No
deduction shall be made for Building columns or projections.
Rentable Area of the Building shall be deemed to be 1,640,134
square
feet; provided, however, that either party may elect, at its sole
cost and expense, to have the Building measured, in accordance with
the foregoing standards and within sixty (60) days of the Effective
Date, by a duly licensed architect reasonably acceptable to the
approved in writing by the other party, and the result of such
measurement shall, if different from the foregoing figure, be
deemed
to be the Rentable Area of the Building.
(g) "Rentable Area of the Premises" shall mean (A) as to
any portion of the Premises consisting of an entire floor, the area
of the entire floor measured to the center line of the exterior
walls; and (B) as to any portion of the Premises consisting of less
than an entire floor, the area measured from the center line of the
exterior wall to the center line of all demising partitions and to
the outside face of corridor partitions. No deduction shall be
made
for Building columns or projections. Rentable Area of the Premises
shall be deemed to be 92,340 square feet; Rentable Area of the
Phase
1 Space shall be deemed to be 54,144 square feet (the "Phase 1
Space
Rentable Area"); and Rentable Area of the Phase 2 Space shall be
deemed to be 38,176 square feet.
(h) "Rentable Area of the Building Office Space" shall
mean the area of all rentable office space in the Building measured
in accordance with the measurement standards for the Rentable Area
of the Premises. Rentable Area of the Building Office Space shall
be deemed to be 184,680 square feet.
(i) "Tenant's Proportionate Share" shall mean 5.63
percent, which is the Rentable Area of the Premises divided by the
Rentable Area of the Building; provided, however, that (i) with
respect to such Expenses that apply only to the office space within
the Building (including without limitation, chiller unit
maintenance
costs if such chiller unit(s) serve only the office space in the
Building), "Tenant's Proportionate Share" shall mean fifty percent
(50%), which is the Rentable Area of the Premises divided by the
Rentable Area of the Building Office Space, (ii) with respect to
such
Expenses that apply only to the Premises (including, without
limitation, air handler unit maintenance costs, if such handler
unit(s) serve only the Premises), "Tenant's Proportionate Share"
shall mean one hundred percent (100%), and (iii) with respect to
Expenses that apply to the parking areas of the Project, "Tenant's
Proportionate Share' shall mean sixty-two and one-half percent
(62.5%), which is the number of parking spaces to which Tenant is
entitled within Tenant's Parking Area (i.e., 1,000) divided by the
approximate total number of parking spaces in the Project (i.e.,
1,600). Landlord shall be entitled to make reasonable allocations
of Taxes and Expenses between the office space portion of the
Building and the warehouse space portion of the Building based on
information received from the Duval County Property Appraiser's
office. In the event that the Duval County Property Appraiser
separately values the Land, the office space portion of the
Building
and the warehouse space portion of the Building, Tenant's
Proportionate Share of Taxes shall equal fifty percent (50%) of the
Taxes allocable to the office space portion of the Building plus an
equitable portion of the Taxes allocable to the Land based on the
Rentable Area of the Premises and the area of Tenant's Parking
Area.
(j) "Adjustment Date" shall mean the first day of the
second Lease Year and the first day of each Lease Year thereafter.
(k) "Adjustment Year" shall mean the first Lease Year
and
each Lease Year thereafter.
(l) "Expenses" shall mean those costs and expenses paid
or incurred by or on behalf of Landlord for owning, operating,
maintaining, redecorating, with the exception of the Landlord's
Refurbishment (as provided in Section 8(e) to be completed by
Landlord at Landlord's expense as provided in Section 8(e) below,
and repairing the Building, the land owned by Landlord upon which
the Building stands and serving the Building (herein called the
"Land") and the personal property used in conjunction therewith
(said
Building, Land and personalty herein collectively called the
"Project"), including without limitation the cost of security and
security devices and systems, snow and ice and trash removal,
cleaning and sweeping, planting and replacing decorations, flowers
and landscaping, maintenance, repair and replacement of utility
systems with the exception of the replacement of the chiller units
for the office space of the Building, sprinkler system repair and
maintenance, electricity, steam, water, sewers, fuel, heating,
lighting, air conditioning, window cleaning, janitorial service,
insurance (including but not limited to, fire, extended coverage,
all risk, liability, worker's compensation, rent loss, or any other
insurance carried by the Landlord and applicable to the Project),
painting, uniforms, supplies, sundries, sales or use taxes on
supplies or services, cost of wages and salaries of all persons
engaged in the operation, maintenance and repair of the Project,
and
so-called fringe benefits (including social security taxes,
unemployment insurance taxes, cost for providing coverage for
disability benefits, cost of any pensions, hospitalization, welfare
or retirement plans, or any other similar or like expenses incurred
under the provisions of any collective bargaining agreement, or any
other cost or expense which Landlord pays or incurs to provide
benefits for employees so engaged in the operation, maintenance and
repair of the Project), assessments of property owners' association
for property within which the Project is located, the charges of
any
independent contractor who, under contract with the Landlord or its
representatives, does any of the work of operating, maintaining or
repairing of the Project, legal and accounting expenses (including,
but not limited to, such expenses as relate to seeking or obtaining
reductions in and refunds of real estate taxes) or any other
expense
or charge, whether or not hereinbefore mentioned, which, in
accordance with generally accepted accounting and management
principles, would be considered as an expense of owning, operating,
maintaining or repairing the Project. Expenses shall not include
any management fees, as Tenant's responsibility for payment of
management fees is provided in Section 4(g) below.
The following items shall be excluded from Expenses:
(i) Costs incurred in connection with the
original construction of the Building;
(ii) Costs of alterations or improvements of
Tenant's Premises pursuant to the Plans (as defined in Section 6),
the premises of other tenants or occupants of the Building or
vacant
leasable space in the Building, except in the case as required by
a governmental agency and for the health and welfare of occupants
of the Building or otherwise provided in this Lease. In such a
case,
the alterations or improvements will be amortized over their useful
life and passed through to tenants annually;
(iii) Depreciation of the Building or the
equipment serving the Building;
(iv) Interest and principal payments on
mortgages
and other debt costs, if any;
(v) Expenses resulting directly from the
negligence of Landlord, its agents, contractors or employees,
negligence will be that determined by a Court of Law;
(vi) Legal fees, space planners' fees, real
estate brokers' leasing commissions and advertising expenses
incurred
in connection with the leasing of the Building, except as
specifically provided herein;
(vii) Costs for which Landlord is reimbursed by
its insurance carrier, any tenant's carrier, any tenant, any
warrantor or other third party, except as specifically provided
herein (Landlord shall diligently and in good faith pursue all
insurance, breach of warranty or other claims which might result in
a reduction in Expenses payable by Tenant);
(viii) Any bad debt loss, rent loss, reserves for
bad debts or rent loss or legal fees incurred in collecting rent
from
other Building tenants;
(ix) The expense of additional services
provided
to other tenants in the Building and other benefits which are not
provided to Tenant, but which are provided to another tenant or
occupant of the Building;
(x) The wages of any employee who does not
devote substantially all of his or her time to the Building or
common
areas, except to the extent such wages are attributable to time
spent
by such employee in servicing and/or managing the Building or
common
areas;
(xi) Amounts paid as ground rental by Landlord,
if any;
(xii) Fees for services rendered to the Building
or common areas by entities controlled by or under common control
with Landlord to the extent such fees exceed the market rate
payable
for such services if rendered by unrelated third parties;
(xiii) Fines, penalties, late payment charges and
interest arising from the acts or inaction of Landlord;
(xiv) Costs of repairs or replacements caused by
the exercise of any condemnation rights by any public or
quasi-public
authority to the extent that Landlord receives compensation for
same
from the condemning authority;
(xv) Any charge for Landlord's income taxes,
excess profit taxes, franchise taxes or similar taxes on Landlord's
business;
(xvi) Salaries and other compensation paid to
executive employees above the grade of Building manager (including
profit sharing, bonuses and 401(K) savings plans) or who receive
compensation pursuant to the terms of the management agreement for
the Building, excepting those related to the management of the
Building and common areas; provided, however, that this exclusion
shall not be deemed to reduce the Additional Rent payable by Tenant
pursuant to Section 4(g);
(xvii) Any rent paid for Landlord's on-site
management or leasing office, or any other offices or spaces of
Landlord or any related entity;
(xviii) Costs and expenses of utilities for tenant
space in the Building;
(xix) Increased insurance premiums caused by any
other tenant's acts to the extent paid by such tenant, except in
the
case of increased insurance due to the use by Tenant, its parent
company, subsidiaries or merger company in the case of a sublease
or assignment of this Lease;
(xx) The costs associated with any concession
granted to other tenants in the Building (such as moving expenses,
lease assumptions, etc.);
(xxi) Legal fees incurred in disputes with
tenants
or in connection with the sale, financing or leasing of the
Building
or with respect to any bankruptcy proceedings involving Landlord or
any tenant other than Tenant;
(xxii) All payments, debt service, costs and
expenses directly related to the sale or financing of the Building;
(xxiii) The cost of any work performed (preparing
a tenant's space for occupancy, including painting and decorating
such space) or services provided (such as separately metered
electricity) for any tenant (including Tenant) at such tenant's
cost
or provided by Landlord without charge as an inducement to lease
(such as free rent or improvement allowance);
(xxiv) The cost of installing, operating and
maintaining any specialty service, such as an observatory,
broadcasting facility, luncheon club, retail store, sundry shop,
newsstand, or concession;
(xxv) The cost of any repairs, alterations,
additions, changes, replacements and the like which under generally
accepted accounting principles are properly classified as capital
expenditures, except in the case as required by a governmental
agency
and for the health and welfare of occupants of the Building. In
such
a case, the alterations or improvements will be amortized over
their
useful life and passed through to tenants annually;
(xxvi) Legal costs (including settlement or other
payments) related to disputes with contractors hired directly by
Landlord, except to the extent such costs are related to Tenant,
the
Premises, the Building or the Land;
(xxvii) Costs related to the leasing or purchase
of art, except to the extent such costs are consistent with
standards
maintained in comparable office buildings;
(xxviii) Costs, including all general overhead
expenses, incurred by Landlord in the operation of the business of
the legal entity that constitutes the Landlord to the extent that
the same is separate and apart from the operation of the Building;
(xxix) Costs arising from the presence within the
Building or the Project of hazardous materials, except to the
extent
such materials have been introduced by, or with the permission or
acquiescence of, Tenant, in which case Tenant shall pay 100% of
such
costs;
(xxx) Charitable or political contributions made
by Landlord;
(xxxi) Costs and expenses for janitorial service
for the Building, except for janitorial service with respect to the
common areas; and
(xxxii) So long as the Premises is located
exclusively on the first floor of the Building, the cost of
maintaining any elevators or escalators.
Notwithstanding anything contained in the above definition of
Expenses to the contrary:
(A) The cost of any capital improvements to the
Building made after the date of this Lease which reduce Expenses,
amortized over such reasonable period as Landlord shall determine,
shall be included in the Expenses, provided that the amortized
amount
included in Expenses is less than the reduction in Expenses
resulting
from the capital improvement.
(B) If any item of Expenses, though paid or
incurred
in one Lease Year, relates to more than one calendar year, at the
option of Landlord such item may be proportionately allocated among
such related Lease Years.
(m) "Taxes" shall mean real estate taxes, assessments
(whether they be general or special), sewer rents, rates and
charges,
transit taxes, taxes based upon leases or the receipt of rent, and
any other federal, state or local governmental charge, general,
special, ordinary or extraordinary (but not including income or
franchise taxes or any other taxes imposed upon or measured by the
Landlord's income or profits, except as provided herein), which may
now or hereafter be levied, assessed or imposed against the Land or
the Building. The Building and the Land are herein collectively
called the "Real Property." Tenant acknowledges and agrees that
all
or a portion of Taxes may be paid by Sears, Roebuck and Co. for a
portion of the Term pursuant to the terms of a separate agreement
and that any such payment shall not affect Tenant's duties and
obligations hereunder for payment of Tenant's Proportionate Share
of Taxes. Landlord shall pay real estate taxes within the period
provided by statute for the maximum possible discount, and Landlord
shall compute the Tax Estimate, as defined herein, based on the
discounted rate.
Notwithstanding anything contained in the above definition of
Taxes to the contrary:
(i) If at any time the method of taxation then
prevailing shall be altered so that any new or additional tax,
assessment, levy, imposition or charge or any part thereof shall be
imposed upon Landlord in place or partly in place of any Taxes or
contemplated increase therein, or in addition to Taxes, and shall
be measured by or be based in whole or in part upon the Real
Property, the rents or other income therefrom (but not including
income or franchise taxes or any other taxes imposed upon or
measured
by the Landlord's income or profits or any leases of any part
thereof), then all such new taxes, assessments, levies, impositions
or charges or part thereof, to the extent that they are so measured
or based, shall be included in Taxes levied, assessed or imposed
against the Real Property to the extent that such items would be
payable if the Real Property were the only property of Landlord
subject thereto and the income received by Landlord from the Real
Property were the only income of Landlord.
(ii) Notwithstanding the year for which any
such
taxes or assessments are levied, (1) in the case of special taxes
or assessments which may be payable in installments, the amount of
each installment, plus any interest payable thereon, paid during an
Adjustment Year shall be included in Taxes for that year and (2) if
any taxes or assessments payable during an Adjustment Year shall be
computed with respect to a period in excess of twelve calendar
months, then taxes or assessments applicable to the excess period
shall be included in Taxes for that year. Except as provided in
the
preceding sentence, all references to Taxes "for" a particular
Adjustment Year shall be deemed to refer to Taxes levied, assessed
or otherwise imposed during such Adjustment Year without regard to
when such Taxes are payable.
(iii) Taxes shall also include any personal
property taxes (attributable to the Adjustment Year in which paid)
imposed upon the furniture, fixtures, machinery, equipment,
apparatus, systems or appurtenances used in connection with the
Real
Property or the operation thereof.
(n) "Lease Year" shall mean each of the seven one-year
(twelve calendar months) periods of the Initial Term and the three
one-year periods of the Renewal Term of the Lease, the first lease
year being that one-year period which commences on the Commencement
Date and ends on date which is one day prior to the one year
anniversary of the Commencement Date (the "First Lease Year").
3. Base Rent.
(a) Tenant shall pay the Annual Base Rent, as set forth
in Exhibit C, to Landlord for the Premises, payable in equal
monthly
installments in the amount of the Monthly Base Rent in advance on
the first day of the Term and on the first day of each calendar
month
thereafter of the Term. Tenant's obligation to pay Rent and
Additional Rent for the Phase 1 Space shall commence on the date of
delivery of possession of the Phase 1 Space in accordance with
Section 6(b)(i) (the "Phase 1 Space Rent Commencement Date"). If
the
Term shall begin on any date except the first day of a calendar
month, or shall end on any day except the last day of a calendar
month, then Monthly Base Rent for any such partial calendar month
within the Term shall be prorated based on a 30-day month.
Tenant's
obligation to pay Rent and Additional Rent for the Phase 2 Space
shall commence on the date of delivery of possession in accordance
with Section 6(b)(i) of the Phase 2 Space (the "Phase 2 Space Rent
Commencement Date"). If the Term shall end on any date except the
last day of a calendar month, then Monthly Base Rent shall be
prorated based on a 30-day month.
(b) Base Rent, Additional Rent (as hereinafter defined),
Tax and Expense Estimate (as hereinafter defined) and all other
amounts becoming due from Tenant to Landlord hereunder (herein
collectively called the "Rent") shall be paid in lawful money of
the
United States to Landlord at the office of Landlord at 100 North
Tampa Street, Suite 3575, Tampa, Florida 33602, or as otherwise
designated from time to time by written notice from Landlord to
Tenant. The payment of Rent hereunder is independent of each and
every other covenant and agreement contained in this Lease, except
as specifically provided herein. Tenant shall pay all applicable
sales and use taxes on each installment or payment of Rent at the
time payment is made.
(c) Notwithstanding anything in this Lease to the
contrary, upon the delivery of the Phase 1 Space for occupancy in
compliance with the requirements of the Lease, including Sections
6 and 13, and until Landlord's delivery to Tenant of the Phase 2
Space in accordance with Sections 6 and 13, Monthly Base Rent for
Phase 1 Space shall be $24,816.00 and Annual Base Rent for the
first
Lease Year shall be adjusted accordingly and all Additional Rent
shall be determined on the basis of the Phase 1 Space Rentable
Area.
4. Additional Rent. In addition to paying the Base Rent
specified in Section 3 hereof, Tenant shall pay to Landlord as
Additional Rent the amounts (herein collectively called "Additional
Rent") determined to be the Tax Adjustment and Expense Adjustment
(both as hereinafter defined) in accordance with this Section 4:
(a) Computation of Additional Rent. Tenant shall pay as
Additional Rent for each Adjustment Year the following amounts:
(i) Tenant's Proportionate Share of Taxes for
such Adjustment Year (herein called the "Tax Adjustment"); plus
(ii) Tenant's Proportionate Share of Expenses
for such Adjustment Year (herein called the "Expense Adjustment").
Notwithstanding anything herein to the contrary, in no event
shall Tenant's Proportionate Share of Expenses other than any and
all expenses incurred in connection with the maintenance, repair
and
operation of the chiller unit(s) serving the Premises and the
common
areas of the Building (the "Chiller Expenses") and insurance
expenses
exceed (1) $.80 per square foot of Rentable Area of the Premises
during the Initial Term, or (2) $.93 per square foot of Rentable
Area
of the Premises during the Renewal Term. The foregoing limitations
of $.80 and $.93 per square foot shall not apply to Tenant's
Proportionate Share of Taxes, Tenant's Proportionate Share of
Chiller
Expenses or Tenant's Proportionate Share of insurance expenses or
to Tenant's obligation to pay same.
(b) Payments of Additional Rent; Tax and Expense
Estimate;
Projections. Tenant shall pay Additional Rent to Landlord in the
manner hereinafter provided.
(i) Tax Adjustment and Expense Adjustment.
The
aggregate of payments required to be made by Tenant on account of
Tax Adjustment and Expense Adjustment for any Adjustment Year until
the actual Tax Adjustment and Expense Adjustment for such
Adjustment
Year are determined is herein called "Tax and Expense Estimate".
(A) Landlord may, at any time and from time to
time prior to each Adjustment Date and from time to time during or
after the Adjustment Year in which such Adjustment Date falls,
deliver to Tenant a written notice or notices ("Projection Notice")
setting forth (1) Landlord's reasonable estimates, forecasts or
projections (collectively, the "Projections") of Taxes or Expenses
for such Adjustment Year, and (2) Tenant's Tax and Expense Estimate
(setting forth the Expense Adjustment component and the Tax
Adjustment component separately), being Tenant's Proportionate
Share
of the Projections.
(B) On or before the first day of the next
calendar month following Landlord's service of a Projection Notice,
and on or before the first day of each month thereafter, Tenant
shall
pay to Landlord, at the time and in the same manner as payment of
Base Rent, one-twelfth (1/12) of the Tax and Expense Estimate shown
in the Projection Notice. Within fifteen (15) days following
Landlord's service of a Projection Notice, to bring Tenant's
payments
of Tax and Expense Estimate current, Tenant shall also pay Landlord
a lump sum equal to the Tax and Expense Estimate shown in the
Projection Notice less (A) any previous payments on account of Tax
and Expense Estimate made during such Adjustment Year and (B)
monthly
installments on account of Tax and Expense Estimate not yet due and
payable for the remainder of such Adjustment Year. Until such time
as Landlord furnishes a Projection Notice for an Adjustment Year,
Tenant shall pay to Landlord a monthly installment of Tax and
Expense
Estimate on the first day of each month equal to the greater of the
latest monthly installment of Tax and Expense Estimate or
one-twelfth
(1/12) of Tenant's latest determined Tax Adjustment and Expense
Adjustment; provided, however, that the initial monthly installment
of Tax and Expense Estimate payable by Tenant beginning on the
Commencement Date, subject to change as herein provided, shall be
equal to the Initial Monthly Estimate. If the amount of the
Initial
Monthly Estimate is not shown in this Lease, then Landlord shall
furnish Tenant with the amount of the Initial Monthly Estimate on
or about the Commencement Date.
(c) Readjustments. The following readjustments with
regard to the Tax Adjustment and Expense Adjustment shall be made
by Landlord and Tenant:
(i) Within ninety (90) days following the end
of each Adjustment Year, Landlord shall submit to Tenant a
statement
showing the actual Expenses incurred in the prior Adjustment Year
according to major categories of expense, together with Tenant's
Proportionate Share of the actual Expenses, and a computation of
either Tenant's overpayment or underpayment of actual Expenses for
the prior Adjustment Year (the "Landlord's Statement"). For
purposes
of the foregoing, Taxes shall be deemed to accrue monthly, although
Taxes are paid annually. If there has been an underpayment by
Tenant
for the previous Adjustment Year, then Tenant shall, within thirty
(30) days after the date of Landlord's Statement, pay to Landlord
an amount equal to the underpayment, subject to any limitation as
set forth in the Lease. If Tenant has overpaid its proportionate
share of the Expenses, Landlord shall credit such excess to Rent
payable after the date of Landlord's Statement, or may, at its
option, credit such excess to any Rent theretofore due and owing,
until such excess has been exhausted. If this Lease shall expire
or be terminated prior to full application of such excess, Landlord
shall pay to Tenant the balance thereof not theretofore applied
against Rent and not reasonably required for payment of Rent for
the
Adjustment Year in which this Lease expires or is terminated,
subject
to Tenant's obligations under Section 4(e) hereof, provided Tenant
shall have vacated the Premises and otherwise surrendered the Prem-
ises to Landlord in accordance with this Lease and Tenant is not
then
in default under this Lease.
(ii) Following the end of each Adjustment Year
and after Landlord shall have determined the actual amount of Taxes
to be used in calculating the Tax Adjustment for such Adjustment
Year, Landlord shall notify Tenant in writing (any such notice
herein
called "Landlord's Statement") of such Taxes for such Adjustment
Year. If the Tax Adjustment owed for such Adjustment Year exceeds
the Tax Adjustment component of the Tax and Expense Estimate paid
by Tenant during such Adjustment Year, then Tenant shall, within
thirty (30) days after the date of Landlord's Statement, pay to
Landlord an amount equal to the excess of the Tax Adjustment over
the Tax Adjustment component of the Tax and Expense Estimate paid
by Tenant during such Adjustment Year. If the Tax Adjustment
component of the Tax and Expense Estimate paid by Tenant during
such
Adjustment Year exceeds the Tax Adjustment owed for such Adjustment
Year, then Landlord shall credit such excess to Rent payable after
the date of Landlord's Statement, or may, at its option, credit
such
excess to any Rent theretofore due and owing, until such excess has
been exhausted. If this Lease shall expire or be terminated prior
to full application of such excess, Landlord shall pay to Tenant
the
balance thereof not theretofore applied against Rent and not
reasonably required for payment of Rent for the Adjustment Year in
which this Lease expires, subject to Tenant's obligations under
Section 4(e) hereof, provided Tenant shall have vacated the
Premises
and otherwise surrendered the Premises to Landlord in accordance
with
this Lease and Tenant is not then in default under this Lease.
(iii) No interest or penalties shall accrue on
any amounts which Landlord is obligated to credit or pay to Tenant
by reason of this Section 4(c) or which Tenant may be obligated to
pay Landlord due to an underestimation and underpayment by Tenant
of the Expenses.
(d) Books and Records. Landlord shall maintain books
and
records showing Taxes and Expenses in accordance with sound
accounting and management practices. Tenant and its
representatives
and consultants shall have the right to examine and copy, at
Tenant's
own expense, such books and records showing Taxes and Expenses upon
reasonable prior notice and during normal business hours at any
time
within one hundred eighty (180) days following service of
Landlord's
Statement provided for in Section 4(c). Unless Tenant shall take
written exception to any item of Taxes or Expenses, specifying in
detail the reasons for such exception as to a particular item,
within
said one hundred eighty (180) days after service of Landlord's
Statement, Landlord's Statement shall be considered as final and
accepted by Tenant. Any examination shall not delay the timely
payment of Tenant's proportionate share of Expenses.
(e) Proration and Survival. Following expiration or
termination of this Lease, Tenant shall pay any Additional Rent due
to Landlord within thirty (30) days after the date of Landlord's
Statement sent to Tenant. Without limitation on other obligations
of Tenant which shall survive the expiration of the Term, the
obligations of Tenant to pay Additional Rent provided for in this
Section 4 shall survive the expiration or termination of this
Lease.
(f) Repayment of Landlord's Contribution. In addition
to the foregoing amounts, Tenant shall pay to Landlord, as
Additional
Rent and together with each installment of Monthly Base Rent, an
amount sufficient to amortize the amount of the Landlord's
Contribution toward the Cost of the Tenant Improvements, as such
terms are defined in Section 6, over the seven (7) year Initial
Term
of this Lease in eighty-three (83) equal monthly installments, plus
interest at the rate of eleven and one-half percent (11 1/2%) per
annum. The computation of the amount of the repayment and the
commencement of the repayment shall be as follows:
(i) The amount of the Landlord's share of the
Cost of the Tenant Improvements to the Phase 1 Space shall be
determined no later than 10 days following the Phase 1 Space Rent
Commencement Date; the amortization of the repayment of that amount
shall assume that the repayment was due on the Phase 1 Space Rent
Commencement Date; within 10 days of the determination of the
amount,
Landlord shall provide Tenant with an amortization statement and a
repayment schedule, which shall be incorporated into an amendment
to this Lease and promptly executed by Landlord and Tenant; Tenant
shall commence repayment with the following installment of Base
Rent.
(ii) the amount of the Landlord's share of the
Cost of the Tenant Improvements of the Phase 2 Space shall be
determined no later than 10 days following the Phase 2 Space Rent
Commencement Date; the amortization of the repayment of that amount
shall assume that the repayment was due on the Phase 2 Space Rent
Commencement Date; within 10 days of the determination of the
amount,
Landlord shall provide Tenant with an amortization statement and a
repayment schedule, which shall be incorporated into an amendment
to this Lease and promptly executed by Landlord and Tenant; Tenant
shall commence repayment for the Phase 2 Space with the following
installment of Base Rent.
(g) Management Fees. In addition to the foregoing
amounts, Tenant shall pay to Landlord, as Additional Rent and
together with each monthly installment of Rent due hereunder an
amount equal to one and one-half percent (1 1/2%) of the sum of the
amount of the Monthly Base Rent and the monthly payment amount
under
Section 4(f) then currently due and payable as compensation for
Landlord's management of the Project.
(h) Additional Rent. All amounts payable by Tenant as
or on account of Additional Rent shall be deemed to be additional
rent due under this Lease.
5. Use of Premises.
(a) Tenant shall use and occupy the Premises for the
Permitted Use only and for no other use or purpose. Except as
otherwise provided in this Lease, Tenant shall, at its own risk and
expense, obtain all governmental licenses and permits necessary for
the Permitted Use.
(b) Tenant shall have access to the Building and the
Premises 24 hours per day and 365 days per year.
(c) Tenant shall have the right to install a
badge-locking
system or card-reading system for controlling access to the
Premises.
Tenant shall provide Landlord with a reasonable number of badges or
cards to enable Landlord to obtain access to the Premises.
6. Tenant Improvements and Delivery of Possession.
(a) Tenant Improvements.
(i) Landlord and Tenant agree that the
Premises
shall be improved in accordance with the plans and specifications
described on Exhibit D attached hereto and made a part hereof (the
"Plans"). These improvements are herein referred to as the "Tenant
Improvements." Landlord and Tenant have reviewed the Plans, and
both
parties believe that the Premises (including the doors and doorways
thereto), when improved in accordance with the Plans, shall comply
with the ADA (as defined in Section 36). In the event that, in the
permitting process, changes to the Plans are required to bring them
into compliance with the ADA or in the event that changes to the
Premises are required after the Tenant Improvements are completed
in order to obtain approval of the Fire Marshall of the City of
Jacksonville, Landlord and Tenant shall share the costs of such
changes equally, and such costs shall be deemed to be part of the
"Cost" of the Tenant Improvements for purposes of Section 6(a)(ii).
Landlord intends to enter into a Construction Contract (herein so
called) with Dav-Lin Construction Co. (the "Contractor"), which
shall
have been approved by Landlord and Tenant. The Contract Sum (as
defined in the Construction Contract), shall include, inter alia,
the cost of dual obligee payment and performance bonds to be issued
to Landlord and Tenant by a surety satisfactory to Landlord and
Tenant, and the Construction Contract shall provide for a retention
that will be not be paid until the Premises are approved by the
Architect (as defined in the Construction Contract) and local
government authorities as being in compliance with the Plans and
applicable codes and laws. Landlord shall use reasonable efforts
to enforce the terms and provisions of the Construction Contract,
including the Contractor's warranty to repair or replace defective
work or work that is not in compliance with the Plans, and in the
event that Landlord fails to use such reasonable efforts, Tenant
shall be deemed a third party beneficiary of the Construction
Contract for the purpose of enforcing the Construction Contract.
(ii) The "Cost" of the Tenant Improvements will
be shared by Landlord and Tenant on an equal (50/50) basis, except
as provided in Section 6(a)(iii) below with respect to additional
costs resulting from changes to the Plans. The Cost to be shared
shall include the fees and expenses for the preparation of the
Plans,
together with the fees and expenses of an architect's normal
construction administration (including but not limited to,
inspections and approvals for payment of contractor draws,
additional
detailing and design that may be necessary, shop drawing review,
etc.) and the cost of the construction and of the Plans (including
the cost of the performance and payment bonds) and the cost of all
striping of the parking lot to prepare it for Tenant's use (the
"shared costs"). It is understood that the Cost shall include (a)
a fee to the Architect of approximately $13,500.00 for the
completion
of the plans and construction administration, which amount shall be
included in the anticipated Contract Sum of $2,003,012.00, and (b)
$3,092.98 for restriping costs, which amount shall not be included
in the Contract Sum. Landlord's share of the Cost of the Tenant
Improvements is herein referred to as the "Landlord's
Contribution."
(iii) If either Landlord or Tenant requests a
change to the Plans, then the cost of such change shall be borne by
the party making the request. All changes to the Plans requested
by either party shall be subject to the other party's reasonable
right of approval.
(iv) To fund the shared costs of the Cost of
the
Tenant Improvements, an interest bearing escrow account will be
established, funded initially by Landlord and Tenant each
depositing
$1,003,052.49 in the escrow account within three (3) business days
of the date of this Lease to cover the anticipated Cost of the
Tenant
Improvements of $2,006,104.98, which amount is the anticipated
Contract Sum plus the cost of restriping, as provided above. The
escrow account shall be with First American Title Insurance Company
in Jacksonville. In the event that the Landlord determines that
the
shared costs of the Cost of the Tenant Improvements exceed such
amount, Landlord and Tenant each shall deposit into the escrow
account on an equal (50/50) basis such additional amounts within
three (3) business days of such determination; provided, however,
that Landlord and Tenant each shall fund the cost of changes which
it has requested without contribution from the other party. The
escrowed funds will be released based upon draws by the Contractor,
which must be approved by the Architect based upon his inspection
of the construction of the Tenant Improvements and determination
that
the Tenant Improvements for which payment is sought have been
completed in accordance with the Plans or that such draw is
otherwise
consistent with the Construction Contract, and by Landlord.
Payment
of the Architect's invoices shall be mutually agreed upon by the
parties. After final completion of all of the Tenant Improvements,
unused funds for shared costs shall be returned to the parties pro
rata, with applicable interest, if any.
(b) Delivery of Possession:
(i) Landlord shall use reasonable efforts (a)
to deliver possession of the Phase 1 Space to Tenant on or before
July 1, 1995, substantially complete in all respects except for
installation of the air handler units and the bifold doors in the
training rooms, Tenant hereby agreeing that, notwithstanding
anything
in this Lease to the contrary, it shall accept possession of the
Phase 1 Space in such condition with Landlord agreeing to complete
installation of the air handler units and the bifold doors as soon
thereafter as reasonably possible, and (b) to deliver possession of
the Phase 2 Space to Tenant on or before August 15, 1995 (such
dates
are hereinafter referred to as the "Target Delivery Dates"). The
"date of delivery" shall mean the date when the Phase 1 Space shall
be substantially complete, except as provided above, as determined
by the Architect and approved for occupancy by the Fire Marshall of
the City of Jacksonville. The Rent Commencement Date shall not be
delayed beyond the scheduled date for either the Phase 1 Space or
the Phase 2 Space if the delay is caused by any change orders to
the
Plans requested by Tenant or by any work within the Premises
performed by Tenant. Landlord shall cause the Contractor to
complete
expeditiously all punch-list work remaining as of the date of
delivery.
(ii) Tenant shall have the right of access to
each phase of the Premises at least 2 weeks prior to delivery to
perform certain pre-occupancy work, including the installation of
Tenant's telephone switch and lines, computer lines, electrical
lines, and any other equipment and wiring which Tenant determines
requires early installation. Landlord shall use reasonable efforts
to include in the Construction Contract a provision requiring the
Contractor to accommodate Tenant's pre-occupancy work in the
Premises
provided that Tenant's pre-occupancy work shall not hinder, impede
or delay the Contractor's work. Tenant shall provide Landlord with
a description of this work for inclusion in the Construction
Contract.
(iii) At substantial completion, to be certified
by the architect, a punch list will be prepared. The punch list
shall be completed expeditiously. This provision shall be included
in the Construction Contract.
(iv) From and after the date of this Lease
until
the sixtieth (60th) day after delivery of possession of the Phase
2 Space (the "Temporary Space Vacation Date"), Tenant shall be
entitled to use the space on the mezzanine of the Building shown on
the floor plan attached hereto as Exhibit A-3 (the "Temporary
Space")
for temporary training facilities. Tenant shall not be required to
pay any Rent for the use of such space other than for use of all
utilities. Tenant shall vacate the Temporary Space and not make
any
alterations or improvements to the Temporary Space without
Landlord's
prior written consent. Tenant shall remove any and all alterations
and improvements from the Temporary Space and return the Temporary
Space to its condition on the date of this Lease, all at Tenant's
sole cost and expense, by no later than the Temporary Space
Vacation
Date. Tenant shall indemnify Landlord and hold Landlord harmless
from and against any and all loss, cost or damage in connection
with
Tenant's use and occupancy of the Temporary Space.
7. Services.
(a) Provided that Tenant is not in default beyond any
applicable grace or cure period in the payment of Rent or any other
charges or amounts due hereunder, Landlord shall furnish the
following services to the Building and the Premises:
(i) Sanitary sewer service in common with
other
tenants into the applicable utility's lines and mains for lavatory
and toilet purposes.
(ii) Domestic water in common with other
tenants
from the applicable utility's mains for drinking, lavatory and
toilet
purposes drawn through fixtures installed by Landlord, or by Tenant
in the Premises with Landlord's written consent. Tenant shall pay
Landlord as Additional Rent for all domestic water and sanitary
sewer
service furnished to the Premises on the basis of the applicable
utility's rates from time to time and Tenant's usage as determined
by a flow meter. Tenant shall not waste or permit the waste of
water.
(iii) Electricity shall be furnished by Landlord
by arranging for electrical service furnished by the electric
utility
company serving the Building and the Premises. Tenant shall pay
Landlord as Additional Rent for all electricity furnished to or for
the benefit of the Premises on the basis of the applicable
utility's
rates (with no Landlord mark-up) from time to time and Tenant's
usage
as determined by a sub-meter which shall be installed as part of
the
construction of the Tenant Improvements. The electricity used for
the making of alterations or repairs in the Premises, or for the
operation of the heating, ventilating or air-conditioning systems
serving the Premises at all times, or for the operation of any
special or supplementary heating, ventilating or air-conditioning
systems which may be required for computer or data processing
equipment or for other special equipment or machinery installed by
or on behalf of Tenant, shall be paid for by Tenant pro rata.
Except
as otherwise provided in this Lease, Tenant shall make no material
alterations or additions to the electric equipment or appliances in
the Premises or the Building without the prior written consent of
Landlord in each instance. Tenant covenants and agrees that at all
times its use of electric current shall never exceed the capacity
of the feeders to the Building or the risers or wiring installed
thereon.
(iv) Air conditioning and ventilating, but not
heating.
(b) All charges for the actual cost (with no Landlord
mark-up) of water, sewer and electricity shall be due and payable
at the same time as the installment of Base Rent with which they
are
billed, or if billed separately, shall be due and payable within
ten
(10) days after Tenant receives Landlord's bill therefor. Failure
by Tenant to promptly pay Landlord's proper charges within five (5)
business days from when they are due shall be a Default under this
Lease and subject to Section 18. In addition, if Tenant shall fail
to pay such charges within thirty (30) days from when they are due
or in the event that Tenant is in default beyond any applicable
grace
or cure period for failing to pay Rent or any other charges or
amounts hereunder, Landlord shall have the right, in addition to
any
other remedies available to Landlord, to discontinue furnishing the
services, and no such discontinuance shall be deemed an eviction or
disturbance of Tenant's use of the Premises or render Landlord
liable
for damages or relieve Tenant from performance of Tenant's
obligations under this Lease.
(c) The Building and Land shall be managed and
maintained
in accordance with standards comparable to those of other
properties
in the Jacksonville, Florida area of the kind and quality of the
Building and Land.
(d) Tenant agrees that Landlord and its agents shall not
be liable in damages for failure to furnish or for delay in
furnishing any service when such failure or delay is occasioned by
any cause beyond the reasonable control of Landlord.
(e) Landlord agrees to use all reasonable efforts to
remedy any interruption of the foregoing services, except in the
event of discontinuation of services due to Tenant's default
hereunder as provided in subparagraph (b) above. In the event
Landlord fails to remedy the interruption of such services within
three (3) business days after receipt of Tenant's notice of such
interruption, Tenant shall have the right to abatement of Rent for
each day of interruption. In the event services are interrupted
such
that the Premises are substantially uninhabitable for more than
sixty
(60) calendar days after Landlord's receipt of a notice from Tenant
of the existence of such condition, then Tenant, as Tenant's sole
and exclusive remedy, shall be entitled to terminate this Lease
upon
written notice delivered to Landlord at any time prior to the
resumption of such services.
(f) Tenant agrees to cooperate fully with Landlord, at
all times, in abiding by all regulations and requirements which are
reasonably necessary for the proper functioning and protection of
all utilities and services and are reasonably necessary for the
operation of the Premises and the Building. Landlord and its
contractors shall have free access to any and all mechanical
installations, and Tenant agrees that there shall be no
construction
or partitions or other obstructions which might interfere with the
moving of the servicing equipment of Landlord to or from the
enclosures containing said installations. Tenant further agrees
that
neither Tenant nor its employees, agents, licensees, invitees or
contractors shall at any time tamper with, adjust or otherwise in
any manner affect Landlord's mechanical installations.
8. Condition and Care of Premises; Landlord's and Tenant's
Maintenance Obligations and Landlord's Refurbishment.
(a) Except to the extent set forth in the Lease,
Landlord
has made no promises to alter, remodel, improve, repair, decorate
or clean the Premises or any part thereof have been made, and no
representation respecting the condition of the Premises, the
Building
or the Land has been made to Tenant by or on behalf of Landlord,
except to the extent expressly set forth herein.
(b) Tenant shall notify Landlord of any damage to the
Premises, regardless of the cause of damage. Except for any damage
resulting from any wanton or negligent act of Landlord, or its
employees or agents and subject to the provisions of Section 16
hereof, Tenant shall at its own expense keep the Premises in good
repair and tenantable condition and, except if Landlord elects to
make such repairs at Tenant's expense as hereinafter provided,
shall
promptly and adequately repair all damage to the Premises caused by
Tenant or any of its employees, agents, licensees, invitees or
contractors, including replacing or repairing all damaged or broken
glass, fixtures and appurtenances resulting from any such damage,
under the supervision and with the approval of Landlord and within
any reasonable period of time specified by Landlord. Landlord may,
but shall have no obligation to, elect to make any or all repairs
on Tenant's behalf at Tenant's sole cost or, upon Tenant's request,
perform any such repairs at Tenant's sole cost. In either case,
Tenant shall pay the cost thereof, and in addition, Tenant shall
pay
to Landlord an amount equal to seven percent (7%) of such cost as
an overhead and supervision fee. If Tenant does not make repairs
promptly and adequately when required to do so, Landlord may, but
need not, make such repairs and replacements and Tenant shall pay
Landlord, on written demand, the cost thereof, and, in addition,
Tenant shall pay to Landlord on written demand, an amount equal to
seven percent (7%) of such cost as an overhead and supervision fee
and interest at the rate specified in Section 27(h) from the date
of such demand.
(c) This Lease does not grant any rights to light or air
over or about the real property of Landlord. Except as otherwise
provided in this Lease, Landlord specifically excepts and reserves
to itself the use of any roofs, the exterior portions of the
Premises, all rights to and the land and improvements below the
improved floor level of the Premises, to the improvements and air
rights above the Premises and to the improvements and air rights
located outside the demising walls of the Premises and to such
areas
within the Premises required for installation of utility lines and
other installations required to serve any occupants of the Building
and to maintain and repair same, and no rights with respect thereto
are conferred upon Tenant, unless otherwise specifically provided
herein.
(d) Landlord shall maintain in good order and repair the
following portions of the Project during the Term: the roof and
roof
membrane of the Building, the structural supports and load-bearing
walls of the Building, the foundation and floor slab of the
Building,
all utilities lines, mains and conduits to their point of entry
into
the Premises, the exterior of the Building, the common or public
areas in the Building, the Landlords's property and grounds
(including landscaping) about the Building, the chiller unit(s) and
air handler(s) serving the Premises and the public areas in the
Building, and Tenant's Parking Area, excepting any damage to any
such
components caused by the act or omission of Tenant or any subtenant
or their respective employees, agents, licensees, contractors or
invitees, in which event such damage shall be promptly repaired at
the expense of Tenant.
(e) Landlord's Refurbishment: Landlord hereby covenants
and agrees, at its sole cost and expense, to paint that portion of
the exterior of the Building immediately surrounding the main
entrance to the Building within one year of the Effective Date, and
promptly after the Effective Date to repair the steps to the main
entrance to the Building and to bring the existing handicap ramps
into compliance with the Americans with Disabilities Act 11 U.S.C.
12181 et seq. (the "ADA"), or construct new handicap ramps in
compliance with the ADA. In addition, prior to the Commencement
Date, Landlord shall restripe the parking lot to provide for
handicap
parking spaces in accordance with applicable code in the area shown
on Exhibit A-2. Tenant agrees to make all repairs to, and keep and
maintain in sightly appearance, good order, condition and repair
(including replacements necessary in Landlord's reasonable
judgment),
the Premises and every part thereof, except as otherwise
specifically
provided herein, including all utility, facilities and related
equipment within the Premises, plumbing, drain, waste and sewage
facilities within the Premises, including free flow up to the
common
sewer line, fixtures, and facilities and equipment for electricity,
heating, and air-conditioning, within the Premises, all in
compliance
with and as may be required by applicable building, zoning,
environmental, safety, fire and other laws and codes, including
legally required fire extinguishers and safety or health
improvements, except as otherwise specifically provided in this
Lease.
9. Surrender of Premises.
(a) At the termination of this Lease by lapse of time or
otherwise, or upon termination of Tenant's right of possession
without terminating this Lease, Tenant shall surrender possession
of the Premises to Landlord and deliver all keys to the Premises to
Landlord and make known to Landlord the combination of all locks of
vaults then remaining in the Premises, and shall, subject to the
following subparagraphs, return the Premises and all equipment and
fixtures of Landlord therein to Landlord in as good condition as
when
Tenant originally took possession, ordinary wear, loss or damage by
fire or other insured casualty, and damage resulting from the act
of Landlord or any of its respective employees and agents excepted,
failing which Landlord may restore the Premises and such equipment
and fixtures to such condition and Tenant shall pay the cost
thereof
to Landlord on demand.
(b) All installations, additions, partitions, hardware,
light fixtures, supplementary heating or air conditioning units,
non-trade fixtures and improvements, except movable furniture and
equipment belonging to Tenant, in or upon the Premises, whether
placed there by Tenant or Landlord, excepting Tenant's Supplemental
Equipment and Tenant's personal property and equipment, shall be
Landlord's property and shall remain upon the Premises upon
expiration of the Term or sooner termination of this Lease or
Tenant's possession hereunder, all without compensation, allowance
or credit to Tenant; provided, however, that if prior to such
expiration or termination or within ten (10) days thereafter
Landlord
so directs by written notice, Tenant, at Tenant's sole cost and
expense, shall promptly remove such of the installations,
additions,
partitions, hardware, light fixtures, supplementary heating or air
conditioning units, non-trade fixtures and improvements placed in
the Premises by Tenant as are designated in such notice and repair
any damage to the Premises caused by such removal, failing which
Landlord may remove the same and repair the Premises and Tenant
shall
pay the cost thereof to Landlord on written demand. All movable
furniture and equipment shall remain the property of Tenant and,
provided no continuing event of default exists hereunder with
respect
to Tenant's obligations, may be removed from the Premises at any
time
without Landlord's consent.
(c) Tenant shall leave in place any floor covering.
Tenant shall remove Tenant's furniture, machinery, safes, trade
fixtures and other items of movable personal property of every kind
and description from the Premises and restore any damage to the
Premises caused thereby, such removal and restoration to be
performed
prior to the expiration of the Term or no later than three (3) days
following the earlier termination of this Lease or Tenant's right
of possession, whichever might be earlier (and upon prior written
notice to Landlord, in the event such removal occurs after
termination of this Lease or Tenant's right to possession), failing
which Landlord may do so and thereupon the provisions of Section
18(f) shall apply.
(d) All obligations of Tenant under this Section 9 shall
survive the expiration of the Term or sooner termination of this
Lease.
10. Holding Over. If Tenant or any party claiming under
Tenant
remains in possession of the Premises or any part thereof after the
termination or expiration of this Lease, such holdover shall be
deemed to create a tenancy at will on a month-to-month basis
subject
to the terms and provisions of this Lease except that Monthly Base
Rent shall be one hundred twenty-five percent (125%) of the Monthly
Base Rent due prior to the commencement of such holdover unless and
until Landlord delivers written notice to Tenant that Landlord has
entered, or in good faith believes it is about to enter, into a
lease
for all or a portion of the Premises, in which event Monthly Base
Rent shall be, effective as of the sixtieth (60th) day after
Tenant's
receipt of such notice and as Landlord's exclusive monetary remedy,
two hundred percent (200%) of the Monthly Base Rent prior to the
commencement of such holdover. The foregoing shall not be
construed
to limit (i) Landlord's right to terminate such month-to-month
tenancy at will in accordance with Florida law or (ii) Landlord's
rights and remedies in accordance with this Lease and Florida law
to evict Tenant or otherwise terminate Tenant's possession of the
Premises in the event of such termination.
11. Rules and Regulations. Tenant agrees to observe and not
to interfere with the rights reserved to Landlord contained in
Section 12 hereof and elsewhere in this Lease, and agrees, for
itself, its employees, agents, invitees, licensees and contractors,
to comply with the rules and regulations set forth in Exhibit B
attached to this Lease, and elsewhere in this Lease, and such other
rules and regulations as shall be adopted by Landlord pursuant to
Section 12(h) or any other Section of this Lease. To the extent
that
the Rules and Regulations, current or amended, conflict with the
provisions of the rest of this Lease, the latter provisions shall
govern. Landlord agrees not to enforce such rules and regulations
selectively.
Any violation by Tenant, or by any of its employees, agents,
licensees, invitees or contractors, of any of the rules and
regulations contained in Exhibit B attached to this Lease or other
Section of this Lease, or as may hereafter be adopted by Landlord
pursuant to Section 12(h) or any other Section of this Lease, may
be restrained or treated as a default hereunder or both; but
whether
or not so restrained, Tenant acknowledges and agrees that it shall
be and remain liable for all damages, losses, costs and expenses
resulting from any violation by Tenant, or by any of its employees,
agents, licensees, invitees or contractors, of any of said rules
and
regulations. Nothing in this Lease contained shall be construed to
impose upon Landlord any duty or obligation to enforce said rules
and regulations or the terms, covenants or conditions of any other
lease against any other tenant or any other person, although
Landlord
shall not enforce the rules and regulations selectively, and
Landlord
shall not be liable to Tenant for violation of the same by any
other
tenant, its employees, agents, licensees, invitees or contractors,
or by any other person.
12. Rights Reserved to Landlord. Landlord reserves the
following rights, exercisable without notice and without liability
to Tenant for damage or injury to property, person or business, and
without effecting an eviction or disturbance of Tenant's use or
possession or giving rise to any claim for setoff or abatement of
Rent or affecting any of Tenant's obligations under this Lease:
(a) To change the name of the Building.
(b) To install and maintain signs on the exterior and
interior of the Building.
(c) To retain at all times, and to use in appropriate
instances, pass keys to the Premises.
(d) To have access for Landlord and other tenants or
occupants of the Building to any mail chutes according to the rules
of the United States Postal Service.
(e) With reasonable notice to Tenant, except in case of
emergency when no notice shall be required, to enter the Premises
at reasonable hours for reasonable purposes, including without
limitation for inspection to meet Landlord's obligations under the
Lease.
(f) To require all persons entering or leaving the
Building during such hours as Landlord may from time to time
reasonably determine to identify themselves to security personnel
by registration or otherwise in accordance with Building security
control. Landlord shall not be liable in damages for any error
with
respect to admission to or eviction or exclusion from the Building
of any person. In case of fire, casualty, invasion, insurrection,
mob, riot, civil disorder, public excitement or other commotion, or
threat thereof, Landlord reserves the right to limit or prevent
access to the Building during the continuance of the same, shut
down
elevator service, activate elevator emergency controls, or
otherwise
take such action or preventive measures deemed necessary by
Landlord
for the safety or security of the tenants or other occupants of the
Building or the protection of the Building and the property in the
Building. Tenant agrees to cooperate in any reasonable safety or
security program developed by Landlord.
(g) To control access to the Building in a manner that
shall not unreasonably interfere with Tenant's rights hereunder.
(h) From time to time to make and adopt such rules and
regulations, in addition to or other than or by way of amendment or
modification of the rules and regulations contained in Exhibit B
attached to this Lease or other Sections of this Lease, or adopted
pursuant to this or other Sections of this Lease, including,
without
limitation, the right to prohibit all smoking in the Building, for
the protection or welfare of the Building or its tenants or
occupants, as Landlord may determine, and Tenant agrees to abide by
and comply with all such rules and regulations.
13. Alterations. After completion of all of the Tenant
Improvements as provided in Section 6 and as provided in the Plans,
Tenant shall not make any new alterations in or additions or
improve-
ments to the Premises ("Alterations") without Landlord's advance
written consent with shall not be unreasonably withheld,
conditioned,
or delayed, in each instance. All Alterations shall be at Tenant's
expense and shall comply with all insurance requirements and with
all ordinances and regulations of the municipality in which the
Building is located or any department or agency thereof, and with
the requirements of all statutes and regulations of the State in
which the Premises are located or of any subdivision, department or
agency thereof. All required working drawings and specifications
for Alterations shall be prepared by an architect, space planner or
engineers reasonably acceptable to Landlord at Tenant's expense.
14. Assignment and Subletting.
(a) Tenant shall not, without the prior written consent
of Landlord in each instance, which consent shall not be
unreasonably
withheld, conditioned, or delayed, subject to Section 14(e), either
prior or subsequent to the Commencement Date, (i) assign, transfer,
mortgage, pledge, hypothecate or encumber or subject to or permit
to exist upon or be subjected to any lien or charge, this Lease or
any interest under it, (ii) allow to exist or occur any transfer of
or lien upon this Lease or the Tenant's interest herein by
operation
of law, (iii) sublet the Premises or any part thereof, or (iv)
permit
the use or occupancy of the Premises or any part thereof for any
purpose not provided for under Section 5 of this Lease or by anyone
other than the Tenant and Tenant's employees. In no event shall
this
Lease be assigned or assignable 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, except as
provided by law. Notwithstanding the foregoing, Tenant shall be
entitled to assign this Lease or sublet the Premises or a portion
thereof to an affiliate or a wholly owned subsidiary corporation of
Tenant without Landlord's consent. An "affiliate" is an entity in
which Tenant has no less than a fifty percent (50%) ownership
interest.
(b) Without thereby limiting the generality of the
foregoing provisions of this Section 14, Tenant expressly covenants
and agrees not to enter into any lease, sublease, license,
concession
or other agreement for use, occupancy or utilization of the
Premises
which provides for rental or other payment for such use, occupancy
or utilization based in whole or in part on the net income or
profits
derived by any person from the property leased, used, occupied or
utilized and that any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and
ineffective as a conveyance of any right or interest in the
possession, use, occupancy or utilization of any part of the
Premises.
(c) No assignment, subletting, use, occupancy, transfer
or encumbrance or Landlord's consent thereto shall operate to
relieve
Tenant from any covenant or obligation hereunder except to the
extent, if any, expressly provided for in Landlord's consent or
other
writing, or be deemed to be a consent to or relieve Tenant from
obtaining Landlord's consent to any subsequent assignment,
subletting, use, occupancy, transfer or encumbrance by Tenant or
anyone claiming by, through or under Tenant. Tenant shall pay all
of Landlord's costs, charges and expenses, including without
limitation, reasonable attorneys' fees, incurred in connection with
any assignment, subletting, use, occupancy, transfer or encumbrance
made or requested by Tenant.
(d) Tenant shall, by notice in writing, advise Landlord
of its intention from, on and after a stated date (which shall not
be less than thirty (30) days after the date of the giving of
Tenant's notice to Landlord) to assign this Lease or sublet any
part
or all of the Premises for the balance or any part of the Term.
Tenant's notice shall include the name and address of the proposed
assignee or subtenant, a true and complete copy of the proposed
assignment or sublease and sufficient information as Landlord deems
necessary to permit Landlord to determine the financial
responsibility, experience and character of the proposed assignee
or subtenant.
(e) Landlord will not unreasonably withhold its consent
to Tenant's assignment of this Lease or subletting the space
covered
by its notice. Landlord shall not be deemed to have unreasonably
withheld its consent to a proposed assignment of this Lease or to
a proposed sublease of part or all of the Premises if its consent
is withheld because: (i) Tenant is then in default hereunder; (ii)
any notice of termination of this Lease or termination of Tenant's
possession shall have been given under Section 18 hereof; (iii)
either the portion of the Premises which Tenant proposes to
sublease,
or the remaining portion of the Premises, or the means of ingress
or egress to either the portion of the Premises which Tenant
proposes
to sublease or the remaining portion of the Premises, or the
proposed
use of the Premises or any portion thereof by the proposed assignee
or subtenant will violate any city, state or federal law, ordinance
or regulation, including, without limitation, any applicable
building
code or zoning ordinances; (iv) the proposed use of the Premises by
the proposed assignee or subtenant does not conform with the use
set
forth in Section 5 hereof; or (v) in the reasonable judgment of
Landlord the proposed assignee or subtenant is of a character or is
engaged in a business which would be deleterious to the reputation
of the Building or Landlord, or the proposed assignee or subtenant
is not sufficiently financially responsible or experienced to
perform
its obligations under the proposed assignment or sublease;
provided,
however, that the foregoing are merely examples of reasons for
which
Landlord may withhold its consent and shall not be deemed exclusive
of any permitted reasons for reasonably withholding consent,
whether
similar or dissimilar to the foregoing examples. Tenant agrees
that
all advertising by Tenant or on Tenant's behalf with respect to the
assignment of this Lease or subletting of any part of the Premises
must be approved in writing by Landlord prior to publication, which
approval shall not be unreasonably conditioned, withheld or
delayed.
(f) Landlord shall not share in any profits from any
subleasing or assignment, it being agreed, however, that Landlord
shall not be responsible for any deficiency if Tenant shall assign
this Lease or sublet the Premises or any part thereof at a rental
less than Rent provided for herein.
(g) If Tenant shall assign this Lease as permitted
herein,
the assignee shall expressly assume all of the obligations of
Tenant
hereunder in a written instrument satisfactory to Landlord and
furnished to Landlord not later than fifteen (15) days prior to the
effective date of the assignment. If Tenant shall sublease the
Premises as permitted herein, Tenant shall obtain and furnish to
Landlord, not later than fifteen (15) days prior to the effective
date of such sublease and in form satisfactory to Landlord, the
written agreement of such subtenant to the effect that the
subtenant
will attorn to Landlord, at Landlord's option and written request,
in the event this Lease terminates before the expiration of the
sublease.
(h) If Tenant is a corporation (other than a corporation
whose stock is traded through a national or regional exchange or
over-the-counter), any transaction or series of transactions
(including without limitation any dissolution, merger,
consolidation
or other reorganization of Tenant, or any issuance, sale, gift,
transfer or redemption of any capital stock of Tenant, whether
voluntary, involuntary or by operation of law, or any combination
of any of the foregoing transactions) resulting in the transfer of
control of Tenant, other than by reason of death, shall be deemed
to be transfer of Tenant's interest under this Lease for the
purpose
of Sections 14(a) and 14(c). If Tenant is a partnership, any
transaction or series of transactions (including without limitation
any withdrawal or admittance of a partner or any change in any
partner's interest in Tenant, whether voluntary, involuntary or by
operation of law, or any combination of any of the foregoing
transactions) resulting in the transfer of control of Tenant, other
than by reason of death, shall be deemed to be a transfer of
Tenant's
interest under this Lease for the purposes of Sections 14(a) and
14(c). The term "control, as used in this Section 14(h) means the
power to directly or indirectly direct or cause the direction of
the
management or policies of Tenant. If Tenant is a private
corporation, a change or series of changes in ownership of stock
which would result in direct or indirect change in ownership by the
stockholders or an affiliated group of stockholders of less than
fifty percent (50%) of the outstanding stock as of the date of the
execution and delivery of this Lease shall not be considered a
change
of control.
15. Waiver of Certain Claims; Indemnity by Tenant and
Landlord.
(a) Tenant acknowledges and agrees that the Building, in
addition to including office uses, includes a substantial
warehousing
operation, and that Tenant shall have no claim due to such
warehousing operation and any disruption of Tenant's business
caused
by the existing warehousing operation or any comparable use of
other
portions of the Building; provided, however, that the foregoing
shall
not be construed to insulate Landlord from liability in the event
that Landlord permits other portions of the Building to be used in
a manner that are substantially more disruptive to Tenant than the
existing warehousing operation. If any damage to the Premises or
the Building or any equipment or appurtenance therein, whether
belonging to Landlord or to other tenants or occupants of the
Building, results from any act or neglect of Tenant, its employees,
agents, licensees, invitees or contractors, Tenant shall be liable
therefor and Landlord may at its option repair such damage and
Tenant
shall upon demand by Landlord reimburse Landlord for all costs of
such repairs and damages in excess of amounts, if any, paid to
Landlord under insurance covering such damages plus a fee to cover
Lessor's administrative expenses in an amount equal to seven
percent
(7%) of all such costs and interest on all such amounts at the rate
specified in Section 27(h) accruing from the date of such demand.
All personal property belonging to Tenant or any occupant of the
Premises that is in the Building or the Premises shall be there at
the risk of Tenant or other person only, and Landlord shall not be
liable for damage thereto or theft or misappropriation thereof,
except as provided in subparagraph (d) of this Section 15.
(b) Tenant agrees to indemnify and hold Landlord, the
managing agent of the Real Property, and their respective agents,
partners and employees, harmless against all loss, damages,
liabilities, claims, liens, costs and expenses, including without
limitation reasonable attorneys' fees, in connection with injuries
to any persons or damage to or theft or misappropriation or loss of
property occurring in or about the Premises, arising from Tenant's
occupancy of the Premises, or the conduct of its business or from
any activity, work, or thing done, permitted or suffered by Tenant
in or about the Premises, or from any breach or default on the part
of Tenant in the performance of any covenant or agreement on the
part
of Tenant to be performed pursuant to the terms of this Lease, or
due to any other act or omission of Tenant, or any of its
employees,
agents, licensees, invitees or contractors.
(c) Notwithstanding the foregoing provisions of this
Section 15, but subject to the provisions of Section 21(b), no
agreement of Tenant in this Section 15 shall be deemed to exempt
Landlord from liability or damages for injury to persons or damage
to property caused by or resulting from the negligence of Landlord,
its agents, servants or employees, in the operation or maintenance
of the Premises or Building.
(d) Landlord agrees to indemnify and hold Tenant, and
its
directors, officers, employees, shareholders, invitees, agents and
representatives, harmless against all loss, damages, liabilities,
claims, liens, costs and expenses, including without limitation
reasonable attorneys' fees, in connection with injuries to any
persons or damage to or theft or misappropriation or loss of
property
occurring in or about the common areas of the Building, arising
from
any negligence of Landlord in or about the common areas of the
Building or for any breach or default on the part of Landlord in
the
performance of any covenant or agreement on the part of Landlord to
be performed pursuant to the terms of this Lease or due to any
other
act or omission of Tenant, or any of its employees, agents,
licensees, invitees or contractors.
(e) Notwithstanding anything in this Lease to the
contrary, in no event shall the provisions of this Lease, including
without limitation those of this Section 15 and those of Section
18,
be construed to entitle either Landlord or Tenant to consequential
damages.
16. Damage or Destruction by Casualty.
(a) If the Premises or the Building shall be damaged by
fire or other casualty and if such damage does not render all or a
substantial portion of the Premises or the Building untenantable,
then Landlord shall proceed with reasonable promptness to repair
and
restore the Premises or the Building so as to render the Premises
tenantable, subject to reasonable delays for insurance adjustments
and delays caused by matters beyond Landlord's reasonable control,
and also subject to zoning laws and building codes then in effect.
If any such damage renders all or a substantial portion of the
Premises or the Building untenantable, Landlord shall, with
reasonable promptness after the occurrence of such damage, estimate
the length of time that will be required to substantially complete
the repair and restoration of the Premises or the Building, as the
case may be, necessitated by such damage and shall by notice advise
Tenant of such estimate. If it is so estimated that the amount of
time required to substantially complete such repair and restoration
will exceed two hundred seventy (270) days from the date such
damage
occurred, then either Landlord or Tenant (but as to Tenant, only if
all or a substantial portion of the Premises are rendered
untenantable and the estimated time required to substantially
complete such repair or restoration of the Premises will exceed
such
two hundred seventy (270) day period) shall have the right to
terminate this Lease as of the date of such damage by giving notice
to the other at any time within twenty (20) days after Landlord
gives
Tenant the notice containing said estimate (it being understood
that
Landlord may, if it elects to do so, also give such notice of
termination together with the notice containing said estimate).
Unless this Lease is terminated as provided in the preceding
sentence, Landlord shall proceed with reasonable promptness to
repair
and restore the Building or the Premises so as to render the
Premises
tenantable, subject to reasonable delays for insurance adjustments
and delays caused by matters beyond Landlord's reasonable control,
and also subject to zoning laws and building codes then in effect.
Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease (except as hereinafter provided)
if such repairs and restoration are not in fact completed within
the
time period estimated by Landlord, as aforesaid, or within said two
hundred seventy (270) days. However, if the Premises are not
substantially repaired or restored within eighteen (18) months
after
the date of such fire or other casualty, then either party may
terminate this Lease, effective as of the date of such fire or
other
casualty, by giving written notice to the other party not later
than
thirty (30) days after the expiration of said eighteen (18) month
period, but prior to substantial completion of repair or
restoration.
Notwithstanding anything to the contrary herein set forth: (i)
Landlord shall have no duty pursuant to this Section 16 to repair
or restore any portion of improvements, additions or alterations
made
by or on behalf of Tenant in the Premises or improvements, except
as provided in the Plans; (ii) Landlord shall not be obligated (but
may, at its option, so elect) to repair or restore the Premises or
Building if the damage is due to an uninsurable casualty or if
insurance proceeds are insufficient to pay for such repair or
restoration, or if any Mortgagee (defined in Section 19) applies
proceeds of insurance to reduce its loan balance, and the remaining
proceeds, if any, available to Landlord are not sufficient to pay
for such repair or restoration; and (iii) Tenant shall not have the
right to terminate this Lease pursuant to this Section 16 if the
damage or destruction was caused by the intentional or negligent
act
of Tenant, its agents or employees.
(b) In the event any such fire or casualty damage
renders
the Premises untenantable and if this Lease shall not be terminated
pursuant to the foregoing provisions of this Section 16 by reason
of such damage, then Rent shall abate during the period beginning
with the date of such damage and ending with the date when Landlord
substantially completes its repair or restoration required
hereunder.
Such abatement shall be in an amount bearing the same ratio to the
total amount of Rent for such period as the portion of the Premises
being repaired and restored by Landlord and not theretofore
delivered
to Tenant from time to time bears to the entire Premises. In the
event of termination of this Lease pursuant to this Section 16,
Rent
shall be apportioned on a per diem basis and be paid to the date of
the fire or casualty.
(c) In the event of any such fire or other casualty, and
if the lease is not terminated pursuant to the foregoing provisions
of this Lease, Tenant shall repair and restore any portion of
alterations, additions or improvements made by or on behalf of
Tenant
in the Premises which Landlord is not required to restore pursuant
to Section 16(a)(i) hereof.
17. Eminent Domain. If the entire Building or a substantial
part thereof or any part thereof which includes all or a
substantial
part of the Premises, shall be taken or condemned by any competent
authority for any public or quasi-public use or purpose, the Term
of this Lease shall end upon and not before the earlier of the date
when the possession of the part so taken shall be required for such
use or purpose or the effective date of the taking, and without
apportionment of the award to or for the benefit of Tenant. If any
condemnation proceeding shall be instituted in which it is sought
to take or damage any part of the Real Property, the taking of
which
would, in Landlord's opinion, prevent the economical operation of
the Building, or if the grade of any street or alley adjacent to
the
Building is changed or any such street or alley is closed by any
competent authority, and such taking, damage, change of grade or
closing makes it necessary or desirable to remodel the Building to
conform to the taking, damage, changed grade or closing, Landlord
shall have the right to terminate this Lease upon not less than
ninety (90) days, written notice to Tenant prior to the date of
termination designated in the notice. In either of the events
above
referred to, Rent at the then current rate shall be apportioned on
a per diem basis and be payable to the date of the termination. No
money or other consideration shall be payable by Landlord to Tenant
for the right of termination. Tenant shall have no right to claim
or share in any condemnation award, whether for a total or partial
taking, for loss of Tenant's leasehold or improvements or other
loss
or expenses, or in any judgment for damages caused by any change of
grade or street or alley closing.
18. Default; Rights and Remedies.
(a) The occurrence of any one or more of the following
matters constitutes a Default by Tenant under this Lease:
(i) Failure by Tenant to pay any Base Rent or
Additional Rent within five (5) business days after the date when
said rent is due and owing under the Lease;
(ii) Failure by Tenant to pay, within ten (10)
business days after Tenant's receipt of written notice thereof to
Tenant, any other moneys required to be paid by Tenant under this
Lease;
(iii) Failure by Tenant to observe or perform
any
of the covenants in respect of assignment, subletting or other
transfer of Tenant's interest under this Lease set forth in Section
14;
(iv) Failure by Tenant to cure forthwith,
promptly and with diligence after receipt of notice from Landlord,
any hazardous condition which Tenant has created or permitted in
violation of law or of this Lease;
(v) Failure by Tenant to observe or perform
any
other covenant, agreement, condition or provision of this Lease, if
such failure shall continue for thirty (30) days after written
notice
thereof from Landlord to Tenant, unless a cure would take longer
and
Tenant has begun to cure within 30 days and diligently pursues it
to completion;
(vi) The levy upon execution or the attachment
by legal process of the leasehold interest of Tenant, or the filing
or creation of a lien in respect of such leasehold interest, which
lien shall not be released or discharged within ten (10) business
days from the date of such filing;
(vii) Tenant vacates or abandons the Premises or
fails to take possession of the Premises when available for
occupancy
(the transfer of a substantial part of the operations, business and
personnel of Tenant to some other location being deemed, without
limiting the meaning of the term "vacates or abandons", to be a
vacation or abandonment within the meaning of this clause (vii),
unless Tenant thereafter continues to pay the Rent due under this
Lease;
(viii) Tenant becomes insolvent or bankrupt or
admits in writing its inability to pay its debts as they mature, or
makes an assignment for the benefit of creditors, or applies for or
consents to the appointment of a trustee or receiver for Tenant or
for the major part of its property;
(ix) A trustee or receiver is appointed for
Tenant or for the major part of its property and is not discharged
within sixty (60) days after such appointment;
(x) Bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings for
relief under any bankruptcy law, or similar law for the relief of
debtors, are instituted (A) by Tenant or (B) against Tenant and are
allowed against it or are consented to by it or are not dismissed
within sixty (60) days after such institution; or
(xi) Any matter described elsewhere in this
Lease
as a Default and Tenant fails to cure such Default for thirty (30)
days after written notice thereof from Landlord to Tenant, unless
a cure would take longer and Tenant has begun to cure within 30
days
and diligently pursues it to completion.
(b) If a Default occurs, Landlord shall have the rights
and remedies hereinafter set forth, which shall be distinct,
separate
and cumulative and shall not operate to exclude or deprive Landlord
of any other right or remedy allowed it at law or in equity or
elsewhere in this Lease:
(i) Landlord may terminate this Lease by
giving
to Tenant written notice of Landlord's election to do so, in which
event the Term of this Lease shall end, and all right, title and
interest of Tenant hereunder shall expire, on the date stated in
such
notice;
(ii) Landlord may terminate the right of Tenant
to possession of the Premises without terminating this Lease by
giving written notice to Tenant that Tenant's right of possession
shall end on the date stated in such notice, whereupon the right of
Tenant to possession of the Premises or any part thereof shall
cease
on the date stated in such notice; and
(iii) Landlord may enforce the provisions of
this
Lease and may enforce and protect the rights of Landlord hereunder
by a suit or suits in equity or at law for the specific performance
of any covenant or agreement contained herein, and for the
enforcement of any other appropriate legal or equitable remedy,
including without limitation injunctive relief, and for the
accelerated payment of all moneys due or to become due from Tenant
under any of the provisions of this Lease.
(c) If Landlord exercises any of the remedies provided
for in subparagraphs (i) and (ii) of the foregoing Section 18(b),
Tenant shall surrender possession of and vacate the Premises and
immediately deliver possession thereof to Landlord, and Landlord
may
re-enter and take complete and peaceful possession of the Premises
by process of law, full and complete license so to do being hereby
granted to Landlord, and Landlord may remove all occupants and
property therefrom, using such force as may be necessary, without
being deemed in any manner guilty of trespass, eviction or forcible
entry and detainer, and without relinquishing Landlord's right to
Rent or any other right given to Landlord hereunder or by law or in
equity.
(d) If Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease, such
termination of possession shall not release Tenant, in whole or in
part, from Tenant's obligation to pay the Rent hereunder for the
full
Term. In addition and regardless of whether Landlord terminates
Tenant's right of possession to the Premises, Landlord shall have
the right, from time to time, to recover from Tenant, and Tenant
shall remain liable for, all Rent and any other sums thereafter
accruing as they become due under this Lease during the period from
the date of such notice of termination of possession to the stated
end of the Term. In any such case, Landlord shall use reasonable
efforts to mitigate its damages, but Landlord shall not be required
to accept any tenant offered by Tenant or to observe any
instructions
given by Tenant with regard to any reletting. Also, in any such
case, Landlord may make repairs, alterations and additions in or to
the Premises and redecorate the same to the extent deemed by
Landlord
necessary or desirable, and in connection therewith Landlord may
change the locks to the Premises, and Tenant shall upon written
demand pay the cost thereof together with Landlord's expenses of
reletting. Landlord may collect the rents from any such reletting
and apply the same first to the payment of the expenses of reentry,
redecoration, repair and alterations and the expenses of reletting,
and second to the payment of Rent herein provided to be paid by
Ten-
ant, and any excess or residue shall operate only as an offsetting
credit against the amount of Rent due and owing or paid as a result
of acceleration or as the same thereafter becomes due and payable
hereunder, but the use of such offsetting credit to reduce the
amount
of Rent due Landlord, if any, shall not be deemed to give Tenant
any
right, title or interest in or to such excess or residue and any
such
excess or residue shall belong to Landlord solely; provided that in
no event shall Tenant be entitled to a credit on its indebtedness
to Landlord in excess of the aggregate sum (including Base Rent and
Additional Rent) which would have been paid by Tenant for the
period
for which the credit to Tenant is being determined, had no Default
occurred. No such re-entry, repossession, repairs, alterations,
additions or reletting shall be construed as an eviction or ouster
of Tenant or as an election on Landlord's part to terminate this
Lease, unless a written notice of such intention is given to
Tenant,
or shall operate to release Tenant in whole or in part from any of
Tenant's obligations hereunder, and Landlord may, at any time and
from time to time, sue and recover judgment for any deficiencies
from
time to time remaining after the application from time to time of
the proceeds of any such reletting.
(e) In the event of the termination of this Lease by
Landlord as provided for by subparagraph (i) of Section 18(b),
Landlord shall be entitled to recover from Tenant all the fixed
dollar amounts of Rent accrued and unpaid for the period up to and
including such termination date, as well as all other additional
sums
payable by Tenant, or for which Tenant is liable or in respect of
which Tenant has agreed to indemnify Landlord under any of the
provisions of this Lease, which may be then owing and unpaid, and
all costs and expenses, including without limitation court costs
and
reasonable attorneys' fees incurred by Landlord in the enforcement
of its rights and remedies hereunder, and in addition, Landlord
shall
be entitled to recover as damages for loss of the bargain and not
as a penalty (i) the aggregate sum which at the time of such
termination represents the excess, if any, of the present value on
the aggregate rents at the same annual rate for the remainder of
the
Term as then in effect pursuant to the applicable provisions of
Sections 3 and 4 of this Lease, over the then present value of the
then aggregate fair rental value of the Premises for the balance of
the Term, such present value to be computed in each case on the
basis
of a seven percent (7%) per annum discount from the respective
dates
upon which such rentals would have been payable hereunder had this
Lease not been terminated; and (iii) any damages in addition
thereto,
including reasonable attorneys' fees and court costs, which
Landlord
shall have sustained by reason of the breach of any of the
covenants
of this Lease other than for the payment of rent.
(f) All property removed from the Premises by Landlord
pursuant to any provisions of this Lease or by law may be handled,
removed or stored by Landlord at the cost and expense of Tenant,
and
Landlord shall in no event be responsible for the value,
preservation
or safekeeping thereof. Tenant shall pay Landlord for all expenses
incurred by Landlord in such removal and for storage charges for
such
property so long as the same shall be in Landlord's possession or
under Landlord's control. All such property not removed from the
Premises or retaken from storage by Tenant within thirty (30) days
after the end of the Term, however terminated, shall, at Landlord's
option, be conclusively deemed to have been conveyed by Tenant to
Landlord as by bill of sale, without further payment or credit by
Landlord to Tenant.
(g) In the event that at any time during the term of
this
Lease either Landlord or Tenant shall institute any action or
proceeding against the other relating to the provisions of this
Lease, or any default hereunder, the unsuccessful party in such
action or proceeding agrees to reimburse the successful party for
the reasonable expenses of attorneys' fees and paralegal fees and
disbursements incurred therein by the successful party. Such
reimbursement shall include all legal expenses incurred prior to
trial, at trial and at all levels of appeal and post judgment
proceedings.
(h) Landlord shall be in default under this Lease if
Landlord fails to perform any obligation under this Lease and such
failure continues for thirty (30) days after Tenant's written
notice
or such additional period as may be necessary to perform any such
obligation provided that Landlord has commenced such performance
within the thirty (30) day period and pursues such performance
diligently thereafter. In the event of such default, Tenant may
elect either (i) to cure such default and receive reimbursement
from
Landlord for the Tenant's actual, reasonable expenses incurred in
curing such default (including an amount equal to seven percent
[7%]
of such expenses as an overhead and supervision fee), and in the
event that Landlord fails to reimburse Tenant for such expenses
within fifteen (15) days of Tenant's written demand, Tenant shall
be entitled to offset such costs against Rent, or (ii) to enforce
Landlord's obligations under this Lease, but in no event shall
Tenant
be entitled to terminate this Lease except as specifically provided
in Section 7 or to seek damages, actual or consequential, except to
the extent of Tenant's actual, reasonable expenses incurred in
curing
Landlord's default as provided above.
(i) Landlord and Tenant hereby waive trial by jury in
any
action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of
or in any way connected with this Lease or any claim of injury or
damage. In the event that Landlord commences any proceedings for
non-payment of Rent, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceedings. This shall
not, however, be construed as a waiver of Tenant's right to assert
such claims in any separate action brought by Tenant. However,
Tenant shall not move to consolidate any such separate action with
any action brought by Landlord for Rent or possession or both.
19. Subordination.
(a) Landlord may have heretofore or may hereafter
encumber
with a mortgage the Building, the Land, the Real Property or any
interest therein, and may have heretofore and may hereafter sell
and
lease back the Land, or any part of the Real Property, and may have
heretofore or may hereafter encumber the leasehold estate under
such
lease with a mortgage or trust deed. (Any such mortgage or trust
deed is herein called a "Mortgage" and the holder of any such
mortgage is herein called a "Mortgagee". Any such lease if the
underlying land is herein called a "Ground Lease" and the lessor
under any such lease is herein called a "Ground Lessor". Any
Mortgage which is a first lien against the Building, the Land, the
Real Property, the leasehold estate under a Ground Lease or any
interest therein is herein called a "First Mortgage" and the holder
or beneficiary of any First Mortgage is herein called a "First
Mortgagee".) Landlord hereby warrants and represents that the
Building, Land and Real Property are not encumbered by a Mortgage
or Ground Lease as of the date of this Lease.
(b) If requested by a Mortgagee or Ground Lessor, Tenant
will either (i) subordinate its interest in this Lease to said
Mortgage or Ground Lease, and to any and all advances made
thereunder
and to the interest thereon, and to all renewals, replacements,
supplements, amendments, modifications and extensions thereof, or
(ii) make certain of Tenant's rights and interest in this Lease
superior thereto; and Tenant will promptly execute and deliver such
agreement or agreements as may be reasonably required by such
Mortgagee or Ground Lessor; provided, however, Tenant covenants it
will not subordinate this Lease to any Mortgage other than a First
Mortgage without the prior written consent of the First Mortgagee.
Tenant may condition delivery of any instrument subordinating
Tenant's interest in this Lease to a Mortgage or a Ground Lease
upon
receipt of a non-disturbance and attornment agreement on the
Mortgagee's or Ground Lessor's standard form which shall be
reasonably satisfactory to Tenant.
(c) It is further agreed that (a) if any Mortgage shall
be foreclosed, or if any Ground Lease be terminated, (i) the
liability of the Mortgagee or purchaser at such foreclosure sale or
the liability of a subsequent owner designated as Landlord under
this
Lease shall exist only so long as such Mortgagee, purchaser or
owner
is the owner of the Building, Land or Real Property, and such
liability shall not continue or survive after further transfer of
ownership; and (ii) upon request of the Mortgagee, if the Mortgage
shall be foreclosed, Tenant will attorn, as Tenant under this
Lease,
to the purchaser at any foreclosure sale under any Mortgage or upon
request of the Ground Lessor, if any Ground Lease shall be
terminated, Tenant will attorn as Tenant under this Lease to the
Ground Lessor, and Tenant will execute such instruments as may be
necessary or appropriate to evidence such attornment; and (b) this
Lease may not be modified or amended so as to reduce the Rent or
shorten the term provided hereunder, or so as to adversely affect
in any other respect to any material extent the rights of the
Landlord, nor shall this Lease be canceled or surrendered, without
the prior written consent, in each instance, of the First Mortgagee
or any Ground Lessor.
(d) Should any prospective First Mortgagee or Ground
Lessor require a modification or modifications of this Lease, which
modification or modifications will not cause an increased cost or
expense to Tenant or in any other way materially and adversely
change
the rights and obligations of Tenant hereunder, in the reasonable
judgment of Tenant, then and in such event, Tenant agrees that this
Lease may be so modified and agrees to execute whatever documents
are required therefor and deliver the same to Landlord within ten
(10) days following the request therefor. Should any prospective
Mortgagee or Ground Lessor require execution of a short form of
lease
for recording (containing, among other customary provisions, the
names of the parties, a description of the Premises and the Term of
this Lease), Tenant agrees to execute such short form of lease and
deliver the same to Landlord within ten (10) days following the
request therefor.
(e) If Tenant fails within ten (10) days after written
demand therefor to execute and deliver any instruments as may be
necessary or proper to effectuate any of the covenants of Tenant
set
forth above in this Section 19, Tenant hereby makes, constitutes
and
irrevocably appoints any one of Landlord or its beneficiaries as
its
attorney in fact (such power of attorney being coupled with an
interest) to execute and deliver any such instruments for and in
the
name of Tenant.
20. Mortgagee Protection. Tenant agrees to give any First
Mortgagee, by registered or certified mail, a copy of any notice or
claim of default served upon the Landlord by Tenant, provided that
prior to such notice Tenant has been notified in writing (by way of
service on Tenant of a copy of an assignment of Landlord's
interests
in leases, or otherwise) of the address of such First Mortgagee.
If required by the Mortgage, Tenant further will agree that if
Landlord shall have failed to cure such default within twenty (20)
days after such notice to Landlord (or if such default cannot be
cured or corrected within that time, then such additional time as
may be necessary if Landlord has commenced within such twenty (20)
days and is diligently pursuing the remedies or steps necessary to
cure or correct such default), then the First Mortgagee shall have
an additional thirty (30) days within which to cure or correct such
default (or if such default cannot be cured or corrected within
that
time, then such additional time as may be necessary if such First
Mortgagee has commenced within such thirty (30) days and is
diligently pursuing the remedies or steps necessary to cure or
correct such default, including the time necessary to obtain
possession if possession is necessary to cure or correct such
default) before Tenant may exercise any right or remedy which it
may
have on account of any such default of Landlord.
21. Insurance and Subrogation.
(a) Tenant shall carry insurance during the entire Term
hereof and any extension thereof insuring Tenant, and insuring
Landlord, the managing agent for the Real Property and their
respective agents, partners and employees, as their interests may
appear, with terms, coverages and in companies reasonably
satisfactory to Landlord, Tenant shall maintain the following
coverages in the following amounts:
(i) Public liability insurance with the broad
form comprehensive general liability endorsement, including
contractual liability insurance covering Tenant's indemnity
obligations hereunder, in an amount not less than $1,000,000
combined
single limit per occurrence, together with umbrella and excess
liability coverage of $5,000,000.
(ii) "All risk" physical damage insurance
including fire, sprinkler leakage, vandalism and extended coverage
for the full replacement cost of all additions, improvements and
alterations to the Premises (except to the extent that such are
contemplated by the Plans) and of all office furniture, trade
fixtures, office equipment, merchandise and all other items of
Tenant's property on the Premises.
(iii) Business interruption or extra expense
insurance with limits not less than those carried by a prudent
tenant.
(iv) Worker's compensation insurance in the
amounts required by applicable law.
Tenant shall, prior to the commencement of the Term and from
time to time during the Term, furnish to Landlord policies or
certificates evidencing the foregoing insurance coverage. Tenant's
policies shall state that such insurance coverage may not be
reduced,
canceled or not renewed without at least thirty (30) days' prior
written notice to Landlord and Tenant (unless such cancellation is
due to non-payment of premium, and in that case only ten (10) days'
prior written notice shall be sufficient).
(b) During the entire Term of this Lease, Landlord shall
maintain the following coverages in the following amounts, naming
Tenant as an additional insured:
(i) Public liability insurance with the broad
form comprehensive general liability endorsement, including
contractual liability insurance covering Tenant's indemnity
obligations hereunder, in an amount not less than $1,000,000
combined
single limit per occurrence, together with umbrella and excess
liability coverage of $5,000,000.
(ii) "All risk" physical damage insurance
including fire, sprinkler leakage, vandalism and extended coverage
for the full replacement cost of physical damage insurance on the
Building, including all mechanical and electrical equipment
therein,
and the Land, together with adequate Boiler and Machinery coverage.
(iii) Business interruption or extra expense
insurance in amounts not in excess of those carried by a prudent
landlord.
(iv) Worker's compensation insurance in the
amounts required by applicable law.
Landlord shall, prior to the commencement of the Term and from
time to time during the Term, furnish to Tenant policies or
certificates evidencing the foregoing insurance coverage.
Landlord's
policies shall state that such insurance coverage may not be
reduced,
canceled or not renewed without at least thirty (30) days' prior
written notice to Tenant and Landlord (unless such cancellation is
due to non-payment of premium, and in that case only ten (10) days'
prior written notice shall be sufficient).
(c) Landlord and Tenant agree to have all fire and
extended coverage and material damage insurance which may be
carried
by either of them endorsed with a clause providing that any release
from liability of or waiver of claim for recovery from the other
party or any of the parties named as additional insureds entered
into
in writing by the insured thereunder prior to any loss or damage
shall not affect the validity of said policy or the right of the
insured to recover thereunder, and Landlord's and Tenant's policies
shall provide further that the insurer waives all rights of
subrogation which such insurer might have against any of the named
insureds. Without limiting any release or waiver of liability or
recovery contained in any other Section of this Lease but rather in
confirmation and furtherance thereof, Landlord waives all claims
for
recovery from Tenant, and Tenant waives all claims for recovery
from
Landlord and the managing agent of the Real Property and their
respective agents, partners, servants and employees for any loss or
damage to any of its property insured under valid and collectible
insurance policies to the extent of any recovery collectible under
such insurance policies.
Notwithstanding the foregoing or anything contained in this
Lease to the contrary, any release or any waiver of claims shall
not
be operative, nor shall the foregoing endorsements be required, in
any case where the effect of such release or waiver is to
invalidate
insurance coverage or invalidate the right of the insured to
recover
thereunder or increase the cost thereof (provided that in the case
of increased cost the other party shall have the right, within ten
(10) days following written notice, to pay such increased cost,
thereby keeping such release or waiver in full force and effect).
(d) Tenant and Landlord shall comply with all applicable
laws and ordinances, all orders and decrees of court and all
requirements of other governmental authority, and shall not
directly
or indirectly make any use of the Premises or the Building or the
Land which may thereby be prohibited or be dangerous to person or
property or which may jeopardize any insurance coverage, or may
increase the cost of insurance or require additional insurance
coverage. Notwithstanding the foregoing if Tenant shall make any
use of the Premises which may increase or has increased the cost of
Landlord's insurance, Tenant shall pay the cost of such increased
insurance upon demand.
22. Nonwaiver. No waiver of any condition expressed in this
Lease shall be implied by any neglect of Landlord or Tenant to
enforce any remedy on account of the violation of such condition,
whether or not such violation be continued or repeated
subsequently,
and no express waiver shall affect any condition other than the one
specified in such waiver and that one only for the time and in the
manner specifically stated. It is agreed that no receipt of moneys
by Landlord from Tenant after the termination in any way of the
Term
or of Tenant's right of possession hereunder or after the giving of
any notice shall reinstate, continue or extend the Term or affect
any notice given to Tenant prior to the receipt of such moneys. It
is also agreed that after the service of notice or the commencement
of a suit or after final judgment for possession of the Premises,
Landlord may receive and collect any moneys due, and the payment of
said moneys shall not waive or affect any said notice, suit or
judgment.
23. Estoppel Certificate. Tenant agrees that from time to
time
upon not less than ten (10) days' prior request by Landlord, or any
existing or prospective First Mortgagee or Ground Lessor, and
Tenant
will cause any subtenant, licensee, concessionaire or other
occupant
of the Premises claiming by, through or under Tenant to, complete,
execute and deliver to Landlord or Landlord's designee or to any
First Mortgagee or Ground Lessor, a written estoppel certificate
certifying (a) that this Lease is unmodified and in full force and
effect (or if there have been modifications, that the lease as
modified is in full force and effect and identifying the
modifications); (b) the date upon which Tenant began paying Rent
and
the dates to which the Rent and other charges have been paid; (c)
that the Landlord is not in default under any provision of this
Lease, or, if in default, the nature thereof in detail; (d) that
the
Premises have been completed in accordance with the terms hereof
and
Tenant is in occupancy and paying Rent on a current basis with no
rental offsets or claims; (e) that there has been no prepayment of
Rent other than that provided for in this Lease; (f) that there are
no actions, whether voluntary or otherwise, pending against Tenant
under the Bankruptcy Code or the bankruptcy laws of any state; and
(g) such other matters as may be required by the Landlord, First
Mortgagee, or Ground Lessor, including, without limitation, any
other
information concerning the status of this Lease or the parties,
performance hereunder reasonably requested by the party to whom
such
estoppel certificate is to be addressed. Tenant's failure to
complete, execute and deliver any such estoppel certificate within
the aforesaid ten (10) day period shall be deemed to be a Default
under Section 18 of this Lease.
24. Corporate Authority. Landlord and Tenant each (a)
represents and warrants that this Lease has been duly authorized,
executed and delivered by and on behalf of Landlord's and Tenant's
respective corporations and constitutes the valid and binding
agreement of the parties hereto in accordance with the terms hereof
and (b) if either party so requests, the other party shall deliver
to it, concurrently with the delivery of this Lease, certified
resolutions of the board of directors (and shareholders, if
required)
authorizing the party's execution and delivery of this Lease and
the
performance of its obligations hereunder.
25. Real Estate Brokers. Tenant represents and warrants that
Tenant has directly dealt with and only with the Brokers in
connection with this Lease and agrees to indemnify and hold
Landlord,
harmless from all losses, damages and liabilities, claims, liens,
costs and expenses including, without limitation, reasonable
attorneys' fees, arising from any claims or demands of any other
broker or brokers or finders or any commission alleged to be due
such
other broker or brokers or finders claiming to have dealt with
Tenant
in connection with this Lease. Landlord shall be solely
responsible
for any commission due the Brokers pursuant to the terms and
provisions of a separate agreement.
26. Notices. All notices to or demands upon Landlord or
Tenant
desired or required to be given under any of the provisions hereof
shall be in writing. Any notices or demands from Landlord to
Tenant
shall be mailed by United States registered or certified mail,
return
receipt requested, or sent by nationally recognized courier service
such as Federal Express or Airborne, addressed to Tenant at 8619
Westwood Center Drive, Vienna, Virginia 22182, Attn: Ellen M.
Kirsh,
General Counsel and Vice President. Any notices or demands from
Landlord to Tenant may be signed by Landlord, the managing agent
for
the Real Property or any agent of any of them. Any notices or
demands from Tenant to Landlord shall be mailed by registered or
certified mail, return receipt requested, or sent by a nationally
recognized courier service such as Federal Express or Airborne,
addressed to Landlord at Landlord's address for payment of Rent.
Either party may, upon notice to the other, change its address for
receipt of notices or demands. All notices to or demands upon
Landlord or Tenant shall be deemed served at the time the same were
posted.
27. Miscellaneous.
(a) Each provision of this Lease shall extend to and
shall
bind and inure to the benefit not only of Landlord and Tenant, but
also their respective heirs, legal representatives, successors and
assigns, but this provision shall not operate to permit any
assignment, subletting, mortgage, lien, charge, or other transfer
or encumbrance contrary to the provisions of this Lease.
or of any of its conditions or provisions shall be
binding upon
Landlord unless in writing signed by Landlord.
(c) Submission of this instrument for examination shall
not constitute a reservation of or option for the Premises or in
any
manner bind Landlord, and no lease or obligation on Landlord shall
arise until this instrument is signed and delivered by Landlord and
Tenant; provided, however, the execution and delivery by Tenant of
this Lease to Landlord or the managing agent or leasing agent of
the
Real Property shall constitute an irrevocable offer by Tenant to
lease the Premises on the terms and conditions herein contained,
which offer may not be revoked for thirty (30) days after such
delivery.
(d) The word "Tenant" whenever used herein shall be
construed to mean Tenants or any one or more of them in all cases
where there is more than one Tenant; and the necessary grammatical
changes required to make the provisions hereof apply either to
corporations or other organizations, partnerships or other
entities,
or individuals, shall in all cases be assumed as though in each
case
fully expressed. In all cases where there is more than one person
or entity comprising Tenant, the liability of each shall be joint
and several.
(e) Clauses, plats, exhibits and riders, if any, affixed
to this Lease are made an integral part hereof.
(f) The headings of Sections are for convenience only
and
do not limit, expand or construe the contents of the Sections.
(g) Time is of the essence of this Lease and of each and
all provisions thereof.
(h) All amounts (including, without limitation, Base
Rent
and Additional Rent) owed by Tenant to Landlord pursuant to any
provision of this Lease shall bear interest from the date due until
paid at the annual rate equal to the lesser of eighteen percent
(18%)
per annum or the highest non-usurious rate permitted by law.
(i) The invalidity of any provision of this Lease shall
not impair or affect in any manner the validity, enforceability or
effect of any other provisions of this Lease.
(j) All understandings and agreements, oral or written,
heretofore made between the parties hereto and any of their agents
are merged in this Lease, which alone fully and completely
expresses
the agreement between Landlord and Tenant.
(k) Without limiting the provisions of Section 5 or any
other provisions of this Lease, if Landlord fails to perform timely
any of the terms, covenants and conditions of this Lease on
Landlord's part to be performed, and such failure is due in whole
or in part to any strike, lockout, labor trouble, civil disorder,
inability to procure materials, failure of power, restrictive
governmental laws and regulations, riots, insurrections, war, fuel
shortages, accidents, casualties, acts of God, acts caused directly
or indirectly by Tenant (or Tenant's employees, agents, licensees,
invitees or contractors) or any other cause beyond the reasonable
control of Landlord, then Landlord shall not be deemed in default
under this Lease as a result of such failure.
(l) Any rights, reserved or granted to Landlord
hereunder
may be exercised by Landlord, its beneficiaries or the managing
agent
for the Real Property or their respective agents, employees,
contractors or designees.
(m) Any payment received from Tenant may be applied by
Landlord at any time against any obligation due and owing by Tenant
under this Lease, notwithstanding any statement appearing on or
referred to in any remittance from Tenant or any prior application
of such payment. If a petition under the Bankruptcy Code is
initiated within ninety (90) days after receipt by Landlord of any
such payment, the payment shall be deemed applicable to any unpaid
obligations then due in the inverse order of their maturity.
28. Landlord. The term "Landlord" as used in this Lease
means
only the owner of Landlord's interest in the Premises from time to
time. In the event of any assignment, conveyance or sale, once or
successively, of Landlord's interest in the Premises or any
assignment of this Lease by Landlord, said Landlord making such
sale,
conveyance or assignment shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder
accruing after such sale, conveyance or assignment, and Tenant
agrees
to look solely to such purchaser, grantee or assignee with respect
thereto. A mortgagee (or assignee under an assignment in
connection
with a Mortgage) shall not be deemed such a purchaser, grantee or
assignee under this Section 31(a), unless and until the foreclosure
of any Mortgage or the conveyance or transfer of Landlord's
interest
under this Lease in lieu of foreclosure, and then subject to the
provisions of Section 19. This Lease shall not be affected by any
such assignment, conveyance or sale, and Tenant agrees to attorn to
the purchaser, grantee or assignee.
29. Title and Covenant Against Liens. Landlord's title is
and
always shall be paramount to the title of Tenant, and nothing in
this
Lease contained shall empower Tenant to do any act which can, shall
or may encumber the title of Landlord. Tenant covenants and agrees
not to suffer or permit any lien of mechanics or materialmen to be
placed upon or against the Premises, the Building, the Land or
against the Tenant's leasehold interest in the Premises and, in
case
of any such lien attaching, to immediately pay and remove same.
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of
Tenant,
operation of law or otherwise, to attach to or be placed upon the
Premises, the Building or the Land, and any and all liens and
encumbrances created by Tenant shall attach only to Tenant's
interest
in the Premises. If any such liens so attach and Tenant fails to
pay and remove the same within ten (10) days after written demand
by Landlord, such failure shall be an event of Default hereunder,
and Landlord, at its election, may pay and satisfy the same, and in
such event the sums so paid by Landlord, with interest from the
date
of payment at the rate set forth in Section 27(h) hereof for
amounts
owed Landlord by Tenant, shall be deemed to be Additional Rent due
and payable by Tenant immediately upon written notice from
Landlord.
30. Signage. With Landlord's prior written consent, which
shall not be unreasonably withheld, and subject to compliance with
all applicable codes and the other terms and provisions of this
Lease, Tenant shall be entitled to erect Tenant's signage on the
exterior face of the Building and/or on a pylon to be erected on
the
Land in a location specified by Landlord and pursuant to signage
specification approved by Landlord in writing; provided, however,
in no event shall Tenant be entitled to mount any signage or other
apparatus whatsoever on the roof of the Building or to may any
penetrations of the roof membrane for any reason whatsoever or make
or perform any alterations or improvements in any way affecting the
roof or the roof membrane.
31. Exculpatory Provisions. It is expressly understood and
agreed by and between the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the representations,
warranties, covenants, undertakings and agreements herein made on
the part of any Landlord while in form purporting to be the
representations, warranties, covenants, undertakings and agreements
of such Landlord are nevertheless each and every one of them made
and intended, not as personal representations, warranties,
covenants,
undertakings and agreements by such Landlord, or for the purpose or
with the intention of binding such Landlord personally, but are
made
and intended for the purpose only of subjecting such Landlord's
interest in the Premises and the Real Property to the terms of this
Lease and for no other purpose whatsoever, and in case of default
hereunder by such Landlord (or default through, under or by any of
its beneficiaries, or any of the agents or representatives of said
beneficiaries), Tenant shall look solely to the interests of such
Landlord in the Premises and the Real Property.
32. Hazardous Substances.
(a) Tenant agrees not to generate, store, use, treat or
dispose of, nor to allow, suffer or permit the generation, storage,
use treatment or disposal of, any "Hazardous Waste" or "Hazardous
Substance" (as those terms are defined in Resource Conservation and
Recovery Act, 42 U.S.C., Section 6901, et seq., as amended
("RCRA"),
or the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C., Section 9601, et seq., as amended
("CERCLA"), and any rules and regulations now or hereafter
promulgated under either of such acts) or any pollutants or other
contaminant (including, without limitation, petroleum-related
products) on, in, from or about the Premises, Building or the Real
Property, except in strict accordance with applicable laws and
regulations and following written notice of same to Landlord.
Tenant
shall and hereby does indemnify and hold Landlord harmless from and
against any and all loss, damages, expenses, fees, claims, costs
and
liabilities (including, but not limited to, attorneys' fees and
costs
of litigation) arising out of or in any manner related to the
"release" or "threatened release" of, and for any clean-up
responsibility imposed upon owner under any federal, state or local
law, ordinance, rule or regulations now or hereafter in effect,
with
respect to, any "Hazardous Waste" or "Hazardous Substance", or any
pollutant, or other contaminant (including, without limitation,
petroleum-related products) or environmental condition on, in from
or about the Premises, Building or the Real Property or any portion
thereof, which release or threatened release of pollutant or
environmental condition arises out of act of Tenant or is in any
manner related to Tenant's use or occupancy of the Premises,
Building
or Real Property an Tenant, its agents, employees, contractors or
invitees. Tenant shall not be responsible for and shall have no
liability with regard to any "Hazardous Waste" or "Hazardous
Substance" or other pollutant or other contaminant or environmental
condition established to be in, on, under or about the Building or
the Land on the date of this Lease.
(b) Landlord hereby warrants and represents that it has
no actual, present knowledge or any "Hazardous Waste" or "Hazardous
Substance" in, on, under or about the Building or the Land except
as describe in that certain Preliminary Groundwater Investigation
dated May 3, 1994, prepared by Dames & Moore and addressed to
Landlord. In the event that any "Hazardous Waste" or "Hazardous
Substance" or other pollutant or other contaminant or environmental
condition is found in the Premises and/or the Building or the Land,
Landlord shall remove and/or encapsulate and/or remedy the same, as
required by applicable law at its sole cost and expense and shall
otherwise comply with all federal, state and local rules,
regulations, laws, statutes or ordinances pertaining thereto and
Tenant shall have the right to obtain reimbursement from Landlord
for all damages suffered by Landlord as a result of the presence
and
removal of such Hazardous Waste" or "Hazardous Substance" or other
pollutant or other contaminant or environmental condition.
Landlord
shall and hereby does indemnify and hold Tenant harmless from and
against any and all loss, damages, expenses, fees, claims, costs
and
liabilities (including, but not limited to, attorneys' fees and
costs
of litigation) arising out of or in any manner related to the
"release" or "threatened release" of, and for any clean-up
responsibility imposed upon owner under any federal, state or local
law, ordinance, rule or regulations now or hereafter in effect,
with
respect to, any "Hazardous Waste" or "Hazardous Substance", or any
pollutant, or other contaminant (including, without limitation,
petroleum-related products) or environmental condition on, in from
or about the Premises, Building or the Real Property or any portion
thereof existing as of the date Tenant takes occupancy of the Phase
1 Space and the date Tenant takes occupancy of the Phase 2 Space,
or which Landlord arises out of act of Landlord or is in any manner
related to Landlord's use or occupancy of the Premises, Building or
Real Property, or Landlord,its agents, employees, contractors or
invitees introduces into the Premises, the Building or the land
upon
which it is situated, which release or threatened release of
pollutant or environmental condition. Landlord shall not be
responsible for and shall have no liability with regard to any
"Hazardous Waste" or "Hazardous Substance" or other pollutant or
other contaminant or environmental condition established to have
been
introduced by Tenant in, on, under or about the Building or the
Land.
33. Radon Gas. Section 404.056(7), Florida Statutes,
requires
the following disclosure: Radon is a naturally occurring
radioactive
gas that, when it has accumulated in 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
your county public health unit.
34. Competitors. Landlord hereby agrees and covenants that,
so long as Landlord has not delivered notice to Tenant either
terminating this Lease or terminating Tenant's right to possession
of the Premises, or both, due to a Default, Landlord shall not
knowingly (i) enter into any Lease of space within the Building
with
any direct competitor of America Online, Inc. ("AOL") or (ii)
permit
any sign or other advertising by a direct competitor of AOL to be
placed on the Building or on the Land. For purposes of the
foregoing
covenant, a "direct competitor of AOL" shall be defined as an
enterprise whose primary business is providing computerized on-line
data and information services to subscribers and whose use of space
in the Building or advertising facilities on the Building or the
Land
is directly related to such business.
35. Tenant's Supplemental Equipment.
(a) Throughout the Lease Term, Tenant shall have the
right
to install and maintain, in locations in the Premises, in and on
the
Building and on the property adjacent to the Building, that are
reasonably acceptable to Landlord, satellite dishes, antennae and
other communications equipment (the "Communications Equipment"),
subject to the following conditions:
(i) Tenant, at its sole cost and expense,
shall
procure all necessary governmental permits and licenses for the
installation, maintenance and/or use of the Communications
Equipment,
and shall at all times comply with all requirements of laws,
ordinances and rules of all public authorities and insurance
companies and all orders, rules and regulations of any public
authority, which shall impose any order or duty upon Landlord or
Tenant with respect to or affecting the Communications Equipment or
arising out of Tenant's use or manner of use thereof.
(ii) Tenant shall promptly pay and discharge
all
out-of-pocket costs and expenses incidental to and/or connected
with
the furnishing, installation, maintenance and operation of, the
Communications Equipment.
(iii) Installation of the Communications
Equipment
shall be at Tenant's sole expense. Tenant shall obtain Landlord's
prior written consent, which shall not be unreasonably withheld,
conditioned or delayed, as to the location of the Communications
Equipment and the manner in which such installation work is to be
done. All plans and specifications concerning such installation
shall be subject to Landlord's prior written approval, which
approval
shall not be unreasonably withheld, conditioned or delayed. In no
event shall the Communications Equipment be located on the roof of
the Building, and in no event shall Tenant disturb the roof
membrane
or make any other penetration on the roof or the exterior facade of
the Building.
(iv) Tenant, at its sole cost and expense,
shall
maintain the Communications Equipment in a clean and safe manner
throughout the entire Term, and shall comply with all applicable
laws, ordinances and regulations. In addition, all repairs to the
Building made necessary by reason of the furnishing, installation,
maintenance or operation of the Communications Equipment or any
replacements thereof shall be at Tenant's sole cost. Upon
expiration
or termination of this Lease, Tenant agrees that it will promptly
remove the Communications Equipment and any wiring or accessories
associated with the Communications Equipment and shall promptly
repair any damage to the Building caused by the installation or
removal of the Communications Equipment and related equipment, all
at its sole cost and expense.
(v) Tenant, at its sole cost and expense,
shall
maintain such insurance as is appropriate with respect to the
installation, operation and maintenance of the Communications
Equipment or as Landlord may otherwise require and shall provide
Landlord with evidence of such insurance prior to installation.
Landlord shall have no liability on account of any damage to or
interference with the operation of the Communications Equipment,
except that which is caused by the negligence or wilful misconduct
by Landlord or its agents or by the failure of Landlord to observe
any of the terms and conditions of the Lease.
(b) Throughout the Term, Tenant shall have the right to
install, operate and maintain an auxiliary generator (the
"Generator") to service Tenant's electric power needs in the
Premises, subject to the following conditions:
(i) If the Generator is not entirely situated
within the Premises, then the location of such Generator shall be
subject to Landlord's written approval, and shall be screened from
view in a manner and with materials reasonably required by
Landlord.
In no event shall the Generator be located on the roof of the
Building, and in no event shall Tenant disturb the roof membrane or
make any other penetration on the roof or the exterior facade of
the
Building.
(ii) Tenant, at its sole cost and expense,
shall
procure all necessary governmental permits and licenses for the
installation, maintenance and/or use of the Generator, and shall at
all times comply with all requirements of laws, ordinances and
rules
of all public authorities and insurance companies and all orders,
rules and regulations of any public authority, which shall impose
any order or duty upon Landlord or Tenant with respect to or
affecting the Generator or arising out of Tenant's use or manner of
use thereof.
(iii) Tenant shall promptly pay and discharge
all
out-of-pocket costs and expenses incidental to and/or connected
with
the furnishing, installation, maintenance, operation and removal of
the Generator.
(iv) Installation of the Generator shall be at
Tenant's sole expense. Tenant shall obtain Landlord's prior
consent,
which shall not be unreasonably withheld, conditioned or delayed,
to the manner in which such installation work is to be done. All
plans and specifications concerning such installation shall be
subject to Landlord's prior written approval, which approval shall
not be unreasonably withheld, conditioned or delayed.
(v) Tenant, at its sole cost and expense,
shall
maintain the Generator in a clean and safe manner throughout the
entire Lease Term, and shall comply with all applicable laws,
ordinances and regulations. In addition, all repairs to the
Building
made necessary by reason of the furnishing, installation,
maintenance, operation or removal of the Generator or any
replacements thereof shall be at Tenant's sole cost. Upon
expiration
or termination of this Lease, Tenant agrees that it will promptly
remove the Generator and any wiring or accessories associated with
the Generator and shall promptly repair any damage to the Building
or the Project caused by the installation or removal of the
Generator
and related equipment, all at its sole cost and expense.
(vi) Tenant shall, at its sole cost and
expense,
maintain such insurance as is appropriate with respect to the
installation, operation and maintenance of the Generator or as
Landlord may otherwise require and shall provide Landlord with
evidence of such insurance prior to installation. Landlord shall
have no liability on account of any damage to or interference with
the operation of the Generator, except that which is caused by the
negligence or wilful misconduct by Landlord or its Agents or by the
failure of Landlord to observe any of the terms and conditions of
the Lease.
(c) Throughout the Term, Tenant shall have the right to
install, operate and maintain, supplemental HVAC units (the "HVAC
Equipment"), subject to the following conditions:
(i) Tenant, at its sole cost and expense,
shall
procure all necessary governmental permits and licenses for the
installation, maintenance and/or use of the HVAC Equipment, and
shall
at all times comply with all requirements of laws, ordinances and
rules of all public authorities and insurance companies and all
orders, rules and regulations of any public authority, which shall
impose any order or duty upon Landlord or Tenant with respect to or
affecting the HVAC Equipment or arising out of Tenant's use or
manner
of use thereof.
(ii) Tenant shall promptly pay and discharge
all
out-of-pocket costs and expenses incidental to and/or connected
with
the furnishing, installation, maintenance and operation of the HVAC
Equipment.
(iii) Installation of the HVAC Equipment shall
be at Tenant's sole expense. Tenant shall obtain Landlord's prior
consent, which shall not be unreasonably withheld, conditioned or
delayed, to the locations of the HVAC units and the manner in which
such installation work is to be done. All plans and specifications
concerning such installation shall be subject to Landlord's prior
written approval, which approval shall not be unreasonably
withheld,
conditioned or delayed.
(iv) Tenant, at its sole cost and expense,
shall
maintain the HVAC Equipment in a clean and safe manner throughout
the entire Lease Term, and shall comply with all applicable laws,
ordinances and regulations. In addition, all repairs to the
Building
made necessary by reason of the furnishing, installation,
maintenance, operation or removal of the HVAC Equipment or any
replacements thereof shall be at Tenant's sole cost. Upon
expiration
or termination of this Lease, Tenant agrees that it will promptly
remove the HVAC Equipment and any wiring, conduit or accessories
associated with the HVAC Equipment and shall promptly repair any
damage to the Building or the Project caused by the installation or
removal of the HVAC Equipment and related equipment, all at its
sole
cost and expense.
(v) Tenant shall, at its sole cost and
expense,
maintain such insurance as is appropriate with respect to the
installation, operation and maintenance of the HVAC Equipment or as
Landlord may otherwise require and shall provide Landlord with
evidence of such insurance prior to installation. Landlord shall
have no liability on account of any damage to or interference with
the operation of the HVAC Equipment, except that which is caused by
the negligence or wilful misconduct by Landlord or its Agents or by
the failure of Landlord to observe any of the terms and conditions
of the Lease.
(vi) Tenant, at its sole cost and expense,
shall
cause the utilities used by the HVAC Equipment to be separately
metered and shall pay for such utilities.
(d) Throughout the Lease Term, Tenant shall have the
right
to install, maintain and remove fiber cabling and other
telecommunications wiring within the plenum above the drop ceiling.
36. ADA Requirements. Tenant shall be solely responsible for
assuring that any Alterations to the Premises other than the Tenant
Improvements shall comply in all respects with the Americans with
Disabilities Act, 11 U.S.C. Section 12181, et seq. (the "ADA"), and
Tenant shall indemnify Landlord and hold Landlord harmless from and
against any and all loss, cost or damage (including, without
limitation, reasonable attorneys' fees and costs through any
appellate proceedings) resulting from any claim, complaint, action,
order, directive, decree or finding that the Premises or any
portion
thereof as a result of any alterations by Tenant do not comply with
the ADA. Landlord shall be solely responsible for assuring that
the
public and common areas of the office space in the Building shall
comply in all respects with the ADA, and Landlord shall indemnify
Tenant and hold Tenant harmless from and against any and all loss,
cost or damage (including, without limitation, reasonable
attorneys'
fees and costs through any appellate proceedings) resulting from
any
claim, complaint, action, order, directive, decree or finding that
such areas do not comply with the ADA. Where alterations made by
either Landlord or Tenant following the date of this Lease trigger
"path of travel" requirements under the ADA, the party making such
alterations shall be responsible for satisfying such requirements.
37. Contingencies. The rights and obligations of Landlord
and
Tenant hereunder shall be contingent upon (i) Landlord's entering
into the Construction Contract with the Contractor within four (4)
business days of the date hereof, (ii) Landlord's and Tenant's each
depositing into escrow the initial amount of $1,003,052.98 pursuant
to Section 6(a)(iv) within the period provided therein, and (iii)
issuance by the City of Jacksonville, within ten (10) days of the
date of this Lease, of a building permit for the Tenant
Improvements.
In the event that any or all of the foregoing contingencies are not
satisfied within the applicable period(s), either party may
terminate
this Lease at any time thereafter, until satisfaction of all such
contingencies, upon written notice to the other party.
IN WITNESS WHEREOF, this Lease was executed as of the
Effective
Date.
Signed, sealed and delivered
in the presence of: LANDLORD:
JACKSONVILLE CENTER, INC., a
Florida corporation
/S/ DALE GLANTON______________ By:__/S/ ARIS NEWTON__________
Name: Dale Glanton____________ Name:__Aris Newton__________
Title:_President____________
/S/ DAWN FLEMING______________
Name:_Dawn Fleming____________
TENANT:
AMERICA ONLINE, INC., a Delaware
corporation
_/S/ SHEILA BURKE_____________ By:_/S/ LENNERT J LEADER______
Name:_Sheila Burke____________ Name:_Lennert J Leader______
Title:_Senior V.P & CFO_____
_/S/ STUART M WEINSTEIN_______
Name:_Stuart M Weinstein______
5132-002-267396.08
EXHIBIT A
PREMISES
EXHIBIT A-1
PREMISES DEPICTING PHASE 1 SPACE AND PHASE 2 SPACE
EXHIBIT A-2
SITE PLAN SHOWING TENANT'S PARKING AREA
EXHIBIT A-3
TEMPORARY SPACE
EXHIBIT B
RULES AND REGULATIONS
1. The sidewalks, walks, plaza entries, corridors,
concourses,
ramps, staircases, escalators and elevators shall not be obstructed
or used for any purpose other than ingress and egress to and from
the Premises. No bicycle or motorcycle shall be brought into the
Building or kept on the Premises without the consent of Landlord.
2. No freight, furniture or bulky matter of any description
will be received into the Building or carried into the elevators
except in such a manner, during such hours and using such elevators
and passageways as may be approved by Landlord, and then only
having
been scheduled in advance. Any hand trucks, carryalls or similar
appliances used for the delivery or receipt of merchandise or
equipment shall be equipped with rubber tires, side guards and such
other safeguards as Landlord shall require.
3. Landlord shall have the right to prescribe the weight,
position and manner of installation of safes and/or other heavy
equipment which shall, if considered necessary by Landlord, be
installed in a manner which shall insure satisfactory weight
distribution. All damage done to the Building by reason of a safe
or any other article of Tenant's office equipment being on the
Premises shall be repaired at the expense of Tenant. The time and
manner of moving safes and/or other heavy equipment shall be
subject
to prior approval by Landlord.
4. Only persons authorized by Landlord will be permitted to
furnish ice, drinking water, towels, barbering, shoe shining, floor
polishing and other similar services to Tenant on the Premises, and
only at hours and under regulations fixed by Landlord.
5. Tenant, or the employees, agents, servants, visitors or
licensees of Tenant shall not at any time, place, leave or discard
any rubbish, paper, articles or objects of any kind whatsoever
outside the doors of the Premises or in the corridors or
passageways
of the Building. No animals or birds shall be brought or kept in
or about the Building.
6. Landlord shall have the right to prohibit any advertising
about the Building by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for
offices, and upon written notice from Landlord, Tenant will refrain
from or discontinue such advertising.
7. Tenant shall not place, cause or allow to be placed any
sign or lettering whatsoever, at, in, about or upon the Premises,
except in and at such places as may be designated by Landlord and
consented to by Landlord in writing. All lettering and graphics on
corridor doors shall conform to the standard prescribed by
Landlord.
8. Canvassing, soliciting or peddling in the Building is
prohibited and Tenant shall cooperate to prevent same.
9. All persons in or entering the Building shall be required
to comply with the security policies of the Building. Landlord
will
provide all security services for the Building, provided that if
Tenant desires any additional security service for the Premises,
Tenant shall have the right (with the advance written consent of
Landlord) to obtain such additional service at Tenant's sole cost
and expense.
10. Only workmen approved by Landlord may be employed for
repairs, installation, alterations, painting, material moving and
other similar work that may be done on the Premises.
11. Except as otherwise provided in the Lease, Tenant shall
not do any cooking or conduct any restaurant, luncheonette or
cafeteria for the sale or service of food or beverages to its
employees or to others, or permit the delivery of any food or
beverage to the Premises, except by such persons delivering the
same
as shall be approved by Landlord and only under regulations fixed
by Landlord. Tenant may, however, operate a kitchen by and for its
employees in accordance with the terms and provisions of this
Lease.
12. Tenant shall not bring or permit to be brought or kept in
or on the Premises any inflammable, combustible, corrosive,
caustic,
poisonous or explosive fluid, material, chemical or substance, or
cause or permit any odors to permeate in or emanate from the
Premises.
13. Tenant shall not mark, paint, drill into, or in any way
deface any part of the Building or the Premises. No boring,
cutting
or stringing of wires shall be permitted, except with the prior
written reasonable consent of Landlord. Tenant shall not install
any resilient tile or similar floor covering in the Premises except
with the prior approval of Landlord.
14. No locks or bolts of any kind, other than Tenant's
badge-lock system shall be placed on any door in the Building or
the
Premises and no lock on any door therein shall be changed or
altered
in any respect. Landlord shall furnish two keys for each lock on
doors in the Premises and shall, on Tenant's request and at
Tenant's
expense, provide additional duplicate keys. All keys shall be
returned to Landlord upon the termination of this Lease. Landlord
may be at all times keep a pass key to the Premises. All entrance
doors to the Premises shall be left closed at all times, and left
locked when the Premises are not in use.
15. Tenant shall give immediate notice to Landlord in case of
accidents in the Premises or in the Building or of defects therein
or in any fixtures or equipment, or of any known emergency in the
Building.
16. Tenant shall not use the Premises or permit the Premises
to be used for photographic, multilith or multigraph reproduction
except in connection with its own business.
17. Tenant shall not use or permit any portion of the
Premises
to be used as an office for a public stenographer or typist, offset
printing, the sale of liquor or tobacco, a barber or manicure shop,
an employment bureau, a doctor's or dentist's office, a dance or
music studio, any type of school, or for any use other than those
specifically granted in this Lease.
18. Tenant shall not advertise for laborers giving the
Premises
as an address, nor pay laborers at a location in the Premises. The
foregoing shall not be deemed to prohibit Tenant from advertising
for and hiring employees consistent with Tenant's Permitted Use.
19. [DELETED]
20. Tenant shall not place a load upon any floor of the
Premises which exceeds the load per square foot which such floor
was
designed to carry and which is allowed by law. Business machines
and mechanical equipment belonging to Tenant which cause noise,
vibration or any other nuisance that may be transmitted to the
structure or other portions of the Building or to the Premises, to
such a degree as to be objectional to Landlord or which interfere
with the use or enjoyment by other tenants of their premises or the
public portions of the Building, shall be placed and maintained by
Tenant, at Tenant's expense, in settings of cork, rubber or spring
type vibration eliminators sufficient to eliminate noise and
vibration.
21. No draperies, shutters or other covering may be installed
by Tenant between the Building Standard window covering and the
exterior windows or walls. Installation and use of lighting which
is visible from the exterior of the Building, except for Building
Standard lights, are subject to the prior written approval of
Landlord.
22. Except as otherwise provided in the Lease, Tenant shall
not place, install or operate within the Premises or any other part
of the Building any engine, stove or machinery, or conduct
mechanical
operations therein, without the written consent of Landlord.
23. No portion of the Premises or any other part of the
Building shall at any time be used or occupied as sleeping or
lodging
quarters.
EXHIBIT C
ANNUAL AND MONTHLY BASE RENT
<PAGE>
Lease Year of Term Annual Base Rent Monthly Base Rent
1<PAGE>
$507,870.00* $42,322.50*
2<PAGE>
$525,645.45 $43,803.79
3<PAGE>
$544,043.04 $45,336.92
4<PAGE>
$563,084.55 $46,923.71
5<PAGE>
$582,792.51 $48,566.04
6<PAGE>
$603,190.24 $50,265.85
7<PAGE>
$624,301.90 $52,025.16
* These provisions and amounts notwithstanding, Tenant shall be
obligated to pay only the Base Rent for Phase 1 Space, as set
forth in Section 3(c) of the Lease, prior to the delivery of
Phase 2 Space in accordance with the requirements of the
Lease.
<PAGE>
Renewal Option Term<PAGE>
8<PAGE>
$646,152.47 $53,846.04
9<PAGE>
$668,767.81 $55,730.65
10<PAGE>
$692,174.68 $57,681.22
EXHIBIT D
DESCRIPTION OF PLANS
Plans prepared by Architectural Associates dated April 30, 1995
under
Job No. 9502801 consisting of 2 pages, A-1 and A-2.
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
IMESON CENTER, INC., A FLORIDA CORPORATION
ASSIX AUTOMOTIVE, INC., A FLORIDA CORPORATION
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE
EXCAL ENTERPRISES, INC. CONSOLIDATED FINANCIAL STATEMENTS INCLUDED
IN
THE COMPANY'S FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 15 AND IS
QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,073,694
<SECURITIES> 1,285,979
<RECEIVABLES> 247,824
<ALLOWANCES> ( 20,441)
<INVENTORY> 0
<CURRENT-ASSETS> 1,077,850
<PP&E> 11,284,494
<DEPRECIATION> 1,417,852
<TOTAL-ASSETS> 14,232,101
<CURRENT-LIABILITIES> 1,992,272
<BONDS> 0
<COMMON> 4,713
0
0
<OTHER-SE> 9,783,093
<TOTAL-LIABILITY-AND-EQUITY> 14,232,101
<SALES> 2,238,986
<TOTAL-REVENUES> 2,238,986
<CGS> 0
<TOTAL-COSTS> 4,108,972
<OTHER-EXPENSES> 664,538
<LOSS-PROVISION> ( 2,534,524)
<INTEREST-EXPENSE> 25,943
<INCOME-PRETAX> ( 2,560,467)
<INCOME-TAX> ( 1,000,000)
<INCOME-CONTINUING> ( 1,560,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 1,560,467)
<EPS-PRIMARY> ( .33)
<EPS-DILUTED> ( .33)
</TABLE>
