SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-K
_____________________
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1998
______________________________
Commission File No. 0-22065
RADIANT SYSTEMS, INC.
A Georgia Corporation
(IRS Employer Identification No. 11-2749765)
3925 Brookside Parkway
Alpharetta, Georgia 30022
(770) 576-6000
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
None
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [CHECK MARK] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
The aggregate market value of the common stock of the registrant held
by nonaffiliates of the registrant (9,091,768 shares) on March 17,
1999 was approximately $85,803,561 based on the closing price of the
registrant's common stock as reported on The Nasdaq Stock Market on
that date. For the purposes of this response, officers, directors and
holders of 10% or more of the registrant's common stock are considered
to be affiliates of the registrant at that date.
The number of shares outstanding of the registrant's Common Stock, as
of March 15, 1999: 16,131,150 shares of no par value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement to be
delivered to the shareholders in connection with the Annual Meeting of
the Shareholders to be held on May 14, 1999 are incorporated by
reference in response to Part III of this Report.
<PAGE>
PART I
Item 1. Business.
General
Radiant Systems, Inc. (the "Company" or "Radiant") provides
enterprise-wide technology solutions to the retail industry.
The Company offers fully integrated retail automation solutions
including point of sale systems, consumer-activated ordering systems,
back office management systems and headquarters-based management
systems. The Company's products enable retailers to interact
electronically with consumers, capture data at the point of sale,
manage site operations and logistics and communicate electronically
with their sites, vendors and credit networks. In addition, the
Company offers system planning and design services that tailor the
automation solution to each retailer's specifications, as well as
implementation services to facilitate installation of the Company's
products.
Certain retail markets require many of the same product features and
functionality. As a result, the Company believes it can continue to
leverage its existing technology across various retail markets with
limited incremental product development efforts.
The Company operates through two primary reportable segments (i)
Global Solutions and (ii) Regional Solutions. Although both groups
provide enterprise-wide technology solutions to the retail industry,
the distinguishing factor between them is primarily size of the
clients served and the nature of the services performed. Global
Solutions' clients tend to be clients with greater than fifty owned
and operated sites, while Regional Solutions' clients typically have
less than fifty owned and operated sites. Additionally, the
purchasing behavior of the Global Solutions' clients is typically
characterized by the use of fewer, larger contracts. These contracts
typically involve longer negotiating cycles, and often require the
dedication of substantial amounts of working capital and other
resources. See Note 12 to the Company's consolidated financial
statements for certain financial information relating to these two
segments.
In May 1997, the Company completed the acquisitions of Restaurant
Management and Control Systems, Inc. ("ReMACS"), based in Pleasanton,
California, and RSI Merger Corporation (d.b.a.Twenty/20 Visual
Systems) ("Twenty/20"), based in Dallas, Texas. ReMACS is a leading
provider of back office management systems for clients in the food
service industry with over 8,000 installed or licensed sites.
Twenty/20 is a provider of point of sale and table management systems
for full-service restaurants.
In October 1997, the Company acquired RapidFire Software, Inc.
("RapidFire Software") and EquiLease Financial Services, Inc.
("EquiLease") (collectively "RapidFire") based in Hillsboro, Oregon.
RapidFire Software is a leading provider of point of sale systems to
the pizza industry and other delivery restaurants, with installations
in over 2,000 food service sites nationwide. EquiLease provides lease
financing to certain clients of RapidFire.
In November 1997, the Company completed its acquisition of Logic Shop,
Inc. ("Logic Shop"), based in Atlanta, Georgia. Logic Shop is a
leading provider of management software to the convenient automotive
service center market, with over 1,500 sites installed.
The Company originally was incorporated under the laws of the state of
New York on August 1, 1985 and was subsequently reincorporated under
the laws of the state of Georgia on October 27, 1995. The name of the
Company was changed to Radiant Systems, Inc. from Softsense Computer
Products, Inc. on November 13, 1996.
Industry Background
Successful retailers increasingly require information systems that
capture a detailed picture of consumer activity at the point of sale
and store that data in an accessible fashion. Early technology
innovators in the retail industry deployed robust, integrated
information systems at the point of sale and used the information to
react rapidly to changing consumer preferences, ultimately gaining
market share in the process. In addition, these integrated
information systems helped retailers achieve operational efficiencies.
Many large national retailers have followed suit by investing in
proprietary information systems.
<PAGE>
For many types of retailers, however, this type of automation did not
make economic or business sense. In particular, merchants with a
large number of relatively small sites, such as convenience stores,
petroleum retailers, convenient automotive service centers, food
service and entertainment venues, generally have not been able to
cost-effectively develop and deploy sophisticated, enterprise-wide
information systems. Economic and standardization problems for these
markets are exacerbated by the fact that many sites operate as
franchises, dealerships or other decentralized ownership and control
structures. Without an investment in technology, these retailers
continue to depend on labor and paper to process transactions.
Management believes that high labor costs, lack of centralized
management control of remote sites and inadequate informational
reporting, together with emerging technology trends, have caused many
of these retailers to reexamine how technology solutions can benefit
their operations.
A large number of retail sites face these challenges. At the end of
1998, there were more than 95,700 convenience stores nationwide, while
the cinema industry had approximately 29,500 screens at 5,100 sites
nationwide. As of June 1998, the food service industry had over
487,000 domestic units, of which approximately 210,000 were classified
as quick service restaurants ("QSR"). Typically, the existing systems
in these industries consist of stand-alone devices such as cash
registers or other point of sale systems with little or no integration
with either the back office of the site or an enterprise-wide
information system. Implementation of systems providing this
functionality typically involves multiple vendors and an independent
systems integration firm. The resulting proprietary solutions are
often difficult to support and have inherently high risks associated
with implementation. Management believes that technology solutions
that are highly functional and scalable, relatively inexpensive and
easy to deploy are critical for successful implementation in these
retail markets.
In the absence of an integrated solution, retailers in these markets
typically rely on manual reporting to capture data on site activity
and disseminate it to different levels of management at the regional
and national headquarters. Basic information on consumers (i.e., who
they are, when they visit and what they buy) is not captured in
sufficient detail, at the right time or in a manner that can be
communicated easily to others in the organization. Similarly,
information such as price changes does not flow from headquarters to
individual sites in a timely manner. In addition, communications with
vendors often remain manual, involving paperwork, delays and related
problems.
Recent trends in the retailing industry have accelerated the need for
enterprise-wide information and have heightened demand for integrated
retailing systems. Based in part upon industry association reports
and other studies, as well as the Company's experience in marketing
its products, the Company believes consumer preferences have shifted
away from retailer loyalty toward value and convenience, creating a
greater need for timely data concerning consumer buying patterns and
preferences. Management also believes that convenient
consumer-activated ordering and payment systems, such as ATMs, voice
response units and "pay at the pump" systems, have become important to
retailers who wish to retain and build a client base. Additionally,
retailers can improve operational and logistical efficiencies through
better management of inventory, purchasing, merchandising, pricing,
promotions and shrinkage control. Management believes that the
constant flow of information among the point of sale, the back office,
headquarters and the supply chain has become a key competitive
advantage in the retail industry, causing retailers to demand more
sophisticated, integrated solutions from their systems vendors.
In a parallel development, technological advances have improved the
capability of systems available to retailers. With
the price of computing power declining, technology investments have
become economically feasible for many retailers. Further, computing
power has become increasingly flexible and distributable, facilitating
data capture and processing by applications located at the point of
sale. Also, new front-end graphical user interfaces are making
systems easier to use, which reduces training time and transaction
costs and facilitates more types of consumer-activated applications.
To meet increasing systems demands from retailers, providers of
hardware and software point of sale solutions are attempting to
integrate existing products. This process often requires independent
systems integrators to provide enterprise-wide data communications.
These systems often are based on proprietary, closed protocols and
technology platforms from several different vendors. As a result, the
effort required to implement and maintain these systems can be
difficult, time consuming and expensive.
<PAGE>
The Radiant Solution
The Company offers fully integrated technology solutions that enable
retailers to improve site operations, serve consumers better and route
information throughout their organization and supply chains. The
Company believes its core technology and solutions are applicable to a
variety of retail markets. The Company's suite of products links
store level point of sale information with centralized merchandising
and financial functions that ultimately drive replenishment
communications with suppliers and vendors. The Company believes that
its site solutions are easy to implement, typically requiring less
than a week to install and a few hours to train individual users. The
following summarizes the solutions provided by the Company:
A five segment diagram presenting in brief form the principal features
and functions of the Company's primary technology solutions and
services. The diagram includes the text:
CONSUMER-ACTIVATED
Touch Screen Interactive
Video, Graphics, Audio
Credit/Cash Payment
Compact, Enclosed Terminals
Suggestive Selling
HEADQUARTERS
Executive Information
Electronic Price Book
Vendor EDI
Centralized Menu Management
Decision Support Systems
POINT OF SALE
Touch Screen Interactive
Transaction Auditing
Credit Processing
Data Capture
Peripheral Integration
Cash Reconciliation
Table Management
BACK OFFICE
Inventory Control
Vendor Management
Purchasing/Receiving
Employee Management
Recipe Management
Menu Management
SERVICES
Consulting
Training
Maintenance
Technical Support
Integration
Installation
The Company's technology solutions enable retailers to: allow
consumers to place their own orders for items such as food, movie
tickets and concessions through graphical touch screen interfaces;
capture transaction information and communicate with credit card
networks; manage and analyze in-store inventory movement, including
electronic ordering; schedule and manage staffing; and connect
headquarters to each of the retailer's local sites and vendors,
enabling management to quickly change pricing and review operating
performance in a timely and efficient manner. The Company's
products have been deployed successfully in retail operations ranging
in size from one to more than 800 sites.
Retailers derive the following benefits from Radiant's solutions:
Integrated information flows. The Company's technology solutions
provide retailers with tools for monitoring and analyzing sales
data, stock status, vendor relationships, merchandising and other
important activities, both at their sites and headquarters.
These products further enable retailers to communicate
electronically with their suppliers in order to exchange purchase
orders, invoices and payments.
Centralized management of highly decentralized operations.
Information provided by the Company's solutions enables
headquarters management to monitor site performance in a
consistent manner on a near-real time basis, implement price
changes simultaneously throughout the enterprise and rapidly
initiate targeted marketing programs.
<PAGE>
Tighter on-site control over operations. The Company's back
office systems enable site managers to closely manage inventory,
reconcile accounts and control issues such as shift scheduling
and hourly wage calculations. The Company's solutions
incorporate sophisticated inventory management techniques to help
a retailer optimize its merchandising strategy.
Improved labor productivity. The Company incorporates user
friendly graphics within its solutions, reducing employee
training and order processing times which are important benefits
in retail environments due to high employee turnover. The
Company's back office solutions can alleviate extensive paperwork
required of site managers, allowing them more time to focus on
operations.
Improved client service. The Company's consumer-activated
ordering systems permit clients to place their own orders, answer
surveys and electronically communicate with the retailer. These
systems can improve client service, reduce site labor costs and,
through automating suggestive selling concepts, help the retailer
implement revenue enhancement opportunities.
Company Strategy
The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the retail markets it serves.
The Company is pursuing the following strategies to achieve this
objective:
Expand existing position in selected markets. The Company
believes that it is in a strong position to expand its current
market share in the convenience store, food service,
entertainment and convenient automotive service center markets
due to its highly functional solutions and its practical
experience in deploying and implementing retail solutions. The
Company has experience integrating all aspects of its solutions
into existing retail technology infrastructures. In particular,
the Company has developed interfaces with a number of the widely
used electronic information and payment networks, including
networks of certain major petroleum retailers. The Company
continues to develop interfaces to credit networks of additional
major petroleum retailers, which if certified, will allow the
Company access to a large number of potential sites.
Introduce new products to current markets. The Company has
introduced a variety of new products and services since the
beginning of 1996, including consumer-activated systems, a
headquarters-based, enterprise-wide management system, Decision
Support System ("DSS"), a Windows NT version of its local
site-based products, consulting services and its multimedia
networking platform. During 1998, the Company began developing
Lighthouse, its next generation software technology. Management
believes its Lighthouse generation of software products, which
leverages both Microsoft Windows CE and NT operating systems,
represents an innovative platform based on open, modular software
and hardware architecture and offers increased functionality and
stability compared to other open systems in the marketplace at a
lower total costs of ownership. Additionally, the Company
continues to review products and solutions utilizing the
Internet.
Continue to develop sales and services infrastructure. To meet
the anticipated requirements of growth in its business, the
Company intends to continue expanding its direct sales force and
its professional services organization.
Expand markets for the Company's solutions. The Company believes
that its core technology and solutions are applicable to a
variety of retail markets. The Company has made five
acquisitions in the food service and entertainment markets, which
combined with its existing systems and technology, will enable it
to broaden its presence in these markets.
Attract and retain outstanding personnel. The Company believes
its strongest asset is its people. To attract and retain top
talent, the Company intends to maintain its entrepreneurial
culture and to continue offering competitive benefit programs.
The Company has granted stock options to a majority of its
employees and will strive to continue to align employee interests
with those of the Company's shareholders.
<PAGE>
Make strategic acquisitions. The Company has accelerated its
entry into new vertical markets through acquisitions and joint
venture arrangements. Although the Company had no acquisitions
in 1998, to the extent the Company believes acquisitions can
better position it to serve its markets or penetrate others, it
will pursue such opportunities.
Retail Markets
To date, the Company's product applications have been focused toward
the convenience store, food service, entertainment and convenient
automotive service center markets, as these markets require many of
the same product features and functionality. The Company believes it
can continue to leverage its existing technology across these and
other retail markets with limited incremental product development
efforts.
Convenience Store Market
In the United States, there currently are approximately 95,700
convenience store sites, which derive a significant portion of
revenues from selling products other than gasoline. Additionally, the
Company believes that the international convenience store market
represents a substantial opportunity for its solutions. Management
believes that the industry is currently under-invested in technology.
Only 28.0% of the industry's retail sites use scanning equipment,
compared to grocery stores, which have implemented scanning at
approximately 90.0% of their locations.
The Company thus believes that the demand for the Company's solutions
in the convenience store market for the foreseeable future will remain
strong. This demand is fueled in part by the fact that many
convenience store operators are finding that their consumers prefer
"pay at the pump" systems, and many operators are upgrading their POS
systems to interface with these consumer-activated systems.
Approximately 37.0% of convenience stores currently utilize pay at the
pump technology. Implementing this technology requires a site to
upgrade its system for controlling and managing fuel sales.
Management believes that installation of pay at the pump systems will
remain strong for the foreseeable future, encouraging additional
investment in store automation. Management also believes that based
on technology in recent years, and the positive return on investment
associated with the Company's solutions, demand for new technology
will remain from both new and existing clients.
Food Service Market
The domestic food service market includes approximately 487,000 sites
as of June 1998. Restaurants increasingly require sophisticated
systems which integrate with evolving headquarters information systems
and enable more timely and accurate management of site operations. At
the site, managers seek real time information access and management
systems that permit employees to increase the speed and accuracy with
which they take an order, prepare the food, and fill the order, often
accommodating numerous concurrent consumer orders at multiple
table-top, counter-top and drive-through locations. Managers at all
levels are seeking solutions to better manage menu and pricing
functions, optimizing profitability and inventory management. The
market for automated information and transaction systems for
restaurants is typically more advanced than in the convenience store,
convenient automotive service center and entertainment markets but is
highly fragmented and includes a large number of proprietary, closed
systems.
Entertainment Market
The domestic cinema industry is concentrated, with the top six chains
operating approximately 44.0% of the cinema screens. In addition to
increasing screens per site, "megaplexes" have evolved, which combine
restaurants, movies and other forms of entertainment in one facility.
There are approximately 29,500 cinema screens in the United States.
These screens are operated at approximately 5,000 sites, with recent
trends emphasizing more screens per site. While cinema sites
typically are operated in a decentralized manner, the Company believes
cinema operators are focused on implementing cost controls from
headquarters.
<PAGE>
Convenient Automotive Service Center Market
The convenient automotive service center market includes quick oil
change centers, full service car washes and various repair centers.
In the United States, there currently are approximately 15,000 quick
oil change centers and approximately 7,000 full service car washes.
The Company believes that the international automotive service center
market also represents a substantial opportunity for its solutions, as
well as various repair centers such as transmission and clutch
specialty shops and tire stores.
Retail Products
While the Company believes that its core technology may be adapted to
provide solutions to a variety of markets, it has concentrated its
efforts to date in the convenience store, food service, entertainment
and convenient automotive service center markets. The Company's
principal products, sales and marketing efforts, clients and
competitors are discussed below for these markets. The Company markets
a variety of products and services as part of its strategy to serve as
an integrated solutions provider. From consumer-activated ordering
solutions to feature-rich, highly functional point of sale and back
office systems tied into headquarters through advanced client/server
software, the Company's enterprise-wide solutions interact with the
consumer, site employees and management and the senior management of a
retailer's operations. To help retailers optimize the impact these
systems have on their operations, the Company also offers a wide array
of consulting, training and support services provided by experienced
professionals. The Company further provides "ruggedized" hardware
systems designed to cope with harsh retailing environments.
Consumer-Activated Ordering Systems
Within each of the markets the Company serves, the trend towards more
focused client service and less favorable labor demographics has
created a demand for consumer-activated ordering systems. In
response, the Company has developed an easy to use, consumer-activated
system which allows a consumer to preview movies and purchase tickets
or place a food order, pay with a plastic card and make inquiries and
view promotions through the use of a touch screen application. The
software development environment and authoring tools allow various
media, such as video clips, logos, pictures and recordings, to be
quickly integrated into a consumer-friendly application.
Management believes consumer-activated technology allows a retailer to
increase labor productivity, increase revenues through suggestive
selling, increase consumer ordering speed and accuracy, capture
consumer information at the point of sale and respond quickly to
changing consumer preferences. The Company's initial
consumer-activated ordering system was commercially released in the
second quarter of 1996, and, to date, the Company has sold systems or
licensed software to a number of retailers.
Point of Sale Systems
The Company offers a variety of point of sale products which can be
licensed as modules or as a complete system. These point of sales
products are comprehensive solutions that allow retailers to process
transactions and capture data, as well as manage other front office
operations. The products feature a touch screen interface,
user-friendly applications and flexibility in set-up and configuration
to accommodate operational variables at each sites. They are based on
an open architecture and run on either the Windows NT or Windows CE
platform and other operating systems. The applications may support
multiple point of sale terminals and a separate back office system and
are upgradable so that clients can phase in their investment with
additional hardware and software modules. The products offer clients
scalability, such that the same application can be run in chains with
widely varying numbers and sizes of sites; yet the enterprise solution
remains consistent and supportive of each site.
Back Office Management Systems
Back office software provides various types of retail operators with
the capabilities to manage employees and inventory, schedule labor,
automate daily reports, analyze costs and forecast results.
Additionally, this system provides the means for retailers to readily
gather point of sale and management information including real-time
sales monitoring. The Company's back office management systems were
developed with a user friendly, graphical interface and are based on
open architecture.
<PAGE>
Headquarters-Based Management Systems
Headquarters-based management systems permit retailers to manage
individual sites from headquarters. This client/server based software
application allows retailers to better manage multiple sites. The
following is a summary of the features and functionality of the
Company's headquarter's application:
[BULLET] Price book-allows retailers to set prices for products
in a timely manner on a site-by-site, zone-by-zone or
system wide basis. Price book also allows retailers to
target prices based on a variety of different factors,
including markups based on cost, gross margins, and
target margins.
[BULLET] Site configuration and management-allows retailers to
define and control the parameters of site operations,
such as prohibiting clerks from authorizing fuel
dispensing without prepayment.
[BULLET] Fuel management-allows retailers to manage fuel
inventory movement and pricing. Such features allow
management to define and regulate site pricing and
strategies, including responding to price changes at
competitors' sites.
[BULLET] Decision Support System ("DSS")-supports headquarters
analysis of site operations, such as sales vs. cost
analysis,sales vs. budget analysis, labor productivity
analysis and category management analysis. DSS also
facilitates "what if" analyses, allowing retailers to
incorporate and ascertain the sensitivities of
operational variables such as price, cost and volume.
[BULLET] Electronic Data Interchange-supports the routing and
analysis of purchase orders and vendor invoices.
The Company believes that its headquarters-based product is one of the
most functional and comprehensive headquarters management applications
widely marketed to various retail chains. The product is built with
state of the art software tools and is flexible and expandable based
on application architecture and database structure. The application
is written in PowerBuilder, and the database, Microsoft SQL Server, is
highly scalable. The user interface is intuitive and easy to use.
To provide food service, entertainment and convenient automotive
service center operators with additional information and functionality
at headquarters, the Company, through its Lighthouse suite of
products, plans to combine certain features and functions of its
convenience store headquarters-based product with the food service,
entertainment and convenient automotive service center product lines.
See "-- Product Development".
Sales and Marketing
Through a dedicated sales effort designed to address the requirements
of different retail operators, the Company believes its sales force is
positioned to understand its clients' businesses, trends in the
marketplace, competitive products and opportunities for new product
development. This allows the Company to take a consultative approach
to working with clients.
The Company has a staff of personnel focusing on selling its solutions
to major clients, both domestically and internationally. All sales
personnel are compensated with a base salary and commission based on
revenue quotas, gross margins and other profitability measures.
To date, the Company's primary marketing objective has been to
increase awareness of all of the Company's technology solutions. To
this end, the Company has attended industry trade shows and
selectively advertised in industry publications. The Company intends
to increase its sales and marketing activities both domestically and
internationally, and will expand its advertising in relevant industry
publications. Additionally, the Company intends to continue developing
an independent distribution network to sell and service its products
to certain segments of the domestic and international markets.
<PAGE>
Clients
Clients who have selected the Company as their technology solutions
provider operate over 22,000 sites. As of December 31, 1998, the
Company has installed its technology solutions in over 13,000 of these
sites. In 1998, one client, Speedway SuperAmerica, LLC, formerly Emro
Marketing Company, accounted for 10.3% of the Company's total
revenues. In 1997, three clients accounted for 36.4% of the Company's
total revenues, as follows: Speedway SuperAmerica, LLC, formerly Emro
Marketing Company (12.8%), Ultramar Diamond Shamrock Corporation
(12.2%) and Conoco, Inc. (11.4%). During 1996, four clients accounted
for greater than 10.0% of the Company's total revenues, as follows:
Ultramar Diamond Shamrock Corporation (21.5%), Loews Theatre
Management Corp. (13.8%), Emro Marketing Company (13.2%), and Sheetz,
Inc. (11.7%).
The following is a partial list of major clients who have licensed or
purchased the Company's products and services:
Advantica Restaurant Group, Inc.
BP Amoco, p.l.c.
Boston Chicken, Inc.
Chick-fil-A, Inc.
Compass Group USA, Inc.
Conoco, Inc.
General Cinema Theatres, Inc.
Loews Cineplex Entertainment Corporation
MAPCO, Inc.
Marsh Supermarkets, LLC
National Amusements, Inc.
Q-Lube, Inc.
Regal Cinemas, Inc.
Ruby Tuesday, Inc.
Souper Salad, Inc.
Speedway SuperAmerica, LLC, formerly Emro Marketing Company
The Neiman Marcus Group, Inc.
Tricon Restaurant Services Group, Inc.
Tosco Corporation
Ultramar Diamond Shamrock Corporation
VICORP Restaurants, Inc.
Competition
In marketing its technology solutions, the Company faces intense
competition, including internal efforts by potential clients. The
Company believes the principal competitive factors are product
quality, reliability, performance, price, vendor and product
reputation, financial stability, features and functions, ease of use,
quality of support and degree of integration effort required with
other systems.
Within the markets it serves, the Company believes it is the only
integrated technology solution provider of point of sale, back office
and headquarters-based management systems. Within these product
lines, the Company faces intense levels of competition from a variety
of competitors. International Business Machines, Inc., NCR
Corporation, Verifone, Inc. a subsidiary of Hewlett Packard Company,
Dresser Industries, Inc., Gilbarco, Inc., Point of Sale Limited,
Stores Automated Software, Inc., Pacer/CATS, a subsidiary of USA
Networks, Inc., MovieFone, Inc., Micros Systems, Inc., Par Technology
Corp. and others provide point of sale systems with varying degrees of
functionality. Back office and headquarters client/server software
providers include The Software Works!, Professional Datasolutions
Inc., SAP AG and JDA Software Group, Inc. In addition, the Company
faces additional competition from systems integrators who offer an
integrated technology solutions approach by integrating other third
party products.
The Company believes there are barriers to entry in the market for
convenience store automation solutions. The Company has invested a
significant amount of time and effort to create the functionality of
its consumer-activated point of sale and back office
headquarters-based management systems. The Company believes that the
time required for a competitor to duplicate the functionality of these
products is substantial and would require detailed knowledge of a
retailer's operations at local sites and headquarters. Also,
developing a credit card network interface often can take an
additional six to nine months, as the certification process can be
time consuming. Moreover, the major petroleum companies are extremely
selective about which automation system providers are permitted to
interface to their credit networks. As of March 15, 1999, the Company
was certified on eight credit networks, and it currently has initiated
the process to become certified on three other major petroleum company
credit networks.
Professional Services
The integration, design, implementation, application and installation
of technology solutions are critical to the Company's ability to
effectively market its solutions. The Company's Radiant Solutions
Group provides these services to its clients. The following is a
summary of some of the professional services the Company provides:
<PAGE>
Consulting. Business consultants, systems analysts and technical
personnel assist retailers in all phases of systems development,
including systems planning and design, client-specific
configuration of application modules and on-site implementation
or conversion from existing systems. Directors in the Company's
consulting organization typically have significant consulting or
retail technology experience. The Company's consulting personnel
undergo extensive training in retail operations and the Company's
products. Consulting services typically are billed on a per diem
basis.
Customization. The Company provides custom application
development work for clients billed on a project or per diem
basis. Such enhancements remain the property of the Company.
Training. The Company has a formalized training program
available to its clients, which is provided on a per diem rate at
the Company's offices or at the client's site.
Integration. Typically, as part of its site solution, the
Company integrates standard PC components for its clients. This
is done as part of the overall technology solution for the
clients to maximize the quality of the overall site solution and
to provide the clients with a system that is easy to support over
the long term.
The market for the Company's professional services is intensively
competitive. The Company believes the principal competitive factors
are the professional qualifications, expertise and experience of
individual consultants. In the market for professional services, the
Company competes with the consulting divisions of the big five
accounting firms, Electronic Data Systems, Inc., International
Business Machines, Inc. and other systems integrators.
Maintenance and Client Support
The Company offers client support on a 24-hour basis, a service that
historically has been purchased by a majority of its clients and also
entitles the client to product upgrades. In some cases, hardware
support is provided by third parties. The Company can remotely access
its clients' systems in order to perform quick diagnostics and provide
on-line assistance. The annual support option is typically priced at
a percentage of the software and hardware cost.
Product Development
The Company's product development strategy is focused on creating
common technology elements that can be leveraged in applications
across various vertical retail markets. The Company's software
architecture is based on open platform and is modular allowing it to
phased into a retailer's operations. The Company has developed
numerous applications running on a Windows NT platform. The software
architecture incorporates Microsoft's Component Object Model,
providing an efficient environment for application development.
Throughout the course of 1997 and 1998, Radiant Systems entered
additional retail markets facilitated primarily through the
acquisition of several companies and product offerings. Combined with
its existing products, the Company began developing, marketing,
deploying and supporting a variety of products. As a result, during
1998 the Company's management determined that significant internal
cost efficiencies and increased market appeal could be obtained
through the consolidation of its legacy products into a single family
of products, Lighthouse. This consolidation effort integrated the
best business and technical knowledge from multiple markets.
The Company is now developing and plans to market a single family of
products that serves the needs of multiple marketplaces. Management
believes the Lighthouse family of products will uniquely position the
Company to serve the needs of retailers who cross business segments
(i.e., a convenience store or cinema with a fast food operation),
further differentiating the Company's systems from those of its
competitors and allowing the Company to significantly reduce future
development and support costs.
Proprietary Rights
The Company's success and ability to compete is dependent in part upon
its proprietary technology, including its software source code. To
protect its proprietary technology, the Company relies on a
combination of trade secret, nondisclosure, copyright and patent law,
which may afford only limited protection. In addition, effective
copyright and trade secret protection may be unavailable or limited in
certain foreign countries. Although the Company relies on the
<PAGE>
limited protection afforded by such intellectual property laws, it
also believes that factors such as the technological and creative
skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable maintenance are essential
to establishing and maintaining a technology leadership position. The
Company presently has one patent and one patent pending. The source
code for the Company's proprietary software is protected both as a
trade secret and as a copyrighted work. The Company generally enters
into confidentiality or license agreements with its employees,
consultants and clients and generally controls access to and
distribution of its software, documentation and other proprietary
information. Although the Company restricts the use by the client of
the Company's software and does not permit the re-sale, sublicense or
other transfer of such software, there can be no assurance that
unauthorized use of the Company's technology will not occur.
Despite the measures taken by the Company to protect its proprietary
rights, unauthorized parties may attempt to reverse engineer or copy
aspects of the Company's products or to obtain and use information
that the Company regards as proprietary. Policing unauthorized use of
the Company's products is difficult. In addition, litigation may be
necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend
against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have
a material adverse effect on the Company's business, operating results
and financial condition.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis.
These licenses usually require the Company to pay royalties and
fulfill confidentiality obligations. The Company believes that there
are alternative resources for each of the material components of
technology licensed by the Company from third parties. However, the
termination of any such licenses, or the failure of the third-party
licensors to adequately maintain or update their products, could
result in delay in the Company's ability to ship certain of its
products while it seeks to implement technology offered by alternative
sources. Any required replacement licenses could prove costly. Also,
any such delay, to the extent it becomes extended or occurs at or near
the end of a fiscal quarter, could result in a material adverse effect
on the Company's results of operations. While it may be necessary or
desirable in the future to obtain other licenses relating to one or
more of the Company's products or relating to current or future
technologies, there can be no assurance that the Company will be able
to do so on commercially reasonable terms or at all.
In the future, the Company may receive notices claiming that it is
infringing on the proprietary rights of third parties, and there can
be no assurance that the Company will not become the subject of
infringement claims or legal proceedings by third parties with respect
to current or future products. In addition, the Company may initiate
claims or litigation against third parties for infringement of the
Company's proprietary rights or to establish the validity of the
Company's proprietary rights. Any such claim could be time consuming,
result in costly litigation, cause product shipment delays or force
the Company to enter into royalty or license agreements rather than
dispute the merits of such claims. Moreover, an adverse outcome in
litigation or similar adversarial proceedings could subject the
Company to significant liabilities to third parties, require the
expenditure of significant resources to develop non-infringing
technology, require disputed rights to be licensed from others or
require the Company to cease the marketing or use of certain products,
any of which could have a material adverse effect on the Company's
business, operating results and financial condition. To the extent
the Company desires or is required to obtain licenses to patents or
proprietary rights of others, there can be no assurance that any such
licenses will be made available on terms acceptable to the Company, if
at all. As the number of software products in the industry increases
and the functionality of these products further overlaps, the Company
believes that software developers may become increasingly subject to
infringement claims. Any such claims against the Company, with or
without merit, as well as claims initiated by the Company against
third parties, can be time consuming and expensive to defend,
prosecute or resolve.
Employees
As of December 31, 1998 the Company employed 650 persons. None of the
Company's employees is represented by a collective bargaining
agreement nor has the Company experienced any work stoppage. The
Company considers its relations with its employees to be good.
The Company's future operating results depend in significant part upon
the continued service of its key technical, consulting and senior
management personnel and its continuing ability to attract and retain
highly qualified technical and managerial personnel. Competition for
such personnel is intense, and there can be no assurance that the
Company will retain its key managerial or technical personnel or
attract such personnel in the future. The Company has at times
<PAGE>
experienced and continues to experience difficulty recruiting
qualified personnel, and there can be no assurance that the Company
will not experience such difficulties in the future. The Company,
either directly or through personnel search firms, actively recruits
qualified product development, consulting and sales and marketing
personnel. If the Company is unable to hire and retain qualified
personnel in the future, such inability could have a material adverse
effect on the Company's business, operating results and financial
condition.
Forward-Looking Statements
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, such as statements relating to financial results
and plans for future business development activities, and are thus
prospective. Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include,
but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities
and Exchange Commission filings. See "-Risk Factors".
Risk Factors
In addition to the other information contained in this Report, the
following risks should be considered carefully in evaluating the
Company and its business.
History of Operating Losses. The Company incurred net losses of $3.4
million, $19.5 million and $2.2 million for fiscal years 1998, 1997
and 1996, respectively. There can be no assurance that the Company
will be able to achieve profitability for fiscal 1999 and beyond. The
Company anticipates that completing its products under development,
and marketing existing products and new releases will require
substantial expenditures. Accordingly, an investment in the Common
Stock is extremely speculative in nature and involves a high degree of
risk.
Management of Growth. The growth in the size and complexity of the
Company's business and the expansion of its product lines and its
client base will place a significant strain on the Company's
management and operations. An increase in the demand for the
Company's products could strain the Company's resources or result in
delivery problems, delayed software releases, slow response time, or
insufficient resources for assisting clients with implementation of
the Company's products and services, which could have a material
adverse effect on the Company's business, operating results
and financial condition. The Company anticipates that continued
growth, if any, will require it to recruit, hire and assimilate a
substantial number of new employees, including consulting, product
development, sales and marketing personnel.
The Company's ability to compete effectively and to manage future
growth, if any, also will depend on its ability to continue to
implement and improve operational, financial and management
information systems on a timely basis and to expand, train, motivate
and manage its work force, particularly its direct sales force and
consulting services organization. There can be no assurance that the
Company will be able to manage any future growth, and any failure to
do so could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company's ability to undertake new projects and increase revenues
is dependent on the availability of the Company's personnel to assist
in the development and implementation of the Company's technology
solutions. The Company currently is attempting to increase consulting
capacity in anticipation of future sales. Should the Company increase
its consulting capacity and such sales fail to materialize, the
Company's business, operating results and financial condition would be
adversely affected.
Growth Through Acquisition. As part of its operating history and
growth strategy, the Company has consummated and may seek to
consummate the acquisition of other businesses. In the future, the
Company may continue to seek acquisition candidates in selected
markets and from time to time engages in exploratory discussions with
suitable candidates. There can be no assurance, however, that the
Company will be able to identify and acquire targeted businesses or
obtain financing for such acquisitions on satisfactory terms. The
process of integrating acquired businesses into the Company's
operations may result in unforeseen difficulties and may require a
disproportionate amount of resources and management attention. In
particular, the integration of acquired technologies with the
Company's existing products could cause delays in the introduction of
new products. In connection with future acquisitions, the Company may
incur significant charges to earnings
<PAGE>
as a result of, among other things, the write-off of purchased
research and development. For instance, in the second quarter of
1997, the Company recorded one-time accounting charges of
approximately $30.1 million for the write-off of purchased research
and development and compensation expense in connection with its 1997
acquisitions. Future acquisitions may be financed through the issuance
of Common Stock, which may dilute the ownership of the Company's
shareholders, or through the incurrence of additional indebtedness.
Furthermore, there can be no assurance that competition for
acquisition candidates will not escalate, thereby increasing the costs
of making acquisitions or making suitable acquisitions unattainable.
Fluctuations in Quarterly Operating Results. The Company has
experienced and expects to continue to experience quarterly
fluctuations in its operating results. The Company's revenue growth
over the past several years should not be taken as indicative of the
rate of revenue growth, if any, that can be expected in the future.
The Company believes that period-to-period comparisons of its
operating results are not meaningful and that the results for any
period should not be relied upon as an indication of future
performance. Moreover, a significant portion of the Company's
quarterly revenues has been derived from a limited number of clients
in the convenience store market. The Company currently anticipates
that this trend will continue. With a limited number of clients,
fluctuations in their purchasing patterns resulting from budgeting or
other considerations can have a significant effect on the Company's
quarterly results. For example, in 1998 a number of factors impacted
the Company's revenue growth and operating results, including the fact
that several of the Company's larger clients were involved in mergers
and acquisitions which, for a variety of reasons, interrupted or
delayed roll outs of the Company's products. In addition, the
purchasing behavior of the Company's largest clients became
increasingly characterized by the use of fewer, larger contracts.
These contract typically involve longer negotiating cycles, require
the dedication of substantial amounts of working capital and other
resources, and in general require costs that may substantially precede
recognition of associated revenues. Any significant cancellation or
deferral of client orders could also have a material adverse effect on
the Company's operating results in any particular quarter.
The introduction of new research and development projects requires the
Company to significantly increase its operating expenses to fund
greater levels of product development and to develop and commercialize
additional products and services. To the extent that such expenses
precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition may
be materially and adversely affected.
The Company's operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside
the Company's control. These factors include the level of usage of
computer-based and consumer-activated products and services, the size
and timing of individual client orders, the introduction of new
products or services by the Company or its competitors, pricing
changes in the industry, technical difficulties with respect to the
use of computer-based products and services developed by the Company,
general economic conditions and economic conditions specific to the
computer, convenience store, restaurant and entertainment markets. As
a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or
marketing decisions or acquisitions that could have a material adverse
effect on the Company's business, results of operations and financial
condition.
Due to all of the foregoing factors, in some future quarters the
Company's operating results may fall below the expectations of
securities analysts and investors. In such event, the trading price of
the Company's Common Stock would likely be materially and adversely
affected.
Industry Concentration and Cyclicality. Greater than 50.0% of the
Company's total revenue in both 1998 and 1997 was related to the
convenience store market, which is dependent on the domestic and
international economy. The convenience store market is affected by a
variety of factors, including global and regional instability,
governmental policy and regulation, natural disasters, consumer buying
habits, consolidation in the petroleum industry, war and general
economic conditions. Adverse developments in the convenience store
market could materially affect the Company's business, operating
results and financial condition. In addition, the Company believes the
purchase of its products is relatively discretionary and generally
involves a significant commitment of capital, because purchases of the
Company's products are often accompanied by large scale hardware
purchases. As a result, although the Company believes its products
can assist convenience stores in a competitive environment, demand for
the Company's products and services could be disproportionately
affected by instability or downturns in the convenience store market
which may cause clients to exit the industry or delay, cancel or
reduce planned expenditures for information management systems and
software products.
<PAGE>
Concentration of Clients. The Company sells systems and services to a
number of major clients. During 1998, approximately 30.6% of the
Company's revenue were derived from six clients. During 1997,
approximately 36.4% of the Company's total revenues were derived from
three clients. During 1996, approximately 60.2% of the Company's
total revenues were derived from four clients. There can be no
assurance that the loss of one or more of these clients will not have
a material adverse effect on the Company's business, operating results
and financial condition.
New Product Development and Rapid Technological Change. The Company
has a substantial ongoing commitment to research and development. In
this regard, the Company is currently designing, coding and testing a
number of new products and developing expanded functionality of its
current products that will be important for the Company to remain
competitive. The Company and its prospects must be considered in
light of the risks, expenses and difficulties frequently encountered
by companies in the rapidly evolving market for computer-based
products and services. To address these risks, the Company must, among
other things, continue to respond to competitive developments;
attract, retain and motivate qualified personnel; implement and
successfully execute its sales strategy; develop and market additional
products and services in present and future markets; upgrade its
technologies and commercialize products and services incorporating
such technologies. There can be no assurance that the Company will be
successful in addressing such risks.
The types of products sold by the Company are subject to rapid and
continual technological change. Products available from the Company,
as well as from its competitors, have increasingly offered a wider
range of features and capabilities. The Company believes that in order
to compete effectively in selected vertical markets, it must provide
compatible systems incorporating new technologies at competitive
prices. There can be no assurance that the Company will be able to
continue funding research and development at levels sufficient to
enhance its current product offerings or will be able to develop and
introduce on a timely basis new products that keep pace with
technological developments and emerging industry standards and address
the evolving needs of clients. There can also be no assurance that the
Company will not experience difficulties that will result in delaying
or preventing the successful development, introduction and marketing
of new products in its existing markets or that its new products and
product enhancements will adequately meet the requirements of the
marketplace or achieve any significant degree of market acceptance.
Likewise, there can be no assurance as to the acceptance of Company
products in new markets, nor can there be any assurance as to the
success of the Company's penetration of these markets, or to the
revenue or profit margins with respect to these products. The
inability of the Company, for any reason, to develop and introduce new
products and product enhancements in a timely manner in response to
changing market conditions or client requirements could materially
adversely affect the Company's business, operating results and
financial condition.
In addition, the Company strives to achieve compatibility between the
Company's products and retail systems the Company believes are or will
become popular and widely adopted. The Company invests substantial
resources in development efforts aimed at achieving such
compatibility. Any failure by the Company to anticipate or respond
adequately to technology or market developments could materially
adversely affect the Company's business, operating results and
financial condition.
Competition. The market for retail information systems is intensely
competitive. The Company believes the principal competitive factors in
such market are product quality, reliability, performance and price,
vendor and product reputation, financial stability, features and
functions, ease of use and quality of support. A number of companies
offer competitive products addressing certain of the Company's target
markets. See "-Competition". In addition, the Company believes that
new market entrants may attempt to develop fully integrated systems
targeting the retail industry. In the market for consulting services,
the Company competes with the consulting divisions of the big five
accounting firms, Electronic Data Systems, Inc. and other systems
integrators. Many of the Company's existing competitors, as well as a
number of potential new competitors, have significantly greater
financial, technical and marketing resources than the Company. There
can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's
business, operating results and financial condition.
Dependence on Key Personnel; Ability to Attract and Retain Technical
Personnel. The Company's future success depends in part on the
performance of its executive officers and key employees. The Company
does not have in place employment agreements with any of its executive
officers. The Company maintains a $1.0 million "key person" life
insurance policy on each of Erez Goren and Alon Goren, the Chief
Executive Officer and Chief Technology Officer, respectively, of the
Company. The loss of the services of any of its executive officers or
other key employees could have a material adverse effect on the
business, operating results and financial condition of the Company.
<PAGE>
The Company is heavily dependent upon its ability to attract, retain
and motivate skilled technical and managerial personnel, especially
highly skilled engineers involved in ongoing product development and
consulting personnel who assist in the development and implementation
of the Company's total business solutions. The market for such
individuals is intensely competitive. Due to the critical role of the
Company's product development and consulting staffs, the inability to
recruit successfully or the loss of a significant part of its product
development or consulting staffs would have a material adverse effect
on the Company. The software industry is characterized by a high
level of employee mobility and aggressive recruiting of skilled
personnel. There can be no assurance that the Company will be able to
retain its current personnel, or that it will be able to attract,
assimilate or retain other highly qualified technical and managerial
personnel in the future. The inability to attract, hire or retain the
necessary technical and managerial personnel could have a material
adverse effect upon the Company's business, operating results and
financial condition.
Dependence on Proprietary Technology. The Company's success and
ability to compete is dependent in part upon its ability to protect
its proprietary technology. The Company relies on a combination of
patent, copyright and trade secret laws and non-disclosure agreements
to protect this proprietary technology. The Company enters into
confidentiality and non-compete agreements with its employees and
license agreements with its clients and potential clients which limits
access to and distribution of its software, documentation and other
proprietary information. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or that the
Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technology.
In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the
United States.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. The
termination of any such licenses, or the failure of the third-party
licensors to adequately maintain or update their products, could
result in delay in the Company's ability to ship certain of its
products while it seeks to implement technology offered by alternative
sources, and any required replacement licenses could prove costly.
While it may be necessary or desirable in the future to obtain other
licenses relating to one or more of the Company's products or relating
to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at
all.
Ownership by Management. The Company's executive officers
collectively own approximately 43.5% of the outstanding Common Stock.
Consequently, together they will continue to be able to exert
significant influence over the election of the Company's directors,
the outcome of most corporate actions requiring shareholder approval
and the business of the Company.
Volatility of Market Price for Common Stock; Absence of Dividends.
The market price for the Company's Common Stock has experienced
substantial price volatility since its initial public offering in
February 1997 and such volatility may occur in the future. Quarterly
operating results of the Company or of other companies participating
in the computer-based products and services industry, changes in
conditions in the economy, the financial markets of the computer
products and services industries, natural disasters or other
developments affecting the Company or its competitors could cause the
market price of the Common Stock to fluctuate substantially. In
addition, the stock market has experienced extreme price and volume
fluctuations that have affected the market price of many technology
stocks in particular and that have often been unrelated or
disproportionate to the operating performance of these companies. For
the foreseeable future, it is expected that earnings, if any,
generated from the Company's operations will be used to finance the
growth of its business, and that no dividends will be paid to holders
of the Common Stock.
Anti-Takeover Provisions. The Company's Amended and Restated Articles
of Incorporation authorize the Board of Directors to issue up to
5,000,000 shares of preferred stock and to fix the rights,
preferences, privileges and restrictions, including voting rights, of
the preferred stock without further vote or action by the Company's
shareholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. While
the Company has no present intention to issue additional shares of
preferred stock, such issuance, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes,
could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. In
addition, certain provisions of the Company's Articles of
Incorporation and Bylaws may discourage proposals or bids to acquire
the Company. This could limit the price that certain investors might
be willing to pay in the future for shares of Common Stock. The
Company's Articles of Incorporation divide the Board of Directors into
three classes, as nearly equal in
<PAGE>
size as possible, with staggered three-year terms. One class will be
elected each year. The classification of the Board of Directors could
have the effect of making it more difficult for a third party to
acquire control of the Company. The Company is also subject to certain
provisions of the Georgia Business Corporation Code which relate to
business combinations with interested shareholders.
Item 2. Properties.
The Company's principal facility occupies approximately 107,000 square
feet in Alpharetta, Georgia, under a ten year lease agreement. The
lease agreement expires in October 2007.
In November 1997, the Company signed a five-year lease to house the
Integration and Client Support Operations. The building, also in
Alpharetta, Georgia, is approximately 102,000 square feet. The
Company also has regional offices in Pleasanton, California and
Hillsboro, Oregon.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Company
is a party or of which any of its properties are subject; nor are
there material proceedings known to the Company to be contemplated by
any governmental authority. There are no material proceedings known to
the Company, pending or contemplated, in which any director, officer
or affiliate or any principal security holder of the Company, or any
associate of any of the foregoing is a party or has an interest
adverse to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter ended December 31,
1998 to a vote of security holders of the Company.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Common Stock has traded on The Nasdaq Stock Market under the
symbol "RADS" since the Company's initial public offering on February
13, 1997. Prior to that time, there was no public market for the
Common Stock. The following table sets forth the high and low sale
prices per share for the Common Stock for the periods indicated as
reported by The Nasdaq Stock Market.
<TABLE>
Year ended December 31, 1997 High Low
- -------------------------------------- --------- --------
<S> <C> <C>
First Quarter (from February 13, 1997) $ 14 1/8 $ 8 1/4
Second Quarter 26 1/4 7
Third Quarter 27 18 1/2
Fourth Quarter 29 3/8 17 3/4
Year ended December 31, 1998 High Low
- -------------------------------------- --------- --------
First Quarter $ 28 5/8 $16
Second Quarter 25 11/16 13 5/8
Third Quarter 14 7/8 3 13/16
Fourth Quarter 8 5/16 5
</TABLE>
As of March 16, 1999, there were 226 holders of record of the Common
Stock. Management of the Company believes that these are in excess of
400 beneficial holders of its Common Stock.
The Company currently anticipates that all of its earnings will be
retained for development of the Company's business and does not
anticipate paying any cash dividends in the foreseeable future. Future
cash dividends, if any, will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, the
Company's future earnings, operations, capital requirements and
surplus, general financial condition, contractual restrictions and
such other factors as the Board of Directors may deem relevant.
<PAGE>
Item 6. Selected Consolidated Financial Data
The following table sets forth selected consolidated financial data of
the Company for the periods indicated, which data has been derived
from the consolidated financial statements of the Company. The
consolidated financial statements of the Company as of, and for each
of the years in the five-year period ended December 31, 1998, have
been audited by Arthur Andersen LLP, independent public accountants.
This selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial
statements of the Company and the notes thereto included elsewhere
herein.
<TABLE>
Year Ended December 31,
-----------------------------------------------------------
(in thousands, except per share data) 1998 1997 1996 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
System sales $ 59,400 $ 66,798 $35,888 $14,078 $13,529
Client support, maintenance and other services 23,535 11,205 5,055 1,804 919
-------- -------- ------- ------- -------
Total revenues 82,935 78,003 40,943 15,882 14,448
Cost of revenues:
System sales 28,877 34,019 22,270 9,863 9,459
Client support, maintenance and other services 20,288 10,298 5,465 2,300 1,208
-------- -------- ------- ------- -------
Total cost of revenues 49,165 44,317 27,735 12,163 10,667
-------- -------- ------- ------- -------
Gross profit 33,770 33,686 13,208 3,719 3,781
Operating expenses:
Product development 11,199 6,897 3,328 1,640 984
Sales and marketing 11,730 5,819 1,487 607 470
Depreciation and amortization 4,665 2,384 948 583 178
Acquisition and other non-recurring charges 1,276 30,086 3,930 -- --
General and administrative 12,360 9,059 5,664 2,990 2,243
-------- -------- ------- ------- -------
Loss from operations (7,460) (20,559) (2,149) (2,101) (94)
Interest (income)expense, net (1,800) (989) 712 166 82
Minority interest in earnings of PrysmTech -- -- 628 -- --
Other income -- -- -- (406) --
-------- -------- ------- ------- -------
Loss before income taxes and extraordinary item (5,660) (19,570) (3,489) (1,861) (176)
Income tax benefit(1) (2,265) (212) (1,333) (709) (61)
Extraordinary item, net of taxes(2) -- 131 -- -- --
-------- -------- ------- ------- -------
Net loss $ (3,395) $(19,489) $(2,156) $(1,152) $ (115)
======== ======== ======= ======= =======
Basic loss per share:
Loss before extraordinary item $ (0.21) $ (1.49) $ (0.26) $ (0.13) $ (0.01)
Extraordinary loss on early extinguishment of debt -- (0.01) -- -- --
-------- -------- ------- ------- -------
Total basic loss per share (3) $ (0.21) $ (1.50) $ (0.26) $ (0.13) $ (0.01)
======== ======== ======= ======= =======
Diluted loss per share:
Loss before extraordinary item $ (0.21) $ (1.49) $ (0.26) $ (0.13) $ (0.01)
Extraordinary loss on early extinquishment of debt -- (0.01) -- -- --
-------- -------- ------- ------- -------
Total diluted loss per share (3) $ (0.21) $ (1.50) $ (0.26) $ (0.13) $ (0.01)
======== ======== ======= ======= =======
Weighted average shares outstanding:
Basic (3) 15,990 13,024 8,300 9,073 13,199
======== ======== ======= ======= =======
Diluted (3) 15,990 13,024 8,300 9,073 13,199
======== ======== ======= ======= =======
December 31,
1998 1997 1996 1995 1994
-------- -------- ------- ------- -------
Balance Sheet Data:
Working capital $ 47,329 $ 57,259 $ 812 $(3,664) $(1,027)
Total assets 84,166 93,515 14,616 4,235 4,818
Long-term debt and shareholder loan,
including current portion 4,267 4,728 9,174 970 1,067
Shareholders' equity (deficit) 69,245 71,021 (4,500) (3,154) (722)
</TABLE>
<PAGE>
(1) As a result of its election to be treated as an S Corporation for
income tax purposes, prior to completion of its initial public
offering in February 1997, the Company was not subject to federal
or state income taxes. For periods prior to the termination of
the S Corporation status, pro forma net income amounts include
additional income tax benefits determined by applying the
Company's anticipated statutory tax rate to pretax income (loss),
adjusted for permanent tax differences. From February (C
Corporation inception) until December 31, 1997, the Company did
not record a tax benefit, primarily due to nondeductible
purchased research and development costs. A tax benefit was
recorded in 1998 due to the net operating loss for the year. See
Note 6 to the consolidated financial statements.
(2) Represents loss from early extinguishment of debt, net of income
tax of $82,000.
(3) In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS 128"), effective for fiscal years ending after
December 15, 1997. The Company adopted the new guidelines for
the calculation and presentation of earnings per share, and all
prior periods have been restated.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion should be read in conjunction with the
consolidated financial statements of the Company (including the notes
thereto) contained elsewhere in this Report.
Overview
The Company provides enterprise-wide technology solutions to the
retail industry. The Company offers fully integrated retail
automation solutions including point of sale systems,
consumer-activated ordering systems, back office management systems
and headquarters-based management systems. The Company's products
enable retailers to interact electronically with their clients,
capture detailed data at the point of sale, manage labor and inventory
at their sites and communicate electronically with their sites,
vendors and credit networks. In addition, the Company offers system
planning, design and implementation services to tailor its solutions
to each retailer's specifications.
The Company derives its revenues primarily from the sale of integrated
systems, including software, hardware and related support and
consulting services. The Company plans to increase licensing of
certain of its software products on a stand-alone basis. In addition,
the Company offers implementation and integration services which are
billed on a per diem basis. The Company's revenues from its various
technology solutions are, for the most part, dependent on the number
of installed sites a client has. Accordingly, while the typical sale
is the result of a long, complex process, the Company's clients
usually continue installing additional sites over an extended period
of time. Revenues from software and systems sales are recognized as
products are shipped, provided that collection is probable and no
significant post shipment vendor obligations remain. Revenues from
client support, maintenance and other services are generally
recognized as the service is performed.
Since November 1995, a number of events resulted in strong revenue
growth for the Company. The Company developed new products,
established relationships with new clients and increased sales to
existing clients. The Company expanded its presence into the retail
industry in November 1995 by entering into a joint venture (PrysmTech)
to market enterprise-wide technology solutions to the cinema
operators. On December 31, 1996, the Company purchased the remaining
interest in PrysmTech. Accordingly, the operations of PrysmTech are
reflected in the 1996 financial statements of the Company with a
deduction for the minority interest in the earnings of PrysmTech.
Continuing its growth in the retail industry, in May 1996 the Company
purchased Liberty Systems International, Inc. ("LSI"), a technology
solution provider to the QSR operators. To broaden its presence in
the food service market, the Company acquired Restaurant Management
and Control Systems, Inc. ("ReMACS") and RSI Merger Corporation d.b.a.
Twenty/20 Visual Systems, Inc. ("Twenty/20"), in May 1997 and
RapidFire Software, Inc. and EquiLease Financial Services, Inc.
(collectively "RapidFire") in October 1997. In November 1997, the
Company acquired Logic Shop, Inc. ("Logic Shop") to serve the
convenient automotive service centers. During this period, the Company
also expanded its sales force and continued to add management,
consulting and product development personnel.
During 1998, the Company's internal reporting segments were
reorganized. Most notably was the creation of the Global Solutions
and Regional Solutions segments. Although both groups provide
enterprise-wide technology solutions to the retail industry, the
distinguishing factor between them is primarily the size of the
clients served and the nature of the
<PAGE>
services performed. Global Solutions' clients tend to be clients with
greater than fifty owned and operated sites, while Regional Solutions'
clients typically have less than fifty owned and operated sites.
In 1998, a number of factors impacted the Company's revenue growth and
operating results. Most notable was the fact that a number of the
Company's larger clients were involved in mergers and acquisitions
which, for a variety of reasons, interrupted or delayed roll outs of
the Company's products. In addition, the purchasing behavior of the
Company's largest clients became increasingly characterized by the use
of fewer, larger contracts. These contracts typically involve longer
negotiating cycles, require the dedication of substantial amounts of
working capital and other resources, and in general require costs that
may substantially precede recognition of associated revenues.
Moreover, in return for larger, longer-term purchase commitments,
clients often demand more stringent acceptance criteria, which can
also cause revenue recognition delays. The above, coupled with
investments by the Company in product development and other areas
of business negatively impacted operating results and contributed to
losses during 1998.
As a result of its election to be treated as an S Corporation for
income tax purposes, prior to the completion of its initial public
offering in February 1997, the Company was not subject to federal or
state income taxes. Pro forma net loss amounts discussed herein
include additional income tax benefits determined by applying the
Company's anticipated statutory tax rate to pretax loss, adjusted for
permanent tax differences. The Company's S Corporation status
terminated upon completion of its initial public offering in February
1997.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage relationship of certain statement of operation items to
total revenues:
<TABLE>
Year ended December 31,
-------------------------------
1998 1997 1996
-------------------------------
<S> <C> <C> <C>
Revenues:
System sales 71.6% 85.6% 87.7%
Client support, maintenance and other services 28.4 14.4 12.3
-------------------------------
Total revenues 100.0 100.0 100.0
Cost of revenues:
System sales 34.8 43.6 54.4
Client support, maintenance and other services 24.5 13.2 13.3
-------------------------------
Total cost of revenues 59.3 56.8 67.7
-------------------------------
Gross profit 40.7 43.2 32.3
Operating expenses:
Product development 13.5 8.8 8.1
Sales and marketing 14.1 7.5 3.6
Depreciation and amortization 5.6 3.1 2.3
Acquisition and other non-recurring charges 1.6 38.6 9.6
General and administrative 14.9 11.6 13.9
-------------------------------
Loss from operations (9.0) (26.4) (5.2)
Interest (income) expense, net (2.2) (1.3) 1.7
Minority interest in earnings of PrysmTech -- -- 1.6
Other income -- -- --
-------------------------------
Loss before income taxes and extraordinary item (6.8) (25.1) (8.5)
Income tax benefit (2.7) (0.3) (3.3)
Extraordinary item, net of taxes -- 0.2 --
-------------------------------
Net loss (4.1)% (25.0)% (5.2)%
==============================
</TABLE>
<PAGE>
Year ended December 31, 1998 compared to year ended December 31, 1997
System Sales. The Company derives the majority of its revenues from
sales and licensing fees for its headquarters and point of sale
solutions. System sales decreased 11.1% to $59.4 million for the year
ended December 31, 1998 ("1998") from $66.8 million for the year ended
December 31, 1997 ("1997"). This decrease was primarily the result of
interruptions and delays in client rollouts of the Company's
solutions. In addition, sales cycles with new clients piloting the
Company's products were lengthier than the Company has historically
experienced resulting in delays in the recognition of revenues on
these system sales.
Client Support, Maintenance and Other Services. The Company also
derives revenues from client support, maintenance and other services,
which increased 110.0% to $23.5 million in 1998 from $11.2 million in
1997. This increase was due to increased support, maintenance and
services revenues resulting from an increased install base and from
the Company's 1997 acquisitions. Additionally, increased client
demand of professional services such as training, custom software
development, project management and implementation services
contributed to this increase.
Cost of System Sales. Cost of system sales consists primarily of
hardware and peripherals for site-based systems and labor. These costs
are expensed as products are shipped. Cost of system sales decreased
15.1% during 1998 to $28.9 million compared to $34.0 million for 1997
due primarily to the decrease in system sales. Cost of system sales
as a percentage of system revenues decreased to 48.6% in 1998 from
50.9% in 1997. The decreases were due primarily to increased
efficiencies associated with the manufacturing of site-based systems,
as well as increased license fees of the Company's software products
which have higher gross margins than the site-based systems, which
bundle both hardware and software, sold by the Company.
Cost of Client Support, Maintenance and Other Services. Cost of
client support, maintenance and other services consists primarily of
personnel and other costs associated with the Company's services
operations. Cost of client support, maintenance and other services
increased 97.0% to $20.3 million for 1998 from $10.3 for 1997. The
increase was due primarily to the Company's decision to expand its
professional services offerings and the related increase in wages
associated with this effort. Cost of client support, maintenance and
other services as a percentage of client support, maintenance and
other services revenues decreased to 86.2% for 1998 from 91.9% in
1997, due to volume related efficiencies and changes in product mix.
Product Development Expenses. Product development expenses consist
primarily of wages and materials expended on product development
efforts. During 1998, product development expenses increased 62.4% to
$11.2 million from $6.9 million for 1997 due to higher development
expenses associated with new product development. Product development
expenses as a percentage of total revenues increased to 13.5% in 1998
from 8.8% in 1997. The Company capitalizes a portion of its software
development costs. In 1998, software development costs of $2.6
million, or 18.7% of its total product development costs, were
capitalized by the Company, as compared to approximately $1.4 million,
or 16.5% of its total product development costs for 1997. This
increase was due primarily to the Company's development of Lighthouse,
its next generation software technology which leverages both Microsoft
Windows CE and NT operating systems.
Sales and Marketing Expenses. Sales and marketing expenses increased
101.6% to $11.7 million during 1998 from $5.8 million in 1997. Sales
and marketing expenses as a percentage of total revenues increased to
14.1% for 1998 from 7.5% for 1997. The increase was associated with
the Company's 1997 acquisitions, continued expansion of its sales
activities and increased commission expense.
Depreciation and Amortization. Depreciation and amortization expenses
increased 95.7% to $4.7 million during 1998 compared to $2.4 million
during 1997 due to goodwill amortization associated with the Company's
1997 acquisitions and the increase in computer equipment and other
assets required to support an increased number of employees and
locations. Depreciation and amortization as a percentage of total
revenues increased to 5.6% for 1998 from 3.1% in 1997 as depreciation
and amortization cost increased at a faster pace than total revenues.
Additionally, amortization of capitalized software development costs
increased 90.5% to $625,000 for 1998, compared to $328,000 for 1997 as
a result of increased investment by the Company in new product
development.
<PAGE>
Acquisition and Other Non-Recurring Charges. Acquisition and other
non-recurring charges decreased 95.8% to $1.3 million during 1998
compared to $30.1 million during 1997. During the second half of
1998, the Company further integrated its acquisitions of ReMACS and
RapidFire by consolidating their support and product development
functions to its Alpharetta, Georgia location. As a result, the
Company recorded approximately $876,000 of non-recurring charges
related to severance arrangements. Additionally, the Company recorded
an impairment charge of $400,000 on goodwill resulting from the
Twenty/20 acquisition. During 1997, in connection with the
acquisitions of ReMACS, Twenty/20, RapidFire and Logic Shop, the
Company recorded non-recurring charges of $28.9 million for purchased
research and development costs. Purchased research and development
costs represent the estimated fair value of acquired incomplete
research and development projects as determined by independent
appraisal. Additionally, in connection with the acquisition of
Twenty/20, the Company granted stock options at an exercise price less
than the current fair market value, a portion of which immediately
vested. As a result, the Company, recorded a non-recurring charge of
$1.2 million. Stock compensation expense represents the excess of the
fair market value of the Company's Common Stock on the date of the
grant of stock options over the aggregate exercise price of such
options. No such charge was recorded in 1998.
General and Administrative Expenses. General and administrative
expenses increased 36.4% during 1998 to $12.4 million from $9.1
million during 1997. The increases were due primarily to personnel
increases and related costs associated with the Company's
acquisitions. General and administrative expenses as a percentage of
total revenues increased to 14.9% from 11.6% during 1998.
Interest Income, Net. Net interest income increased 82.0% to $1.8
million during 1998, compared to net interest income of $989,000 for
1997. The increase resulted primarily from interest income earned on
the proceeds of the sale of 5.4 million shares of the Company's Common
Stock during 1997.
Income Tax Benefit. A tax benefit of 40.0% was recorded in 1998
compared to a tax benefit of 1.1% in 1997. This increase resulted
primarily from the non-deductible purchased research and development
expenses incurred in connection with the Company's 1997 acquisition.
As of December 31, 1998, the Company has recorded a net deferred tax
asset of $6.4 million. Realization is dependent upon generating
sufficient taxable income in future periods. Although realization is
not assured, management believes it is more likely than not that the
deferred tax asset will be realized.
Extraordinary Item. During 1997, a loss from early extinguishment of
debt of $213,000, net of taxes of $82,000, was recognized due to the
write off of certain unamortized loan origination costs and
unamortized debt discounts associated with the repayment of
outstanding indebtedness to Sirrom Capital Corporation of $4.5
million. No such charge was incurred during 1998.
Net Loss. For the reasons discussed above, the net loss for the year
ended December 31, 1998, before non-recurring charges, was $2.6
million or $0.16 per share, a decrease of approximately $8.9 million
or $0.56 per share over net income of $6.3 million or $0.40 per share
for the year ended December 31, 1997, before extraordinary items and
acquisition related charges. Including the non-recurring charges for
the year ended December 31, 1998, of approximately $1.3 million, net
loss for the period was $3.4 million, or $0.21 per share. Net loss
for the year end period of 1997 was approximately $19.5 million or
$1.50 per share, including acquisition related charges of
approximately $25.6 million, net of tax benefits.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
System Sales. The Company derives the majority of its revenues from
sales and licensing fees for its headquarters and point of sale
solutions. System sales increased 86.1% to $66.8 million for the year
ended December 31, 1997 ("1997"), compared to $35.9 million for the
year ended December 31, 1996 ("1996"). The increase related to sales
and license fees from new and existing clients, and the expansion of
the Company through its acquisitions of ReMACS and Twenty/20 in the
second quarter of 1997 and RapidFire and Logic Shop in the fourth
quarter of 1997.
Client Support, Maintenance and Other Services. The Company also
derives revenues from client support, maintenance and other services,
which increased 121.7% to $11.2 million for 1997, compared to $5.1
million for 1996. The increase was due to increased support,
maintenance and services revenues, within its existing markets as well
as those related to the Company's 1997 acquisitions. Additionally,
increased client demand of professional services which the Company
began offering in the first quarter of 1996 contributed to this
increase.
<PAGE>
Cost of System Sales. Cost of system sales consists primarily of
hardware and peripherals for site-based systems and labor. These costs
are expensed as products are shipped. Cost of system sales increased
52.8% to $34.0 million for 1997, compared to $22.3 million for 1996.
The increase was directly attributable to the increase in system
sales. Cost of system sales as a percentage of system revenues
decreased to 50.9% from 62.1%. The decrease was due primarily to
increased efficiencies associated with the manufacturing of site-based
systems; as well as increased sales of existing and newly introduced
and acquired products, such as its back office and headquarters-based
management systems software. These products typically have higher
gross margins than the site-based systems sold by the Company.
Cost of Client Support, Maintenance and Other Services. Cost of
client support, maintenance and other services consists primarily of
personnel and other costs associated with the Company's services
operations. Cost of client support, maintenance and other services
increased 88.4% to $10.3 million for 1997 from $5.5 million for 1996.
The increase was due primarily to the Company's decision to expand its
professional services offerings and the related increase in wages
associated with this effort. Cost of client support, maintenance and
other services as a percentage of client support, maintenance and
other services revenues decreased to 91.9% from 108.1%.
Product Development Expenses. Product development expenses consist
primarily of wages and materials expended on product development
efforts. Product development expenses increased 107.2% to $6.9
million for 1997, compared to $3.3 million for 1996. The increase was
due to higher development costs associated with new product
development, including development activity associated with the
acquisitions of ReMACS, Twenty/20, RapidFire and Logic Shop and the
development of new credit card network interfaces. Product
development expenses as a percentage of total revenues increased to
8.8% from 8.1%, as product development expenses increased at a faster
pace than total revenues. The Company capitalizes a portion of its
software development costs. In 1997, software development costs of
$1.4 million, or 16.5% of its total product development costs, were
capitalized by the Company, as compared to approximately $635,000, or
16.0% of its total product development costs for 1996.
Acquisition and Other Non-Recurring Charges. During 1997, in
connection with the acquisitions of ReMACS, Twenty/20, RapidFire, and
Logic Shop, the Company recorded non-recurring charges of $28.9
million for purchased research and development costs. Purchased
research and development costs represent the estimated fair value of
acquired incomplete research and development projects as determined by
independent appraisal. Additionally, in connection with the
acquisition of Twenty/20, the Company granted such stock options, a
portion of which immediately vested, and recorded a non-recurring
charge of $1.2 million. Stock compensation expense represents the
excess of the fair market value of the Company's Common Stock on the
date of the grant of stock options over the aggregate exercise price
of such options.. No such charge was recorded in 1996.
Sales and Marketing Expenses. Sales and marketing expenses increased
291.3% to $5.8 million during 1997, compared to $1.5 million in 1996.
The increase was associated with the Company's acquisitions, continued
expansion of its sales activities and increased commission expense
attributable to higher sales. Sales and marketing expenses as a
percentage of total revenues increased to 7.5% from 3.6%.
Depreciation and Amortization. Depreciation and amortization expenses
increased 151.5% to $2.4 million for 1997, compared to approximately
$948,000 for 1996. The increase resulted from an increase in computer
equipment and other assets required to support an increased number of
employees, as well as increased goodwill amortization resulting from
acquisitions. Depreciation and amortization as a percentage of total
revenues increased to 3.1% from 2.3% during the period, primarily
because associated personnel support costs increased at a pace higher
than associated revenues. Additionally, amortization of capitalized
software development costs increased 37.2% to $328,000 for 1997,
compared to $239,000 for 1996 as a result of increased investment by
the Company in new product development.
General and Administrative Expenses. General and administrative
expenses increased 59.9% to $9.1 million for 1997, compared to $5.7
million for 1996. The increase was due primarily to personnel
increases in 1997 and the Company's acquisitions. General and
administrative expenses as a percentage of total revenues declined to
11.6% from 13.9% as a result of higher sales volumes.
Interest (Income) Expense. Interest (income) expense increased 238.9%
to net interest income of $989,000 for 1997, compared to net interest
expense of $712,000 for 1996. The increase resulted primarily from
interest income earned on the proceeds of the sale of 5.4 million
shares of the Company's Common Stock during 1997, compared to interest
expense resulting from the Company borrowing $4.5 million in 1996 and
the borrowing costs associated therewith.
<PAGE>
Minority Interest in Earnings of PrysmTech. In 1997, the Company
recognized no minority interest in earnings of PrysmTech compared to
$628,000 in 1996, as the remaining interest in PrysmTech was acquired
by the Company during the fourth quarter of 1996.
Income Tax Benefit. As a result of its election to be treated as an S
Corporation for income tax purposes, the Company, prior to the
completion of its initial public offering in February 1997, was not
subject to federal or state income taxes. The Company's S Corporation
status was terminated upon completion of its initial public offering
in February 1997 and upon termination of its S Corporation status, the
Company recorded deferred tax assets in the amount of $592,000.
Simultaneously, with the recording of these deferred tax assets, the
Company recorded a tax benefit of $305,000 and a valuation allowance
of $287,000. The valuation allowance was recorded due to the
uncertainty surrounding the future utilization of such deferred tax
assets. For all periods presented, the accompanying financial
statements reflect provisions for income taxes computed in accordance
with the provisions of Statement of Accounting Standards No. 109,
"Accounting for Income Taxes". For those periods prior to the
Company's initial public offering, the tax benefit has been presented
on a pro forma basis as if the Company had been liable for federal and
state income taxes during those periods. The pro forma effective tax
rate for the period from January 1, 1997 through February 19, 1997,
the date the Company terminated its S Corporation status was a benefit
of 1.1%, compared to a benefit of 38.2% for 1996. The decrease
resulted primarily from nondeductible purchased research and
development costs.
Extraordinary Item. During 1997, a loss from early extinguishment of
debt of $213,000, net of taxes of $82,000, was recognized due to the
write off of certain unamortized loan origination costs and
unamortized debt discounts associated with the repayment of
outstanding indebtedness to Sirrom Capital Corporation of $4.5
million.
Net Loss. For 1997, the Company recognized a net loss of $19.5
million compared to a net loss of $2.2 million for 1996. The loss in
1997 resulted from the recording of acquisition-related expenses
consisting of purchased research and development costs and stock
compensation expense associated with the purchase of ReMACS,
Twenty/20, RapidFire and Logic Shop during 1997 of $30.1 million,
which were partially offset by increased revenues and improved margins
during 1997 as compared to 1996. Net income before extraordinary
items and acquisition related charges for 1997, was $6.3 million or
$0.40 per share, an increase of $6.1 million or $0.38 per share over
the net income of $273,000 or $0.02 per share for 1996.
Liquidity and Capital Resources
In July 1997, the Company completed a public offering of 2.6 million
shares of common stock and received net proceeds of approximately
$58.4 million after deducting estimated underwriting discounts and
offering expenses. A portion of the offering proceeds was used to
repay $3.3 million of debt incurred in connection with the acquisition
of ReMACS. The remaining proceeds will be used for general corporate
purposes, including research and development, sales and marketing,
possible strategic acquisitions and the increased working capital
requirements of the Company generated by its growth. As of December
31, 1998, the Company had $25.5 million in cash and cash equivalents.
The Company's operating activities used cash of $12.3 million, $8.4
million and $1.4 million during, 1998, 1997 and 1996 respectively. In
1998, the Company's uses of cash were primarily a result of the net
loss for the period then ended; increased inventories due to increased
committed sales backlog, decreased accounts payable and accrued
liabilities due to timing of vendor payments; and decreased client
deposits and unearned revenues as the Company delivered products
and/or services previously paid by clients. The Company's uses of
cash in 1997 were primarily the result of increased accounts
receivables and inventory purchases due to increased sales and a
decrease in client deposits and unearned revenues, as products were
delivered to clients. During 1996, the Company's use of operating cash
was primarily the result of cash payments received from clients in
advance of shipments offset by increased accounts receivables and
inventories.
Cash used in investing activities was $8.9 million, $15.0 million and
$727,000 for 1998, 1997 and 1996, respectively. The uses of cash in
investing activities for 1998 consisted of the purchases of property
and equipment for approximately $6.3 million and capitalized software
costs of $2.6 million. During 1998, the Company moved into two new
leased facilities in Alpharetta, Georgia with approximately 209,000
combined square feet. As a result, the Company purchased equipment
and furniture to accommodate the moves. The use of cash for 1997 in
investing activities consisted primarily of the acquisitions of
ReMACS, Twenty/20, RapidFire, and Logic Shop for approximately $10.3
million in cash consideration. During 1996, the use of cash for
investing activities consisted primarily of capitalized software costs
of $635,000 and purchases of property and equipment of $493,000.
These costs were primarily for purchases of computer
<PAGE>
equipment, furniture and fixtures. Total product development
expenditures were $13.8 million, $8.3 million and $4.0 million in
1998, 1997 and 1996, respectively. Of these costs, the Company
capitalized $2.6 million, $1.4 million and $635,000 in software
development costs in 1998, 1997 and 1996, respectively.
Cash used in financing activities was approximately $792,000 in 1998,
while $68.6 million and $4.3 million was provided by financing
activities during 1997 and 1996, respectively. During 1998, cash used
in financing activities was primarily a result of the Company's
purchase of common stock from shareholders for $4.0 million and an
advance made by the Company to the former sole shareholder of
RapidFire under its agreement to loan up to $1.5 million, which debt
matures October 31, 2005 and bears interest at 5.0% per annum offset
by the income tax effect of stock options exercised of $3.8 million.
In 1997, the cash provided by financing activities primarily resulted
from the issuance of common stock of approximately $82.4 million,
offset by the repayment of long-term debt and shareholder loans of
approximately $12.8 million. Financing activities in 1996 consisted
primarily of borrowings of $4.5 million from Sirrom Capital
Corporation. These loan proceeds were partially offset by payment of
loan origination fees as well as continued repayments of borrowings
under capital lease agreements.
In September 1998, the Board of Directors of the Company authorized a
stock repurchase program pursuant to which management is authorized to
repurchase up to 3,000,000 shares of common stock of the Company. As
of March 1, 1999, the Company had repurchased an aggregate of 680,154
shares of its common stock in the open market for a total of $4.5
million. These purchases were, and any future purchase will be,
financed from the Company's cash reserves.
Year 2000 Computer Matter
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any
of the Company's computer programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a
temporary inability to process transactions or invoices sent, or
engage in similar normal business activities.
The Company is in the process of conducting an inventory and business
risk assessment of its non-information technology systems. The
Company will develop remediation plans for such non-information
technology systems if its business risk assessment indicates such is
warranted. All costs associated with analyzing the Year 2000 Issue or
making conversions to existing systems are being expensed as incurred.
Management presently believes that the costs to modify its information
technology infrastructure to be Year 2000 compliant will not have a
material adverse impact to its financial condition or results of
operations during any quarterly or annual reporting period. However,
the Company is currently identifying and considering various
contingency options to minimize the risk of any Year 2000 problems.
The Company is planning formal communications with all of its
significant suppliers of goods and services to determine the extent to
which the Company's operations and systems are vulnerable to those
third parties' failure to remediate their own Year 2000 Issues. There
can be no guarantee that the systems of other companies on which the
Company's operations and systems rely will be timely converted and
would not have an adverse effect on the Company's systems or
result of operations.
The Company will utilize predominantly internal resources to
reprogram, or replace, and test the software for Year 2000
modifications. The Company anticipates completing the Year 2000
project by September 1, 1999, which is prior to any anticipated impact
on its operating systems.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of
future events, including the continued availability of certain
resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated.
Specific factors that might cause such material difference include,
but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer
codes, and similar uncertainties.
<PAGE>
Item 7 A. Quantitative and Qualitative Disclosures About Market
Risk.
The Company's financial instruments that are subject to market risks
are its cash and cash equivalents. During 1998, the weighted average
interest rate on its cash balances was approximately 5.26%. A 10.0%
decrease in this rate would impact interest income by approximately
$180,000.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements are filed with
this Report:
Report of Independent Public Accountants.
Consolidated Balance Sheets at December 31, 1998 and 1997.
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.
Consolidated Statements of Shareholders' Equity (Deficit) for the
years ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Radiant Systems, Inc.:
We have audited the accompanying consolidated balance sheets of
RADIANT SYSTEMS, INC. (a Georgia corporation) AND SUBSIDIARIES as of
December 31, 1998 and 1997 and the related consolidated statements of
operations, shareholders' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Radiant
Systems, Inc. and subsidiaries as of December 31, 1998 and 1997 and
the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 1999
<PAGE>
<TABLE>
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
1998 1997
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $25,537 $47,567
Accounts receivable, net of allowances for doubtful accounts of $750 and
$350 in 1998 and 1997, respectively 17,645 17,557
Inventories 11,965 8,706
Deferred tax assets 687 179
Other 2,310 1,688
------- -------
Total current assets 58,144 75,697
PROPERTY AND EQUIPMENT, net 8,341 4,844
SOFTWARE DEVELOPMENT COSTS, net 3,718 1,773
INTANGIBLES, net 6,271 10,332
DEFERED TAXES, long-term 5,680 345
OTHER ASSETS 2,012 524
------- -------
$84,166 $93,515
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,844 $ 7,234
Accrued liabilities 3,210 5,887
Client deposits and deferred revenue 2,600 4,645
Current portion of long-term debt 161 672
------- -------
Total current liabilities 10,815 18,438
LONG-TERM DEBT, less current portion 4,106 4,056
------- -------
Total liabilities 14,921 22,494
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 5,000,000 shares authorized, 0 shares issued -- --
Common stock, no par value; 30,000,000 shares authorized, 15,505,565 and
15,423,587 shares issued and outstanding in 1998 and 1997, respectively 0 0
Additional paid-in capital 92,144 90,708
Deferred compensation (353) (536)
Accumulated deficit (22,546) (19,151)
------- -------
Total shareholders' equity 69,245 71,021
------- -------
$84,166 $93,515
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
<PAGE>
<TABLE>
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 1997 1996
------- -------- -------
<S> <C> <C> <C>
REVENUES:
System sales $59,400 $ 66,798 $35,888
Client support, maintenance, and other services 23,535 11,205 5,055
------- -------- -------
Total revenues 82,935 78,003 40,943
------- -------- -------
COST OF REVENUES:
System sales 28,877 34,019 22,270
Client support, maintenance, and other services 20,288 10,298 5,465
------- -------- -------
Total cost of revenues 49,165 44,317 27,735
------- -------- -------
GROSS PROFIT 33,770 33,686 13,208
OPERATING EXPENSES:
Product development 11,199 6,897 3,328
Sales and marketing 11,730 5,819 1,487
Depreciation and amortization 4,665 2,384 948
Acquisition and other non-recurring charges 1,276 30,086 3,930
General and administrative 12,360 9,059 5,664
------- -------- -------
LOSS FROM OPERATIONS (7,460) (20,559) (2,149)
INTEREST (INCOME) EXPENSE, NET (1,800) (989) 712
MINORITY INTEREST IN EARNING OF PRYSMTECH -- -- 628
------- -------- -------
LOSS BEFORE INCOME TAX AND EXTRAORDINARY ITEM (5,660) (19,570) (3,489)
INCOME TAX BENEFIT (2,265) (212) (1,333)
------- -------- -------
LOSS BEFORE EXTRAORDINARY ITEM (3,395) (19,358) (2,156)
EXTRAORDINARY ITEM:
Loss from early extinguishment of debt, net of taxes -- 131 --
------- -------- -------
NET LOSS $(3,395) $(19,489) $(2,156)
======= ======== =======
BASIC AND DILUTED LOSS PER SHARE:
Loss before extraordinary item $ (0.21) $ (1.49) $ (0.26)
Extraordinary loss on early extinguishment of debt -- (0.01) --
------- -------- -------
Total basic loss per share $ (0.21) $ (1.50) $ (0.26)
======= ======== =======
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 15,990 13,024 8,300
======= ======== =======
Diluted 15,990 13,024 8,300
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
<TABLE>
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
Class A Deferred Deferred Accumu-
Common Stock Common Stock Compen- Sales ated
Shares Amount Shares Amount APIC Warrants ation Discount Deficit Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1995: 6,857 $ 0 1,143 $ 0 -- $ 240 -- $ (112) $ (3,282) $(3,154)
Issuance of client
warrant -- -- -- -- -- 79 -- (79) -- --
Sales of software
licenses under
client warrants -- -- -- -- -- -- -- 59 -- 59
Shares issued in
PrysmTech
acquisition -- -- 300 0 $ 2,100 -- -- -- -- 2,100
Issuance of
warrant for loan
origination fees -- -- -- -- -- 40 -- -- -- 40
Accretion of
put warrants -- -- -- -- -- -- -- -- (45) (45)
Accretion of
client warrants -- -- -- -- -- 826 -- -- (826) --
Distributions to
shareholders -- -- -- -- -- -- -- -- (11) (11)
Loss before pro
forma income taxes -- -- -- -- -- -- -- -- (3,489) (3,489)
-------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1996: 6,857 -- 1,443 -- 2,100 1,185 -- (132) (7,653) (4,500)
Issuance of
common stock 5,428 -- -- -- 82,422 -- -- -- -- 82,422
Automatic conver-
sion of Series
A common stock 1,443 -- (1,443) -- -- -- -- -- -- --
Exercise of stock
purchase warrants 1,353 -- -- -- 2,658 (1,185) -- -- -- 1,473
Exercise of
employee stock
options 161 -- -- -- 441 -- -- -- -- 441
Shares issued for
acquired companies 975 -- -- -- 11,571 -- -- -- -- 11,571
Stock options
granted below
fair market value -- -- -- -- 1,841 -- (627) -- -- 1,214
Amortization of
deferred compens-
ation -- -- -- -- -- -- 91 -- -- 91
Repurchase of
common stock
from a shareholder (600) -- -- -- (1,125) -- -- -- -- (1,125)
Repurchase of
common stock
from a client (193) -- -- -- (997) -- -- -- -- (997)
Sales of software
licenses under
warrant -- -- -- -- -- -- -- 132 -- 132
Reclassification of
S corporation
accumulated deficit -- -- -- -- (8,203) -- -- -- 8,203 --
Loss before pro
forma income
taxes and
extraordinary item -- -- -- -- -- -- -- -- (19,570) (19,570)
Extraordinary item,
net of tax -- -- -- -- -- -- -- -- (131) (131)
-------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1997: 15,424 0 -- -- 90,708 -- (536) -- (19,151) 71,021
Treasury stock
purchase (607) 0 -- -- (4,027) -- -- -- -- (4,027)
Exercise of
employee stock
options 647 0 -- -- 1,395 -- -- -- -- 1,395
Stock issued
under employee
stock purchase plan 42 -- -- -- 264 -- -- -- -- 264
Income tax benefit
of stock options
exercised -- -- -- -- 3,804 -- -- -- -- 3,804
Amortization of
deferred
compensation -- -- -- -- -- -- 183 -- -- 183
Net loss -- -- -- -- -- -- -- -- (3,395) (3,395)
-------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1998: 15,506 $ 0 -- -- $92,144 -- $ (353) -- $ (22,546) $69,245
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
<TABLE>
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,395) $(19,489) $ (2,156)
Adjustments to reconcile net loss to net
cash used in operating activities:
Pro forma tax benefit -- (212) (1,333)
Deferred income taxes (3,428) (1,573) --
Accretion of note payable interest 226 34 --
Depreciation and amortization 5,067 2,384 948
Amortization of debt discount -- 332 306
Discounts earned on software license sales -- 132 59
Non-cash acquisition and other non-recurring charges 400 30,086 3,930
Amortization of deferred compensation 182 90 --
Minority interest in earnings of PrysmTech -- -- (628)
Changes in assets and liabilities, net of acquired entities:
Accounts receivable (88) (11,420) (3,230)
Inventories (3,257) (5,194) (774)
Other assets (921) (449) (503)
Accounts payable (2,390) 1,748 563
Accrued liabilities (2,677) 350 711
Accrued client rebates -- -- 58
Client deposits and deferred revenue (2,045) (5,227) 674
--------- -------- --------
Net cash used in operating activities (12,326) (8,408) (1,375)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,342) (3,305) (493)
Purchases of acquired entities, net of cash acquired -- (10,314) 401
Capitalized software development costs (2,570) (1,365) (635)
--------- -------- --------
Net cash used in investing activities (8,912) (14,984) (727)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock, net of issuance costs -- 82,422 --
Proceeds from exercise of common stock warrants -- 960 --
Repurchase of common stock (4,027) (2,122) --
Exercise of employee stock options 1,395 441 --
Stock issued under employee stock purchase plan 264 -- --
Issuance of shareholder loans, net (1,540) (330) (157)
Borrowings of long-term debt -- -- 4,594
Income tax benefit of stock options exercised 3,804 -- --
Issuance of long-term debt (687) (5,418) (458)
Dividends received from PrysmTech -- -- 255
Repayments of note from shareholder -- (7,343) 30
Other (1) 7 15
--------- -------- --------
Net cash (used in) provided by financing activities (792) 68,617 4,279
--------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (22,030) 45,225 2,177
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 47,567 2,342 165
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 25,537 $ 47,567 $ 2,342
========= ======== ========
</TABLE>
The accompany notes are an integral part of these consolidated
statements.
<PAGE>
RADIANT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. ORGANIZATION AND BACKGROUND
Radiant Systems, Inc. (the "Company") provides enterprise-wide
technology solutions to the retail industry. The Company offers fully
integrated retail automation solutions, including point of sale
systems, consumer-activated order systems, back office management
systems and headquarters-based management systems. The Company's
products enable retailers to interact electronically with consumers,
capture data at the point of sale, manage site operations and
logistics and communicate electronically with their sites, vendors and
credit networks. In addition, the Company offers system planning,
design and implementation services that tailor the automation solution
to each retailer's specifications as well as a variety of
post-implementation services such as a help desk and technical
support.
The Company originally was organized under the laws of the state of
New York on August 1, 1985 and was subsequently reincorporated under
the laws of the state of Georgia on October 27, 1995. The name of the
company was changed to Radiant Systems, Inc. from Softsense Computer
Products, Inc. on November 13, 1996. In connection with the
reincorporation of the Company in October 1995, each outstanding share
of common stock and Class A common stock of the Company was exchanged
for 109,714 shares of common stock and Class A common stock, as
applicable. The shares outstanding and all other references to shares
of common stock and Class A common stock reported have been restated
to give effect to the reincorporation.
Upon completion of the initial public offering (the "IPO") (See Note
9), the Company converted from an S corporation to a C corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Radiant Systems, Inc. and its wholly owned subsidiaries.
Presentation
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue Recognition
In January 1998, the Company adopted Statement of Position, 97-2
"Software Revenue Recognition" (the "Statement"). This Statement
provides guidance on recognizing revenues on software transactions and
did not have a significant impact on previous licensing or revenue
recognition practices.
The Company's revenue is generated primarily through software and
system sales, support and maintenance and installation and training:
Software and System Sales
The Company generally sells its products, which include both
software licenses and hardware, directly to end users. Revenue
from software licenses and system sales is generally recognized
as products are shipped, provided that no significant vendor and
postcontract support obligations remain and that the collection
of the related receivable is probable.
Support and Maintenance
The Company offers to its clients postcontract support in the
form of maintenance, telephone support and unspecified software
enhancements. Revenue from support and maintenance is generally
recognized as the service is performed.
<PAGE>
Installation and Training
The Company offers installation and training services to its
clients. Revenue from installation and training is generally
recognized at the time the service is performed.
Payments received in advance are recorded as client deposits and
deferred revenue in the accompanying balance sheets and are recognized
as revenue when the related product is shipped or related revenue is
earned.
Inventories
Inventories consist principally of computer hardware and software
media and are stated at the lower of cost (first-in, first-out method)
or market.
Property and Equipment
Property and equipment are recorded at cost, less accumulated
depreciation and amortization. Depreciation and amortization are
provided using the straight-line method over estimated useful lives of
two to five years.
Property and equipment at December 31, 1998 and 1997 are summarized as
follows (in thousands):
<TABLE>
1998 1997
------- -------
<S> <C> <C>
Computers and office equipment $ 8,195 $ 4,732
Furniture and fixtures 2,373 1,249
Purchased software 2,319 1,111
Leasehold improvements 1,100 552
------- -------
13,987 7,644
Less accumulated depreciation and amortization (5,646) (2,800)
------- --------
$ 8,341 $ 4,844
======= ========
</TABLE>
Intangible Assets
Intangible assets consisting of goodwill, product licenses and patents
are amortized using the straight-line method over four to ten years.
Goodwill represents the excess of purchase price over the estimated
fair value of assets acquired.
Long-Lived Assets
The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those
assets. As more fully described in Note 5, the Company recorded an
impairment charge related to certain goodwill of $400,000 during 1998.
Software Development Costs
Capitalized software development costs consist principally of salaries
and certain other expenses directly related to the development and
modification of software products. Capitalization of such costs begins
when a working model has been produced as evidenced by the completion
of design, planning, coding and testing, such that the product meets
its design specifications and has thereby established technological
feasibility. Capitalization of such costs ends when the resulting
product is available for general release to the public. Amortization
of capitalized software development costs is provided at the greater
of the ratio of current product revenue to the total of current and
anticipated product revenue or on a straight-line basis over the
estimated economic life of the software, which the Company has
determined is not more than three years. At December 31, 1998 and
1997, accumulated amortization of capitalized software development
costs was $1.3 million and $689,000, respectively.
Purchased Research and Development Costs
As more fully described in Note 4, based on independent appraisal, the
Company allocated $28.9 million in 1997 and $3.9 million in 1996 of
the purchase price for its acquisitions to incomplete research and
development projects. Accordingly, these costs were expensed as of
the acquisition dates. These allocations represent the estimated fair
value based on risk-adjusted cash flows related to incomplete
projects. The development of these projects had not yet reached
technological feasibility, and the technology has no alternative
future use. The technology acquired in these acquisitions will
require substantial additional development by the Company. No such
charges were recorded in 1998.
<PAGE>
Stock Compensation
Employee stock awards under the Company's compensation plans are
accounted for in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25). In
January 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123).
Net Loss Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), effective for fiscal years ending after December 15, 1997. The
Company adopted the new guidelines for the calculation and
presentation of earnings per share, and all prior periods have been
restated. Basic loss per share is based on the weighted average number
of shares outstanding. Diluted loss per share is based on the
weighted average number of shares outstanding and the dilutive effect
of common stock equivalent shares ("CSEs") issuable upon the exercise
of stock options and warrants (using the treasury stock method). For
all periods presented, CSE's have been excluded from diluted weighted
average shares outstanding, as their impact was antidilutive.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade accounts
payable and other financial instruments approximate their fair values
principally because of the short-term maturities of these instruments.
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of similar terms and
maturities. Under this method, the Company's fair value of long-term
debt was not significantly different than the stated value at December
31, 1998.
Statements of Cash Flows
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash.
Cash paid for interest was $166,000, $432,000 and $244,000 in 1998,
1997 and 1998, respectively. Cash paid for income taxes was $0,
$155,000 and $0 in 1998, 1997 and 1996, respectively. The Company
acquired equipment of $0, $43,000 and $307,000 in 1998, 1997 and 1996,
respectively, under capital lease obligations.
During 1998, 1997 and 1996, the Company recorded bad debt expense of
approximately $400,000, $150,000 and $110,000, respectively.
Concentration of Business and Credit Risk
Financial instruments which potentially subject the Company to credit
risk consist principally of trade receivables and interest bearing
investments. The Company performs on-going credit evaluations of its
clients and generally does not require collateral. The Company
maintains adequate reserves for potential losses and such losses,
which have historically been minimal, have been included in
management's estimates.
A majority of the Company's clients operate within the convenience
store market, and a significant portion of the Company's revenues is
derived from a limited number of clients. During the years ended
December 31, 1998, 1997 and 1996, the following clients individually
accounted for more than 10.0% of the Company's revenue:
December 31,
1998 1997 1996
-----------------------------
Client A * 11.4% *
Client B 10.3% 12.8 13.2%
Client C * 12.2 21.5
Client D * * 11.7
Client E * * 13.8
*Accounted for less than 10.0% of total revenues for the period
indicated.
At December 31, 1998, 3.4% of the Company's accounts receivable
related to Client B.
Recent Accounting Pronouncements
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130). SFAS 130 establishes standards for reporting and
disclosing comprehensive
<PAGE>
income and its components. Comprehensive income is defined as the
change in equity (net assets) of a business enterprise during a
period from transactions and other events and circumstances from
non-owner sources. In addition to net income, SFAS 130 requires the
reporting of other comprehensive income, defined as revenues,
expenses, gains and losses that under generally accepted accounting
principles are not included in net income. As of December 31, 1998,
the Company had no items of other comprehensive income.
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information" (SFAS 131). SFAS
131 establishes standards for the way that public business enterprises
report information about operating segments in its financial reports
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
clients. Operating segments are defined as components of an
enterprise about which separate financial information is available
that is evaluated by the chief decision makers in deciding how to
allocate resources and assessing performance. SFAS 131 also allows
the aggregation of segments which meet certain criteria. See further
discussion at Note 12.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," (SFAS 133) which
established accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value, and changes
in the derivative fair value be recognized currently in earnings
unless specific accounting criteria are met. The Company plans to
adopt SFAS 133 in the first quarter of fiscal 2000. Management does
not believe that adoption of this statement will have a material
effect on the consolidated financial statements of the Company.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." Under
SOP 98-1, computer software costs incurred in the preliminary project
stage are expensed as incurred. Additional, specified upgrades and
enhancements may be capitalized; however, external costs related to
maintenance, unspecified upgrades, and enhancements should be
recognized as expense over the contract period on a systematic basis.
Internal costs incurred for maintenance should be expensed as
incurred. SOP 98-1 is effective for the Company's fiscal year
beginning January 1, 1999. In the opinion of management, the adoption
of SOP 98-1 will not have a material effect on the consolidated
financial statements of the Company.
Reclassifications
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
3. PRODUCT DEVELOPMENT EXPENDITURES
Product development expenditures, excluding purchased research and
development costs (Notes 2 and 4) for the years ended December 31,
1998, 1997 and 1996 are summarized as follows (in thousands):
<TABLE>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Total development expenditures $13,769 $8,262 $3,963
Less additions to capitalized software development
Costs prior to amortization 2,570 1,365 635
------- ------ ------
Product development expense $11,199 $6,897 $3,328
======= ====== ======
</TABLE>
The activity in the capitalized software development account during
1998 and 1997 is summarized as follows (in thousands):
<TABLE>
December 31,
1998 1997
------- ------
<S> <C> <C>
Balance at beginning of period, net $ 1,773 $ 736
Additions 2,570 1,365
Amortization expense (625) (328)
------- -----
Balance at end of period, net $ 3,718 $1,773
======= ======
</TABLE>
4. ACQUISITIONS
From January 1, 1996 through December 31, 1997, the Company acquired
six businesses, all of which were accounted for under the purchase
method of accounting. These businesses were acquired for a
combination of cash, notes payable and shares of the Company's common
stock. The value of the common stock reflects the market value of the
Company's common stock at the closing of each acquisition, adjusted to
account for restrictions common to unregistered securities and for
registration rights, if applicable. The Company made no acquisitions
during 1998.
The following describes each of the acquisitions completed by the
Company in 1996 and 1997:
PrysmTech
In November 1995, the Company and Billmart, L.L.C. ("Billmart") formed
PrysmTech to pursue the development and sale of integrated site
solutions to the entertainment market. The Company contributed an
exclusive license to market its
<PAGE>
software to the entertainment market, while Billmart contributed net
assets of $143,000 and an exclusive license to modify and market the
Billmart software. Each party received a 50% interest for its
contribution.
On December 31, 1996, the Company acquired Billmart's interest in
PrysmTech for 300,000 shares of common stock and $3.2 million in
notes. Total consideration, including transaction costs of
approximately $100,000, was $5.4 million. Intangibles of $869,000
were recorded, after adjusting for purchased research and development
costs of $3.9 million (Note 2), which are being amortized over five
years. The accompanying financial statements include the operating
results of PrysmTech since January 1, 1995, with applicable deductions
for minority interest earnings.
LSI
On May 17, 1996, the Company acquired LSI for $100 cash and assumed
net liabilities of $78,000. Intangibles of $48,000 were recorded,
after adjusting for purchased research and development costs of
$30,000, which are being amortized over seven years.
ReMACS
On May 23, 1997, the Company purchased all of the outstanding common
stock of Restaurant Management and Control Systems, Inc. ("ReMACS"), a
provider of back office management systems for clients in the food
service industry. The purchase price consisted of 627,500 shares of
common stock, $3.3 million in cash, $3.3 million in notes and
assumption of net liabilities of $4.5 million. Total consideration,
including transaction costs of approximately $150,000, was $18.5
million. Intangibles of $3.2 million were recorded, after adjusting
for purchased research and development costs of $15.8 million, which
are being amortized over four to ten years. In connection with the
acquisition, the Company entered into employment agreements with five
employees for terms expiring June 2002 (See Note 8).
Twenty/20
On May 30, 1997, the Company purchased all of the outstanding common
stock of RSI Merger Corporation (d.b.a. Twenty/20 Visual Systems)
("Twenty/20"), a provider of point of sale and table management
systems for full service restaurants. The purchase price consisted of
199,074 shares of common stock and $1.3 million in cash. Total
consideration, including transaction costs of approximately $100,000,
was $3.7 million. Intangibles of $644,000 were recorded, after
adjusting for purchased research and development costs of $3.4
million, which are being amortized over four to ten years. See
further discussion at Note 5.
RapidFire
On October 31, 1997, the Company purchased all of the outstanding
common stock of RapidFire Software, Inc. ("RapidFire Software") and
EquiLease Financial Services, Inc. ("EquiLease"), (collectively
"RapidFire"), a leading provider of point of sale systems to the pizza
industry and other delivery restaurants. The purchase price consisted
of 102,230 shares of common stock, $4.2 million in cash and $3.8
million in notes. Intangibles of $5.2 million were recorded, after
adjusting for purchased research and development costs of $6.9
million, which are being amortized over four to ten years.
Separately, the Company agreed to loan up to $1.5 million to the sole
shareholder, which debt matures October 31, 2005 and bears interest at
a rate of 5.0% per annum (See Note 11). The Company also entered into
a five-year employment agreement with the sole shareholder (See Note
8).
Logic Shop
On November 18, 1997, the Company purchased all of the outstanding
common stock of Logic Shop, Inc. ("Logic Shop"), a provider of point
of sale and back office management software to the convenient
automotive service center market. The purchase price consisted of
46,032 shares of common stock and $2.0 million in cash. Intangibles
of approximately $829,000 were recorded, after adjusting for purchased
research and development costs of $2.8 million, which are being
amortized over four to ten years.
The Company's unaudited pro forma consolidated results of operations
for 1997 and 1996 shown below are presented assuming that the
Company's business combinations had been consummated on January 1,
1996 (in thousands, except per share data):
<PAGE>
For the Years Ended
December 31,
1997 1996
------ -------
Pro forma revenue $87,863 $56,905
Pro forma net income (loss) 3,801 (2,658)
Income (loss) per share:
Basic $ 0.28 $ (0.29)
Diluted 0.23 (0.29)
The Company's unaudited pro forma results of operations are presented
for informational purposes only and may not necessarily reflect the
future results of operations of the Company or what the results of
operations would have been had the Company owned and operated these
businesses as of January 1, 1996.
5. ACQUISITION AND OTHER NON-RECURRING CHARGES
During the second half of 1998, the Company further integrated its
acquisitions of ReMACS and RapidFire by consolidating their support
and product development functions to its Alpharetta, Georgia location.
As a result, the Company recorded a pretax charge of approximately
$876,000 related to severance arrangements, of which approximately
$500,000 was paid in 1998.
In the fourth quarter of 1998, the Company recorded a charge of
approximately $400,000 for the impairment of goodwill associated with
its acquisition of Twenty/20. The Company's management determined
certain factors existed which indicated the goodwill was impaired. As
a result, the goodwill was evaluated for impairment based on comparing
the unamortized goodwill to projected undiscounted operating results,
and the impairment charge recorded.
During 1997, the Company incurred $30.1 million in non-recurring
charges. As more fully described in Note 4, these non-recurring
charges were comprised of $28.9 million in purchased research and
development costs and $1.2 million in stock compensation expenses (see
Note 9) incurred in connection with the Company's 1997 acquisitions.
6. LONG-TERM DEBT
Long-term debt, including obligations under capital leases, consists
of the following (in thousands):
<TABLE>
December 31,
1998 1997
------ -------
<S> <C> <C>
Capital lease obligations, interest ranging from 5.0% to 31.0%,
payable monthly through 1999, secured by equipment $ 76 $ 375
Noninterest bearing promissory note; lump-sum payment of
$6.0 million due October 31, 2005 (earlier acceleration upon
the attainment certain financial targets); net of imputed
interest of $2.0 million and $2.2 million at December 31,
1998 and 1997, respectively at an interest rate of 6.0% 4,024 3,798
Notes payable; unsecured; payable in monthly installments of
$23,556, including interest between 12.0% and 19.0%;
maturing through September 2001 -- 355
Other 167 200
------ -------
4,267 4,728
Less current portion (161) (672)
------ -------
$4,106 $ 4,056
====== =======
</TABLE>
<PAGE>
In connection with the purchase of RapidFire on October 31, 1997, the
Company issued a noninterest-bearing note in the amount of $6.0
million to the sole shareholder of the acquired company. The note is
nonnegotiable and nonassignable. All outstanding principal is due and
payable in full in a single lump-sum payment on October 31, 2005,
unless maturity is accelerated by RapidFire's ability to attain
certain net income levels. A principal payment not to exceed $2.0
million is due on March 31, 1999, 2000 and 2001 if RapidFire meets or
exceeds specified net income levels for the years ended December 31,
1998, 1999 and 2000, respectively. During 1998 RapidFire did not meet
such specified net income levels. Accordingly, the initial payment on
March 31, 1999 is not due.
At December 31, 1998, aggregate maturities of long-term debt,
including obligations under capital leases, are as follows (in
thousands):
1999 $ 161
2000 82
2001 --
2002 --
2003 --
Thereafter 4,024
-------
$ 4,267
=======
7. INCOME TAXES
Prior to the Company's IPO, the Company elected to be treated as an S
corporation for federal and state income tax purposes. Accordingly,
all income or losses of the Company were recognized by the Company
shareholders on their individual tax returns. In connection with the
IPO, the Company converted from an S corporation to a C corporation
and is now subject to federal and state income taxes. Upon conversion
to C corporation status, the Company recorded net deferred tax assets
of $592,000. Simultaneously, with the recording of these deferred tax
assets, the Company recorded a tax benefit of $305,000 and a valuation
allowance of $287,000.
For all periods presented, the accompanying financial statements
reflect provisions for income taxes computed in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." For those periods prior to the IPO,
the tax benefit has been presented on a pro forma basis as if the
Company had been liable for federal and state income taxes during
those periods. The following summarizes the components of the income
tax benefit (in thousands):
<TABLE>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal $ -- $ 2,280 $ --
State -- 394 --
Deferred taxes (2,264) (2,674) --
Pro forma taxes -- (212) (1,333)
------- ------- -------
Income tax benefit $(2,264) $ (212) $(1,333)
======= ======== =======
</TABLE>
In addition to the above, the Company recorded a tax benefit of
$82,240 in 1997 related to the extraordinary loss from early
extinguishment of debt.
Reconciliation from the federal statutory rate to the combined pro
forma and actual income tax benefit, is as follows:
<TABLE>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate (35.0)% (35.0)% (34.0)%
State income taxes, net of federal tax benefit (5.0) (5.0) (4.5)
Purchased research and development -- 40.2 --
Conversion from S corporation to C corporation -- (1.6) --
Other -- 0.3 0.3
----- ---- ----
(40.0)% (1.1)% (38.2)%
===== ==== =====
</TABLE>
<PAGE>
The components of the net deferred tax asset as of December 31, 1998
and 1997 are as follows (in thousands):
<TABLE>
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 13 $ 57
Net operating loss carry forward 3,123 --
Inventory reserve 399 161
Depreciation 131 27
Allowance for doubtful accounts 468 140
Intangibles 3,665 999
Deferred revenue 591 520
------- -------
8,390 1,904
Valuation allowance (507) (287)
------- -------
Total deferred tax assets 7,883 1,617
------- -------
Deferred tax liabilities:
Capitalized software (1,411) (709)
Other (105) (384)
------- -------
Total deferred tax liabilities (1,516) (1,093)
------- -------
Net deferred tax asset $ 6,367 $ 524
======= =======
</TABLE>
During fiscal 1998, the valuation allowance was increased $220,000 for
unrealized tax benefits from stock options exercises. Upon realizing
the tax benefit, through utilization of net operating loss carry
forwards, the valuation allowance will be reduced with an offsetting
increase to additional paid-in-capital. As of December 31, 1998, the
Company has recorded net operating losses of $7.8 million which are
available for carryforward through 2012. Additionally, in connection
with the filing of the Company's 1997 income tax returns, the Company
revised the tax basis of the intangible assets acquired in connection
with its fourth quarter 1997 acquisitions of RapidFire and Logic Shop
resulting in an increase in deferred tax assets with an offsetting
reduction of intangible assets of $2.3 million.
As of December 31, 1998, the Company has recorded a net deferred tax
asset of $6.4 million. Realization is dependent upon generating
sufficient taxable income in future periods. Although realization is
not assured, management believes it is more likely than not that the
deferred tax asset will be realized.
8. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space, equipment and certain vehicles under
noncancelable operating lease agreements expiring on various dates
through 2008. At December 31, 1998, future minimum rental payments
for noncancelable leases with terms in excess of one year were as
follows (in thousands):
1999 $3,171
2000 2,863
2001 2,755
2002 2,502
2003 1,908
Thereafter 8,344
Total rent expense under operating leases was approximately $2.7
million, $1.1 million and $504,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
Employment Agreements
As of December 31, 1997 the Company had entered into employment
agreements with eight employees. During 1998 four of the employees
under employment agreements terminated their employment with the
Company, including the
<PAGE>
former sole shareholder of RapidFire, and the primary shareholders of
ReMACS and PrysmTech. As of December 31, 1998, the Company has no
further obligation under such agreements.
Under each of the remaining four agreements, in the event employment
is terminated (other than voluntarily by the employee or by the
Company for cause or upon the death of the employee), the Company is
committed to pay certain benefits, including specified monthly
severance of not more than $13,000 per month. The benefits are to be
paid from the date of termination to June 2002.
9. SHAREHOLDERS' EQUITY
Stock
Stock Offerings
In February 1997, the Company completed an IPO of its common stock.
The Company issued 2.8 million shares, including the underwriters'
overallotment of 325,000 shares, at an offering price of $9.50. The
total proceeds of the IPO, net of underwriting discounts and offering
expenses, were approximately $24.2 million. Subsequent to the public
offering of common stock, the Company repaid outstanding debt of $8.7
million and repurchased and subsequently retired 793,093 shares of
common stock from two shareholders for a total of $2.1 million.
In July 1997, the Company completed a follow-on public offering of its
common stock. The Company issued 2.6 million shares at an offering
price of $23.75. The total proceeds of the offering, net of
underwriting discounts and offering expenses, were approximately $58.2
million.
Common Stock
At December 31, 1996, the authorized capital of the Company consists
of 40,000,000 shares of capital stock comprised of 30,000,000 shares
of no par common stock and 10,000,000 shares of no par Class A common
stock. Both classes of stock have a stated value of $.00001 per
share. In February 1997, the Class A common stock was automatically
converted into common stock at a rate of one share of common stock for
one share of Class A common stock.
Stock Repurchase Program
On September 18, 1998, the Company's Board of Directors authorized the
Company to repurchase up to 3.0 million shares of its common stock
from time to time in the open market, negotiated or block transactions.
As of December 31, 1998, the Company had repurchased and subsequently
retired approximately 607,000 shares at prices ranging from $6 3/8 to
$7 7/8 per share, for total consideration of approximately $4.0 million.
Preferred Stock
In January 1997, the Company authorized 5,000,000 shares of preferred
stock with no par value. The Company's Board of Directors has the
authority to issue these shares and to fix dividends, voting and
conversion rights, redemption provisions, liquidation preferences and
other rights and restrictions.
Warrants
Client Warrants
In May 1994, the Company and one of its clients (the "Client") entered
into an agreement (the "Agreement") whereby the Client was granted the
right (the "Client Warrant") to acquire 10% of the Company's
outstanding Class A common stock for $800,000, provided the Client
meets certain purchase criteria. A deferred sales discount of $240,000
was charged on the date of grant, which represented the fair market
value of the Client Warrant on such date, and is being amortized as a
reduction of sales as the Client makes purchases under the Agreement.
In February 1996, the Company amended the Agreement such that the
Client Warrant was increased to 12% of the Company's outstanding
common shares. An additional deferred sales discount of $79,000 was
charged on the date of grant, which represented the fair market value
on the date of the increase of the Client Warrant. The Company had
the option to repurchase one-sixth of the shares issuable under the
Client Warrant at a price midway between the Client's exercise
price and the fair market value of the shares. Because the Company
intended to exercise its option to repurchase the shares, it was
accreting to the expected redemption value of the shares. For the
year ended December 31, 1996, the Company recorded accretion of
$826,000.
<PAGE>
In February 1997, the Company repurchased 193,060 shares of common
stock for approximately $1.0 million, which represented one-sixth of
the shares issuable under the Client Warrant. Additionally, the
client exercised the remaining 646,304 shares issuable under the
warrant for proceeds of $6,463.
Put Warrants
In connection with the issuance of the debt, the Company issued Put
Warrants to purchase 1.5% of the Company's outstanding common stock at
an exercise price of $.01.
In February 1997, the debt holder exercised its warrant to purchase
1.5% of the Company's outstanding common stock, which represented
174,642 shares of common stock.
Loan Origination Warrant
In 1996, the Company issued warrants to purchase 20,000 shares of
Class A common stock at an exercise price of $.01 for payment of loan
origination fees. The fair value of the warrant was determined to be
$40,000 and has been capitalized as loan origination fees. In
February 1997, the warrant was exercised for proceeds of $200.
Deferred Compensation
As part of the acquisition of Twenty/20, the Company granted two
employees options to purchase 140,000 shares of the Company's common
stock at an exercise price less than the fair market value of the
Company's common stock on the date of such grant. In connection with
the issuance of the 100,000 options, which vested immediately, the
Company recorded a nonrecurring compensation charge of $1.2 million.
Additionally, the Company recorded $303,500 as deferred compensation
for 40,000 options that vested over four years, for the excess of the
fair market value of the Company's common stock on the date of grant
over the aggregate exercise price of such options. The deferred
compensation will be amortized ratably over the four-year vesting
period. Also during 1997, the Company issued certain employees
options to purchase 26,500 of shares of the Company's common stock at
a price less than fair market value on the date of grant. Deferred
compensation of $323,375 was recorded and is being amortized ratably
over a four-year vesting period.
10. EMPLOYEE BENEFITS
Stock-Based Compensations Plans
Employee Stock Purchase Plan
In April 1998, the Company's Board of Directors adopted the 1998
Employee Stock Purchase Plan (the "ESPP"). Under the ESPP, an
aggregate of 1,000,000 shares of common stock is reserved for purchase
by qualified employees, at 85.0% of the appropriate market price. The
ESPP provides that qualified employees may purchase shares at the
lower of the market price in effect on the day the offering starts or
the day the offering terminates. In 1998, the Company issued 42,693
shares under the ESPP at an average price of $6.27 per share.
Directors Stock Option Plan
During 1997, the Company's Board of Directors adopted the
Non-Management Directors' Stock Option Plan (the "Directors' Plan")
for non-management directors of the Company, under which the Company
may grant up to 100,000 options to nonemployee directors of the
Company to purchase shares of the Company's common stock. Options are
granted at an exercise price, which is not less than fair value as
estimated by the Board of Directors. Initial grants to new
directors are exercisable over three years, while annual grants are
exercisable six months after the grant date. Options granted under
the Plan expire ten years from the date of grant. The Company has
granted 50,000 options under the Directors' Plan at December 31, 1998.
1995 Stock Option Plan
The Company's 1995 Stock Option Plan (the "Plan"), as amended,
provides for the issuance of up to 6,000,000 incentive and
nonqualified stock options to key employees. Options are granted at
an exercise price which is not less than fair value as estimated by
the Board of Directors and become exercisable as determined by the
Board of Directors, generally over a period of four to five years.
Options granted under the Plan expire ten years from the date of
grant. At December 31, 1998, options to purchase 1,627,370 shares of
common stock were available for future grant under the Plan.
<PAGE>
The Company has granted 540,690 nonqualified stock options outside the
Plan, of which, 276,690 have been cancelled. Of these remaining
options, 164,000 vest over four years, and the remaining 100,000
options vest over periods no greater than four years, subject to
acceleration based on specified terms within the agreements.
Sharp declines in the market price of the Company's common stock
during 1998 resulted in many outstanding employee stock options being
exercisable at prices that exceeded the current market price, thereby
substantially impairing the effectiveness of such options as
performance incentives. Consistent with the Company's philosophy of
using such equity incentives to motivate and retain management and
employees, the Company's Board of Directors determined it to be in the
best interests of the Company and its shareholders to restore the
performance incentives intended to be provided by employee stock
options by repricing such options at a price equal to the average
price since the decline, or $6.875 per share. Certain stock options
of non-management directors and executive management were not repriced
from their original exercise price. Consequently, on September 18,
1998, the Board of Directors of the Company decided to cancel and
reissue certain employee stock options which had exercise prices in
excess of such price.
Stock option activity for each of the three years ended December 31,
1998 is as follows:
<TABLE>
1998 1997 1996
------------------------ ----------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------ ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,661,160 $ 7.01 3,335,750 $ 2.64 1,774,000 $ 1.00
Granted 1,643,408 8.44 1,660,163 15.26 1,625,750 4.51
Canceled (1,787,141) 15.65 (165,550) 15.71 (64,000) 1.00
Exercised (646,493) 2.11 (169,203) 2.80 -- --
------------------------ ----------------------- -----------------------
Outstanding at end of year 3,870,934 $ 4.52 4,661,160 $ 7.01 3,335,750 $ 2.64
======================== ======================= =======================
Options exercisable at end of year 1,001,814 $ 5.27 698,279 $ 5.03 253,661 $ 2.77
======================== ======================= =======================
</TABLE>
The following table sets forth the range of exercise prices, number of
shares, weighted average exercise price and remaining contractual
lives by groups of similar price and grant date:
<TABLE>
Options Outstanding Options Exercisable
------------------------------------------ ------------------------
Weighted
Average
Weighted Remaining Weighted
Range at Number of Average Contractual Number Average
Exercise Price Shares Price Life (Years) of Shares Price
- -------------- --------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
$1.00-$2.00 1,541,535 $ 1.17 7.06 292,690 $ 1.27
$4.00-$6.00 536,250 4.62 7.80 286,448 4.74
$6.25-$7.00 1,651,369 6.83 8.57 356,246 6.94
$7.06-$28.50 141,780 13.64 8.67 66,430 14.83
--------- ---------
Total 3,870,934 $ 4.52 7.86 1,001,814 $ 5.27
--------- ---------
</TABLE>
Fair Value Disclosure
The Company has elected to account for its stock-based compensation
plan under APB 25; however, the Company has computed for pro forma
disclosure purposes the value of all options granted during 1998, 1997
and 1996 using the Black-Scholes option pricing model as prescribed by
SFAS 123 using the following weighted average assumptions used for
grants in 1998, 1997 and 1996:
1998 1997 1996
-------- ------- -------
Risk free interest rate 4.8% 5.9% 5.8%
Expected dividend yield 0.0% 0.0% 0.0%
Expected lives 4.5 years 4 years 4 years
Expected volatility 68.0% 62.0% 56.0%
The total value of the options granted during the years ended December
31, 1998, 1997 and 1996 were computed as approximately $4,687,000,
$10,734,000 and $3,527,000 respectively, which would be amortized over
the vesting period of the options. If the Company had accounted for
these plans in accordance with SFAS 123, the Company's reported pro
<PAGE>
forma net loss and pro forma net loss per share for the years ended
December 31, 1998, 1997 and 1996 would have increased to the following
pro forma amounts (in thousands, except per share data):
1998 1997 1996
------- -------- -------
Net loss:
As reported $(3,395) $(19,489) $(2,156)
Pro forma (7,559) (22,409) (2,984)
Basic:
As reported $ (0.21) $ (1.50) $ (0.26)
Pro forma (0.47) (1.72) (0.36)
Diluted:
As reported $ (0.21) $ (1.50) $ (0.26)
Pro forma (0.47) (1.72) (0.36)
Employee Benefit Plan
The Company has a 401(k) profit-sharing plan (the "Plan") available to
all employees of the Company who have attained age 21. The Plan
includes a salary deferral arrangement pursuant to which employees may
contribute a minimum of 1.0% and a maximum of 15.0% of their salary on
a pretax basis. The Company may make both matching and additional
contributions at the discretion of the Company's Board of Directors.
The Company made no such contributions during 1998, 1997 or 1996.
11. RELATED-PARTY TRANSACTIONS
In June 1996, a shareholder sold 200,000 shares of Class A common
stock for $1.875 per share. The shareholder also issued to one of the
Company's principal shareholders an option to repurchase the remaining
600,033 shares of Class A common stock for $1.875 per share through
June 1997. In January 1997, the principal shareholder assigned this
option to the Company, at which time the Company repurchased all
600,033 shares for $1,125,062.
During 1997, two shareholders received a loan from the Company in the
amount of $165,000 each. The notes, together with interest at a rate
of 7.0% per year, mature on December 31, 2001. During 1998 one of the
shareholders repaid both the note balance and accrued interest in
full. Interest income recorded during 1998 and 1997 related to these
notes was approximately $21,000 and $16,000, respectively.
As more fully described in Note 4, as part of the acquisition of
RapidFire the Company agreed to loan the former sole shareholder of
RapidFire $1.5 million. During 1998, the Company advanced $1.5
million under the loan agreement and recorded interest income related
thereto of approximately $58,000.
During 1998, a shareholder received a loan from the Company in the
amount of $225,000. The loan bears interest at 7.0% and is payable in
certain specified increments beginning July 2000 with final payment
due December 2001. Interest income recorded during 1998 related to
the note was approximately $4,000.
12. SEGMENT REPORTING DATA
The Company operates through two primary reportable segments (i)
Global Solutions and (ii) Regional Solutions. Although both groups
provide enterprise-wide technology solutions to the retail industry,
the distinguishing factor between them is primarily the size of the
clients served and the nature of the services performed. Global
Solutions' clients tend to be clients with greater than fifty owned
and operated sites, while Regional Solutions' clients typically have
less than fifty owned and operated sites. Additionally, the
purchasing behavior of the Global Solutions' clients is typically
characterized by the use of fewer, larger contracts. These contracts
typically involve longer negotiating cycles, and often require the
dedication of substantial amounts of working capital and other
resources.
The accounting policies of the segments are substantially the same as
those described in the summary of significant accounting polices. The
Company's management evaluates the performance of the segments based
on an internal measure of contribution margin, or income and loss from
operations, before certain allocated costs of development and
corporate overhead.
<PAGE>
The Company accounts for intersegment sales and transfers as if the
sales or transfers were to third parties, that is, at current market
prices.
The Other nonreportable segment includes miscellaneous businesses,
certain unallocated corporate operating expenses and the elimination
of intersegment sales.
The summary of the Company's operating segments is as follows (in
thousands):
<TABLE>
For the year ended December 31, 1998
----------------------------------------------------------
Global Regional
Solutions Solutions Other Consolidation
--------- --------- ------- -------------
<S> <C> <C> <C> <C>
Revenues $ 67,403 $ 15,532 -- $ 82,935
Contribution margin 15,663 (1,888) $(1,333) 12,442
Acquisition and other non-recurring charges 1,123 153 -- 1,276
Operating loss (445) (5,682) (1,333) (7,460)
Identifiable assets (1) 30,353 11,631 42,182 84,166
For the year ended December 31, 1998
----------------------------------------------------------
Global Regional
Solutions Solutions Other Consolidation
--------- --------- ------- -------------
Revenues $ 74,811 $ 3,192 -- $ 78,003
Contribution margin 19,402 43 $ (17) 19,428
Acquisition and other non-recurring charges 20,349 9,737 -- 30,086
Operating loss (10,681) (9,861) (17) (20,559)
Identifiable assets (1) 31,075 9,441 52,999 93,515
</TABLE>
(1) Identifiable assets allocated between the segments are comprised
primarily of accounts receivable, inventory and intangible
assets. All assets included in the Other segment are shared
among all segments.
During 1996, the Company's internal financial statements were not
segmented to include Global and Regional Solutions. As such, no
financial data is presented. International sales for the years ended
December 31, 1998, 1997 and 1996 were not material.
13. SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (unaudited)
The following tables set forth certain unaudited financial data for
each of the Company's last eight calendar quarters. The information
has been derived from unaudited consolidated financial statements
that, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such quarterly information. The operating results for
any quarter are not necessarily indicative of the results to be
expected for any future period.
<TABLE>
Quarter ended
Mar. 31, June 30, Sept 30, Dec. 31,
1998 1998 1998 1998
----------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
System sales $16,647 $13,793 $13,706 $15,254
Client support, maintenance and other services 4,897 5,732 6,072 6,834
----------------------------------------------------
Total revenues 21,544 19,525 19,778 22,088
Cost of revenues:
System sales 7,996 7,150 6,284 7,447
Client support, maintenance and other services 4,154 5,062 5,293 5,779
----------------------------------------------------
Total cost of revenues 12,150 12,212 11,577 13,226
----------------------------------------------------
<PAGE>
Gross profit 9,394 7,313 8,201 8,862
Operating expenses:
Product development 2,793 3,020 2,748 2,638
Sales and marketing 2,823 3,073 3,105 2,729
Depreciation and amortization 987 1,188 1,214 1,276
Acquisition and other non-recurring charges -- -- 455 821
General and administrative 3,051 3,052 3,072 3,185
----------------------------------------------------
Loss from operations (260) (3,020) (2,393) (1,787)
----------------------------------------------------
Interest income, net (539) (472) (407) (382)
----------------------------------------------------
Income (loss) before income taxes 279 (2,548) (1,986) (1,405)
Income tax provision (benefit) 111 (1,019) (795) (562)
----------------------------------------------------
Net income (loss) $ 168 $(1,529) $(1,191) $ (843)
====================================================
Basic and diluted (income) loss per share:
Basic income (loss) per share $ 0.01 $ (0.10) $ (0.07) $ (0.05)
====================================================
Diluted income (loss) per share $ 0.01 $ (0.10) $ (0.07) (0.05)
====================================================
Weighted average shares outstanding:
Basic 15,926 15,991 16,062 15,983
====================================================
Diluted 18,624 15,991 16,062 15,983
====================================================
</TABLE>
<PAGE>
<TABLE>
Quarter ended
Mar. 31, June 30, Sept 30, Dec. 31,
1997 1997 1997 1997
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
System sales $10,742 $14,466 $17,532 $24,058
Client support, maintenance and other services 1,818 2,694 3,258 3,435
--------------------------------------------------
Total revenues 12,560 17,160 20,790 27,493
Cost of revenues:
System sales 6,278 7,942 8,071 11,728
Client support, maintenance and other services 1,749 2,395 2,795 3,359
--------------------------------------------------
Total cost of revenues 8,027 10,337 10,866 15,087
--------------------------------------------------
Gross profit 4,533 6,823 9,924 12,406
Operating expenses:
Product development 1,153 1,466 1,984 2,294
Sales and marketing 872 1,243 1,447 2,257
Depreciation and amortization 367 533 666 818
Acquisition and other non-recurring charges -- 20,348 -- 9,738
General and administrative 1,689 1,911 2,424 3,035
--------------------------------------------------
Income (loss) from operations 452 (18,678) 3,403 (5,736)
Interest (income) expense, net 209 (44) (576) (578)
--------------------------------------------------
Income (loss) before income taxes and extraordinary item 243 (18,634) 3,979 (5,158)
Income tax provision (benefit) (212) -- 1,532 (1,532)
Extraordinary item, net of taxes 131 -- -- --
--------------------------------------------------
Net income (loss) $ 324 $(18,634) $ 2,447 $(3,626)
==================================================
Basic income (loss) per share:
Income (loss) before extraordinary item $ 0.03 $ (1.55) $ 0.17 $ (0.24)
Extraordinary income (loss) on early extinguishment of debt (0.01) -- -- --
--------------------------------------------------
Total basic income (loss) per share $ 0.02 $ (1.55) $ 0.17 $ (0.24)
==================================================
Diluted income (loss) per share:
Income (loss) before extraordinary item $ 0.02 $ (1.55) $ 0.14 $ (0.24)
Extraordinary loss on early extinquishment of debt (0.01) -- -- --
--------------------------------------------------
Total diluted income (loss) per share $ 0.01 $ (1.55) $ 0.14 $ (0.24)
==================================================
Weighted average shares outstanding:
Basic 15,926 12,045 14,646 15,356
==================================================
Diluted 18,624 12,045 17,844 15,356
==================================================
</TABLE>
Net income (loss) per share is computed independently for each of the
quarters presented. As such, the summation of the quarterly amounts
may not equal the total net income (loss) per share reported for the
year.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
There has been no occurrence requiring a response to this Item.
PART III
Items 10, 11, 12 and 13 will be furnished by amendment hereto on or
prior to April 30, 1999 or the Company will otherwise have filed a
definitive proxy statement involving election of directors pursuant to
Regulation 14A which will contain such information
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a)
1. Financial Statements. The following consolidated
financial statements, together with the applicable report of
independent public accountants, have been filed as Item 8 in Part II
of this Report:
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules. No schedules are
included with this Report, as they are not applicable or the
information required to be set forth therein is included in the
consolidated financial statements or notes thereto.
3. Exhibits.
The following exhibits are filed with or incorporated by
reference into this report. The exhibits which are denominated
by an asterisk (*) were previously filed as a part of, and are hereby
incorporated by reference from (i) a Registration Statement on Form
S-1 for the Registrant, Registration No. 333-17723, as amended
(referred to herein as "2/97 S-1"), (ii) a Registration Statement on
Form S-1 for the Registrant, Registration No. 333-30289 (referred to
herein as "6/97 S-1"), (iii) a Registration Statement on Form S-8 for
the Registrant, Registration No. 333-41291 (referred to herein as
"1997 S-8"), (iv) a Registration Statement on Form S-8 for the
Registrant, Registration No. 333-62157 (referred to herein as ("1998
S-8"), and (v) a Registration Statement on Form S-8 for the
Registrant, Registration No. 333-62151 (referred to herein as ("ESPP
S-8"). Except as otherwise indicated, the exhibit number corresponds
to the exhibit number in the referenced document.
Exhibit
Number Description of Exhibit
*3. (i) Amended and Restated Articles of Incorporation (2/97
S-1)
*3. (ii) Amended and Restated Bylaws (2/97 S-1)
*4.1 Specimen Certificate of Common Stock (2/97 S-1)
<PAGE>
Exhibit
Number Description of Exhibit (cont.)
*10.1 Form of License, Support and Equipment Purchase
Agreement (2/97 S-1)
*10.2 Employee Stock Purchase Plan (ESPP S-8, Exhibit 10.1)
*10.3 Amended and Restated 1995 Stock Option Plan (2/97 S-1)
*10.3.1 Amendment No. 1 to Amended and Restated 1995 Stock
Option Plan (1997 S-8)
*10.3.2 Amendment No. 2 to Amended and Restated 1995 Stock
Option Plan (1998 S-8)
10.4 Lease Agreement dated October 7, 1997, by and between
Weeks Realty, L.P. and the Registrant for lease of
office space in Alpharetta, Georgia (Brookside Parkway)
10.4.1 Amendment No. 1 to Lease Agreement dated October 7,
1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta,
Georgia (Brookside Parkway)
10.4.2 Amendment No. 2 to Lease Agreement dated October 7,
1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta,
Georgia (Brookside Parkway)
10.5 Lease Agreement dated November 12, 1997 by and between
Meadows Industrial, LLC and the Registrant for lease of
office space in Alpharetta, Georgia (Shiloh Road)
10.5.1 Amendment No. 1 to Lease Agreement dated November 12,
1997 by and between Meadows Industrial, LLC and the
Registrant for lease of office space in Alpharetta,
Georgia (Shiloh Road)
*10.10 Software License, Support and Equipment Purchase
Agreement dated May 27, 1994, as amended, by and
between the Registrant and Emro Marketing Company
(2/97 S-1)
*10.13 Non-Management Directors' Stock Option Plan (6/97 S-1)
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule (for SEC use only)
<PAGE>
SIGNATURES
In accordance with the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, in the City of Alpharetta,
State of Georgia on March 30, 1999.
RADIANT SYSTEMS, INC.
/s/ Erez Goren
By: Erez Goren
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
- -------------------- ---------------------------- -------------
/s/ Erez Goren Co-Chairman of the Board and March 30, 1999
Erez Goren Chief Executive Officer
(principal executive officer)
/s/ Alon Goren Co-Chairman of the Board and March 30, 1999
Alon Goren Chief Technology Officer
/s/ Eric B. Hinkle President, Chief Operating March 30, 1999
Eric B. Hinkle Officer and Director
/s/ John H. Heyman Executive Vice President, March 30, 1999
John H. Heyman Chief Financial Officer and
Director (principal financial
officer)
/s/ Paul J. Ilse Vice President, Finance March 30, 1999
Paul J. Ilse (principal accounting officer)
/s/ James S. Balloun Director March 30, 1999
James S. Balloun
/s/ Evan O. Grossman Director March 30, 1999
Evan O. Grossman
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.4 Lease Agreement dated October 7, 1997, by and between
Weeks Realty, L.P. and the Registrant for lease of
office space in Alpharetta, Georgia (Brookside Parkway)
10.4.1 Amendment No. 1 to Lease Agreement dated October 7,
1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta,
Georgia (Brookside Parkway)
10.4.2 Amendment No. 2 to Lease Agreement dated October 7,
1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta,
Georgia (Brookside Parkway)
10.5 Lease Agreement dated November 12, 1997 by and between
Meadows Industrial, LLC and the Registrant for lease of
office space in Alpharetta, Georgia (Shiloh Road)
10.5.1 Amendment No. 1 to Lease Agreement dated November 12,
1997 by and between Meadows Industrial, LLC and the
Registrant for lease of office space in Alpharetta,
Georgia (Shiloh Road)
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule (for SEC use only)
Exhibit 10.4
RADIANT SYSTEMS, INC.
LEASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1 LEASED PREMISES..................................................1
2 TERM.............................................................1
3 RENTAL...........................................................1
4 DELAY IN DELIVERY................................................6
5 USE OF LEASED PREMISES...........................................7
6 UTILITIES........................................................8
7 LANDLORD OBLIGATIONS.............................................9
8 ALTERATIONS, MECHANICS' LIENS...................................10
9 WASTE AND QUIET CONDUCT.........................................11
10 FIRE INSURANCE, HAZARDS.........................................11
11 INDEMNIFICATION.................................................11
12 WAIVER OF CLAIMS................................................12
13 SIGNS, LANDSCAPING..............................................12
14 ENTRY BY LANDLORD...............................................13
15 INSURANCE.......................................................13
16 ABANDONMENT.....................................................14
17 DESTRUCTION.....................................................15
18 ASSIGNMENT AND SUBLETTING.......................................16
19 INSOLVENCY OF TENANT............................................17
<PAGE>
20 BREACH BY TENANT................................................17
21 ATTORNEYS' FEES/COLLECTION CHARGES..............................20
22 CONDEMNATION....................................................20
23 NOTICES.........................................................21
24 WAIVER..........................................................21
25 EFFECT OF HOLDING OVER..........................................22
26 SUBORDINATION...................................................22
27 ESTOPPEL CERTIFICATE............................................22
28 PARKING.........................................................23
29 MORTGAGEE PROTECTION............................................23
30 RULES AND REGULATIONS...........................................23
31 BROKERAGE COMMISSIONS...........................................23
32 DELAYS..........................................................24
33 MISCELLANEOUS PROVISIONS........................................25
EXHIBITS:
EXHIBIT "A": Legal Description of the Land
EXHIBIT "B": Description of Brookside Office Park
EXHIBIT "C": Estimated Operating Expenses
EXHIBIT "D": Construction Schedule
EXHIBIT "E": Subordination, Non-disturbance, Attornment
Agreement
EXHIBIT "F": Base Building Project Plans and Specifications
EXHIBIT "G": Management Specifications
EXHIBIT "H": Special Stipulations
EXHIBIT "I": Land Option Agreement
EXHIBIT "J": The Additional Building
EXHIBIT "K": Work Letter Agreement
EXHIBIT "L": Location of Jogging Trail
EXHIBIT "M": Example of Rental Rate Calculation
<PAGE>
STATE OF GEORGIA
GWINNETT COUNTY
THIS LEASE AGREEMENT, made this 7th day of October, 1997, by
and between WEEKS REALTY, L.P., hereinafter referred to as
"Landlord", and RADIANT SYSTEMS, INC., hereinafter referred to as
"Tenant";
ARTICLE I
PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the property hereinafter referred to as the
LEASED PREMISES, described as: (i) an office building (the
"Building") containing approximately 106,631 rentable square feet
(and 102,043 usable square feet) of office and warehouse space in
Brookside Office Park, Fulton County, Georgia, which Building is
to be constructed by Landlord for Tenant, at Landlord's sole cost
and expense, in accordance with the Approved Plans and
Specifications (as hereafter defined), and (ii) the land on which
the Building is to be located (the "Land") as more particularly
described on Exhibit "A" attached hereto and by this reference
incorporated herein. The Land is a part of that certain office
park to be known as Brookside Office Park (the "Office Park"),
said Office Park being shown on Exhibit "B" attached hereto and
made a part hereof. (The Building and Land are sometimes
collectively referred to as the "Leased Premises").
ARTICLE II
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term
commencing upon Substantial Completion of construction of the
Leased Premises (hereafter defined) (hereinafter referred to as
the "Commencement Date") and continuing for a period of ten (10)
years, (provided that if the Commencement Date is not the first
day of a calendar month, the term of this lease shall continue
until the last day of the calendar month in which the 10th
anniversary of the Commencement Date occurs) upon the terms,
conditions, and covenants contained herein. "Substantial
Completion" shall mean completion of construction
<PAGE>
of the Leased Premises in accordance with the Approved Plans and
Specifications, subject only to normal punchlist items and
completion of all off-site improvements reasonably necessary for
Tenant's occupancy of and operation of its business within the
Leased Premises, including, but not limited to, all roadways and
utility lines. It is understood and agreed by Landlord and
Tenant that in order to achieve Substantial Completion the only
permitted incomplete or defective punchlist items must be those
which shall, if taken either individually or in the aggregate, do
not materially or substantially interfere with Tenant's taking
possession of, moving its personal property and effects into, or
using and enjoying the Leased Premises for the purposes for which
it was intended. Landlord agrees to provide to Tenant at least
thirty (30) days prior written notice of the date on which it
expects to achieve Substantial Completion.
ARTICLE III
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to
pay to Landlord, without offset or abatement, except as might
otherwise be specifically provided for hereunder to the contrary,
base rental as set forth below:
Years 1-5 $134,149.08/month $1,609,789.00/year
Years 6-10 $150,247.00/month $1,802,964.00/year
due on or before the first day of each calendar month
beginning on the Commencement Date and thereafter for the
remainder of the term, together with any other additional rental
as hereinafter set forth. Notwithstanding the foregoing, in the
event the Commencement Date occurs on or before July 17, 1998,
then, in such event, Base Rental shall not be due and payable
hereunder until said July 17, 1998 date. Tenant shall pay
interest at a rate of twelve percent (12%) per annum on any
payment of rent remaining due five (5) days after the due date
thereof. Tenant has deposited with Landlord, upon delivery of
this Lease Agreement, an amount equal to One Hundred Thirty-three
Thousand Two Hundred Eighty-nine and 97/100 Dollars
($133,289.97), which is to be applied as first month's rental.
If the Commencement Date of this Lease shall be a date other than
the first day of a calendar month, applicable rent for such month
shall be prorated on a daily basis, based on the number of days
in such month.
<PAGE>
3.02 In addition to the Base Rental payable by Tenant in
accordance with Paragraph 3.01 of this Lease, Tenant shall pay
monthly to Landlord on the same due date as the Base Rental the
sum (hereinafter referred to as the "Additional Rent") calculated
in accordance with the following:
(a) As used in this Lease, the following definitions shall
apply:
<PAGE>
(i) "Calendar Year" shall mean any period during the Term of this
Lease commencing on January 1 and ending on the next following
December 31.
(ii) "Building" shall mean the Land and the Building and other
structures, improvements, fixtures and appurtenances now or
hereafter placed, constructed or erected thereon.
(iii) "Pro Rata Share" shall equal one hundred percent (100%);
provided, however, that in the event that the amount of space
leased by Tenant shall increase or decrease subsequent to the
Commencement Date of the Term, whether pursuant to an option to
expand or otherwise, the Pro Rata Share shall be appropriately
adjusted by Landlord.
(iv) "Operating Expenses" shall mean any and all costs, expenses
and disbursements of every kind and character (subject to the
limitations set forth below) which Landlord shall incur, pay or
become obligated to pay in connection with the ownership of any
estate or interest in the Building or the operation, maintenance,
repair, and security of the Building and which are typically
passed through to tenants by landlords of like kind space in the
northern corridor of the Atlanta, Georgia metropolitan area and
which are determined in accordance with generally accepted
accounting principles consistently applied, including, but not
limited to, the following:
(A) Wages and salaries of all employees engaged in the
operation, repair, maintenance, and security of the
Building, including taxes, insurance and benefits relating
thereto.
(B) All supplies and materials used in the operation,
maintenance, repair, and security of the Building.
(C) Cost of all maintenance and service agreements on
equipment, including alarm service, window cleaning and
elevator maintenance.
(D) Cost of casualty, liability and other insurance
applicable to the Building or Landlord's personal property
used in connection therewith.
<PAGE>
(E) All taxes and assessments and governmental charges,
whether federal, state, county or municipal, and whether
they be by taxing districts or authorities presently taxing
or by others, subsequently created or otherwise, and any
other taxes and assessments imposed upon or attributable to
the Building, its operation or the Base Rental or Additional
Rent without reference to other income of the Landlord.
(F) Cost of repairs, and general maintenance of the
Building.
(G) Cost of service or maintenance contracts with
independent contractors for the operation, maintenance,
repair, replacement, or security of the Building.
(H) Cost of maintaining accounting books and records.
(I) Costs of contractual management fees and other costs
directly related to the on-site management of the Building.
(J) Cost of janitorial services, trash, garbage, snow and
ice removal; servicing, replacing, equipping and maintenance
of all electrical, security and fire alarms, fire pumps,
sprinkler systems and fire extinguishers and hose cabinets;
painting; window cleaning and landscaping and gardening.
(K) Capital expenditures required by any governmental or
regulatory authority, or fire and safety equipment, and
capital expenditures for energy related equipment only to
the extent of savings resulting therefrom. Said capital
expenditures shall be amortized over their useful life and
shall only be passed through on an annualized basis.
(L) All costs, expenses or assessments levied, assessed or
imposed on the Leased Premises by, or at the direction of,
any entity or group authorized by the Protective Covenants
to make such assessments or levy such costs in connection
with the Leased Premises
<PAGE>
Specifically excluded from the definition of the term "Operating
Expenses" are expenses for repairs, replacements and general
maintenance to the extent paid by proceeds of insurance or by
Tenant or other third parties and alterations attributable solely
to tenants of the Building other than Tenant; expenses for
repairs, replacements or maintenance to the extent same are to be
paid for solely by Landlord pursuant to the provisions of Article
VII hereof; interest, amortization or other payments on loans to
Landlord whether secured or unsecured; depreciation of the
Building; leasing commissions; legal expenses; salaries of
officers, executives, employees and agents not directly involved
in the on-site operation of the Building; and state, federal or
local income taxes, excess profits or franchise taxes or other
such taxes imposed on or measured by or determined from the gross
income of Landlord.
(b) Commencing on the first anniversary of the Commencement
Date and continuing thereafter during each Calendar Year of the
term of this Lease, Tenant shall pay to Landlord increases in
Operating Expenses above: the greater of (i) $3.29 per square
foot of rentable area in the Building, said amount being based
upon the estimated Operating Expense amounts provided by Landlord
to Tenant as set forth on Exhibit "C" attached hereto and
incorporated herein by reference, or (ii) the Operating Expenses
for the first full year during which the Building is fully
operational (hereinafter the "Base Amount"). Tenant shall pay to
Landlord, as additional rent, its Pro Rata Share of the amount of
such increase in equal monthly installments along with its Base
Rental payments. Notwithstanding the provisions of this Section
3.02, in no event shall any increase in the Operating Expenses
attributable to increases in all costs except taxes and insurance
exceed a 5% per annum increase over Operating Expenses for the
immediately preceding Calendar Year. Tenant shall in any event
be responsible for the payment of all increases in the costs of
taxes and insurance over the Base Amount.
(c) On or before December 31st of each Calendar Year during
the Term, or as soon thereafter as practicable, Landlord shall
give Tenant written notice of its estimate of the Additional Rent
for the next ensuing Calendar Year, which estimate shall break
down each component of the Operating Expenses into the same
categories and shall otherwise be in the same format as shown on
Exhibit "C". Commencing in the first (1st) month of the ensuing
Calendar Year, or as soon thereafter as Landlord shall invoice
Tenant, Tenant shall pay to Landlord one-twelfth (1/12) of such
estimated Additional Rent. If notice of
<PAGE>
Landlord's estimate of Additional Rent is not given prior to December
31, during the next Calendar Year Tenant shall continue to pay the
monthly payment based on the Additional Rent computed for the previous
Calendar Year until the month after such notice is given. In relation
to the foregoing and by way of example, if, as anticipated, the
Commencement Date falls in July of 1998, then, in such event, Landlord
would provide Tenant notice of Landlord's estimate of Tenant's Pro
Rata Share of Operating Expenses for the months August, 1999 through
December, 1999 on or about December 31, 1998; however, Tenant would
not be obligated to pay such Pro Rata Share until August, 1999, at
which time the Base Amount will have been established. Furthermore,
in the event of such a July, 1998 Commencement Date, Tenant's Pro Rata
Share for the partial year running from August, 1999 through December,
1999 would be reconciled during the first three (3) months of the year
2000.
(d) Within ninety (90) days after the close of each Calendar
Year, Landlord shall deliver to Tenant a final statement of the
Additional Rent for the immediately preceding Calendar Year and
such statement shall be final and binding upon Landlord and
Tenant, absent manifest error as determined by a Tenant audit of
same. If such statement shows an amount owing by Tenant that is
less than the payments actually made by the Tenant for the
immediately preceding Calendar Year, Tenant shall be credited for
such excess against the next monthly payments of Additional Rent.
If such statement shows an amount owing by the Tenant that is
more than the payments actually made by the Tenant for the
immediately preceding Calendar Year, Tenant shall pay the
deficiency to Landlord within thirty (30) days after delivery of
the statement.
(e) Tenant will be entitled from time to time, at its sole
cost and expense, to audit and verify the operations of the
Building and the related books and records of Landlord to assure
that the operating expenses from time to time reported by
Landlord are in keeping with the provisions of this paragraph.
As to any calendar year, any undertaking by Tenant must be
initiated before the end of the following calendar year; and
absent fraud or gross negligence on Landlord's part, the
operating expenses as timely reported by Landlord for the
calendar year will be deemed controlling upon the expiration of
Tenant's audit and verification rights for such calendar year.
In the event of any errors, the appropriate party will make a
correcting payment in full to the other party within thirty (30)
days after the determination and communication to all parties of
the amount of such error. Notwithstanding any other
<PAGE>
language contained herein to the contrary, in the event of any errors
on the part of Landlord in excess of 7.5% of Tenant's actual
Operating Expenses liability for that Calendar Year, Landlord
will also reimburse Tenant for all costs of the audit and
verification reasonably, and actually incurred by Tenant.
(f) Landlord agrees to manage the Leased Premises based upon
the management specifications as outlined in Exhibit "G".
Notwithstanding any provisions contained herein to the contrary,
Landlord acknowledges and agrees that it will, at all times, at a
minimum, manage and operate the Leased Premises in accordance
with the standards then generally met by landlords of first class
office parks located in the northern corridor of the metropolitan
Atlanta, Georgia area. Tenant shall be given the opportunity to
actively participate in management procedure and policy decisions
which directly relate to Operating Expenses for the Leased
Premises, and, in relation thereto, Landlord agrees to consider
in good faith all recommendations of Tenant related thereto.
3.03 Landlord shall provide the allowances as set forth in
the Work Letter Agreement, attached hereto and incorporated
herein by reference as Exhibit "K".
3.04 Tenant agrees to pay as additional rent to Landlord,
upon demand, its pro rata share of any utility surcharges, or any
other costs levied, assessed or imposed by, or at the direction
of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any Federal, State, Municipal or local
governmental authorities in connection with the use or occupancy
of the Leased Premises.
3.05 Tenant recognizes that the Leased Premises are subject
to the Protective Covenants (as defined below) and that the
Protective Covenants provide, among other things, for the
imposition of assessments and other charges against the Leased
Premises and the Land. In relation thereto, Landlord agrees to
pay all such charges and assessments, however, such charges and
assessments will constitute a portion of the Operating Expenses
as provided for in Section 3.02(a) hereof. Further in relation
thereto, Tenant may, within the time and in the manner prescribed
by the Protective Covenants for such purpose, in its own name and
behalf or, if necessary or appropriate in order to perfect such
challenge, in the name and on behalf of Landlord, challenge the
amount, validity or applicability of any such costs, expenses or
assessments (an "Assessment Protest"); provided that (a) Tenant
shall pay any such cost, expense or assessment under protest,
prior to delinquency, if any such
<PAGE>
Assessment Protest does not suspend the collection thereof from any
party, and (b) no portion of the Leased Premises or any rentals
payable hereunder or Landlord's title or interest therein would be in
any danger of being sold, forfeited, interrupted or lost as a result
of such Assessment Protest. Tenant shall prosecute any Assessment
Protest with due diligence and continuity. Tenant shall provide
Landlord with copies of any application, petition or other
pleading filed in connection with any Assessment Protest before
filing. Landlord may join with Tenant in making any such
application, petition or other pleading, retain co-counsel,
attend hearings, present evidence and arguments, and generally
participate in the conduct of the Assessment Protest. If and to
the extent that Landlord is requested in writing to do so by
Tenant, Landlord agrees to cooperate with Tenant in good faith in
connection with any Assessment Protest undertaken by Tenant,
provided Tenant promptly reimburses Landlord for any expense in
connection therewith. Subject to Landlord's right to
reimbursement as set forth below, Tenant shall be entitled to
receive and retain any refund of any costs, expense or
assessments obtained by Tenant, to the extent such cost, expense
or assessment was paid by Tenant under this paragraph 3.05.
Nothing contained in this paragraph 3.05 shall limit or restrict
Landlord's right to undertake any Assessment Protest with respect
to the Leased Premises. Any reduction in or refund of any such
costs, expenses or assessments previously paid by Tenant obtained
by Landlord shall be applied first to Landlord's costs and
expenses in conducting such Assessment Protest, with the balance
refunded to Tenant in the manner described above, and in the
event of a reduction in any such costs, expenses and assessments
not yet paid by Tenant, Tenant shall reimburse Landlord, within
thirty (30) days of receipt of Landlord's invoice therefor, for
Landlord's costs and expenses in conducting such Assessment
Protest, up to the amount of the reduction obtained. In the
event Tenant undertakes or files any Assessment Protest in the
name of Landlord, Tenant shall promptly provide Landlord written
notice thereof, and Tenant acknowledges that Tenant's use of
Landlord's name shall be subject to the indemnification of
Landlord contained in Article 12 hereof. Tenant shall give
Landlord five (5) days advance written notice of any such use of
Landlord's name.
"Protective Covenants" means the Initial Declaration of
Covenants, Conditions and Restrictions for the Office Park which
shall be recorded in the Fulton County, Georgia records, as might
thereafter be amended.
<PAGE>
3.06 In the event Landlord elects not to file a tax protest
(a "Tax Protest"), Tenant may, within the respective times and in
the manner prescribed by law for such purposes, in its own name
and behalf or, if necessary or appropriate in order to perfect
such petition, in the name and on behalf of Landlord, petition
for reduction of the assessed valuation of the Building and Land,
claim a refund of real estate taxes or assessments or otherwise
challenge the amount, validity or applicability of any real
estate tax or assessment pertaining to the Leased Premises.
Tenant shall prosecute any Tax Protest with due diligence and
continuity. If and to the extent that Landlord is requested to
do so by Tenant, Landlord agrees to cooperate with Tenant in good
faith in connection with any Tax Protest undertaken by Tenant,
provided Tenant promptly reimburses Landlord for any expense in
connection therewith.
ARTICLE IV
DELAY IN DELIVERY OF POSSESSION
4.01 Attached hereto as Exhibit "D" is a schedule of
construction of the Leased Premises, including the dates by which
Tenant must make certain decisions regarding the Leased Premises
(hereinafter referred to as the "Construction Schedule").
Landlord and Tenant shall use their diligent good faith efforts
to ensure construction of the Leased Premises remains on schedule
in accordance with the Construction Schedule, provided, however,
that in no event shall the failure of Landlord to cause
Substantial Completion to occur on or before the scheduled
completion date, constitute a default by Landlord under this
Lease. In the event of any delay in Substantial Completion of
the Leased Premises caused by Tenant Delays (hereafter defined),
the Commencement Date (for purposes of Tenant's obligation to
commence the payment of rent and for purposes of fixing the lease
term) shall be the date on which Substantial Completion would
have occurred but for such delay.
4.02 Landlord acknowledges and agrees that it is of
critical importance to Tenant that Landlord (i) shall have
completed all aspects of the Base Building Improvements and
Tenant Improvements as necessary to enable Tenant to begin its
Tenant fixturing by June 26, 1998 (the "Tenant Fixturing Date"),
and (ii) shall have achieved Substantial Completion, as herein
defined, by July 17, 1998 (the "Target Substantial Completion
Date"). Accordingly, Landlord agrees that Landlord shall be
liable to Tenant for any and all damages suffered by Tenant as a
result of Landlord's failure to meet such construction deadlines,
except to the extent such failure is due to Tenant
<PAGE>
Delays or Excusable Delays. Notwithstanding the foregoing damages, in
the event the completion of the required work by Landlord is so
delayed for thirty (30) days or less following said Tenant
Fixturing Date or Target Substantial Completion Date (whichever
is applicable), said damages shall be limited to one-half (1/2)
of the total holdover rent paid by Tenant to Tenant's current
landlord (estimated at $62,500.00), and in the event completion
of the required work is so delayed for more than thirty (30) days
following said Tenant Fixturing Date or Target Substantial
Completion Date (whichever is applicable), said damages shall be
limited to an additional One Hundred Fifty Thousand Dollars
($150,000.00). Furthermore, in addition to Landlord's liability
for such damage amounts, Tenant shall be entitled to a credit
against future rent equal to the number of days by which the work
necessary to achieve Substantial Completion remains incomplete
following the Target Substantial Completion Date for any reason
other than Tenant Delays or Excusable Delays.
4.03 In the event the Substantial Completion has not
occurred by November 14, 1998, as such date has been extended for
Excusable Delays and Tenant Delays, or, in the event Substantial
Completion has not occurred by March 14, 1999, as such date has
been extended for only Tenant Delays, then, in either said event,
Tenant shall have the right to terminate this Lease by giving
Landlord five (5) days written notice, whereupon neither party
shall have further liability to the other hereunder except as
provided for in Section 4.02 above.
ARTICLE V
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for
general manufacturing and assembly, testing, warehousing and
distribution, showroom and offices and such other uses as are
incidental thereto and customary in connection therewith, and for
no other purpose or purposes, without Landlord's prior written
consent. Tenant shall promptly comply at its sole expense with
all laws, ordinances, orders, and regulations affecting the
Leased Premises which are applicable as a result of Tenant's
specific use of the Leased Premises. Tenant shall not, without
prior written notice to Landlord, do or permit anything to be
done in or about the Leased Premises that will in any way
increase the insurance premiums due for fire insurance upon the
Building. Tenant shall be solely responsible for all increases
in fire insurance premium amounts resulting from Tenant's
specific use of the Building. Tenant
<PAGE>
will not perform any act or carry on any practices that may injure the
building or be a nuisance to owners or occupants of adjoining
premises. Tenant shall not cause, maintain or permit any outside
storage on or about the Leased Premises, including pallets or other
refuse. No area outside of the Leased Premises shall be used by
Tenant for storage without Landlord's prior written consent. The rear
loading areas of the Tenant's unit must be clean and unobstructed.
Tenant shall, at Tenant's sole cost and expense, comply fully with all
environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use
and occupancy of, the Leased Premises. On or before the Commencement
Date, Tenant shall take possession of the Leased Premises and operate
thereon the normal business operations of Tenant.
5.02 Tenant shall not (either with or without negligence)
cause or permit the escape, disposal or release of any
biologically or chemically active or other hazardous substances
or materials, except in such manner as allowed under all
applicable laws, rules and regulations. Tenant shall not allow
the storage or use of such substances or materials in any manner
not sanctioned by law or by the highest standards prevailing in
the industry for the storage and use of such substances or
materials, nor allow to be brought into the Leased Premises any
such materials or substances except to use in the ordinary course
of Tenant's business, and then only after written notice is given
to Landlord of the identity of such substances or materials.
Without limitation, hazardous substances or materials shall
include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any
applicable state or local laws and the regulations adopted under
these acts. If any lender or governmental agency shall ever
require testing of the Leased Premises to ascertain whether or
not there has been any release of hazardous materials, and such
testing is required as the result of a reasonable suspicion on
the part of such lender or governmental agency of a violation by
Tenant of its covenants hereunder, then the reasonable costs
thereof shall be reimbursed by Tenant to Landlord upon demand as
additional rent. In addition, Tenant shall execute affidavits,
representations and the like from time to time at Landlord's
request concerning Tenant's best knowledge and belief regarding
the presence of hazardous substances or materials on the Leased
Premises. Tenant shall in the manner provided in Article 12
<PAGE>
indemnify Landlord and hold Landlord harmless from and against
any and all claims, damages, fines, judgments, penalties, costs,
liabilities and losses (including, without limitation, any and
all sums paid for settlement of claims, attorneys' fees and
consultant and expert fees) arising from or in connection with
the presence or suspected presence of hazardous substances in or
on the Leased Premises resulting from the actions of Tenant of
those for whom Tenant is responsible at law or under this Lease,
except as a result of the acts or omissions of Landlord, its
agents, employees and contractors for which Landlord shall
indemnify Tenant and hold Tenant harmless in the manner provided
in paragraph 5.03 below. Without limitation of the foregoing,
these indemnifications shall include any and all costs incurred
due to any investigation of the site or any cleanup, removal, or
restoration mandated by a federal, state, or local agency or
political subdivision. The within covenants shall survive the
expiration or earlier termination of the lease term.
5.03 Landlord agrees to indemnify and hold harmless the
Tenant from any and all claims, damages, fines, judgments,
penalties, costs, liabilities, or losses (including without
limitation, any and all sums paid for settlement of claims,
attorneys' fees, consultant, and expert fees) from or in
connection with the presence of hazardous substances in or on the
Leased Premises as a result of the acts or omissions of Landlord,
its agents, employees and contractors. Without limitation of the
foregoing, this indemnification shall include any and all costs
incurred due to any investigation of the site or any cleanup,
removal, or restoration mandated by a federal, state, or local
agency or political subdivision as a result of the acts or
omissions of Landlord, its agents, employees and contractors.
<PAGE>
ARTICLE VI
UTILITIES
6.01 Landlord shall not be liable in the event of any
interruption in the supply of any utilities unless and except to
the extent caused by the actions or inactions of Landlord or
those for whom Landlord is responsible at law. Notwithstanding
the foregoing, Landlord agrees to use all reasonable efforts to
aid Tenant in having any such interrupted utility restored in an
expeditious manner. Tenant agrees that it will not knowingly
install any equipment which will exceed or overload the capacity
of any utility facilities and that if any equipment installed by
Tenant shall require additional utility facilities, the same
shall be installed by Tenant at Tenant's expense in accordance
with plans and specifications approved in writing by Landlord.
Tenant shall be solely responsible for and shall pay all charges
for use or consumption of sanitary sewer, water, gas,
electricity, telephone and any other utility services for the
Leased Premises.
ARTICLE VII
LANDLORD'S OBLIGATIONS
7.01 The Leased Premises shall be constructed by Landlord
in compliance with all federal, state, county, municipal or local
government laws, ordinances, regulations, rules and orders
(including, without limitation, all environmental laws, rules and
regulations, the Americans With Disabilities Act and the
Occupational Safety and Health Act of 1970, as amended). Further,
Landlord shall be solely responsible for insuring that the
Building is constructed in compliance with the Protective
Covenants.
7.02 During the course of construction of the Leased
Premises, Tenant or Tenant's agents or contractors may enter upon
the Leased Premises for purposes of inspecting and reviewing the
work, taking measurements, making plans, installing trade
fixtures and telephones, erecting temporary or permanent signs
and doing such other work as may be appropriate or desirable
without being deemed thereby to have taken possession or
obligated itself to pay rent but Tenant agrees that: (a) Landlord
shall have no liability for injury to any person or damage to any
property of Tenant stored on the Leased Premises except for
damages caused by the willful act or gross negligence of Landlord
or its employees or agents, (b) Tenant shall not materially
interfere with Landlord's construction
<PAGE>
work on the Leased Premises, (c) Tenant shall indemnify, protect and
hold harmless Landlord from and against any and all claims, demands,
damages, losses, costs, expenses, liabilities and actions at law or in
equity based upon any occurrence or condition arising out of or
attributable to Tenant's exercise of such right, and (d) Tenant
shall be solely responsible for the permitting of any such work
it performs.
<PAGE>
7.03 No later than twenty (20) days after the Commencement
Date, Tenant and Landlord shall prepare an agreed final punch
list setting forth the work, if any, remaining to be done, or
requiring correction, on the Leased Premises, and Landlord shall
promptly commence, and thereafter with due diligence prosecute to
completion, the work required by said punch list (which shall in
no event include, except on condition Tenant shall pay to
Landlord the actual cost thereof plus ten percent (10%) of such
amount, work required as a consequence of injury or damage to the
Leased Premises attributable to Tenant, its agents, employees,
contractors or movers). If the parties cannot agree upon the
final punch list, then the punch list shall be determined by an
independent professional engineer employed by the mutual
agreement of Landlord and Tenant. Landlord agrees to commence to
complete all mutually agreed upon punch list items within thirty
(30) days after Substantial Completion. Landlord acknowledges
and agrees that in the event it has not completed all punchlist
items within ninety (90) days after Substantial Completion,
Tenant shall have the right to complete such items and charge
Landlord the cost thereof.
7.04 Notwithstanding anything elsewhere in this Lease to
the contrary, Landlord shall, at its sole cost and expense, upon
notice by Tenant for a period of one (1) year immediately
subsequent to the Commencement Date, repair, replace or otherwise
correct structural or other construction defects, as well as
defects in any of the additional items to be constructed or
installed by Landlord in accordance with this Lease, provided
that Landlord shall not have any obligation to correct or repair
any defect or condition caused by the acts or failure to act of
Tenant, its agents, contractors, employees or invitees. In
addition, Landlord acknowledges and agrees that it shall, at its
sole cost and expense, repair any structural defects in any of
the structural components of the Leased Premises discovered
during the Lease Term. Landlord acknowledges and agrees that
Landlord's costs incurred in connection with its obligations
under this Section 7.04 shall not be passed through as Operating
Expense items.
7.05 From the Commencement Date until the expiration or
earlier termination of the term hereof, Tenant shall have
exclusive control of the Leased Premises and Landlord shall be
under no obligation to inspect the same. Tenant shall report in
writing to Landlord any defective condition known to it which
Landlord is required to repair, and Landlord shall move with
reasonable diligence to repair such condition. Landlord
<PAGE>
agrees that in the event Landlord fails to maintain the Leased
Premises as required or fails to commence to make repairs within
thirty (30) days after its receipt of notice from Tenant, or fails
thereafter to diligently pursue such repair to completion, then
Tenant shall have the right to make such repairs and charge
Landlord for the cost thereof. Failure to report such defects
within a reasonable time after discovery shall make Tenant
responsible to Landlord for any and all additional costs or
liability incurred by Landlord resulting from such delay in
notification. Landlord agrees that in the event Landlord fails
to maintain the Leased Premises as required or fails to commence
repairs within thirty (30) days as provided herein, Tenant shall
have the right to make such repairs and charge Landlord for the
cost thereof.
ARTICLE VIII
ALTERATIONS, MECHANICS' LIENS
8.01 Alterations may not be made to the Leased Premises
without prior written consent of Landlord, and any alterations of
the Leased Premises excepting furniture and trade fixtures shall
at Landlord's option become part of the realty and belong to
Landlord. Notwithstanding the foregoing provisions, Tenant shall
have the absolute right to make alterations, additions or
improvements to the Leased Premises having a cost of Fifteen
Thousand Dollars ($15,000.00) for each alteration, addition or
improvement, or Forty-five Thousand Dollars ($45,000.00) in the
aggregate per lease year, provided such alterations, additions or
improvements do not diminish the value of the Building or
materially adversely affect the structure, electrical, mechanical
or plumbing systems of the Building.
8.02 Should Tenant desire to alter the Leased Premises and
Landlord gives written consent to such alterations, at Tenant's
option, Tenant shall contract with a contractor approved by
Landlord for the construction of such alterations.
8.03 Notwithstanding anything in paragraph 8.02 above,
Tenant may install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes,
ordinances, rules, regulations, and the same may be removed upon
the termination of this Lease provided the Leased Premises are
not damaged by such removal. Tenant shall return the Leased
Premises on the termination of this Lease in the same condition
as when rented to Tenant, casualty, reasonable wear and tear only
excepted. Tenant shall not be required to remove the initial
Tenant Improvements upon the termination of the
<PAGE>
Lease, and, further shall have no obligation to remove any alteration,
addition or improvement approved by Landlord during the term
unless Landlord advises Tenant at the time of such approval that
it will require such removal. Tenant shall keep the Leased
Premises, the building and property in which the Leased Premises
are situated free from any liens arising out of any work
performed for, materials furnished to, or obligations incurred by
Tenant, and Tenant shall discharge of record by bond or
otherwise, within ten (10) days following Tenant receiving notice
of the filing thereof, any mechanic's or similar lien or
encumbrance filed against the Leased Premises for work or
materials claimed to have been furnished to or for the benefit of
Tenant and/or the Leased Premises. All such work provided for
above, shall be done at such times and in such manner as Landlord
may from time to time reasonably designate.
<PAGE>
ARTICLE IX
WASTE AND QUIET CONDUCT
9.01 Tenant shall not commit, or suffer any waste upon the
Leased Premises, or any nuisance, or other act or thing which may
unreasonably interfere with the quiet enjoyment of any owner or
occupant of any other property in the project in which the Leased
Premises are located.
ARTICLE X
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the
Leased Premises, nor acts done which might cause the cancellation
of any insurance policy covering the Building, or any part
thereof, nor shall Tenant sell, or permit to be kept, used or
sold, in or about the Leased Premises, any article which may be
prohibited by the standard form of fire insurance policies.
Tenant shall, at its sole cost and expense, comply with any and
all requirements pertaining to the Leased Premises, of any
insurance organization or company, necessary for the maintenance
of reasonable fire and public liability insurance, covering the
Leased Premises and appurtenances. In the event that Tenant
takes any actions in the future, or conducts its business in such
a way that causes an increase in the fire insurance rate on the
Building, Landlord shall give Tenant notice of such proposed
increase, and Tenant shall have a period of ten (10) days within
which to discontinue such actions or use before Tenant shall be
responsible for the payment of such increase in cost.
ARTICLE XI
INDEMNIFICATION
11.01 Tenant shall indemnify Landlord and hold Landlord
harmless against and from any and all claims arising from
Tenant's use of the Leased Premises (other than those arising
from any negligence of Landlord or its agents or employees), or
the conduct of its business or from any activity, work, or thing
done, permitted or suffered by the Tenant in or about the Leased
Premises, and shall further indemnify and hold harmless Landlord
against and from any and all claims arising from any breach or
default in the performance of any obligation on Tenant's part to
be performed under the terms of this Lease, or arising from any
act, neglect, fault or omission of the Tenant,
<PAGE>
or of its agents or employees, and from and against all costs,
reasonable attorney's fees actually incurred, expenses and liabilities
incurred in or about such claim or any action or proceeding
brought relative thereto and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord shall defend the same at Tenant's expense by
counsel, chosen by Tenant and who is reasonably acceptable to
Landlord. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property or injury
to persons in or about the Leased Premises from any cause
whatsoever except that which is caused by the failure of Landlord
to observe any of the terms and conditions of this Lease where
such failure has persisted for an unreasonable period of time
after written notice of such failure, and Tenant hereby waives
all claims in respect thereof against Landlord. The obligations
of Tenant under this section arising by reason of any occurrence
taking place during the term of this Lease shall survive any
termination of this Lease.
11.02 Landlord shall indemnify and hold harmless Tenant
against and from all claims arising from any breach or default in
the performance of any obligation on Landlord's part to be
performed under this Lease, or arising from any act, neglect,
fault or omission of Landlord or of its agents, employees or
contractors and from and against all reasonable costs, reasonable
attorneys' fees actually incurred, expenses and liabilities
actually incurred in or about such claim or any action or
proceeding brought relative thereto and in case any action or
proceeding be brought against Tenant by reason of any such claim,
Landlord upon notice from Tenant shall defend the same at
Landlord's expense by counsel, chosen by Landlord and who is
reasonably acceptable to Tenant. The obligations of Landlord or
Tenant under this section arising by reason of any occurrence
taking place during the term of this Lease shall survive any
termination of this Lease.
ARTICLE XII
WAIVER OF CLAIMS
12.01 Notwithstanding any indemnity granted herein, and
notwithstanding any other term or provision of the Lease to the
contrary, Landlord and Tenant hereby both release the other and
their respective employees, agents and invitees from and waive
any claims either may have against the other and their employees,
agents, servants or invitees for any loss or damage to the
Building, Leased Premises, Land,
<PAGE>
Office Park, improvements on or to the Building, Leased Premises,
Land, Office Park, or the contents of the foregoing, and any personal
property stored or placed thereon by either of them caused by any of
the perils insurable against under fire and extended coverage
insurance policies with "all risks" endorsement, whether such damage
or loss was caused by the negligence of either of them or their
respective employees, agents, servants or invitees. The
foregoing mutual release and waiver of subrogation shall apply
whether or not such insurance on the Building, Leased Premises,
Land, Office Park improvements, contents, and/or personal
property was in force at the time of the loss of damage.
Moreover, each party agrees to take all actions necessary to make
the foregoing release effective and binding upon their respective
insurance carriers so that such carriers specifically waive any
right of subrogation that such carriers might otherwise have
against the other party and/or their respective employees,
agents, servants or invitees.
ARTICLE XIII
SIGNS, LANDSCAPING
13.01 Landlord shall have the right to control landscaping
and approve the placing of signs and the size and quality of the
same. Tenant shall, however, be entitled to make changes to the
landscaping plan, with the prior written consent of the Landlord.
Tenant shall place no exterior signs on the Leased Premises
without the prior written consent of Landlord. Any signs not in
conformity with the Lease may be immediately removed by Landlord.
Notwithstanding the above language, Landlord acknowledges and
agrees that Tenant shall be entitled to have corporate
identification signage on any and all monument signs constructed
by Landlord within the Office Park, and, furthermore, Landlord
acknowledges and agrees that it will not withhold its approval of
any proposed Tenant signage based upon size so long as such
signage is in conformance with the Protective Covenants and all
applicable governmental requirements. Finally, Tenant shall have
the absolute right to place such identification signs within the
interior of the Building as Tenant so elects.
ARTICLE XIV
ENTRY BY LANDLORD
14.01 Tenant shall permit Landlord and Landlord's agents to
enter the Leased Premises at all reasonable times during normal
business hours for the purpose of inspecting the same or for the
purpose of maintaining the building, or for the purpose of making
repairs, alterations, or additions to any portion of the
<PAGE>
building, including the erection and maintenance of such
scaffolding, canopies, fences and props as may be required or for
the purpose of posting notices of non-responsibility for
alterations, additions, or repairs, or for the purpose of showing
the Leased Premises to prospective tenants, or placing upon the
building any usual or ordinary "for sale" signs, without any
rebate of rent and without any liability to Tenant for any loss
of occupation or quiet enjoyment of the Leased Premises thereby
occasioned; and shall permit Landlord at any time within thirty
(30) days prior to the expiration of this Lease, to place upon
the Leased Premises any usual or ordinary "to let" or "to lease"
signs. For each of the aforesaid purposes, Landlord shall at all
times have and retain a key with which to unlock all of the
exterior doors about the Leased Premises. Notwithstanding the
foregoing, Landlord agrees to use all reasonable efforts to
provide Tenant at least twenty-four (24) hours prior written
notice of its intent to enter the Leased Premises and further
agrees any such entry shall be conducted in such manner so as to
minimize any interference with Tenant's business operations.
<PAGE>
ARTICLE XV
INSURANCE
15.01 Liability Insurance. Tenant, at its own expense,
shall obtain and keep in full force and effect at all times
during the term of this Lease public liability insurance for the
benefit of Landlord and Tenant (and, at Landlord's request, any
Mortgagee (as hereinafter defined) of Landlord) jointly against
liability for personal injury and property damage in the amount
of not less than Three Million Dollars ($3,000,000.00) in respect
to injuries to or death of more than one person in any one
occurrence, in the amount of not less than One Million Dollars
($1,000,000.00) in respect to injuries to or death of any one
person, and in the amount of not less than One Million Dollars
($1,000,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably
indicated by circumstances from time to time existing. Tenant
shall increase said insurance coverage as reasonably required by
Landlord. All or part of the liability insurance coverage, if
any, that may from time to time be required or maintained in
excess of the minimum limits set forth above may be provided by
an umbrella policy complying in all respects with the
requirements of this Article 15 and which provides that its
coverage is not limited or affected by claims made with respect
to personal injury or property damage at other locations. As
used herein, "Mortgage" means any deed to secure debt, mortgage,
deed of trust, or similar security instrument. "Mortgagee" means
the holder of a Mortgage.
15.02 Each insurance policy required to be maintained by
Tenant hereunder shall be written by a company having an A.M.
Best Company rating of "A" or better and a financial category of
"VII" or better and legally qualified to issue such insurance,
and shall name as insured parties Landlord (and, at Landlord's
request, any Mortgagee of Landlord) and Tenant as their interests
may appear. Each such policy shall provide that it shall not be
canceled or reduced except after not less than thirty (30) days
written notice to Landlord (and any Mortgagee of Landlord), and
shall also provide that the interest of Landlord and any
Mortgagee of Landlord shall not be invalidated by any act or
negligence of Tenant or Landlord or of any person or entity
having an interest in the Leased Premises nor by occupancy or use
of the Leased Premises for any purpose that is more hazardous
than permitted by such policy. Tenant shall deliver to Landlord
(and, at Landlord's request, any Mortgagee of Landlord) a
certificate of insurance
<PAGE>
evidencing the existence and renewal of each insurance policy which is
required to be maintained by Tenant hereunder (and specifically
confirming that such policy shall not be canceled or reduced except
after not less than thirty (30) days written notice to Landlord and
any Mortgagee of Landlord), such delivery to be made promptly after
such insurance is obtained at least thirty (30) days prior to the
expiration date of such insurance policy. If any such insurance
policy has a deductible clause, Tenant shall be liable for the full
deductible amount. Each policy of property insurance maintained
by Tenant hereunder shall provide that the insurer waives any
right of subrogation against Landlord and any Mortgagee of
Landlord, and any policy or policies of property insurance
maintained by Landlord with respect to the Leased Premises shall
provide that the insurer waives any right of subrogation against
Tenant. Each such policy maintained by Tenant shall be primary
and non-contributing with any insurance carried by Landlord (and
any Mortgagee of Landlord). The limits of any insurance provided
hereunder shall not limit the liability of Tenant hereunder. If
Tenant shall fail to procure and maintain any insurance required
hereunder, Landlord may, but shall not be required to, procure
and maintain the same but at the expense of Tenant.
15.03 At all times during and throughout the term hereof,
Landlord shall procure and maintain in full force and effect (i)
fire and extended coverage insurance covering the Building in an
amount at least equal to the full replacement cost thereof, and
(ii) public liability insurance for bodily injury and property
damage in an amount to be determined by Landlord in its sole
discretion, but in no event less than a limit of One Million
Dollars ($1,000,000.00) per occurrence and One Million Dollars
($1,000,000.00) aggregate. Landlord shall furnish Tenant with
certificates of such policies whenever reasonably required by
Tenant to satisfy Tenant that such policies are in full force and
effect.
ARTICLE XVI
ABANDONMENT
16.01 Tenant shall not abandon the Leased Premises at any
time during the term of this Lease; and if Tenant shall abandon,
or surrender the Leased Premises, or be dispossessed by process
of law, or otherwise, any personal property belonging to Tenant
and left on the Leased Premises shall, at the option of the
Landlord, be deemed abandoned and be and become the property of
Landlord.
<PAGE>
16.02 Tenant may vacate the Leased Premises during the term
of this Lease provided (i) Tenant is not otherwise in default
hereunder; (ii) Tenant adequately secures the Leased Premises to
prevent damage, destruction or vandalism to the Leased Premises;
(iii) Tenant continues such utilities to the Leased Premises as
will prevent any damage to the Leased Premises; (iv) Tenant
continues to provide insurance for the Leased Premises and Tenant
pays any increased premium resulting from a lack of a tenant in
the Leased Premises.
ARTICLE XII
DESTRUCTION
17.01 In the event of damage to or destruction of the
Building during the lease term which requires repairs to the
Building, Landlord shall (subject to paragraph 17.02 below)
forthwith make repairs, provided in Landlord's reasonable
judgment repairs can be completed within one hundred fifty (150)
days under the laws and regulations of authorized public
authorities, but such damage or destruction (including any
destruction necessary in order to make repairs) shall in no way
annul or void this Lease, except that Tenant shall be entitled to
a proportionate reduction of rent while such repairs are being
made (but only to the extent of the proceeds of rental insurance
made available to Landlord pursuant to the rental insurance
policy Tenant is required to maintain under Article 15). The
proportionate reduction is to be based upon the extent to which
the making of repairs shall interfere with the business carried
on by Tenant in the Leased Premises. If repairs cannot in
Landlord's reasonable judgment be completed within one hundred
fifty (150) days, Landlord may, at its option, make same within a
reasonable time, this Lease continuing in full force and effect
and the rent to be proportionately abated, as in this paragraph
provided. In the event that Landlord does not so elect to make
repairs which cannot in Landlord's reasonable judgment be
completed within one hundred fifty (150) days, or repairs cannot
be made under current laws and regulations, this Lease may be
terminated at the option of either party. Landlord agrees to
notify Tenant in writing of the estimated time period for the
completion of required repairs within thirty (30) days after
Landlord receives notice of the occurrence of the damaging event,
and to promptly commence and diligently prosecute unto completion
any repairs required to be made by Landlord hereunder.
Notwithstanding any other provision contained herein to the
contrary, in the event following a casualty Landlord fails to
<PAGE>
complete all necessary repairs within two hundred ten (210) days
of the date of the casualty event, then, in such event, Tenant
shall have the absolute right to terminate this Lease by
providing written notice of such election to Landlord on or
before ten (10) days following the expiration of said two hundred
ten (210) day period, provided, however, said two hundred ten
(210) day period shall be extended day for day for up to two
hundred seventy (270) days (but no longer than two hundred
seventy (270) days unless such delays are caused by Tenant
Delays) for any Tenant Delays or Excusable Delays.
17.02 (a) Either Landlord or Tenant may require that any
dispute under this Article 17 be submitted to arbitration
pursuant to this paragraph 17.02. To the extent the provisions
of this paragraph 17.02 vary from or are inconsistent with the
rules of the American Arbitration Association or any other
arbitration tribunal, the provisions of this paragraph 17.02
shall govern. All arbitration shall occur at a location in
Atlanta, Georgia chosen by the arbitrators and shall, except as
expressly provided to the contrary in this paragraph 17.02, be
conducted pursuant to the rules of the American Arbitration
Association (or the successor organization, or if no such
organization exists, then an organization composed of persons of
similar professional qualifications).
(b) The party desiring such arbitration shall give notice
to that effect to the other party. As soon as possible, but in
any event within the next ten (10) days, Landlord and Tenant
shall each select one arbitrator. As soon as possible, but in
any event within the next ten (10) days, the two arbitrators so
selected shall select a third arbitrator. Each arbitrator shall
be, if reasonably possible, a recognized expert in the subject
matter of the arbitration. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be
appointed in his stead, which appointment shall be made in the
same manner as provided above. At the request of either party,
the arbitrators shall authorize the service of subpoenas for the
production of documents or attendance of witnesses.
(c) Within twenty (20) days after their appointment, the
arbitrators so chosen shall hold a hearing at which each party
may submit evidence, be heard and cross-examine witnesses, with
each party having at least ten (10) days advance notice of the
hearing. The hearing shall be conducted such that each of
Landlord and Tenant shall have reasonably adequate time to
present oral evidence or
<PAGE>
argument, but either party may present whatever written evidence
it deems appropriate prior to the hearing (with copies of any
such written evidence being sent to the other party).
(d) The decision of the arbitrators so chosen shall be
given within a period of twenty (20) days after the conclusion of
such hearing, and shall be accompanied by findings of fact. The
decision within which any two arbitrators so appointed and acting
hereunder concur shall in all cases be binding and conclusive
upon the parties and shall be the basis for a judgment entered in
any court of competent jurisdiction.
(e) The fees and expenses of the arbitration proceeding and
the fees of the third arbitrator appointed under this paragraph
17.02 shall be equally borne by both parties. Landlord and Tenant
shall each pay the fees of the arbitrator each selected, and the
fees and expenses of preparing and presenting its own case.
Landlord and Tenant may at any time by mutual written agreement
discontinue arbitration proceedings and agree themselves upon any
such matter submitted to arbitration.
ARTICLE XVIII
ASSIGNMENT AND SUBLETTING
18.01 Landlord shall have the right to transfer and assign,
in whole or in part its rights and obligations in the Leased
Premises; provided, however, in the event of any such transfer
and assignment, Weeks Realty, L.P. shall remain primarily
responsible for any liability to Tenant arising either (i) prior
to the date of said assignment, or (ii) by virtue of Landlord's
failure to timely deliver the Leased Premises to Tenant in
accordance with the standards and schedules set forth in this
Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of
the Landlord. Landlord agrees to provide Tenant written notice
of its decision to either approve or disapprove of any proposed
sublessee or assignee within ten (10) days of Tenant's request
for such approval. In the event of any assignment or subletting,
Tenant shall nevertheless at all times, remain fully responsible
and liable for the payment of the rent and for compliance with
all of its other obligations under the terms, provisions and
covenants of this Lease. Notwithstanding the foregoing, Tenant
shall have the right, without Landlord's consent, to sublet the
Leased Premises or any part thereof, or
<PAGE>
assign this Lease to any of Tenant's parent, subsidiaries or
affiliated companies; provided, however, as a condition to any such
subletting or assignment (i) both Tenant and the proposed subtenant
or, if applicable, assignee shall be solvent at the time of each such
subletting and/or assignment; (ii) Tenant shall provide Landlord
at least ten (10) business days prior written notice of each such
subletting and/or assignment; and (iii) no such subletting and/or
assignment shall release Tenant of Tenant's obligation or alter
the primary liability of Tenant to pay Base Rental hereunder and
to perform all obligations to be performed by Tenant under this
Lease. Upon the occurrence of an "Event of Default" as defined
below, if all or any part of the Leased Premises are then
assigned or sublet, Landlord, in addition to any other remedies
provided by this Lease or provided by law, may at its option,
collect directly from the assignee or subtenant all rents
becoming due to Tenant by reason of the assignment or sublease.
Any collection directly by Landlord from the assignee or
subtenant shall not be construed to constitute a novation or a
release of Tenant from the further performance of its obligations
under this Lease, or an acceptance of such assignee or subtenant.
In the event that Tenant sublets the Leased Premises or any part
thereof, or assigns this Lease and at any time receives rent
and/or other consideration which exceeds that which Tenant would
at that time be obligated to pay to Landlord, Tenant shall pay to
Landlord 50% of the gross excess in such rent as such rent is
received by Tenant and 50% of any other consideration received by
Tenant from such subtenant in connection with such sublease or,
in the case of any assignment of this Lease by Tenant, Landlord
shall receive 50% of any consideration paid to Tenant by such
assignee in connection with such assignment. Landlord
acknowledges and agrees that Tenant shall be entitled to recoup
any and all normal customary costs incurred in connection with
its re-leasing the Leased Premises prior to sharing with Landlord
any gross excess and/or additional consideration received by
Tenant as a result of any sublease or lease assignment. In
addition, should Landlord agree to an assignment or sublease
agreement, Tenant will pay to Landlord on demand the sum of
$500.00 to partially reimburse Landlord for its costs, including
reasonable attorneys' fees, incurred in connection with
processing such assignment or subletting request.
ARTICLE XIX
INSOLVENCY OF TENANT
19.01 Either (a) the appointment of a receiver to take
possession of all or substantially all of the assets of Tenant,
<PAGE>
or (b) a general assignment by Tenant for the benefit of
creditors, or (c) any action taken or suffered by Tenant under
any insolvency or bankruptcy act shall, if any such appointments,
assignments or action continues for a period of sixty (60) days,
constitute a breach of this Lease by Tenant, and Landlord may at
its election with written notice, terminate this Lease and in
that event be entitled to immediate possession of the Leased
Premises and damages as provided below.
ARTICLE XX
BREACH
20.01 The occurrence of any of the following shall
constitute an Event of Default ("Event of Default") under this
Lease on the part of Tenant:
(a) Failure to pay when due any payment of base rental,
additional rent, or any other sum of money payable by Tenant
under this Lease, and such failure to pay continues for a period
of ten (10) days after notice from Landlord of such failure to
pay; provided, however, Landlord shall not be required to provide
such notice more than two (2) times in any one (1) calendar year,
the third (3rd) and any subsequent such failure in such calendar
year to pay within ten (10) days after the due date therefor
constituting an Event of Default without Landlord being required
to provide such notice or allow Tenant a grace period after such
notice;
(b) Tenant's interest in this Lease or the Leased Premises
shall be subjected to any attachment, execution, levy or other
judicial seizure pursuant to any order or decree entered against
Tenant in any legal proceeding that is not stayed (so as to
prevent seizure) pending appeal and such order or decree is not
vacated or bonded against so as to prevent seizure upon the
earlier to occur of (aa) fifteen (15) days prior to the sale of
such interest pursuant to such order or decree, or (bb) sixty
(60) days after entry of the order; or
(c) Tenant breaches or fails to comply with any term,
provision, condition, or covenant of this Lease, other than as
described in clause 20.01 above, and such breach or failure
continues for thirty (30) days after written notice from Landlord
of such breach or failure to comply; or in the event such breach
or failure is curable but
<PAGE>
cannot be cured within thirty (30) days and Tenant does not
commence to cure such breach or failure promptly within such
thirty (30) day period and continuously thereafter pursue such
cure and remedy such breach or failure within a reasonable period
of time, not to exceed an additional 90 days.
20.02 Upon the occurrence of an Event of Default, Landlord
shall have the option to do and perform any one or more of the
following in addition to, and not in limitation of, any other
remedy or right permitted it by law or in equity or by this
Lease:
<PAGE>
(a) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter re-enter the Leased
Premises and correct or repair any condition which shall
constitute a failure on Tenant's part to keep, observe, perform,
satisfy, or abide by any term, condition, covenant, agreement, or
obligation of this Lease or of any notice given Tenant by
Landlord pursuant to the terms of this Lease, and Tenant shall
fully reimburse and compensate Landlord on demand for Landlord's
actual costs so incurred.
(b) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter demand in writing that
Tenant vacate the Leased Premises and thereupon Tenant shall
immediately vacate the Leased Premises and remove therefrom all
property thereon belonging to or placed in the Leased Premises
by, at the direction of, or with consent of Tenant, whereupon
Landlord shall have the right to re-enter and take possession of
the Leased Premises. Any such demand, reentry and taking
possession of the Leased Premises by Landlord shall not of itself
constitute an acceptance by Landlord of a surrender of this Lease
or of the Leased Premises by Tenant and shall not of itself
constitute a termination of this Lease by Landlord.
(c) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter, reenter the Leased
Premises pursuant to a court order and remove therefrom Tenant
and all property belonging to or placed on the Leased Premises
by, at the direction of, or with consent of Tenant. Any such
re-entry and removal by Landlord shall not of itself constitute
an acceptance by Landlord of a surrender of this Lease or of the
Leased Premises by Tenant and shall not of itself constitute a
termination of this Lease by Landlord.
(d) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter use reasonable efforts to
relet the Leased Premises or any part thereof, without cost to
Landlord (it being agreed that "reasonable efforts" does not
require Landlord to make any effort to relet the Leased Premises
or any portion thereof in preference to any unleased space or
space leased or subleased by Landlord or its affiliates in other
buildings) for such time or times, at such rental or rentals and
upon such other terms and conditions as Landlord in its sole, but
reasonable judgment (taking into
<PAGE>
account the fair market rental value of the Leased Premises)
deems advisable, and Landlord may make any alterations or repairs
to the Leased Premises which it may deem necessary or proper to
facilitate such reletting; and Tenant shall pay all actual costs
of such reletting including but not limited to the cost of any
such alterations and repairs to the Leased Premises, reasonable
attorneys' fees actually incurred, leasing inducements, and
brokerage commissions; and if this Lease shall not have been
terminated, Tenant shall continue to pay all rent due under this
Lease up to and including the date of beginning of payment of
rent by any subsequent tenant of part or all of the Leased
Premises, and thereafter Tenant shall pay monthly during the
remainder of the term of this Lease the difference, if any,
between the rent and other charges collected from any such
subsequent tenant or tenants and the rent and other charges
reserved in this Lease, but Tenant shall not be entitled to
receive any excess of any such rents collected over the rent
reserved herein.
(e) Landlord may immediately or at any time thereafter
terminate this Lease, and this Lease shall be deemed to have been
terminated upon receipt by Tenant of notice of such termination;
upon such termination Landlord shall recover from Tenant all
damages that Landlord may suffer by reason of such termination
including, without limitation, all arrearages in rentals, costs,
charges, additional rentals, and reimbursements, the cost
(including court costs and reasonable attorneys' fees actually
incurred) of recovering possession of the Leased Premises, the
actual or estimated (as reasonably estimated by Landlord) cost of
any alteration of or repair to the Leased Premises which is
necessary or proper to prepare the same for reletting and, in
addition thereto, Landlord shall have and recover from Tenant an
amount equal to the present value (discounted at a rate per annum
equal to the discount rate of the Federal Reserve Bank of Atlanta
at the time the Event of Default occurs) of the rental to be paid
by Tenant for the remainder of the lease term, over the present
value (discounted at the same rate) of the fair market value of
the Leased Premises for the remainder of the lease term.
20.03 If Landlord re-enters the Leased Premises or
terminates this Lease pursuant to any of the provisions of this
Lease, Tenant hereby waives all claims for damages which may be
<PAGE>
caused by such re-entry or termination by Landlord's reasonable
acts complying with the provisions of this Lease. No such reentry
or termination shall be considered or construed to be a forcible
entry.
20.04 "Events of Default by Landlord" under this Lease shall
be deemed to be the situations where Landlord shall fail to
comply with any term, provision or covenant of this Lease and
shall not commence to cure such failure within thirty (30) days
after written notice thereof and diligently and in good faith
continue to cure the default until completion. If the default
cannot reasonably be cured within such thirty (30) day period,
Landlord shall not be in default if Landlord commences to cure
the default within the thirty (30) day period and diligently and
in good faith continues to cure the default until completion. In
no event shall Landlord's right to cure extend beyond ninety (90)
days following written notice from Tenant, unless such period is
extended by Tenant Delays or Excusable Delays.
20.05 Upon the occurrence of any Event of Default by
Landlord, Tenant shall have the right to perform the obligations
of Landlord and Tenant shall have Landlord reimburse Tenant on
demand for any reasonable and necessary costs and expenses which
Tenant may have incurred.
ARTICLE XXI
ATTORNEY'S FEES
21.01 If Landlord and Tenant litigate any provision of this
Lease or the subject matter of this Lease, the unsuccessful
litigant will pay to the successful litigant all costs and
expenses, including reasonable attorneys' fees and court costs,
incurred by the successful litigant at trial and on any appeal.
If, without fault, either Landlord or Tenant is made a party to
any litigation instituted by or against the other, the other will
indemnify the faultless one against all loss, liability, and
expense, including reasonable attorneys' fees and court costs,
incurred by it in connection with such litigation.
ARTICLE XXII
CONDEMNATION
22.01 If, at any time during the term of this Lease, title
to the entire Leased Premises should become vested in a public or
quasi-public authority by virtue of the exercise of
<PAGE>
expropriation, appropriation, condemnation or other power in the
nature of eminent domain, or by voluntary transfer from the owner
of the Leased Premises under threat of such a taking then this
Lease shall terminate as of the time of such vesting of title,
after which neither party shall be further obligated to the other
except for occurrence antedating such taking. The same results
shall follow if less than the entire Leased Premises be thus
taken, or transferred in lieu of such a taking, but to such
extent that it would be legally or commercially impractical for
Tenant to reasonably conduct his trade or business therein.
22.02 Should there be such a partial taking or transfer in
lieu thereof, but not to such an extent as to make such continued
occupancy and operation by Tenant commercially impractical, then
this Lease shall continue on all of its same terms and conditions
subject only to an equitable reduction in rent proportionate to
the effect (if any) of such taking on Tenant's continued
occupancy and operation.
22.03 Subject to paragraph 22.04 below, in the event of any
such taking or transfer, whether of the entire Leased Premises or
a portion thereof, it is expressly agreed and understood that all
sums awarded, allowed or received in connection therewith shall
belong to Landlord, and any such rights otherwise vested in
Tenant are hereby assigned to Landlord, and Tenant shall have no
interest in or claim to any such sums or any portion thereof,
whether the same be for the taking of the property or for
damages, or otherwise; provided, however, that Tenant may
separately claim and receive from the condemning authority (but
not from Landlord), if legally payable, compensation for Tenant's
removal and relocation costs and/or business interruption, as
well as alterations, additions and improvements paid for by
Tenant.
22.04 If all or any part of the Leased Premises shall be
the subject of a temporary taking, this Lease shall nevertheless
remain in full force and effect, and Tenant shall continue to be
responsible for all of its obligations hereunder insofar as
Tenant's ability and authority to comply with such obligations
are not affect by such taking, including without limitation the
payment of all base rental and additional rent. The award for
any such temporary taking payable for any period prior to the
expiration date of this Lease shall be paid to Tenant and the
award for any temporary taking for any period thereafter shall be
paid to Landlord. A taking or transfer in lieu of taking shall be
deemed to be a temporary taking if the
<PAGE>
term of such taking does not extend beyond the then current lease term
so that Landlord's interest in unaffected thereby.
ARTICLE XXIII
NOTICES
23.01 Prior to the Commencement Date of this Lease, all
notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations
under this Lease by either party to the other shall be in writing
and shall be sufficiently given and served upon the other party,
if sent by certified mail, return receipt requested, postage
prepaid, and addressed as follows:
(a) To Tenant at 1000 Alderman Drive, Alpharetta, Georgia,
30202, Attention: John Heyman;
(b) To Smith, Gambrell & Russell, Suite 3100, Promenade II, 1230
Peachtree Street, N.E., Atlanta, Georgia, 30309-3592,
Attention Mark G. Pottorff, Esq.
(c) To Landlord, addressed to Landlord at 4497 Park Drive,
Norcross, Georgia 30093, with a copy to such other place as
Landlord may from time to time designate by notice to
Tenant.
23.02 Following the Commencement Date, all notices, statements,
demands, requests, consents, approvals, authorization, offers,
agreements, appointments, or designations under this Lease by either
party to the other shall be in writing and shall be sufficiently given
and served upon the other party, if sent by certified mail, return
receipt requested, postage prepaid, and addressed as follows:
(a) To Tenant at the Leased Premises;
(b) To Smith, Gambrell & Russell, Suite 3100, Promenade II, 1230
Peachtree Street, N.E., Atlanta, Georgia, 30309-3592,
Attention Mark G. Pottorff, Esq.
(c) To Landlord, addressed to Landlord at 4497 Park Drive,
Norcross, Georgia 30093, with a copy to such other place as
Landlord may from time to time designate by notice to
Tenant.
<PAGE>
23.03 All notices shall be deemed received five (5) days
after being deposited in the mail in accordance with the
foregoing provisions.
ARTICLE XXIV
WAIVER
24.01 The waiver by either party of any breach of any term,
covenant, or condition herein contained shall not be deemed to be
a waiver of such term, covenant, or condition or any subsequent
breach of the same or any other term, covenant, or condition
herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant, or condition of this
Lease, other than the failure of Tenant to pay the particular
rental so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.
ARTICLE XXV
EFFECT OF HOLDING OVER
25.01 If Tenant should remain in possession of the Leased
Premises after the expiration of the lease term and without
executing a new lease, then such holding over shall be construed
as a tenancy from month to month, subject to all the conditions,
provisions, and obligations of this Lease insofar as the same are
applicable to a month to month tenancy, except that the rent
payable pursuant to subparagraph 3.01 hereof shall be 125% of the
rent payable pursuant to subparagraph 3.01 for any month or
portion thereof during the first thirty (30) days of any holdover
period, and 125% of the monthly rent payable pursuant to
subparagraph 3.01 during each subsequent month of any holdover
period after thirty (30) days. In such event, Landlord shall
have the right to terminate such tenancy-at-sufferance by giving
Tenant five (5) business days prior written notice of such
termination.
<PAGE>
ARTICLE XXVI
SUBORDINATION
26.01 This Lease and all rights of Tenant hereunder are and
shall be subject and subordinate to each Mortgage which may now
or hereafter affect Landlord's fee simple title to the Leased
Premises and to any modifications, renewals, consolidations,
extensions or replacements thereof; provided, however, that such
subordination is conditioned upon the lessor under any such
holder of any such Mortgage first executing and delivering to
Tenant a Subordination, Non-Disturbance and Attornment Agreement
as described in paragraph 26.02 below. Subject to the provisions
of the immediately preceding sentence, Tenant agrees to recognize
and attorn to any party succeeding to the interest of Landlord as
a result of the enforcement of any Mortgage, and to be bound to
such party under all of the terms, covenants, and conditions of
this Lease, for the balance of the term of this Lease, including
renewal terms, with the same force and effect as if such party
were the original Landlord under this Lease.
26.02 Upon the request of Landlord, the holder of any
Mortgage, Tenant agrees to execute a Subordination,
Non-Disturbance and Attornment Agreement with respect to each
Mortgage or other instrument from time to time encumbering fee
simple title to the Leased Premises. Tenant agrees to execute
and deliver any Subordination, Non-Disturbance and Attornment
Agreement substantially in the form attached hereto as Exhibit
"E", or in such other form as Landlord, the lessor under such
Mortgagee shall reasonably request.
26.03 Notwithstanding the foregoing provisions of this
Article 26, Tenant shall, upon demand, at any time or times,
execute, acknowledge and deliver to Landlord, the holder of any
Mortgage, any and all instruments that may be necessary to make
this Lease superior to the lien of such Mortgage, and each
renewal, modification, consolidation, replacement and extension
thereof.
ARTICLE XXVII
ESTOPPEL CERTIFICATE
27.01 Upon ten (10) days notice from Landlord to Tenant at
any time after Substantial Completion and completion of the punch
list, Tenant shall deliver a certificate dated as of the first
day of the calendar month in which such notice is received,
<PAGE>
executed by an appropriate officer, partner or individual, in the
form as Landlord may reasonably require and stating the
following: (i) the commencement date of this Lease; (ii) the
space occupied by Tenant hereunder; (iii) the expiration date
hereof; (iv) a description of any renewal or expansion options;
(v) the amount of rental currently and actually paid by Tenant
under this Lease; (vi) the nature of any default or claimed
default hereunder by Landlord; (vii) that Tenant is not in
default hereunder nor has any event occurred which with the
passage of time or the giving of notice would become a default by
Tenant hereunder and (viii) such other statements as Landlord may
reasonably require.
ARTICLE XXVIII
PARKING
28.01 Tenant shall be entitled to the exclusive use of five
and one-half (5 1/2) parking spaces per 1,000 square feet of
usable space within the Building. All such parking spaces shall
be provided for on the Leased Premises in accordance with the
Base Building Approved Plans and Specifications. Tenant agrees
to park all Tenant's trucks in the parking spaces provided at the
rear of the Building. "Parking" as used herein means the use by
Tenant's employees, its visitors, invitees, and customers for the
parking of motor vehicles for such periods of time as are
reasonably necessary in connection with use of and/or visits to
the Leased Premises. No vehicle may be repaired or serviced in
the parking area and any vehicle deemed abandoned by Landlord, in
its reasonable discretion, will be towed from the Leased Premises
and all costs therein shall be borne by the Tenant.
ARTICLE XXIX
MORTGAGE PROTECTION
29.01 In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any
holder of a Mortgage covering the Leased Premises whose address
shall have been furnished to Tenant, and shall offer such
Mortgagee a reasonable opportunity to cure the default, including
time to obtain possession of the Leased Premises by power of sale
or a judicial foreclosure, if such should prove necessary to
effect a cure. Tenant will accept cure by Landlord's Mortgagee;
provided, however, such cure must occur within the same time
period provided for a Landlord cure under the Lease.
<PAGE>
ARTICLE XXX
RULES AND REGULATIONS
30.01 Tenant shall comply with all covenants, restrictions
and other matters of record in the deed records of the county in
which the Leased Premises are located which affect or encumber
the Leased Premises, the Building or the Land.
<PAGE>
ARTICLE XXXI
BROKERAGE COMMISSIONS
31.01 Landlord and Tenant acknowledge that Carter &
Associates, LLC ("Broker") has represented Tenant in connection
with this Lease. Broker's commission, however, shall be payable
by Landlord. Landlord shall pay to Broker a leasing commission in
an amount as set forth in a separate agreement between Broker and
Landlord. The parties hereto do acknowledge and agree that that
certain Commission Agreement dated July 14, 1997, by and between
Weeks Realty, L.P., as lessor/owner, and Carter & Associates,
LLC, as broker, is hereby incorporated into this Lease as if same
were repeated in full. Broker acknowledges that Broker is not
entitled to any other compensation in connection with this Lease
other than as expressly provided hereinabove.
31.02 Landlord and Tenant each represents and warrants to
the other that it has not dealt with any broker, agent,
commission salesman or other person (other than Broker) in the
negotiations for and procurement of this Lease and of the Leased
Premises and that no commissions, fees, or compensation of any
kind are due and payable in connection herewith to any broker,
agent, commission salesman or other person (other than Broker) as
a result of any such dealings. Landlord and Tenant each hereby
agrees to indemnify the other and hold the other harmless from
and against any and all claims, suits or judgments (including
without limitation, reasonable attorneys' fees and court costs
incurred in connection with any such claims, suits or judgments
or in the enforcement of this indemnity for any fees, commissions
or compensation of any kind which arise out of or in any way
connected with any claimed dealings or relationship with the
indemnifying party.
31.03 Broker represents and warrants to Landlord and Tenant
that Broker has not dealt with any broker, agent, commission
salesman or other person in the negotiations for and procurement
of this Lease and of the Leased Premises, and that no
commissions, fees, or other compensation of any kind are due and
payable in connection herewith to any broker, agent, commission
salesman or other person as a result of any such dealings.
Broker agrees to indemnify Landlord and Tenant and hold Landlord
and Tenant harmless from and against any and all claims, suits or
judgments (including without limitation, reasonable attorneys'
fees and court costs incurred in connection with any such claims,
suits or judgments or in the enforcement of this indemnity) for
any fees, commissions or
<PAGE>
compensation of any kind which arise out of or in any way connected
with any claimed dealings or relationship with Broker.
31.04 Broker has executed this Lease solely for the purpose
of agreeing to the provisions of this Article 31 and for no other
purpose.
ARTICLE XXXII
DELAYS
32.01 The term "Excusable Delay" shall mean any delay due to
war, natural catastrophe, future order of any government, court
or regulatory body claiming jurisdiction, blockage, embargo,
inability to secure structural steel, pre-cast concrete panels or
elevators through ordinary sources by reason of shortages,
provided such items were ordered as early as reasonably possible
following the determination of the need for same, or similar
regulation or order of any government or other regulatory body,
storm, flood, washout, adverse weather conditions, inability to
obtain or delay in obtaining permits for reasons beyond the
control of the party seeking such permits, (provided that
applications for permits have been made within a reasonable
time), or inability to obtain any approval or consent required
under the Protective Covenants for reasons beyond the control of
the party seeking such approval or consent, or any other cause
whatsoever beyond the reasonable control of the party from whom
performance is required, whether or not similar to any of the
causes stated above; provided, however, that a party's lack of
funds or a party's failure, refusal or neglect to pay any amount
due hereunder shall not be deemed to be a cause beyond the
control of such party, and further provided, however, in no event
shall delays caused by strikes, lockouts or other labor or
industrial disturbance or the failure or inability to secure
materials (other than structural steel, pre-cast concrete panels
or elevators under the conditions provided for above), supplies
or labor, through ordinary sources by reason of shortages or
priority be deemed to be a cause beyond the control of such
party) and an Excusable Delay shall be deemed to exist only so
long as the party relying on such delay to excuse its performance
exercises due diligence to remove or overcome it (except that it
is expressly agreed that nothing contained in this definition of
Excusable Delay or elsewhere in this Lease shall obligate either
party to settle a strike or labor dispute when it does not wish
to do so).
<PAGE>
32.02 Performance Excused. Landlord and Tenant shall each
be excused for the period of any Excusable Delay from, and shall
not be deemed in default with respect to, the performance of any
of the terms, covenants and conditions of this Lease to be
performed by such party when prevented from doing so by Excusable
Delays; provided, however, that nothing contained in this
paragraph shall excuse a party's performance or prohibit the
other party from exercising any remedy in any circumstance in
which any other provision of this Lease expressly provides that
such party is not excused or that such remedy may be exercised
notwithstanding or without regard to the existence of all or
certain Excusable Delays.
32.03 "Tenant Delays", as used herein, shall mean and refer
to delays directly or substantially attributable to or caused by
Tenant or Tenant's employees or agents, including any failure by
Tenant to make any decision within the time frame specified in
the Construction Schedule.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and
when required by the context, the same shall include the plural,
and the masculine gender shall include the feminine and neuter
genders, and the word "person" shall include corporation, firm or
association. If there be more than one tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.
B. The headings or titles to paragraphs of this Lease are
not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
C. This instrument contains all of the agreements and
conditions made between the parties to this Lease and may not be
modified orally or in any other manner than by agreement in
writing signed by all parties to this Lease.
D. Time is of the essence of each term and provision of this
Lease.
E. Except as otherwise expressly stated, each payment
required to be made by Tenant shall be in addition to and not in
substitution for other payments to be made by Tenant.
F. Subject to Article 18, the terms and provisions of this
Lease shall be binding upon and inure to the benefit of the
<PAGE>
heirs, executors, administrators, successors, and assigns of
Landlord and Tenant.
G. Except as otherwise expressly provided herein, all
covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any abatement of rent.
H. Where the consent, approval or acceptance of a party is
required, the party agrees that such consent, approval or
acceptance shall not be unreasonably withheld, conditioned or
unreasonably delayed.
I. This Lease shall create the relationship of Landlord and
Tenant between Landlord and Tenant; no estate shall pass out of
Landlord; Tenant has only a usufruct, not subject to levy and/or
sale and not assignable by Tenant except as provided in paragraph
18.01 hereof.
J. Tenant acknowledges and agrees that Landlord shall not
provide guards or other security protection for the Leased
Premises and that any and all security protection shall be the
sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Upon the request of Landlord or Tenant, both parties
shall join in the execution of a memorandum or so-called "short
form" of this Lease for the purpose of recordation. Said
memorandum or short form of this Lease shall describe the
parties, the Leased Premises and the lease term, the renewal and
purchase options, and shall incorporate this Lease by reference.
Said memorandum or short form of this Lease shall not include the
economic terms of this Lease unless both parties consent.
M. Except as otherwise expressly provided herein, Landlord's
liability for performance of its obligations under the terms of
this Lease shall be limited to its interest in the Leased
Premises, and neither Landlord, nor any officer, director,
shareholder or partner of Landlord, or of any partner of
Landlord, shall have any personal liability whatsoever with
respect to this Lease. Landlord's exculpation of liability
hereunder shall not apply to any liability of Landlord resulting
from its failure to timely deliver the Leased Premises to Tenant.
<PAGE>
N. Landlord's obligations under this Lease are specifically
subject to and conditioned upon the closing by Landlord of the
purchase of the Land on or before October 10, 1997. If Landlord
is unable for any reason, to close the purchase of the Land on or
before October 10, 1997, either Landlord or Tenant shall have the
right at any time within five (5) days from the date thereof to
terminate this Lease by giving written notice to the other. Upon
such termination, this Lease shall be of no further force and
effect and neither party shall have any further rights or
obligations to the other.
SIGNATURES CONTAINED ON FOLLOWING PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto who are individuals
have set their hands and seals, and the parties who are
corporations have caused this instrument to be duly executed by
its proper officers and its corporate seal to be affixed, as of
the day and year first above written.
Signed, sealed and delivered LANDLORD:
as to Landlord, in the
presence of: WEEKS REALTY, L.P.,
a Georgia limited partnership
/s/ Kelly A. Kinney By: Weeks Corporation,
a Georgia corporation,
its sole general partner
/s/ Karen F. Correnty By: /s/ Forrest Robinson
Notary Public Name: Forrest Robinson
Its: President & C.O.O.
Signed, sealed and delivered TENANT:
as to Tenant, in the presence
of: RADIANT SYSTEMS, INC.
___________________________ By: /s/ John H. Heyman
Name: John H. Heyman
Its: EVP/CFO
/s/ Ruth Ann Tino
Notary Public
ATTEST:
By: /s/ Alon Goren
Name: Alon Goren
Its: CTO
[Corporate Seal]
<PAGE>
EXHIBIT A
[LEGAL DESCRIPTION OF LAND]
<PAGE>
EXHIBIT B
[DESCRIPTION OF BROOKSIDE OFFICE PARK]
<PAGE>
EXHIBIT C
[ESTIMATED OPERATING EXPENSES]
<PAGE>
EXHIBIT D
[CONSTRUCTION SCHEDULE]
<PAGE>
EXHIBIT E
[SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT]
THIS AGREEMENT, made as of the ___ day of ___________ , 1997, by
and among _______________________________, a _______________
corporation ("Tenant") ____________________________, a Georgia
____________________ ("Owner") and _________________________ (herein,
together with its successors, transferees and assigns, the
"Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortgagee is about to or has heretofore granted to
Owner a first mortgage loan, which loan is secured by a Security
Deed (herein "Mortgage") dated as of __________________, 199__
and duly recorded on _______________, 199___, in the land records
of Fulton County, Georgia; and
WHEREAS, the Mortgage is to be a first and prior lien upon
the Owner's fee estate in the real property described in Exhibit
"A" annexed hereto ("Mortgaged Premises"); and
WHEREAS, Tenant is to occupy the Mortgaged Premises under a
lease dated as of ____________________ in which Owner is the
Landlord (the "Lease") covering that portion of the Mortgaged
Premises therein more particularly described (the "Leased
Premises"); and
WHEREAS, Mortgagee desires to confirm that the lease is and
shall be subordinate to the lien and security title of the
Mortgage; and
WHEREAS, Tenant desires to be assured of its continued and
undisturbed occupancy of the Leased Premises should the Mortgage
be foreclosed or the Mortgaged Premises sold pursuant to any
power of sale contained therein and Mortgagee is agreeable
thereto.
NOW, THEREFORE, in consideration of the mutual covenants
contained in this Agreement and in further consideration of the
sum of ONE DOLLAR ($1.00) each to the other in hand paid, the
receipt whereof is hereby acknowledged, Owner, Tenant and
Mortgagee mutually covenant and agree as follows:
FIRST: The Lease and all of Tenant's rights, interest and
estate therein and thereunder are hereby made subject and
subordinate to the lien and security title of the Mortgage and to
any extensions, renewals, replacements, modifications, additions
<PAGE>
or consolidations thereof and to all rights, title and interest
of Mortgagee and its successors and assigns therein and
thereunder.
SECOND: In the event, however, proceedings shall ever be
instituted by Mortgagee to foreclose or exercise its right of
power of sale under the Mortgage (in either case hereinafter
referred to as a "foreclosure"), the Tenant's possession of the
Leased Premises shall not be disturbed by the foreclosure
proceedings or results thereof or exercise of right of power to
sell or other transfer and the Mortgaged Premises shall be sold
at any foreclosure sale or other sale or transfer subject to
Tenant's possession on the condition that there shall be, at the
time of commencement of foreclosure proceedings, as well as all
subsequent times, no default by Tenant in the due and timely
observance and performance of any covenant and agreement in the
Lease to be observed and performed by Tenant subject to periods
of notice and cure. Provided, however, Tenant acknowledges and
agrees that such condition is for the sole benefit of Purchaser
(as hereinafter defined) and that Purchaser shall have the right,
at its sole and exclusive option, to waive such condition in
connection with its acquisition of the Leased Premises by
foreclosure, or otherwise, without notice to Tenant, in which
event the non-disturbance of Tenant shall remain effective so
that Tenant and its rights under the Lease shall not be affected
by the foreclosure or other acquisition of the Leased Premises
notwithstanding the default by Tenant. Any such election by
Purchaser shall not however, waive such default or the rights or
remedies of the Purchaser as landlord under the Lease as a
consequence thereof.
THIRD: Tenant shall attorn to Mortgagee while Mortgagee is
in possession of the Mortgaged Premises, or to a Receiver
appointed in any action or proceeding to foreclose the Mortgage
or to any other person or entity acquiring the interest of
Landlord by foreclosure of the Mortgage or other proceeding to
enforce the rights of the Mortgage holder by deed in lieu of
foreclosure (herein the "Purchaser"). In the event of the
completion of foreclosure proceedings and sale of the Mortgaged
Premises or in the event the Purchaser should otherwise acquire
possession of the Mortgaged Premises, the Tenant will promptly
upon demand attorn to the Purchaser and will recognize such
Purchaser as the Tenant's landlord. The Tenant agrees to execute
and deliver, at any time and from time to time, upon the request
of the Purchaser at the foreclosure sale, as the case may be, any
reasonable instrument which may be necessary
<PAGE>
or appropriate to such successor landlord to evidence such attornment.
The Tenant shall, upon demand of the Purchaser, pay to the Purchaser,
all rental monies then due or as they thereafter become due.
FOURTH: Upon the attornment provided for in preceding
Paragraph THIRD the Tenant's occupancy shall thereafter be in
full force and effect as under a direct Lease between the
Purchaser at the foreclosure sale, and Tenant. It is
specifically understood and agreed that Purchaser shall not be:
(a) personally liable for any act, omission, negligence or
default of any prior landlord; provided, however, that from
and after the date Purchaser shall take possession of or
obtain title to the Premises, Purchaser shall be responsible
for its own actions which may result in defaults under the
Lease notwithstanding the fact any such default may have
existed prior to the date that Mortgagee (or any Receiver or
purchaser) shall take possession of or obtain title to the
Premises;
(b) subject to any offsets, claims or defenses which Tenant
might have against any prior landlord under the Lease,
except to the extent Purchaser shall have received notice of
same and an opportunity to cure same in accordance with the
terms of the Lease and shall have failed to effect a cure;
(c) bound by any rent or additional rent which Tenant might have
paid for more than one month in advance to any prior
landlord;
(d) bound by any amendment or modification of the Lease made
without the prior written consent of the Mortgagee;
(e) personally liable or bound by the obligations of Landlord
regarding construction of the Premises or for any damages or
penalties resulting from Landlord's default in such
obligation; or
(f) bound in any respect with regard to the Lease for matters
and obligations accruing or to be performed thereunder from
and after the date of any subsequent disposition of the
Premises by Purchaser; provided the subsequent purchaser
assumes such matters and obligations.
<PAGE>
FIFTH: On and after the date Tenant in good standing
attorns to Purchaser in pursuance of its agreement herein set
forth, Purchaser will undertake and perform all subsequent
obligations of the Landlord as set forth in the Lease for the
benefit of and undisturbed occupancy of Tenant under the Lease;
provided, however, that, Mortgagee shall have no obligation to
complete construction of the Leased Premises in the event of
foreclosure prior to completion thereof (provided, however that
in the event Purchaser elects not to complete construction of the
Leased Premises, after written notice of such election to be
given to Tenant within a reasonable time following foreclosure,
then, Tenant shall have the option, exercisable by delivery of
written notice to Purchaser within fifteen (15) days following
its receipt of notice of Purchaser's election, of terminating the
Lease and neither Mortgagee nor Tenant shall have any further
obligation thereunder accruing from and after the date of such
termination).
SIXTH: Tenant agrees it will not amend, modify nor abridge
the Lease (including any changes in the plans and specifications
for the construction of the Leased Premises) in any way without
prior written approval of the Mortgagee (which approval shall not
be unreasonably withheld), nor will the Lease ever merge into the
fee in the event that the Mortgagee acquires fee title to the
Mortgaged Premises.
<PAGE>
SEVENTH: So long as the Mortgage remains outstanding and
unsatisfied, Tenant will mail or deliver to Mortgagee, at the
address and in the manner hereinbelow provided, a copy of all
notices permitted or required to be given to the landlord by
Tenant under and pursuant to the terms and provisions of the
Lease. At any time before the rights of the landlord shall have
been forfeited or adversely affected because of any default of
the landlord, or within the time permitted the landlord for
curing any default under the Lease as therein provided (but not
more than ninety (90) days from the receipt of notice by
Mortgagee), Mortgagee may, but shall have no obligation to, pay
any taxes and assessments, make any repairs and improvements,
make any deposits or do any other act or thing required of the
landlord by the terms of the Lease to cure any such default or
correct or remedy any condition giving rise to such default; and
all payments so made and all things so done and performed by
Mortgagee shall be as effective to prevent the rights of the
landlord from being forfeited or adversely affected because of
any default under the Lease as the same would have been if done
and performed by the landlord. Anything herein notwithstanding,
if necessary to enable Mortgagee (or Purchaser as the case may
be) to cure any default by Landlord, Mortgagee shall have such
reasonable amount of additional time to acquire possession and
title to the Premises by power of sale, within which to cure such
default by Landlord. Tenant will accept cure by Landlord's
Mortgagee; provided, however, such cure must occur within the
same time period provided for a Landlord cure under the Lease.
EIGHTH: Tenant acknowledges that Owner will execute and
deliver to Mortgagee an assignment of the Lease as additional
security for the loan secured by the Mortgage, and Tenant hereby
expressly consents to such assignment.
NINTH: Owner and Tenant shall certify to Mortgagee, to the
extent that the same are true at such time, that the Lease has
been duly executed by Owner and Tenant, has not been terminated
or canceled by either party and is in force in accordance with
its terms; that the Lease and any modifications and amendments
specified herein are a complete statement of the agreement
between Owner and Tenant with respect to the leasing of the
Leased Premises, and the Lease has not been modified or amended
except as specified herein; that to the knowledge of Owner and
Tenant, no party to the Lease is in default thereunder; that no
rent under the Lease has been paid more than thirty (30) days in
advance of its due date; and that Tenant, as of this date, has no
charge, lien or claim of offset
<PAGE>
under the Lease, or otherwise, against the rents or other charges due
or to become due thereunder.
TENTH: Any and all notices, elections, demands, requests
and responses thereto permitted or required to be given under
this Agreement shall be in writing, signed by or on behalf of the
party giving the same, and shall be deemed to have been properly
given and shall be effective upon being personally delivered, or
upon being deposited in the United States mail, postage prepaid,
certified with return receipt requested, to the other party at
the address within the continental United States as such other
party may designate by notice specifically designated as a notice
of change of address and given in accordance herewith; provided,
however, that the time period in which a response to any such
notice, election, demand or request must be given shall commenced
on the date of receipt thereof; and provided further no notice of
change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer,
partner, agent or employee of such party at said address shall
constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no
notice has been received shall also constitute receipt. Any such
notice, election, demand, request or response, if given to
Mortgagee, shall be addressed as follows:
___________________________________
___________________________________
___________________________________
___________________________________
Attn: ____________________________
with a copy to:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
Attn: ___________________________
and, if given to Tenant, shall be addressed as follows:
__________________________________
__________________________________
__________________________________
Attn: ___________________________
<PAGE>
with a copy to:
__________________________________
__________________________________
__________________________________
Attn: ___________________________
<PAGE>
and, if given to Owner, shall be addressed as follows:
Weeks Realty, L.P.
4497 Park Drive
Norcross, Georgia 30093
Attn: A. R. Weeks, Jr.
ELEVENTH: Mortgagee has and shall have the continuing right
to execute and record in the Land Records of Fulton County,
Georgia at any time, in its unilateral discretion, a Declaration
of Subordination for the purpose of thereby subordinating its
rights, title and interest in and under the Mortgage to the
rights, title and interest of Tenant under the Lease. Such
Declaration of Subordination shall, at Mortgagee's election,
operate, function and be in full force and effect for whatever
period of time Mortgagee declares therein that it shall be in
force not exceeding the term of the Lease and any extensions
thereof and the said Declaration may be voided unilaterally by
Mortgagee when it so elects.
TWELFTH: Tenant waives any and all rights it may have to
execute and record after the date hereof any document purporting
to again or further subordinate its right, title or interest
under the Lease to the lien of either the Mortgage or any other
mortgage or deed to secure debt or any ground lease or any
agreement modifying or amending the Mortgage except with the
written consent of Mortgagee.
THIRTEENTH: This Agreement cannot be changed orally but
only in writing signed by both parties hereto.
FOURTEENTH: This Agreement may be recorded by any party at
its own expense in the Land Records of Fulton County, Georgia
whenever, in its sole discretion, either party elects so to do.
FIFTEENTH: All of the terms, covenants and conditions
hereof shall run with the Mortgaged Premises and shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
SIXTEENTH: If the interest of Landlord shall be acquired by
Purchaser, Tenant shall look solely to the Purchaser's estate in
the Premises (or the proceeds thereof) for the satisfaction of
Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Purchaser by
the Purchaser in the event of default by the Purchaser, and no
other property or assets of Purchaser or
<PAGE>
its partners or shareholders shall be subject to levy, execution or
other enforcement procedure in satisfaction of Tenant's remedies.
SEVENTEENTH: Landlord and Tenant agree there shall be no
other subordination of Tenant's interest under the Lease to any
other Lender or other party without first obtaining Lender's
prior written consent. Any attempt to subordinate such interest
shall be null and void.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, acknowledged and delivered the day
and year first above written.
Signed, sealed and delivered TENANT:
in the presence of:
_________________________
____________________________
Witness
____________________________ By:____________________
Notary Public Its: ____________________
Attest:
By: ____________________
Its: ____________________
[CORPORATE SEAL]
Signed, sealed and delivered OWNER:
in the presence of:
___________________________,
____________________________ a Georgia limited partnership,
Witness By: ______________________,
a Georgia corporation, its
____________________________ general partner
Notary Public
By:________________________
[CORPORATE SEAL]
<PAGE>
Signed, sealed and delivered MORTGAGEE:
in the presence of:
__________________________
____________________________
Witness By: ______________________
Name:_____________________
____________________________ Its:______________________
Notary Public
[BANK SEAL]
<PAGE>
EXHIBIT F
[APPROVED PLANS AND SPECIFICATIONS]
<PAGE>
EXHIBIT G
[MANAGEMENT SPECIFICATIONS]
<PAGE>
EXHIBIT H
SPECIAL STIPULATIONS
1. Option to Renew:
Tenant shall have the option to renew this Lease Agreement
for two (2) renewal terms of up to five (5) years each (each an
"Extended Term") provided that Tenant gives written notice to
Landlord of its intention to renew at least eight (8) months
prior to the end of the then current term of the Lease. Renewal
shall be upon the same terms and conditions as contained herein
except that the annual base rental shall be the fair market
rental value (but in no event less than the current rental rate
under the Lease) which shall be determined as follows:
(a) Landlord and Tenant will have fifteen (15) days after
Landlord receives the renewal notice within which to agree on the
then-fair market rental value of the Leased Premises as defined
in paragraph (c) below for the renewal period. If they agree on
the base monthly rent for the renewal period within fifteen (15)
days, they will amend this Lease by stating the base monthly
rental for the renewal period.
(b) If they are unable to agree on the base monthly rental
for the renewal period within fifteen (15) days, then the base
monthly rental for the renewal period will be the then-fair
market rental value of the Leased Premises as determined in
accordance with paragraph (d) below.
(c) The "then-fair market rental value of the Leased
Premises" means what a Landlord under no compulsion to lease the
Leased Premises and a Tenant under no compulsion to lease the
Leased Premises would determine as rents for the renewal period,
as of the commencement of the renewal period, taking into
consideration the uses permitted under this Lease, the quality,
size, design, and location of the Leased Premises, the rent for
comparable buildings located in the vicinity of the Leased
Premises and all other relevant factors related thereto.
Notwithstanding the foregoing, Landlord acknowledges and agrees
that the "then fair market rental value of the Leased Premises"
shall specifically exclude the increase in the rental value of
the Leased Premises resulting from any improvements made to the
Leased Premises which were paid for by Tenant. The then-fair
market rental value of the Leased Premises for the renewal period
will not be less than that provided during the initial term.
<PAGE>
(d) Within seven (7) days after the expiration of the
fifteen (15) day period set forth in paragraph (b) above,
Landlord and Tenant will each appoint a real estate appraiser to
appraise the then-fair market rental value of the Leased
Premises. The two appraisers will meet promptly and attempt to
set the then-fair market rental value of the Leased Premises. If
they are unable to agree within thirty (30) days, they will
select a third appraiser within ten (10) days to set the then
fair market rental value of the Leased Premises. Landlord and
Tenant will bear one-half (1/2) of the cost of appointing the
third appraiser and of paying the third appraiser's fee.
(e) Within thirty (30) days after the selection of the
third appraiser, a majority of the appraisers will set the
then-fair market rental value of the Leased Premises. If a
majority of the appraisers are unable to set the then-fair market
rental value of the Leased Premises within thirty (30) days after
selection of the third appraiser, the two closest appraisals will
be averaged and the average will be the then-fair market rental
value of the Leased Premises.
It is expressly understood that Tenant shall have no option
to extend the term of this Lease for the Extended Term if at the
time of such attempted exercise of said Extended Term this Lease
is not then in full force and effect and if Tenant is then in
monetary default of any terms and conditions of this Lease beyond
any applicable notice and cure period provided for herein.
2. Option to Expand:
Landlord hereby grants to Tenant an option (the "Expansion
Option") for additional office space of approximately 25,000
square feet (the "Expansion Space"), to be located in any office
building to be built at Brookside by Landlord which will contain
speculative office space. In relation thereto, Landlord shall
provide written notice to Tenant of its intention to build
speculative office space at Brookside, at least ninety (90) days
prior to commencement of construction thereof. If space is
available, such Expansion Space shall be available to Tenant
upon the same terms and conditions contained herein, except that
the economic terms shall be at Fair Market Rental Value, as
defined below. In the event Tenant elects to exercise the
Expansion Option, and such space is still available, Tenant shall
provide written notice to Landlord of its intent to lease the
Expansion Space, and Landlord shall within seven (7) days provide
Tenant an option proposal (the "Option Proposal") stating the
location of such Expansion Space, the availability
<PAGE>
date and market terms. The lease term for such Expansion Space shall
be for five (5) years with Tenant having an option to cancel (the
"Cancellation Option") (a) at any time after the third lease
year, or (b) at any time after the second lease year in the event
Tenant elects to have Landlord develop the Additional Building
(as hereinafter defined), provided Tenant provides written notice
to Landlord of its intention to cancel the Lease ten (10) months
prior to the Cancellation Date and reimburses Landlord for one
hundred percent (100%) of all unamortized tenant improvement
costs (below the finished ceiling) and for any unamortized
brokerage commissions paid to Carter & Associates, L.L.C. by
Landlord. The Expansion Option shall be upon the same terms and
conditions as contained herein except that the annual base rental
shall be the fair market rental value which shall be determined
as follows:
(a) Landlord shall provide Tenant notice of its
determination of the Fair Market Rental Value in its Option
Proposal. Landlord and Tenant will have fifteen (15) days after
Tenant receives the Option Proposal within which to agree on the
then-fair market rental value of the Expansion Space as defined
in paragraph (c) below for the term of such lease. If they agree
on the terms of the Option Proposal, they will enter into a new
lease, on the same terms and conditions contained herein except
for the terms and conditions specific to the Expansion Space.
(b) If they are unable to agree on the base monthly rental
for the Expansion Space within fifteen (15) days, then the base
monthly rental for the term will be the Fair Market Rental Value
of the Expansion Space as determined in accordance with paragraph
(d) below.
(c) The "Fair Market Rental Value of the Expansion Space"
means what a Landlord under no compulsion to lease the Expansion
Space and a Tenant under no compulsion to lease the Expansion
Space would determine as rents for a five (5) year lease term, as
of the commencement of the term, taking into consideration the
uses permitted under the Lease, the quality, size, design, and
location of the Expansion Space, and the rent for comparable
buildings located in the vicinity of the Expansion Space
(inclusive of tenant improvement allowances and any concessions
which may be offered in the market place).
(d) Within seven (7) days after the expiration of the
fifteen (15) day period set forth in paragraph (b) above,
Landlord and Tenant will each appoint a real estate appraiser to
appraise the Fair Market Rental Value of the Expansion Space.
The two appraisers will meet promptly and attempt to set the
<PAGE>
then-fair market rental value of the Expansion Space. If they
are unable to agree within thirty (30) days, they will select a
third appraiser within ten (10) days to set the then fair market
rental value of the Expansion Space. Landlord and Tenant will
bear one-half (1/2) of the cost of appointing the third appraiser
and of paying the third appraiser's fee.
(e) Within thirty (30) days after the selection of the
third appraiser, a majority of the appraisers will set the Fair
Market Rental Value of the Expansion Space. If a majority of the
appraisers are unable to set the Fair Market Rental Value of the
Expansion Space within thirty (30) days after selection of the
third appraiser, the two appraisals which are closest in value
will be averaged and the average of these two will be the Fair
Market Rental Value of the Expansion Space.
(f) It is expressly understood that Tenant shall have no
option to exercise its Expansion Option if at the time of the
attempted exercise of such option or at the commencement of such
term this Lease is not then in full force and effect or if Tenant
is then in monetary default of any terms and conditions of this
Lease after applicable notice and cure periods.
(g) It is expressly understood that this Expansion Option
is subject to space availability. In the event there is no
available space at Brookside, then Landlord shall provide the
Expansion Space in another building which Landlord owns in the
North Fulton County office market (also subject to space
availability). In the event Landlord has multiple vacancies
which could accommodate this requirement, then the exact location
of the Expansion Space shall be determined by Tenant subject to
Landlord's approval, such approval not to be unreasonably
withheld, conditioned or delayed.
3. The Additional Building:
Provided this Lease is in full force and effect and Tenant
is not in monetary default of any terms and conditions of this
Lease after applicable notice and cure periods, Landlord shall
extend to Tenant certain opportunities, with respect to an
additional building which can be constructed approximately as
shown on Exhibit "J" attached hereto and made a part hereof (the
"Additional Building") (it being expressly understood by both
parties that the representation is conceptual in nature and that
the final building plan will be based on Tenant's requirement of
a minimum 50,000 square feet), subject to the following terms and
conditions:
<PAGE>
(a) Simultaneously with the execution of this Lease, Tenant
has entered into an Option Agreement with Realticorp. (the
"Option Agreement") to purchase from Realticorp. up to
approximately 25 acres of land adjacent to the Land (hereinafter
the "Additional Land"), said Option Agreement being attached
hereto as Exhibit "I". In consideration of the Construction
Option, as hereinafter defined, Landlord agrees to pay to Tenant
Ten Thousand Dollars ($10,000.00) on or before thirty (30) days
following Tenant's payment to Realticorp. of the Forty Thousand
Dollars ($40,000.00) payment due under the Option Agreement
(which payment is due Realticorp. on or before November 15,
1998). In the event Tenant elects to expand into an additional
building within the Additional Land, Tenant shall provide notice
thereof to Landlord. In such event, Landlord shall have the
option (the "Construction Option") to have Landlord construct,
for lease to Tenant, the Additional Building within the Phase II
Land, as hereinafter defined. In the event Landlord desires to
so construct the Additional Building for lease to Tenant,
Landlord shall provide written notice of such election on or
before thirty (30) days following its receipt of Tenant's notice.
In the event Landlord fails to provide such notice within said
thirty (30) day period or, provides notice to Tenant of its
election not to proceed with the construction of the Additional
Building for lease to Tenant, then, in such event, Landlord shall
have no further rights whatsoever with respect to the Option
Agreement or the Additional Land related thereto. If however,
Landlord does elect to construct the Additional Building for
Tenant, Tenant shall assign to Landlord so much of its rights
under the Option Agreement as are necessary to allow Landlord to
purchase that portion of the Additional Land upon which the
Additional Building and related improvements are to be
constructed (said portion being hereinafter referred to as the
"Phase II Land"), with Tenant retaining all other of its rights
under the Option Agreement. The Additional Building shall be of
similar quality as the Leased Premises in all material respects.
The size of the Additional Building shall be determined by Tenant
in its sole discretion. Other development decisions affecting
development costs, development schedule, and architectural style
of the Additional Building shall be mutually agreed upon between
Landlord and Tenant, the parties agreeing that the configuration
and style of the Additional Building shall be compatible with the
Building. In the event Tenant elects to have Landlord construct
the Additional Building pursuant to this paragraph, Tenant shall
enter into a Lease with Landlord for such space, which Lease
shall contain the same terms and conditions of this Lease, except
as follows:
<PAGE>
(i) The commencement date of the term of the Additional Building
Lease, as hereinafter defined, shall be the date of Substantial
Completion of construction of the Additional Building (the
"Commencement Date"); rental payments shall commence on the
Commencement Date. The term of the lease for the Additional
Building (hereinafter referred to as the "Additional Building
Lease") shall be for a minimum of seven (7) years.
(ii) The Additional Building Lease shall contain no further
expansion options, rights of refusal or other opportunities to
lease additional space, no period of free rent and no
construction allowance or other similar incentives other than as
specified in (iii) below.
(iii) The annual base rent for the Additional Building shall be
equal to a yield of 11.30% per annum on the Project Cost of the
Additional Building. Any specialized construction (above building
standard allowance of $22.00 per useable square foot below a
partially finished ceiling commensurate with the Building) will
be amortized over the remaining term of the Lease at 10.5% per
annum. Yield shall be calculated as gross rents less a vacancy
allowance of 5% on lease terms less than ten (10) years, less a
base year operating expense stop and less a structural reserve of
.07 per square foot, divided by Project Costs as hereinafter
defined. (Please note that for purposes of this transaction,
utilities are paid for by Tenant.)
(b) "Project Costs" shall mean Landlord's cost of the Phase
II Land, and any commissions relating to the lease transaction
and all direct and indirect, hard and soft, costs and expenses of
designing, permitting, landscaping and constructing the
Additional Building including general conditions and a
construction and development fee of 5% of the total costs.
Landlord acknowledges and agrees that all of the standards and
procedures provided for in the Work Letter Agreement attached
hereto as Exhibit "K" relating to the Building shall be followed
by Landlord with respect to its construction of the Additional
Building.
(c) Landlord represents and warrants that the factors and
methodology which will be used for the determination of the
rental rate necessary to realize an 11.30% per annum yield on the
Project Cost of the Additional Building as set forth in Section
3(a)(iii) above are the same factors and methodology Landlord
used in its calculation on the rental rate necessary to realize
an 11.30% per annum yield on the Project Cost of the Leased
<PAGE>
Premises. An example of said methodology is provided for on
Exhibit "M" attached hereto and made a part hereof. Landlord
further represents and warrants that the factors and methodology
used in the calculation of the 5% construction and development
fee for said Additional Building shall be the same as that used
in deriving the 5% construction and development fee applicable to
the Leased Premises. Finally, Landlord represents and warrants
that all phases of the development process relating to the
construction of the Additional Building shall be conducted on an
"open book" basis.
4. Lease Term Extensions: In the event Landlord constructs for
Tenant the Additional Building on the Phase II Land, Tenant shall
have the unilateral right to extend the lease term of the Leased
Premises so that it is co-terminus with the lease term of the
Additional Building. The extension Base Rental rate shall
escalate two and one-half (2.5%) percent annually from the end of
the original Lease for the Leased Premises.
5. Due Diligence Information: Landlord agrees to provide
Tenant with copies of all due diligence information collected by
Landlord associated with the Leased Premises or other land which
is included in Tenant's land option and agrees to consider in
good faith any of Tenant's comments or concerns in relation
thereto. Furthermore, Landlord acknowledges and agrees that it
has, on or before the date of execution hereof, provided to
Tenant a leasehold title insurance commitment which commitment
specifies all title exceptions applicable to the Land. Landlord
acknowledges and agrees that, as of the Commencement Date, only
those exceptions noted within Schedule B-2 of the title
commitment provided to Tenant shall encumber the Land, except,
however, that Landlord shall be able to place utility easements
on the Land for utilities to serve the Leased Premises.
6. Brookside Protective Covenants: To the extent that Landlord
exercises any control or influence with respect to the Protective
Covenants for Brookside, Landlord agrees that Tenant shall have
reasonable input into the establishment of same and that Landlord
will consider in good faith all of Tenant's comments and concerns
in relation thereto and will further consider in good faith all
of Tenant's comments and concerns in relation to any proposed
amendments thereto.
7. Infrastructure: Landlord shall enter into an agreement with
Realticorp. requiring that all infrastructure, including roads,
landscaping, park entry, signage and the section of the jogging
trail in the vicinity of the Building, shall be
<PAGE>
completed prior to the Commencement Date. The approximate location of
the jogging trail is shown on Exhibit "L" attached hereto and by this
reference made a part hereof.
8. Microwave Dishes: Tenant may install, at its sole cost and
expense (but at no additional rental), up to four (4) microwave
satellite dishes as well as related base site cabinets in
connection with such satellite dishes, on either the ground or
rooftop of the Leased Premises. The exact size of each dish
should not exceed six (6) feet in diameter. Any installation
shall be in accordance with applicable code requirements and
shall be subject to Landlord's approval of the size, design,
installation and appearance, and screening of such equipment,
such approval not to be unreasonably withheld, conditioned or
delayed. Any additional screening or structural reinforcement
necessary as a result of the installation of such microwave
dishes shall be at Tenant's sole cost and expense. Tenant's use
of and access to such facilities and equipment will be
uninterrupted while the Lease is in effect. In addition to the
foregoing, at Tenant's election, subject only to structural
limitations applicable to the Building, Tenant shall be entitled
to install additional microwave satellite dishes on the roof of
the Building or elsewhere on the Land; provided, however, each of
the above provisions relating to Landlord's approval of size,
design, installation, appearance and screening of the original
four microwave satellite dishes shall likewise apply to such
additional microwave dishes. Landlord acknowledges and agrees
that in no event shall it charge any additional rent with respect
to any such microwave satellite dishes; however, Tenant shall pay
for any structural alterations to the Building necessitated by
the installation of such microwave satellite dishes. Tenant
acknowledges and agrees that the placement of such additional
microwave dishes is contingent on there being adequate land for
the placement of such additional microwave dishes, and if Tenant
requests in writing Landlord to acquire any such additional land,
Tenant shall be responsible for the cost of acquiring such
additional land.
9. Traffic Signal: Upon the Commencement Date, Landlord will
either install a traffic signal at the Western entrance (primary
entrance) to the Office Park or that traffic officers will be on
site during peak hours and the lunch hour to direct traffic until
such time as the traffic signal has been installed.
10. Computer Cabling Conduits: Landlord shall, during its
initial construction of the Building and related improvements on
the Land, make accommodation for additional computer cabling
conduits running from the Building to the planned public
<PAGE>
right-of-way and running from the Building to the common property
line separating the Land and the Additional Land. In relation
thereto, Landlord acknowledges and agrees that it is likely
Tenant will, in the future, need to add additional computer cable
lines from the Building to the right-of-way and, in the event the
Additional Building is constructed, will desire to cross cable
between the Building and said Additional Building. Tenant
acknowledges and agrees that any and all costs for such
additional computer cabling work shall be borne by Tenant.
11. Buffer: Landlord shall enter into an agreement with the
owner of the property adjoining the eastern boundary of the Land
requiring that there be a ten (10) foot buffer located on all
property adjoining the eastern boundary of the Land.
<PAGE>
EXHIBIT I
[LAND OPTION AGREEMENT]
TO BE ATTACHED
<PAGE>
EXHIBIT J
[THE ADDITIONAL BUILDING]
<PAGE>
EXHIBIT K
[WORK LETTER AGREEMENT]
<PAGE>
EXHIBIT L
[LOCATION OF JOGGING TRAIL]
349255
349255
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (hereinafter
referred to as the "First Amendment") is made as of the 3rd day
of April 1998, by and between WEEKS REALTY, L.P. (hereinafter
referred to as "Landlord") and RADIANT SYSTEMS, INC. (hereinafter
referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease
Agreement dated October 7, 1997 (hereinafter referred to as the
"Agreement"), for the lease of land and an office building
containing approximately 106,631 rentable square feet (and
102,043 usable square feet) of office and warehouse space in
Brookside Office Park, Fulton County, Georgia;
WHEREAS, subsequent to the execution of the Agreement, the
legal description of the Land (as defined in the Agreement) was
revised based upon the final survey of the Land; and
WHEREAS, subsequent to the execution of the Agreement, it
was discovered that the incorrect entity was reflected as
Landlord's general partner in the signature block.
NOW, THEREFORE, for and in consideration of Ten Dollars
($10.00) paid by Landlord and Tenant to one another, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Landlord and
Tenant, Landlord and Tenant amend the Agreement as follows:
1. The Agreement is hereby amended to delete the legal
description of the Land attached as Exhibit "A" to the Agreement
and to substitute in lieu thereof the legal description which is
attached hereto as Exhibit "A" and incorporated herein by this
reference.
2. The Agreement is also amended to reflect that Weeks GP
Holdings, Inc., a Georgia corporation, is Landlord's sole general
partner.
3. Except as expressly modified by this First Amendment,
all provisions, terms and conditions of the Agreement shall
remain in full force and effect.
<PAGE>
4. In the event a provision of this First Amendment
conflicts with a provision of the Agreement, the First Amendment
shall supersede and control.
5. All terms and phrases used herein shall have the same
meaning as assigned to them in the Agreement.
6. This First Amendment shall not be of any legal effect
or consequence unless signed by Landlord and Tenant, and once
signed by Landlord and Tenant it shall be binding upon and inure
to the benefit of Landlord, Tenant, and their respective legal
representatives, successors and assigns.
7. This First Amendment has been executed and shall be
construed under the laws of the State of Georgia.
IN WITNESS WHEREOF, the undersigned have caused this First
Amendment to be executed under seal and delivered as of the day
and year first above written.
LANDLORD:
Signed, sealed, and delivered in WEEKS REALTY, L.P., a Georgia
the presence of: limited partnership
/s/ Kelly A. Kinney By: Weeks GP Holdings, Inc.,
Unofficial Witness A Georgia corporation,
its sole general partner
/s/ Karen F. Correnty
Notary Public By: /s/ Forrest W. Robinson
Name:
My Commission Expires: Title:
March 26, 2000
[NOTARIAL SEAL] [CORPORATE SEAL]
Signatures continued on following page
<PAGE>
TENANT:
Signed, sealed, and delivered in RADIANT SYSTEMS, INC., a
the presence of: Georgia corporation
/s/ Renee Jones By: /s/ John H. Heyman
Unofficial Witness Name: John Heyman
Title: CFO
/s/ Ruthann Tino
Notary Public
My Commission Expires: March 24, 1999
[NOTARIAL SEAL] [CORPORATE SEAL]
<PAGE>
EXHIBIT A
(Tract P-1/Radiant)
ALL THAT TRACT OR PARCEL OF LAND lying and being in the City of
Alpharetta, in Land Lot 50 of the 1st District, 1st Section,
Fulton County, Georgia and being more particularly described as
follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at the intersection
of Land Lots 50, 51, 82 and 83, aforesaid District, Section and
County; run thence along the southern boundary of Land Lot 50,
South 89(51'49" West a distance of 242.08 feet to a 5/8" rebar
set and the TRUE POINT OF BEGINNING; from the True Point of
Beginning as thus established and thence continuing along said
land lot line the following courses and distances: South
89(51'49" West a distance of 210.00 feet to a 5/8" rebar set;
South 89(26'07" West a distance of 45.86 feet to a 1/2" rebar
set; South 89(55'39" West a distance of 283.60 feet to a 5/8"
rebar set; and South 89(55'39" West a distance of 25.82 feet to
a point located in the centerline of a creek (said centerline
being the property line); run thence in a generally northwesterly
direction along said centerline, and following the meanderings
thereof, the following courses and distances: North 41(30'21"
East, 4.92 feet to a point; North 14(22'37" East, 13.73 feet to a
point; North 31(10'03" West, 13.37 feet to a point; South
72(00'00" West, 16.36 feet to a point; South 74(47'00" West,
16.62 feet to a point; South 64(53'57" West, 28.66 feet to a
point; South 89(56'29" West, 14.51 feet to a point; North
02(26'55" West, 11.54 feet to a point; North 25(26'18" East,
22.40 feet to a point; North 01( 57'35" East, 10.22 feet to a
point; North 43(44'42" West, 9.44 feet to a point; North
30(17'38" West, 22.78 feet to a point; North 44( 52' 53" West,
56.18 feet to a point; North 24(54'45" West, 9.00 feet to a
point; North 14(56'16" East, 7.78 feet to a point; North
10(50'16" East, 33.87 feet to a point; North 19( 14'38" East,
17.69 feet to a point; North 55(17'45" East, 22.60 feet to a
point; North 45(31'27" East, 15.05 feet to a point; North
17(48'05" West, 9.26 feet to a point; North 06(08'58" West, 27.57
feet to a point; North 14(46'37" West, 39.87 feet to a point; and
North 12(29'06" West, 22.73 feet to a point; thence leaving said
centerline of the creek, run North 51(43'33" East a distance of
347.95 feet to a 5/8" rebar set; thence North 16(22'35" East a
distance of 231.62 feet to a 5/8" rebar set on the southern
right-of-way line of a proposed road to be known as Brookside
Parkway (right-of-way varies); run thence in a generally
northeasterly direction along said proposed right-of-way line the
following two courses and distances: along the arc of a
540.05-foot radius curve, an arc distance of 341.00 feet to a
5/8" rebar set (said arc being subtended by a chord lying to the
north thereof having a bearing of North 85(58'23" East and a
chord length of 335.36 feet); and along the arc of a 15.00-foot
radius curve, an arc distance of 22.21 feet to a 5/8" rebar set
(said arc being subtended by a chord lying to the southwest
thereof having a bearing of South 69(41'51" East and a chord
length of 20.24 feet), said rebar being located on the western
right-of-way line of a proposed road (right-of-way varies); run
thence along said right-of-way line the following two courses and
distances: South 27(16'45" East a distance of 39.07 feet to a
5/8" rebar set; and along arc of a 350.00-foot radius curve, an
arc distance of 205.00 feet to a 5/8" rebar set (said arc being
subtended by a chord lying to the northeast thereof having a
bearing of South 44(03'31" East and a chord length of 202.08
feet); thence leaving said proposed right-of-way line, run South
30(58'55" West a distance of 354.75 feet to a point; thence South
<PAGE>
00(11'10" West a distance of 270.00 feet to a 5/8" rebar set on
the south land lot line of Land Lot 50 and the TRUE POINT OF
BEGINNING.
Said parcel contains 9.9727 acres and is shown on, and described
according to, that certain Survey for Weeks Realty, Inc. and
Chicago Title Insurance Company, dated September 15, 1997, last
revised October 9, 1997, prepared by Ruhling and Ruhling Land
Surveyors (Vance W. Ruhling, Georgia R.L.S. No. 2134), which
certain Survey is incorporated herein by this reference and made
a part of this description.
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (hereinafter
referred to as the "Second Amendment") is made as of the ______
day of September 1998, by and between WEEKS REALTY, L.P.
(hereinafter referred to as "Landlord") and RADIANT SYSTEMS, INC.
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease
Agreement dated October 7, 1997, as amended by that certain First
Amendment to Lease dated April 3, 1998, (hereinafter
collectively referred to as the "Agreement"), for the lease of
land and an office building containing approximately 106,631
rentable square feet (and 102,043 usable square feet) of office
and warehouse space in Brookside Office Park, Fulton County,
Georgia;
WHEREAS, pursuant to Paragraph 3.03 of the Agreement,
Landlord provided Tenant with an Allowance in the amount of
$2,244,946.00 for the installation and construction of tenant
improvements to the Leased Premises, and Tenant expended
$510,215.00 in excess of the Allowance;
WHEREAS, pursuant to Paragraph 4.02 of the Agreement,
Landlord agreed to pay damages to Tenant in the event there was a
delay in the delivery of the Leased Premises; and
WHEREAS, Landlord and Tenant desire to enter into this
Second Amendment in order to set forth their agreement regarding
the payment of such costs and to amend the rental rate
accordingly under the Agreement and to provide for the resolution
of any claim for the payment of damages to Tenant for delay in
delivery ;
NOW, THEREFORE, for and in consideration of Ten Dollars
($10.00) paid by Landlord and Tenant to one another, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Landlord and
Tenant, Landlord and Tenant amend the Agreement as follows:
<PAGE>
1. Paragraph 3.01 of the Agreement is hereby amended to
provide for the amortization of the overage cost of the
Allowance. The base rental shall be as follows:
Years 1-5 $141,168.60/month $1,694,023.20/year
Years 6-10 $157,266.51/month $1,887,198.10/year
in accordance with the Rental Rate Adjustment schedule
attached hereto as Exhibit A and incorporated herein by this
reference, which payments shall be due and payable together with
any other additional rental due under the Agreement, all as set
forth in the Agreement.
2. In the event the net sum total cost of the tenant
improvements to the Leased Premises exceeds the total Allowance,
as herein adjusted, the excess shall be paid by Tenant within
thirty (30) days of Tenant's receipt of Landlord's notice.
3. Pursuant to the provisions of Paragraph 4.02 of the
Agreement, Landlord hereby pays to Tenant an amount equal to
$180,000.00 which amount represents full and complete payment of
any amounts owed to Tenant under Paragraph 4.02 of the Agreement.
Tenant hereby agrees that such amount is in full satisfaction of
any amount claimed to be due Tenant under Paragraph 4.02 of the
Agreement and hereby waives and releases any and all claims or
any rights for additional damages it has or may have against the
Landlord due to any delay in the delivery of the Leased Premises.
4. Except as expressly modified by this Second Amendment,
all provisions, terms and conditions of the Agreement shall
remain in full force and effect.
5. In the event a provision of this Second Amendment
conflicts with a provision of the Agreement, the Second Amendment
shall supersede and control.
6. All capitalized terms and phrases used herein shall have
the same meaning as assigned to them in the Agreement.
7. This Second Amendment shall not be of any legal effect
or consequence unless signed by Landlord and Tenant, and once
signed by Landlord and Tenant it shall be binding upon and inure
to the benefit of Landlord, Tenant, and their respective legal
representatives, successors and assigns.
8. This Second Amendment has been executed and shall be
construed under the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Second
Amendment to be executed under seal and delivered as of the day
and year first above written.
LANDLORD:
Signed, sealed, and delivered in WEEKS REALTY, L.P., a Georgia
the presence of: limited partnership
/s/ Ann Loewert By: Weeks GP Holdings, Inc.,
Unofficial Witness a Georgia corporation,
its sole general partner
/s/ Karen F. Correnty
Notary Public
By:/s/ Forrest W. Robinson
Name: Forrest W. Robinson
My Commission Expires: Title: President/C.O.O.
March 26, 2000
[NOTARIAL SEAL] [CORPORATE SEAL]
TENANT:
Signed, sealed, and delivered in RADIANT SYSTEMS, INC., a Georgia
the presence of: corporation
___________________________
Unofficial Witness By: /s/ John H. Heyman
Name: John H. Heyman
/s/ Karen Westbrook Title: CFO
Notary Public
My Commission Expires: Attest: /s/ Alon Goren
January 15, 2002 Name:
Title:
[NOTARIAL SEAL] [CORPORATE SEAL]
<PAGE>
EXHIBIT A
Radiant Systems at Brookside
Rental Rate Adjustment
25-Sep-98
Building Rentable Square Feet (RSF) 106,631
Building Useable Square Feet (USF) 102,043
<TABLE>
Cost Annual Rent Monthly Rent
----------- ------------- ------------
<S> <C> <C> <C>
Additional Tenant Improvements
($5.00 per USF amortized at 10.5%) 510,215.00 82,615.03 6,884.59
Base Building Revisions
($0.0014 per RSF for each $1,000 of additional cost)
Modify base building structure for file storage 1,160.00 173.17 14.43
Increase elevators doors to 8'-0" 2,544.00 379.78 31.65
Maple doors at corridors 7,142.00 1,066.18 88.85
---------- ------------ ----------
10,846.00 1,619.13 134.93
Total Rent Adjustments 84,234.16 7,019.51
Current Rate (Yrs 1-5) 1,609,789.00 134,149.08
</TABLE>
Adjusted Rent (Yrs 1-5) 1,609,023.16 141,168.60
<PAGE>
STANDARD WAREHOUSE LEASE AGREEMENT. Building Meadows XII
Atlanta Industrial / 1997 Address 6610 Shiloh
Road East
Sq. Ft. 54,798
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between
Meadows Industrial, LLC hereinafter referred to as "Landlord,"
and Radiant Systems, Inc. hereinafter referred to as "Tenant";
W I T N E S S E T H :
1. PREMISES AND TERM. In consideration of the obligation of
Tenant to pay rent as herein provided, and in consideration of
the other terms, provisions and covenants hereof, Landlord hereby
demises and leases to Tenant, and Tenant hereby accepts and
leases from Landlord certain Premises situated within the County
of Forsyth, State of Georgia, more particularly the portion of
the Building described on Exhibit "D" attached hereto and
incorporated herein by reference, together with all rights,
privileges, easements, appurtenances, and amenities belonging to
or in any way pertaining to the Premises and together with the
buildings and other improvements situated or to be situated upon
said Premises (said real property, building and improvements
being hereinafter referred to as the "Premises").
TO HAVE AND TO HOLD the same for a term commencing on the
"commencement date", as hereinafter defined, and ending sixty
(60) months thereafter; provided however, that in the event the
commencement date is a date other than the first day of a
calendar month, said term shall extend for said number of months
in addition to the remainder of the calendar month following the
commencement date.
A.
B.
The commencement date shall be the later of (i) January 15,
1998 or (ii) fourteen (14) days after the date upon which the
buildings and other improvements erected and to be erected upon
the Premises shall have been substantially completed, as such
term is hereinafter defined, in accordance with the plans and
specifications described in Exhibit "B" attached hereto and
incorporated herein by reference. Landlord acknowledges and
agrees that it shall use all reasonable efforts to substantially
complete the Premises on or before January 1, 1998 (the "Target
Completion Date"). The commencement date shall be fourteen (14)
days after substantial completion, as defined herein, as to allow
Tenant time to install FF&E, computer cabling, telephone systems,
security systems, fire alarms, racking systems and inventory such
fourteen (14) days of activity hereinafter referred to as the
"Installation". However, establishing commencement two (2) weeks
after substantial completion is not intended to provide free
occupancy and rent will commence earlier if Tenant has
substantially occupied the Premises. If Landlord has failed to
substantially complete the Premises within thirty (30) days
following the Target Completion Date and such failure is not the
result of either (i) Tenant Delays, as hereinafter defined, or
(ii) force majeure, then, in such event Tenant shall receive one
day of free rent for every day beyond this thirty (30) day grace
period that substantial completion is achieved. For example, if
substantial completion is achieved on February 14, 1998, then
Tenant will perform the Installation and take occupancy on
February 28, 1998. Due to the delayed completion rental and the
Lease would commence on February 28, 1998. The term
"substantially completed" and "substantial completion" shall mean
completion of all construction of the Premises in accordance with
the plans and specifications described on Exhibit "B", subject
only to normal punch list items and completion of all offsite
improvements reasonably necessary for Tenant to occupancy of
operation of its business within the Premises, including, but not
limited to all roadways, parking areas and utility lines. It is
understood and agreed by Landlord and Tenant that in order to
achieve substantial completion the only permitted incomplete or
defective punch list items must be those which shall, if taken
either individually or in the aggregate, do not materially or
substantially interfere with Tenant's taking possession of,
moving its personal property and effects into, or using and
enjoying the Premises for the purposes for which it was intended.
Landlord shall deliver to Tenant a final Certificate of Occupancy
for the Premises upon achievement of substantial completion as
evidence thereof. In the event of any dispute as to substantial
completion of the work performed or required to be performed by
Landlord, the certificate of Landlord's architect and Landlord's
general contractor along with the Certificate of Occupancy shall
be conclusive. For the purpose hereof, Tenant Delays shall
include (i) Tenant's failure to agree to plans, specifications
and cost estimates within such reasonable period of time as
designated by Landlord, (ii) Tenant's request for materials,
finishes or installation other than Landlord's standard provided
Landlord informs Tenant of the estimated amount of delay which
would result form such items at the time of Tenant's request
therefore; (iii) Tenant requested change orders to the plans or
specifications; or (iv) and interference by Tenant or Tenant's
employees or agents with Landlord's prosecution of the work
necessary to substantially complete the Premises. In the event
Landlord shall be delayed in substantial completion of the
Premises s a result of a Tenant Delay, the commencement date and
the payment of rent hereunder shall be accelerated by the number
of days of such Tenant
<PAGE>
Delay; provided, however, in no event shall the commencement date
occur prior to January 15, 1998. Taking of possession by Tenant shall
be deemed to conclusively establish that the buildings and other
improvements have been completed in accordance with the plans and
specifications and the Premises are in good and satisfactory condition
as of when possession was so taken subject, however, to all punch list
items and possible latent defects. Tenant acknowledges that no
representations as to the repair of the Premises have been made
by Landlord, unless such are expressly set forth in this Lease.
Following the commencement date, Tenant shall, upon demand,
execute and deliver to Landlord a letter of acceptance of
delivery of the Premises, which letter shall be subject only to
punch list items and possible latent defects. The Premises shall
be constructed by Landlord in compliance with all federal, state,
county, municipal or local government laws, ordinances,
regulations, rules and orders. Further, Landlord shall be fully
responsible for insuring that the Premises are constructed in
compliance with any applicable protective covenants. During the
course of construction of the Premises, Tenant or Tenant's agents
or contractors may enter upon the Premises for the purposes of
inspecting and reviewing the work as may be appropriate or
desirable without being deemed to have taken possession or
obligated itself to pay rent but Tenant agrees that: (a) Landlord
should have no liability for injury to any person or damage to
any property of Tenant stored on the Leased Premises except for
damages caused by the willful or negligent acts of Landlord or
its employees or agents, (b) Tenant shall not materially
interfere with Landlord's construction work in the Premises, (c)
Tenant shall indemnify, protect and hold harmless Landlord from
and against any and all claims, demands, losses, costs, expenses,
liabilities and actions at law or in equity based upon any
occurrence or condition arising out of or attributable to
Tenant's exercise of such right, and (d) Tenant shall be solely
responsible for the permitting of any such work it performs.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord rent for the Premises,
in advance, without demand, deduction or set off, for the entire
term hereof at the rate of Twenty-two thousand six hundred
ninety-six and No/100 Dollars ($22,696.00) per month. One such
monthly installment shall be due and payable on the date hereof
and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the
commencement date recited above during the hereby demised term,
except that the rental payment for any fractional calendar month
at the commencement or end of the lease period shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the
date hereof the sum of Twenty-two thousand six hundred ninety-six
and no/100 Dollars ($22,696.00), which sum shall be held by
Landlord, without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this
lease, it being expressly understood and agreed that such deposit
is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon the occurrence of any
event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided
by law, use such fund to the extent necessary to make good any
arrears of rent or other payments due Landlord hereunder, and any
other damage, injury, expense or liability caused by such event
of default; and Tenant shall pay to Landlord on demand the amount
so applied in order to restore the security deposit to its
original amount. Although the security deposit shall be deemed
the property of Landlord, any remaining balance of such deposit
shall be returned by Landlord to Tenant at such time after
termination of this lease that all of Tenant's obligations under
this lease have been fulfilled.
3. USE.
A. The demised Premises shall be used only for the purpose
of general office, receiving, storing, shipping and selling
(other than retail) products, materials and merchandise made
and/or distributed by Tenant, light manufacturing and product
testing and for such other lawful purposes as may be incidental
thereto, and subject to any building or building complex rules
and regulations. Outside storage, including without limitation,
trucks and other vehicles, is prohibited without Landlord's prior
written consent. However, Tenant from time to time will park
trucks and trailers within the delivery area and will locate a
trash compactor and visually screened air compressor in the truck
court. Additionally, Tenant will stripe, at Landlord's expense,
a portion of the truck court as shown on Exhibit E and Tenant
agrees to utilize these striped spaces on a regular basis to
avoid absorbing more than their proportionate of spaces provided
in front of the Building. The spaces in front of the Building
that Tenant has the non-exclusive right to use are also depicted
on Exhibit E. Landlord and Tenant understand and agree that
Tenant will be mounting and 18" satellite dish on the roof of the
southwestern corner of the Building. Any damage to roof
components due to the installation or maintenance of the dish
will be Tenant's responsibility. Tenant shall at its own cost
and expense obtain any and all licenses and permits necessary for
any such use. Tenant shall comply with all governmental laws,
ordinances and regulations applicable to its particular use of
the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and
abatement of nuisances in or upon, or connected with, the
Premises, all at Tenant's sole expense. Tenant shall not permit
any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other
action which would constitute a nuisance or would disturb or
endanger any other tenants of the building in which their
Premises are situated or unreasonably interfere with their use of
their respective Premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any
product, material or merchandise which is explosive or highly
flammable. Tenant will not permit the Premises to be used for
any purpose or in any manner (including without limitation any
method of storage) which would render the insurance thereon void
or the insurance risk more hazardous or cause the State Board of
Insurance or other insurance authority to disallow any sprinkler
credits.
B. Tenant agrees that the point pressure resulting from
Tenant's racking system, inventory, forklifts and equipment
pertaining to Tenant's use of the Premises shall not exceed
allowable design floor loading for floor slabs
<PAGE>
on grade. Tenant
shall hold harmless Landlord from any claims, loss, liability,
and expensesarising out of such damage or repair caused by
Tenant's negligence or failure to comply with this paragraph.
4. TAXES.
A. Landlord Tenant agrees to pay before they become
delinquent its proportionate share of all taxes, assessments and
governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied
or assessed against the building and the grounds, parking areas,
driveways and alleys immediately adjacent to the building.
provided however, that if the taxes paid by Landlord exceed $_____
annually, then any excess shall be paid by Tenant to Landlord, upon
demand, as additional rental. In the event any such amount is not
paid within twenty (20) days after the date of Landlord's invoice to
Tenant, such invoice to be accompanied by a true copy of the taxbill,
the unpaid amount shall bear interest at the rate of fifteen (15%)
percent per annum from the date which is thirty (30) days following
such invoice until payment by Tenant. Landlord reserves the right to
require Tenant during each month of the lease term to pay an escrow
deposit to Landlord equal to one-twelfth of its proportionate share of
the estimated taxes, such estimated taxes not requiring the invoice
copy mentioned above. If the Tenant's total tax escrow payments are
less than Tenant's actual proportionate share of such taxes,
Tenant shall pay to Landlord upon demand the tax payment
shortage; if the total tax escrow payments of Tenant are more
than Tenant's actual proportionate share of such taxes, Landlord
shall retain such excess and credit it to Tenant's next accruing
tax escrow payment.
B. If at any time during the term of this lease, the present
method of taxation shall be changed so that, in lieu of the whole
or any part of any taxes, assessments or governmental charges
levied, assessed or imposed on real estate and the improvements
thereon, there shall be levied, assessed or imposed on Landlord a
tax directly on the rents received therefrom and/or a franchise
tax, assessment, levy or charge measured by or based, in whole or
in part, upon such rents for the present or any future building
or buildings on the Premises, then all such taxes, assessments,
levies or charges, or the part thereof so measured or based,
shall be deemed to be included within the term "taxes" for the
purposes hereof.
C. The Landlord shall have the right to employ an unrelated
third party tax consulting firm to attempt to assure a fair tax
burden on the building and grounds within the applicable taxing
jurisdiction. Landlord shall use reasonable efforts to obtain
such service on a contingency fee basis where the cost of such
service is less than or equal to the amount of tax savings
realized. Tenant shall pay to Landlord upon demand from time to
time, as additional rent, the amount of Tenant's proportionate
share of the cost of such service as part of the expenses
described in 6A.
D. Any payment to be made pursuant to this paragraph 4 with
respect to the real estate tax year in which this lease commences
or terminates shall be prorated.
5. LANDLORD'S REPAIRS AND OBLIGATIONS. Landlord shall at its
sole expense maintain only the roof, foundation, floor slab the
exterior walls and the structural elements of the Building
including in good repair, reasonable wear and tear excepted.
Tenant shall repair and pay for any damage caused by the
negligence of Tenant, or Tenant's employees, agents or invitees,
or caused by Tenant's default hereunder. The term "walls" as
used herein shall not include windows, glass or plate glass,
doors, store fronts or office entries. Tenant shall immediately
give Landlord written notice of defect or need for repairs, after
which Landlord shall have reasonable opportunity to repair same
or cure such defect. Landlord's liability with respect to any
defects, repairs or maintenance for which Landlord is responsible
under any of the provisions of this lease shall be limited to the
cost of such repairs or maintenance or the curing of such defect.
Notwithstanding anything else wherein this Lease to the contrary,
Landlord shall, at its sole cost and expense, upon notice by
Tenant for a period of one (1) year immediately subsequent to the
commencement date, repair, replace or otherwise correct
structural or other construction defects, as well as defects in
any of the additional items to be constructed or installed by
Landlord within the Premises in accordance with this Lease,
provided, however, Landlord shall not have any obligation to
correct or repair any defect or condition caused by the normal
wear, misuse or negligent acts of Tenant, its agents,
contractors, employees or invitees. Landlord acknowledges and
agrees that such costs of Landlord shall not be passed through to
Tenant under any other provision of this Lease. Tenant shall
have the right to conduct any repairs itself, which Landlord has
failed to complete under this one (1) year warranty following
notice and reasonable opportunity to do so, with Landlord being
responsible for the cost thereof.
6. TENANT'S REPAIRS AND OBLIGATIONS.
A. Tenant shall at its own cost and expense keep and
maintain all parts of the Premises(except those for which
Landlord is expressly responsible under the terms of this lease)
in good condition, promptly making all repairs, repainting, and
replacements, including but not limited to, windows, glass and
plate glass, doors, any office entries, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and
air conditioning systems, dock levelers, truck doors, dock
bumpers, plumbing work and fixtures, termites and pest
extermination inside the building, regular removal of trash and
debris. Tenant shall not be obligated to repair any damage caused
by fire, tornado or other casualty covered by the insurance to be
maintained by Landlord pursuant to subparagraph 12A below, except
that Tenant shall be obligated to repair all wind damage to glass
except with respect to tornado or hurricane damage.
B. The cost of maintenance and repair of any common party
walls (any wall, divider, partition or any other structure
separating the Premises from any adjacent Premises) shall be
shared equally by the Tenant and the
<PAGE>
tenant or tenants occupying the adjacent Premises, unless damage is
attributable to the actions of a specific tenant in which case the
responsible tenant shall bear all costs of repair. Tenant shall not
damage any demising wall or disturb the integrity and support provided
by any demising wall and shall, at its sole cost and expense,
promptly repair any damage or injury caused to any demising wall
caused by Tenant or its employees, agents or invitees.
C. In the event the Premises constitute a portion of a
multiple occupancy building, Tenant and its employees, customers
and licensees shall have the non-exclusive right to use the
parking areas designated on Exhibit E as the Tenant parking area,
subject to such reasonable rules and regulations as Landlord may
from time to time prescribe and subject to rights of ingress and
egress of other tenants. Landlord shall not be responsible for
enforcing Tenant's exclusive parking rights against any third
parties.
D. Landlord shall maintain the grounds, regularly performing
the mowing of any grass, trimming, weed removal, general
landscape maintenance, common sewage line plumbing, common
exterior lighting (if applicable), common dumpster removal (if
applicable) and other exterior maintenance obligations of the
building, including but not limited to painting, the maintenance,
and repair of the parking areas, driveways, alleys and
maintenance of the whole of the Premises in a clean and sanitary
condition, and may provide all or any part of Tenant's repairs
and obligations under subparagraph 6A above. Notwithstanding the
foregoing, in no event shall any such common area maintenance
costs include capital expense items. and At Tenant's request,
which will not occur more frequently than annually, Landlord will
competitively bid the landscape maintenance portion of this work
between no fewer than two (2) qualified contractors. Tenant
shall, pay monthly as additional rent due under subparagraph 2A
for its proportionate share of the cost and expense, including
reasonable overhead not to exceed seven percent (7%) of actual
costs and reserves for items described in this paragraph 6;
provided however that Landlord shall have the right to require
Tenant to pay such other reasonable proportions of said repairs
and obligations as may be determined by Landlord and further
provided that if Tenant or any other particular tenant of the
building can be clearly identified as being responsible for
obstructions or stoppage of the common sanitary sewage line, then
Tenant, if Tenant is responsible, shall pay the entire cost
thereof, upon demand, as additional rent. If, for any calendar
year during which the Lease is in effect, Tenant's total monthly
payments made pursuant to this subparagraph are less than
Tenant's actual proportionate share of such repair obligations,
Tenant shall pay to Landlord upon demand the payment shortage. If
the total monthly payments are more than Tenant's actual
proportionate share of such repairs and obligations, Landlord
shall retain such excess and credit it to Tenant's next accruing
monthly payment for such repairs and obligations.
E.
F. Tenant shall, at its own cost and expense, enter into a
semi-annual scheduled preventive maintenance/service contract
with a maintenance contractor for servicing all hot water,
heating and air conditioning systems and equipment within the
Premises. The maintenance contractor and the contract must be
approved by Landlord. Landlord may, at its option, enter into
such maintenance agreement provided it is competitively priced
and Tenant will pay to Landlord, as additional rent, for the cost
of such contract. The service contract must include all services
suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a
copy thereof delivered to the Landlord) within thirty (30) days
of the date Tenant takes possession of the Premises.
7. ALTERATIONS. Tenant shall not make any alterations,
additions or improvements to the Premises (including but not
limited to roof and wall penetrations) without the prior written
consent of Landlord, which consent shall not be unreasonably
withheld. In the event Landlord consents to the making of any
such alterations, additions or improvements by Tenant, the same
shall be made by Tenant, at Tenant's sole cost and expense, in
accordance with all applicable laws, ordinances and regulations,
and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications
approved by Landlord; and any contractor or person selected by
Tenant to make the same and all subcontractors must first be
approved in writing by Landlord. Tenant may, without the consent
of Landlord, but at its own cost and expense and in a good
workmanlike manner erect such shelves, bins, machinery and trade
fixtures as it may deem advisable, without altering the basic
character of the building or improvements and without overloading
or damaging such building or improvements, and in each case
complying with all applicable governmental laws, ordinances,
regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain
the property of Tenant during the term of this lease and Tenant
shall, unless Landlord otherwise elects as hereinafter provided,
remove all alterations, additions, improvements and partitions
erected by Tenant and restore the Premises to their original
condition by the date of termination of this lease or upon
earlier vacating of the Premises; provided, however, that if
Landlord so elects prior to termination of this lease or upon
earlier vacating of the Premises, such alterations, additions,
improvements and partitions shall become the property of Landlord
as of the date of termination of this lease or upon earlier
vacating of the Premises and shall be delivered up to the
Landlord with the Premises. Notwithstanding the foregoing
sentence, all shelves, bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the
termination of this lease if Tenant so elects, and shall be
removed by the date of termination of this lease or upon earlier
vacating of the Premises if required by Landlord. Upon any such
removal Tenant shall restore the Premises to their original
condition (normal wear and tear excepted). All such removals and
restoration shall be accomplished in a good workmanlike manner so
as not to damage the primary structure or structural qualities of
the building and other improvements situated on the Premises.
<PAGE>
8. SIGNS. Tenant agrees to conform to Landlord's signage
program for the building; however, except as expressly provided
for below all costs and expenses for the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall have
the right to install standard signs upon the Premises only where
first approved in writing by Landlord and subject to any
applicable governmental laws, ordinances, regulations and other
requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall
be made in such a manner as to avoid injury or defacement of the
building and other improvements, and Tenant shall repair any
injury or defacement, including without limitation, discoloration
caused by installation and/or removal. Tenant shall have the
right at its sole cost and expense within Landlord's standards,
to place signage on the exterior of the Demised Premises. On
this, the exact location and size of the signage, as well as a
basic conceptual plan therefor, should be approved by Landlord
prior to Lease execution. Landlord's signage standards include
placing Tenant's company name in a standard type face on a 5 foot
high and 10 foot wide monument in front of the Building at
Landlord's expense and placing Tenant's company name, in Tenant's
logo typeface if desired on the glass store front at the entry to
Tenant's space, at Tenant's expense.
9. INSPECTION AND RIGHT OF ENTRY. Landlord and Landlord's
agents and representatives shall have the right to enter the
Premises at any time in the event of an emergency and to enter
and inspect the Premises at any reasonable time during business
hours with reasonable prior notification, for the purpose of
ascertaining the condition of the Premises or in order to make
such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that
is six (6) months prior to the end of the term hereof, Landlord
and Landlord's agents and representatives shall have the right to
enter the Premises at any reasonable time during business hours
with reasonable prior notification for the purpose of showing the
Premises and shall have the right to erect on the Premises a
suitable sign indicating the Premises are available. Tenant
shall give written notice to Landlord at least ten (10) days
prior to vacating the Premises and shall arrange to meet with
Landlord for a joint inspection of the Premises prior to
vacating. In the event of Tenant's failure to give such notice
or arrange such joint inspection, Landlord's inspection at or
after Tenant's vacating the Premises shall be, absent manifest
error, conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
10. UTILITIES. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into
the Premises in accordance with the specifications, if any,
attached hereto. Tenant's interior build-out will include
telephone and computer conduit. Tenant shall pay for all water,
gas, heat, light, power, telephone, sewer, sprinkler charges and
other utilities and services used on or from the Premises,
together with any taxes, penalties, surcharges or the like
pertaining thereto, and any maintenance charges for utilities,
and shall furnish all electric light bulbs and tubes. If any
such services are not separately metered to Tenant, Tenant shall
pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other Premises. Landlord shall in no
event be liable for any interruption or failure of utility
services on the Premises. Unless and except under circumstances
where such interruption arises as a result of the gross
negligence or willful misconduct of Landlord or those for whom
Landlord is responsible at law.
11. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not sell, assign, encumber or otherwise
transfer by operation of law or otherwise, this lease or any
interest herein, sublet the Premises or any portion thereof, or
suffer any other person to occupy or the use of the Premises or
any portion thereof, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed as provided herein, nor shall Tenant
permit any lien to be placed on the Tenant's interest by
operation of law. Tenant shall, by written notice, advise
Landlord of its desire from and after a stated date (which shall
not be less than thirty (30) days nor more than ninety (90) days
after the date of Tenant's notice) to sublet the Premises or any
portion thereof for any part of the term thereof; and in such
event, Landlord shall have the right, to be exercised by giving
written notice to Tenant within ten (10) days after receipt of
Tenant's notice, to terminate this lease as to the portion of the
Premises described in Tenant's notice and such notice shall, if
given, terminate this lease with respect to the portion of the
Premises therein described as of the date stated in Tenant's
notice. However, if Landlord chooses to exercise such right of
termination, Tenant may, within ten (10) days of Landlord's
decision, rescind the request to sublease. Said notice by Tenant
shall state the name and address of the proposed subtenant, and
Tenant shall deliver to Landlord a true and complete copy of the
proposed sublease with said notice. If said notice shall specify
all of the Premises and Landlord shall give said termination
notice with respect thereto, this lease shall terminate on the
date stated in Tenant's notice. If Landlord, upon receiving said
notice by Tenant, with respect to any of the Premises, shall not
exercise its right to terminate, Landlord will not unreasonably
withhold its consent to Tenant's subletting the Premises
specified in said notice. Tenant shall, at Tenant's sole cost
and expense, discharge in full any outstanding commission
obligation which may be due and owing as a result of any proposed
assignment or subletting. Notwithstanding the foregoing, Tenant
shall have the right, without Landlord's consent, to sublet the
leased Premises or any part thereof, or assign this Lease to any
of Tenant's parent, subsidiaries or affiliated companies;
provided, however, as a condition to any such subletting or
assignment (i) both Tenant and the proposed subtenant or, if
applicable, assignee shall be solvent at the time of each such
subletting and/or assignment; (ii) Tenant shall provide Landlord
at least ten (10) business days prior written notice of each such
subletting and/or assignment; and (iii) no such subletting and/or
assignment shall release Tenant from Tenant's primary liability
under this Lease.
B. Any subletting hereunder by Tenant shall not result in
Tenant being released or discharged from any liability under this
lease. As a condition to Landlord's prior written consent as
provided for in subparagraph 11A above, the subtenant or
subtenants shall agree in writing to comply with and be bound by
all of the terms,
<PAGE>
covenants, conditions, provisions and agreements of this lease, and
Tenant shall deliver to Landlord promptly after execution, an executed
copy of each sublease and an agreement of said compliance by each
sublessee.
C. Landlord's consent to any sale, assignment, encumbrance,
subletting, occupation, lien or other transfer shall not release
Tenant from any of Tenant's obligations hereunder or be deemed to
be a consent to any subsequent occurrence. Any sale, assignment,
encumbrance, subletting, occupation, lien or other transfer of
this lease which does not comply with the provision of this
paragraph 11 shall be null and void.
12. FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain insurance covering the
building of which the Premises are a part in an amount not less
than one hundred percent (100%) of the replacement cost thereof,
insuring against the perils of Fire, Lightning, Extended
Coverage, Vandalism and Malicious Mischief, extended by Special
Extended Coverage Endorsement to insure against all other Risks
of Direct Physical Loss, such coverages and endorsements to be as
defined, provided and limited in the standard bureau forms
prescribed by the insurance regulatory authority for the state in
which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of
subparagraphs 12C, 12D and 12E below, such insurance shall be for
the sole benefit of Landlord and under its sole control. Tenant
shall pay, as additional rental on a 1/12 per month basis,
Tenant's proportionate share of the full cost of maintaining such
insurance. Upon Tenant's request, Landlord shall provide a copy
of Landlord's insurance carrier's estimate of insurance for the
year. If during the second full lease year after the
commencement date of this lease, or during any subsequent year of
the primary term or any renewal or extension, Landlord's cost of
maintaining such insurance shall exceed Landlord's cost of
maintaining such insurance for the first full lease year of the
term hereof, Tenant agrees to pay to Landlord, as additional
rental, the amount of such excess (or in the event the Premises
constitute a portion of a multiple occupancy building, Tenant's
full proportionate share of such excess). Said payment shall be
made to Landlord within thirty (30) days after presentation to
Tenant of Landlord's statement setting forth the amount due. Any
payment to be made pursuant to this subparagraph 12A with respect
to the year in which this lease commences or terminates shall
bear the same ratio to the payment which would be required to be
made for the full year as the part of such year covered by the
term of this lease bears to a full year.
B. If any increase in the fire and extended coverage
insurance premiums paid by Landlord or other Tenants for the
building in which Tenant occupies space is caused by Tenant's use
and occupancy of the Premises, or if Tenant vacates the Premises
and causes an increase in such premiums, then Tenant shall pay as
additional rental the amount of such increase to Landlord.
C. If the buildings situated upon the Premises should be
damaged or destroyed by fire, tornado or other casualty, Tenant
shall give immediate written notice thereof to Landlord.
D. If the buildings situated upon the Premises should be
totally destroyed by fire, tornado or other casualty, or if they
should be so damaged thereby that rebuilding or repairs cannot in
Landlord's estimation be completed within two hundred (200) days
after the date upon which Landlord is notified by Tenant of such
damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the
date of the occurrence of such damage.
E. If the buildings situated upon the Premises should be
damaged by any peril covered by the insurance to be provided by
Landlord under subparagraph 12A above, but only to such extent
that rebuilding or repairs can in Landlord's estimation be
completed within two hundred (200) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall
not terminate, and Landlord shall at its sole cost and expense
thereupon proceed with reasonable diligence to rebuild and repair
such buildings to substantially the condition in which they
existed prior to such damage, except that Landlord shall not be
required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements which may
have been placed in, on or about the Premises by Tenant and
except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of
any option which is unexercised at the time of such damage. If
the Premises are untenantable in whole or in part following such
damage, the rent payable hereunder during the period in which
they are untenantable shall be reduced to such extent as may be
fair or reasonable under all of the circumstances. In the event
that Landlord should fail to complete such repairs and rebuilding
within two hundred (200) days after the date upon which Landlord
is notified by Tenant of such damage, Tenant may at its option
terminate this lease by delivering written notice of termination
of Landlord as Tenant's exclusive remedy, whereupon all rights
and obligations hereunder shall cease and terminate.
F. Notwithstanding anything herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or
deed of trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall
have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after
such requirement is made by any such holder, whereupon all rights
and obligations hereunder shall cease and terminate. However, in
the event that a casualty occurs resulting in property damage of
less than $500,000.00 and Tenant's occupancy of the Premises is
not affected in any way, this right by Landlord to terminate the
Lease will not be effective.
<PAGE>
G. Each of Landlord and Tenant hereby releases the other
from any loss or damage to property caused by fire or any other
perils insured in policies of insurance covering such property,
even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party
may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or
damage occurring during such times as the releasor's policies
shall contain a clause or endorsement to the effect that any such
release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder and
then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it
will request its insurance carriers to include in its policies
such a clause or endorsement. If extra cost shall be charged
therefore, each party shall advise the other thereof and of the
amount of the extra cost, and the other party, at its election,
may pay the same, but it shall not be obligated to do so.
13. LIABILITY. Landlord shall not be liable to Tenant or
Tenant's employees, agents, patrons or visitors, or to any other
person whomsoever, for any injury to person or damage to property
on or about the Premises, resulting from and/or caused in part or
whole by the negligence or misconduct of Tenant, its agents,
servants or employees, or of any other person entering upon the
Premises, or caused by the buildings and improvements located on
the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the
Premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without
limitation the trustee and beneficiaries if Landlord is a trust),
Landlord's agents and employees from any loss, liability, claims,
suits, costs, expenses, including without limitation attorney's
fees and damages, both real and alleged, arising out of or
relating to any such damage or injury; except injury to persons
or damage to property the sole cause of which is the negligence
of Landlord or the failure of Landlord to repair any part of the
Premises which Landlord is obligated to repair and maintain
hereunder within a reasonable time after the receipt of written
notice from Tenant of needed repairs. Tenant shall procure and
maintain throughout the term of this lease a policy or policies
of insurance, at its sole cost and expense, insuring both
Landlord and Tenant against all claims, demands or actions
arising out of or in connection with: Tenant's operations in and
maintenance and use of the Premises; and Tenant's liability
assumed under this lease, the limits of such policy or policies
to be in the amount of not less than $500,000 per occurrence in
respect to injury to persons (including death), and in the amount
of not less than $100,000 per occurrence in respect to property
damage or destruction, including loss of use thereof. All such
policies shall be procured by Tenant from responsible insurance
companies satisfactory to Landlord. Certified copies or
certificates of such policies, together with receipt evidencing
payment of premiums therefor, shall be delivered to Landlord
prior to the commencement date of this lease. Not less than
fifteen (15) days prior to the expiration date of any such
policies, certified copies of the renewals thereof (bearing
notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that
not less than thirty (30) days written notice shall be given to
landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
14. CONDEMNATION.
A. If the whole or any substantial part of the Premises (or
reasonable access or a material portion of the parking area at
the Premises) should be taken for any public or quasi-public use
under governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and the
taking would prevent or materially interfere with the use of the
Premises for the purpose for which they are being used, this
lease shall terminate and the rent shall be abated during the
unexpired portion of this lease, effective when the physical
taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and this lease is not terminated as provided in
subparagraph 14A above, this lease shall not terminate but the
rent payable hereunder during the unexpired portion of this lease
shall be reduced to such extent as may be fair and reasonable
under all of the circumstances.
C. All compensation awarded for any taking (or the proceeds
of private sale in lieu thereof) of the Premises, buildings or
other improvements, or any part thereof, shall be the property of
Landlord and Tenant hereby assigns its interest in any such award
to Landlord; provided, however, Landlord shall have no interest
in any award made to Tenant for loss of business or for the
taking of Tenant's fixtures and improvements if a separate award
for such items is made to Tenant.
15. HOLDING OVER. Tenant will, at the termination of this
lease by lapse of time or otherwise, yield up immediate
possession to Landlord with all repairs and maintenance required
herein to be performed by Tenant completed. If Landlord agrees
in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise
agree in writing on the terms of such holding over, the hold over
tenancy shall be subject to termination by Landlord at any time
upon not less than thirty (30) days advance written notice, or
by Tenant at any time upon not less than thirty (30) days advance
written notice, and all of the other terms and provisions of this
lease shall be applicable during that period, except that Tenant
shall pay Landlord from time to time upon demand, as rental for
the period of any hold over, an amount equal to one and one half
(1 1/2) the rent in effect on the termination date, computed on a
daily basis for each day of the hold over period. No holding
over by Tenant, whether with or without consent of Landlord,
shall operate to extend this lease except as otherwise expressly
provided. The preceding provisions of this paragraph 15 shall
not be construed as consent for Tenant to hold over.
<PAGE>
16. QUIET ENJOYMENT. Landlord covenants that it now has,
or will acquire before Tenant takes possession of the Premises,
good title to the Premises, free and clear of all liens and
encumbrances, excepting only the lien for current taxes not yet
due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of
such property, and easements, restrictions and other conditions
of record. Landlord represents and warrants that it has full
right and authority to enter into this lease and that Tenant,
upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and
quietly have, hold and enjoy the Premises for the term hereof
without hindrance or molestation from Landlord, subject to the
terms and provisions of this lease.
17. EVENTS OF DEFAULT. The following events shall be deemed
to be events of default by Tenant under this lease:
A. Tenant shall fail to pay any installment of rent herein
reserved when and as same becomes due and payable, and such
failure shall continue for five (5) days after written notice of
such default is provided by Landlord to Tenant regarding same,
provided that Landlord shall only be required to give such notice
and opportunity to cure twice within any consecutive twelve (12)
month period and upon any subsequent failure to timely pay such
sums within twelve (12) month period, no notice or opportunity to
cure shall be required to be given to Tenant.
B. Tenant shall vacate all or a substantial portion of the
Premises or fail to continuously operate its business at the
Premises for the permitted use set forth in paragraph 3 whether
or not Tenant is in default of the rental payments due under this
lease; or
C. Tenant shall fail to discharge any lien placed upon the
Premises in violation of paragraph 22 hereof within twenty (20)
days after Tenant receives notice that any such lien or
encumbrance is filed against the Premises, or
D. Tenant shall fail to comply with any term, provision or
covenant of this lease (other than the foregoing in this
paragraph 17), and shall not cure such failure within twenty (20)
days after written notice thereof to Tenant, provided, however,
that with respect to any such default which cannot by its nature
reasonably be cured within twenty (20) days, Tenant shall have
such additional time to complete such cure as is reasonably
necessary under the circumstances provided in no event shall such
period extend beyond ninety (90) days and further provided that
it commences its efforts to cure such default within such twenty
(20) day period, and thereafter diligently prosecutes same until
completion.
E. Default by any guarantor of this Lease of the terms of
its guaranty, or the bankruptcy or insolvency of any guarantor.
18. REMEDIES.
A. Upon each occurrence of any event of default, Landlord
shall have the option to pursue any one or more of the following
remedies without any notice or demand;
(1) Terminate this lease; and/or
(2) Enter upon and take possession of the Premises with or
without terminating this lease; and/or
(3) Alter all locks and other security devices at the Premises
with or without terminating this lease, and pursue, at Landlord's
option, one or more remedies pursuant to this lease, Tenant
hereby specifically waiving any state or federal law to the
contrary; and in any such event Tenant immediately shall
surrender its Premises to Landlord, and if Tenant fails to do so,
Landlord, without waiving any other remedy it may have, may enter
upon and take possession of the Premises or any part thereof by
force if necessary, without being liable for prosecution or any
claim of damages therefor.
B. In the event Tenant fails to pay any installment of rent
hereunder on or before five (5) days after such installment is
due, to help defray the additional cost to Landlord for
processing such late payments, Tenant shall pay to Landlord on
demand a late charge in an amount equal to five (5%) percent of
such installment; and the failure to pay such amount within five
(5) days after demand therefor shall be an event of default
hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder
or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
C. Exercise by Landlord of any one or more remedies
hereunder granted or otherwise shall not be deemed to be an
acceptance of surrender of the Premises by Tenant, whether by
agreement or by operation of law, it being understood that such
surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other
security devices and no removal of the property of Tenant
pursuant to 18I or others at the Premises shall be deemed
unauthorized or constitute a conversion, Tenant hereby
consenting, after any event of default, to such actions . All
claims for damages by reason of such re-entry and/or repossession
and/or alteration of locks or other security devices are hereby
waived, as are all claims for damages by reason of any distress
warrant, forcible detainer proceedings, sequestration proceedings
or other legal process. Tenant agrees that any re-entry by
Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the
necessity for any legal proceedings, as Landlord may elect, and
Landlord shall not be liable for trespass or otherwise.
<PAGE>
D. In the event Landlord elects to terminate the lease by
reason of an event of default, then notwithstanding such
termination, Tenant shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein,
the sum of all rental and other indebtedness accrued to the date
of such termination, plus, as damages, an amount equal to the
greater of (i) the total rental hereunder for the remaining
portion of the lease term (had such term not been terminated by
Landlord prior to the date of expiration stated in paragraph 1),
or (ii) the then present value of the then fair rental value of
the Premises for such period.
E. In the event that Landlord elects to repossess the
Premises without terminating the lease, or in the event Landlord
elects to terminate the lease, then Tenant, at Landlord's option,
shall be liable for and shall pay to Landlord, at the address
specified for notice to Landlord herein, all rental and other
indebtedness accrued to the date of such repossession, plus
rental required to be paid by Tenant to Landlord during the
remainder of the lease term until the date of expiration of the
term as stated in paragraph 1 diminished by any net sums
thereafter received by Landlord through reletting the Premises
during said period (after deducting expenses incurred by Landlord
as provided in subparagraph 18F below). In no event shall Tenant
be entitled to any excess of any rental obtained by letting over
and above the rental herein reserved. Actions to collect amounts
due by Tenant to Landlord under this subparagraph may be brought
from time to time, on one or more occasions, without the
necessity of Landlord's waiting until expiration of the lease
term.
F. In case of any event of default or breach by Tenant, or
threatened or anticipatory breach of default, Tenant shall also
be liable for and shall pay to Landlord, at the address specified
for notice to Landlord herein, in addition to any sum provided to
be paid above, broker's fees incurred by Landlord in connection
with reletting the whole or any part of the Premises; the costs
of removing and storing Tenant's or the occupant's property; the
costs of repairing, altering, remodeling or otherwise putting the
Premises into condition acceptable to a new tenant or tenants,
and all reasonable expenses incurred by Landlord in enforcing or
defending Landlord's rights and/or remedies including reasonable
attorney's fees.
G. In the event of termination or repossession of the
Premises for an event of default, Landlord shall not have any
obligation to relet or to attempt to relet the Premises, or any
portion thereof, or to collect rental after reletting; and in the
event of reletting, Landlord may relet the whole or any portion
of the Premises for any period to any tenant and for any use and
purpose.
H. If Tenant should fail to make any payment or cure any
default hereunder within the time herein permitted, Landlord,
without being under any obligation to do so and without thereby
waiving such default, may make such payment and/or remedy such
other default for the account of Tenant (and enter the Premises
for such purpose), and thereupon Tenant shall be obligated to,
and hereby agrees to pay Landlord upon demand, all costs,
expenses and disbursements (including reasonable attorney's fees)
incurred by Landlord in taking such remedial action.
I. In the event that Landlord shall have taken possession of
the Premises pursuant to the authority herein granted, Landlord
shall also have the right to remove from the Premises (without
the necessity of obtaining a distress warrant, writ of
sequestration or other legal process) all or any portion of such
furniture, fixtures, equipment and other property located thereon
and to place same in storage at any Premises within the County in
which the Premises is located; and in such event, Tenant shall be
liable to Landlord for costs incurred by Landlord in connection
with such removal and storage. Landlord shall also have the
right to relinquish possession of all or any portion of such
furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who
presents to Landlord a copy of any instrument represented to
Landlord by Claimant to have been executed by Tenant (or any
predecessor Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of
Landlord to inquire into the authenticity of said instrument's
copy of Tenant's or Tenant's predecessor's signature(s) thereon
and without the necessity of Landlord making any investigation or
inquiry as to the validity of the factual or legal basis upon
which Claimant purports to act; and Tenant agrees to indemnify
and hold Landlord harmless from all cost, expense, loss, damage
and liability incident to Landlord's relinquishment of possession
of all or any portion of such furniture, fixtures, equipment or
other property to Claimant. The right of Landlord herein stated
shall be in addition to any and all other rights which Landlord
has or may hereafter have at law or in equity; and Tenant
stipulates and agrees that the rights herein granted Landlord are
commercially reasonable.
19.
20. MORTGAGES.
A. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the Premises or the
improvements situated thereon, provided however, that if the
mortgagee, trustee, or holder of any such mortgage or deed of
trust elects to have Tenant's interest in this lease superior to
any such instrument, then by notice to Tenant from such
mortgagee, trustee or holder, this lease shall be deemed superior
to such lien, whether this lease was executed before or after
said mortgage or deed of trust. Landlord shall, as soon as
practicable after the full execution of this Lease, deliver to
Tenant a Non-Disturbance, Subordination and Attornment Agreement
mutually acceptable to Tenant and
<PAGE>
Landlord's lender. Tenant shall at any time hereafter on demand
execute any instruments, releases or other documents which may be
required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage. All
mortgages or deeds of trust referred to in this subparagraph 20A refer
to first mortgages or deeds of trust only.
B. Tenant agrees not to look to the mortgagee, as mortgagee,
mortgagee in possession, or successor entitled to the property,
for accountability for any security deposit required by the
Landlord hereunder, unless said sums have been received by said
mortgagee as security for Tenant's performance of this lease.
21. LANDLORD'S DEFAULT. In the event Landlord should become
in default in any payments due on any such mortgage described in
Paragraph 20 hereof or in the payment of taxes or any other items
which might become a lien upon the Premises and which Tenant is
not obligated to pay under the terms and provisions of this
lease, Tenant is authorized and empowered after giving Landlord
five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on
behalf of Landlord, and the amount of any item so paid by Tenant
for or on behalf of Landlord, together with any interest or
penalty required to be paid in connection therewith, shall be
payable on demand by Landlord to Tenant; provided however, that
Tenant shall not be authorized and empowered to make any payment
under the terms of this Paragraph 21 unless the item paid shall
be superior to Tenant's interest hereunder. In the event Tenant
pays any mortgage debt in full, in accordance with this
paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
22. MECHANICS LIEN AND OTHER TAXES. Tenant shall have no
authority, express or implied, to create or place any lien or
encumbrance of any kind or nature whatsoever upon, or in any
manner to bind the interests of Landlord in the Premises or to
charge the rentals payable hereunder for any claim in favor of
any person dealing with Tenant, including those who may furnish
materials or perform labor for any construction or repairs, and
each such claim shall affect and each such lien shall attach to,
if at all, only the leasehold interest granted to Tenant by this
instrument. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on
account of any labor performed or materials furnished in
connection with any work performed on the Premises on which any
lien is or can be validly and legally asserted against its
leasehold interest in the Premises or the improvements thereon
and that it will save and hold Landlord harmless from any and all
loss, cost or expense based on or arising out of asserted claims
or liens against the leasehold estate or against the right, title
and interest of the Landlord in the Premises or under the terms
of this lease. Tenant agrees to give Landlord immediate written
notice if any lien or encumbrance is placed on the Premises.
23. NOTICES. Each provision of this instrument or of any
applicable governmental laws, ordinances, regulations and other
requirements with reference to the sending, mailing or delivery
of any notice or the making of any payment by Landlord to Tenant
or with reference to the sending, mailing or delivery of any
notice or the making of any payment by Tenant to Landlord shall
be deemed to be complied with when and if the following steps are
taken:
A. All rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at the address
hereinbelow set forth or at such other address within the
Continental United States as Landlord may specify from time to
time by written notice delivered in accordance herewith.
Tenant's obligations to pay rent and any other amounts to
Landlord under the terms of this lease shall not be deemed
satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow
set forth, or at such other address within the continental United
States as Tenant may specify from time to time by written notice
delivered in accordance herewith.
C. Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether
actually received or not five (5) days after being deposited in
the United States Mail, or when received whichever is earlier,
postage prepaid, Certified or Registered Mail, addressed to the
parties hereto at the respective addresses set out below, or at
such other address as they have theretofore specified by written
notice delivered in accordance herewith:
LANDLORD: TENANT:
After Commencement Before Commencement
Meadows Industrial, LLC Radiant Systems, Inc.
1000 Alderman Drive
300 Galleria Parkway, Suite 600 Attn: VP Operations
Suite A
Atlanta, Georgia 30339 6610 Shiloh
Road East, Suite A Alpharetta, GA 30005
<PAGE>
Attn: John Decker Alpharetta, GA 30005
If and when included within the term "Landlord", as used in this
instrument, there are more than one person, firm or corporation,
all shall jointly arrange among themselves for their joint
execution of such a notice specifying some individual at some
specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used
in this instrument, there are more than one person, firm or
corporation, all shall jointly arrange among themselves for their
joint execution of such a notice specifying some individual at
some specific address within the continental United States for
the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively,
shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such
notice.
24. HAZARDOUS MATERIALS
A. For purposes of this section, "Hazardous Materials" shall
include all solid, liquid or gaseous materials defined or
regulated as wastes under any federal statute or regulation or
any state or local law, regulation or ordinance and shall further
include all other substances defined or regulated as pollutants
or as hazardous, toxic, infectious, or radioactive substances
under any federal statute or regulation or any state or local
law, regulation or ordinance, all as amended from time to time.
B. Tenant shall not cause or permit any Hazardous Materials
to be used, generated, stored or disposed of on, under or about,
or transported to or from the Premises (collectively, "Hazardous
Materials Activities") except in compliance with all applicable
federal, state, and local laws, regulations, ordinances and
orders governing such Hazardous Materials or Hazardous Materials
Activities, which compliance shall be at Tenant's sole cost and
expense. Additionally, Tenant shall not cause or permit any
Hazardous Materials to be disposed of on, under or about the
Premises without the express prior written consent of the
Landlord, which may be withheld for any reason and may be revoked
at any time.
C. Landlord shall not be liable to Tenant or to any other
party for any Hazardous Materials Activities conducted or
permitted on, under or about the Premises by Tenant or by
Tenant's employees, agents, contractors, licensees or invitees,
and Tenant shall indemnify, defend and hold Landlord harmless
from any claims, damages, fines, penalties, losses, judgments,
costs and liabilities arising out of or related to any Hazardous
Materials Activities conducted or permitted on, under or about
the Premises by Tenant or by Tenant's employees, agents,
contractors, Licensees or invitees, regardless of whether
Landlord shall have consented to, approved of, participated in or
had notice of such Hazardous Materials Activities. The
provisions of this paragraph shall survive the expiration or
termination of this lease.
D. At the expiration or earlier termination of this lease,
Tenant shall remove from the Premises, at Tenant's sole expense,
all Hazardous Materials located, stored and disposed of on, under
or about the Premises. Tenant shall close, remove or otherwise
render safe any buildings, tanks, containers or other facilities
related to the Hazardous Materials Activities conducted or
permitted on the Premises in the manner required by all
applicable laws, regulations, ordinances or orders.
E. Landlord represents that it has not stored or disposed
of any Hazardous Materials on or about the Premises and has no
knowledge of any existing violations of environmental laws, rules
or regulations with respect to the building or any common areas
associated therewith. Landlord will be obligated to remedy any
environmental problems associated with the Premises, which are
not caused by Tenant, to the extent same adversely affect
Tenant's business operations.
25. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver
to take possession of all or substantially all of the assets of
Tenant, or an assignment of Tenant for the benefit of creditors,
or any action taken or suffered by Tenant under any insolvency,
bankruptcy, or reorganization act, shall at Landlord's option
constitute a breach of this Lease by Tenant. Upon the happening
of any such event or at any time thereafter, this Lease shall
terminate five (5) days after written notice of termination from
Landlord to Tenant. In no event shall this Lease be assigned or
assignable by operation of law or by voluntary or involuntary
bankruptcy proceedings or otherwise and in no event shall this
Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency, or reorganization proceedings.
26. LANDLORD'S LIABILITY. Any liability of Landlord
hereunder shall be enforceable only out of the Building or
Property and in no event out of the separate assets of any
constituent partner of Landlord. No holder or beneficiary of any
mortgage or deed of trust on any part of the Property shall have
any liability to Tenant hereunder for any default of Landlord.
27. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and
construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context
otherwise requires.
B. In the event the Premises constitutes a portion of a
multiple occupancy building or building complex, Tenant's
"proportionate share", as used in this lease, shall mean a
fraction, the numerator of which is the space contained in the
Premises and the denominator of which is the entire space
contained in the building or building complex.
<PAGE>
C. The terms, provisions and covenants and conditions
contained in this lease shall apply to, inure to the benefit of,
and be binding upon the parties hereto and upon their respective
heirs, legal representatives, successors and permitted assigns,
except as otherwise herein expressly provided. Landlord shall
have the right to assign any of its rights and obligations under
this lease. Each party agrees to furnish to the other, promptly
upon demand, a corporate resolution, proof of due authorization
by partners, or other appropriate documentation evidencing the
due authorization of such party to enter into this lease.
D. The captions inserted in this lease are for convenience
only and in no way define, limit or otherwise describe the scope
or intent of this lease, or any provision hereof, or in any way
effect the interpretation of this lease.
E. Tenant agrees from time to time within ten (10) days
after request of Landlord, to deliver to Landlord, or Landlord's
designee an estoppel certificate stating to the extent true that
this lease is in full force and effect, the date to which rent
has been paid, the unexpired term of this lease and such other
matters pertaining to this lease as may be requested by Landlord.
It is understood and agreed that Tenant's obligation to furnish
such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except
by an instrument in writing signed by both parties hereto.
G. All obligations of the parties hereunder not fully
performed as of the expiration or earlier termination of the term
of this lease shall survive the expiration or earlier termination
of the term hereof, including without limitation all payment
obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the
expiration or earlier termination of the term hereof, and prior
to Tenant vacating the Premises, Tenant shall pay to Landlord any
amount reasonably estimated by Landlord as necessary to put the
Premises, including without limitation all heating and air
conditioning systems and equipment therein, in good condition and
repair, reasonable wear and tear excepted. Tenant shall also,
prior to vacating the Premises, pay to Landlord the amount, as
estimated by landlord, of Tenant's obligation hereunder for real
estate taxes and insurance premiums for the year in which the
lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant
hereunder, with Tenant being liable for any additional costs
therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been
determined and satisfied, as the case may be. Any security
deposit held by Landlord shall be credited against the amount
payable by Tenant under this subparagraph 27G.
H. If any clause or provision of this lease is illegal,
invalid or unenforceable under present or future laws effective
during the term of this lease, then and in that event, it is the
intention of the parties hereto that the remainder of this lease
shall not be affected thereby, and it is also the intention of
the parties to this lease that in lieu of each clause or
provision of this lease that is illegal, invalid or
unenforceable, there be added as a part of this lease contract a
clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the Premises are on the open market and are
presently being shown, this lease shall be treated as an offer
with the Premises being subject to prior lease and such offers
subject to withdrawal or non-acceptance by Landlord or to other
use of the Premises without notice, and this lease shall not be
valid or binding unless and until accepted by Landlord in writing
and a fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or
similar references shall be deemed to refer to the last date, in
point of time, on which all parties hereto have executed this
lease.
K. Time is of the essence of this lease and all of its
provisions. This lease in all respects shall be governed by the
laws of the State of Georgia.
L. Tenant shall not be permitted to install drapes,
curtains, blinds or any window treatment without Landlord's prior
written approval.
M. The duties and obligations of Tenant herein shall be
binding upon all or any of them. The duties and obligations of
Tenant shall run and extend not only to the benefit of the
Landlord, as named herein, but to the following, at the option of
the following or any of them: (i) any person by, through or
under which Landlord derives the right to lease the Premises;
(ii) the owner of the Premises; and (iii) holders of mortgage or
rent assignment interests in the Premises, as their respective
interests may appear; provided, however, nothing contained herein
shall be construed to obligate Tenant to pay rent to any person
other than the Landlord until such time as Tenant has been given
written notice of either an exercise of a rent assignment or the
succession of some other party to the interests of Landlord.
N. Except in the case of sublet and assignment and as Except as
otherwise specifically provided for herein to the contrary, where
the consent, approval or acceptance of a party is required, the
party agrees that such consent, approval or acceptance shall not
be unreasonably withheld, conditioned or delayed.
<PAGE>
O. Landlord and Tenant each represent and warrant to the other
that it has not dealt with any broker, agent, commissioned
salesperson other than CARTER & Associates in the negotiations
for and procurement of this Lease and that no commissions, fees
or compensation of any kind are due and payable in connection
herewith to any broker, agent, commissioned salesperson or other
person other than CARTER & Associates as the result of such
dealings. Landlord acknowledges and agrees it is solely liable
for payment of all commissions to CARTER & Associates. Landlord
and Tenant each hereby agree to indemnify the other and hold the
other harmless from and against any and all claims, suits or
judgements incurred as the result of the foregoing
representations and warranties being untrue.
P. Notwithstanding any indemnity granted herein and not
withstanding any other term or provision of this Lease to the
contrary. Landlord and Tenant hereby both release the other and
their respective employees, agents and invitees from and waive
any claims either may have against the other and their employees,
agents, servants or invitees for any loss or damage to the
building, Premises or contents of the foregoing caused by any of
the perils required to be insured against under fire and extended
coverage insurance policies under this Lease with "all risks"
endorsement, to the extent of the greater of the limits of
insurance actually being carried or required to be carried by
this Lease, whether such damage or loss is caused by the
negligence either of them or their respective employees, agents,
servants or invitees. The foregoing mutual release and waiver of
subrogation shall apply whether or not insurance on the building,
Premises other improvements or contents was in force at the time
of the loss or damage. Moreover, each party agrees to take all
actions necessary to make the foregoing release effective and
binding upon their respective insurance carriers so that such
carriers specifically waive any right of subrogation that the
carriers might otherwise have against the other party and/or
their respective employees, agents, servants or invitees.
28. ADDITIONAL PROVISIONS. See Additional Provisions,
Paragraphs 29 thru 31, attached hereto and made a part hereof as
if fully incorporated herein and when in conflict with the
printed portion of this lease, said Additional Provisions shall
prevail.
EXECUTED BY LANDLORD, this day of , 1997.
MEADOWS Industrial, LLC
By: John R. Decker
Attest / Witness: Its: Managing Member
<PAGE>
Title:
EXECUTED BY TENANT, this day of , 1997.
Radiant Systems, Inc.
By:
Attest / Witness: Its:
Title:
<PAGE>
ADDITIONAL PROVISIONS
29. The Base Monthly Rental provided for in paragraph 2A of this
Lease shall be increased on every anniversary of the commencement
by three percent (3%) of the monthly rental due for the month
immediately preceding such anniversary, so as to generate a
monthly rental schedule as follows:
Year 1 $22,696.00 per month or $4.97 per s.f.
Year 2 $23,376.00 per month or $5.12 per s.f.
Year 3 $24,078.00 per month or $5.27 per s.f.
Year 4 $24,800.00 per month or $5.43 per s.f.
Year 5 $25,544.00 per month or $5.59 per s.f.
Such monthly amounts are exclusive of Tenant's obligation to pay
its proportionate share of taxes, insurance and maintenance
provided for in paragraphs 4A, 12A and 6 respectively.
30. Landlord grants to Tenant two (2) consecutive options to
extend this Lease for a period of up to five (5) years each; but
in no case less than one year each. Such extensions will be
exercised individually and will require nine (9) months written
notice from Tenant to Landlord prior to the expiration of the
existing term and the full execution of a document to effect the
extension occurring eight (8) months prior to the expiration of
the existing term. The extensions shall be in accordance with
the same terms and conditions of this Lease except that the
monthly rental shall be increased by four percent (4%) of the
final month of the existing term to establish the monthly rent
for the first month of the extension. During the term of any
extension, the monthly rental will be increased by three percent
(3%) on every anniversary of the extension commencement date.
For example, if Tenant chooses to exercise two (2) consecutive
extensions of three (3) years each, the monthly rental schedule
would be as follows:
Year 6 $26,566.00 or $5.82 per s.f.
Year 7 $27,363.00 or $5.99 per s.f.
Year 8 $28,184.00 or $6.17 per s.f.
Year 9 $29,311.00 or $6.42 per s.f.
Year 10 $30,190.00 or $6.61 per s.f.
Year11 $31,096.00 or $6.81 per s.f.
31. Landlord grants to Tenant, during the initial term or any
extension thereof, a first right hereinafter ("FRTL Right") to
lease any available, unencumbered bay or bays immediately
adjacent to Tenant's Premises, hereinafter referred to as ("FRTL
Space").
a) In order to preserve Tenant's FRTL Right, anytime Landlord
receives a written offer from a bonafide third party hereinafter
("TPO") to lease the FRTL Space, Landlord must offer the FRTL
Space to Tenant for lease under the same terms and conditions
contained in the TPO before leasing the FRTL Space to the third
party.
b) At Tenant's request, Landlord will provide to Tenant a copy
of the TPO and Tenant will have five (5) business days from
receipt of Landlord's offer to lease the FRTL Space in accordance
with the terms of the TPO.
c) In the event Tenant declines to exercise its FRTL Right,
Landlord shall lease the FRTL Space to the third party and when
the FRTL Space becomes available and an encumbered, Tenant's FRTL
Right will continue to exist and provisions 31a and 31b will
apply.
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "B"
IMPROVEMENT AGREEMENT
Added to and made a part of this Lease Agreement is Landlord's
obligation to install the improvements described in this Exhibit
"B" and Exhibit "B-1" in a diligent and workmanlike manner at no
cost to Tenant.
1. Landlord will construct at its sole cost and expense except
as otherwise provided herein the office and warehouse portions of
the Premises in accordance with the Smith-Cave drawing Job No.
9574.23 labeled I-1 and dated November 5, 1997 hereby
incorporated by reference as a part of this Lease. Landlord will
adhere to all details and notes on the drawing and will produce
the office finish in accordance with the standard specifications
in Exhibit "B-1". However, Landlord will install deep-cell
parabolic 2x4 light fixtures in lieu of acrylic lens fixtures in
the office area.
2. Landlord's obligation to construct Tenant's interiors shall
include providing the following electrical service:
Warehouse Area
* J-Box mounted on cord with two (2) 20-amp
120-volt circuit 1 EA
* J-Box with one (1) 20-amp 120-volt circuit 1 EA
* J-Box with two (2) 20-amp 120 volt circuits 3 EA
* J-Box with three (3) 20-amp 120 volt circuits 2 EA
* J-Box with four (4) 20-amp 120 volt circuits 3 EA
* Quad receptacle 10 EA
* 600-amp 3-phase 4-wire 277/480 volt disconnect 1 EA
* 600-amp 3-phase 4-wire 277/480 volt MLO panel 1 EA
* 600-amp 3-phase 4-wire feeder 10 FT
* 100-amp 3-phase 3-wire feeder 10 FT
* 75 KVA transformer 480 volt to 120/208 volt on top
of main electrical room 1 EA
* 200-amp 3-phase 4-wire 220/380 volt MCB panel 1 EA
* 200-amp 3-phase 4-wire feeder 120 FT
* 112-1/2 KVA transformer 480 to 120/208 volt
mounted at bar joist for Item #1 1 EA
* 300-amp 3-phase 4-wire 120/208 volt MCB panel 1 EA
* 300-amp 3-phase 4-wire feeder 30 FT
* 100-amp 3-phase 3-wire feeder 120 FT
* 75 KVA transformer 480 volt to 120/208 volt
mounted at bar joist for Item #1 1 EA
* 200-amp 3-phase 4-wire 120/208 volt MCB panel 1 EA
* 200-amp 3-phase 4-wire feeder 30 FT
* Electrical Engineering 1 LS
Office Area
* 2'x4' lay-in parabolic light fixtures 188 EA
* 100 watt shower down light fixture 2 EA
* Dual head emergency light with battery backup 10 EA
* Exit light with battery backup 10 EA
* Single-pole switch 20 EA
* Three way switch 6 EA
<PAGE>
* Duplex receptacle 32 EA
* GFI duplex receptacle 2 EA
* Dedicated GFI duplex receptacle 2 EA
* Dedicated duplex receptacle 8 EA
* Wall J-box with one (1) 20 amp 120 volt circuit 6 EA
* Ceiling J-box with two (2) 20 amp 120 volt circuits 2 EA
* Wall or ceiling J-box with three (3) 20 amp 120 volt
circuits 7 EA
* Telephone/Data box with pull string 24 EA
* Waterproof GFI duplex receptacles 10 EA
Connect ceiling exhaust fan 2 EA
Connect water heater 1 EA
Provide service to air conditioning 47-1/2 TN
Provide and install the following in the Warehouse:
* 400 watt MH Hi Bay fixture 64 EA
* 400 watt MH Hi Bay fixture with Quartz Restrike 10 EA
* Exit/Emergency combination 6 EA
* Dual head emergency light with battery backup 6 EA
* Three way switch 2 EA
* Waterproof GFI duplex receptacles 7 EA
Provide service to air conditioning 76-1/2 TN
Service
* 600-amp, 3-phase, 4-wire, 277/480-volt disconnect 1 EA
* 600-amp, 3-phase, 4-wire, 277/480-volt MLO panel 1 EA
* 600-amp, 3-phase, 4-wire PVC conduit & aluminum feeder 180 FT
* 200-amp, 3-phase, 4-wire, 277/480-volt MLO panel 1 EA
* 200-amp, 3-phase, 4-wire feeder PVC & aluminum 10 FT
* 75 KVA transformer 480 volt to 120/208 volt 1 EA
* 200-amp, 3-phase, 4-wire 220/380 bolt MCB panel 2
section 1 EA
* 200-amp, 3-phase, 4-wire flexible conduit and copper
wire feeder 10 FT
3. The following improvements to the Premises shall be made at
Tenant's sole cost and expense and such expense, a total of
$53,049 shall be paid by Tenant when Tenant executes and delivers
this Lease to Landlord:
Provide plugmold with seventy-five (75) 20-amp 120 volt circuits
at tenant provided roller conveyors ADD $12,600
Provide service upgrade at roller conveyor area for future
expansion for twenty-four additional conveyor racks as follows:
* 150-amp 3-phase 3-wire feeder 120 FT
* 112-1/2 KVA transformer 480 to 120/208 volt mounted
at bar joist for Item #1 1 EA
* 300-amp 3-phase 4-wire 120/208 volt MCB panel 2-section 2 EA
* Omit 300-amp 3-phase 4-wire 120/208 volt MCB panel (1 EA)
* 300-amp 3-phase 4-wire feeder 50 FT
* Omit 100-amp 3-phase 3-wire feeder (120 FT)
* Omit 75 KVA transformer 480 volt to 120/208 volt mounted
at bar joist for Item #1 (1 EA)
* Omit 200-amp 3-phase 4-wire 120/208 volt MCB panel (1 EA)
* Omit 200-amp 3-phase 4-wire feeder (30 FT)
ADD $3,908
<PAGE>
Provide plugmold with twenty-four 20-amp 120-volt circuits at
tenant provided roller conveyors ADD $4,426
Provide 2,400 additional square feet of open plan office space of
$15.00 per square foot.
ADD$27,762
Provide one (1) additional mechanical pit type dock leveler with
dock light.
ADD $4,353
EXHIBIT "B-1"
STANDARD SPECIFICATIONS
PARTITIONS
Demising Partitions: One-hour rated office/warehouse partition:
6" metal studs to structure with 1/2" type
"X" fire code drywall each side and 3-1/2"
SAB in cavity (test number: UL Des U.448).
Note: Furnish and install 6", 25 gauge
metal studs at 16" o.c. to limiting
height of 20'-0".
Furnish and install 6", 20 gauge
metal studs at 24" o.c. to limiting
height of 25'3".
Furnish and install 6", 20 gauge
metal studs at 16" o.c. to limiting
height of 32'11".
Interior Partitions: 3-5/8", 25 gauge metal studs at 24" O.C.,
with 1/2" GWB each side - slab to ceiling
grid.
Warehouse Partitions: If office is over 25% of total lease, office
warehouse is to be one-hour rated.
Non-rated office/warehouse partition: 3-5/8"
metal studs to structure with 1/2" GWB and
3-1/2" SAB to 1'0" above finished ceiling at
office side and 1/2" GWB to structure at
warehouse side.
DOORS
Tenant Entry Door: 3'-0"W x 7'-0"H glass storefront door
Tenant Interior Door: 3'-0"W x 7'-0"H flush solid core stain grade
birch veneer in hollow metal frame.
Bifold Door: 6'-8"H stain grade flush birch veneer.
Hardware: PDQ ST-Plantation Design:
126 passage set
176 privacy set
182 lockset
Closers: LCN painted silver
Door Stops: Floor stops: Quality #331ES
CEILINGS
Grid: 2' x 4' x 15/16" white Donn grid
Acoustical Tile: Armstrong 2' x 4' x 5/8" Cortega minaboard
flat fissured
Ceiling Height: 9'-0"
LIGHTING/ELECTRICAL
Light Fixtures: Lithonia 2 GT - 440 2' x 4' 4-lamp with
acrylic lens
Emergency Egress Lithonia #6 ELM or combination
Lighting: unit: Lithonia #H2MSW1R
Exit Signs: Lithonia #MSW3 REL.
Audio/Visual Strobes:
HVAC
Diffusers: 2' x 2' perf. face
Return Air: 2' x 2' perf. face
Exhaust Fans:
Thermostats:
SPRINKLERS
Type: Exposed chrome
FINISHES
Carpet: 26 oz level loop or 30 oz cut pile; 22 oz.
textured level loop
Base: Roppe; 4"h rubber cove
<PAGE>
Vinyl Composition Tile: Tarkett; Expressions
Door Trim Paint: Alkyd base semi-gloss Duron or equal
<PAGE>
EXHIBIT "C"
ESTOPPEL CERTIFIATE
Landlord: ________________________________
Tenant: ________________________________
Premises: ________________________________
Area: _______________________________ Sq. Ft. Lease
Date: _____________________
The undersigned Tenant under the above-referenced lease (the
"Lease") hereby ratifies the Lease and certifies to
________________ ("Landlord") as owner of the real property of
which the premises demised under the Lease (the "Premises") is a
party, as follows:
1. That the term of the Lease commenced on
________________, 19_____ and the Tenant is in full and complete
possession of the Premises demised under the Lease and has
commenced full occupancy and use of the Premises, such possession
having been delivered by Landlord and having been accepted by
Tenant.
2. That the Lease calls for base monthly rent installments
of $_______________ which commenced to accrue on the __________
day of ___________________, 19____.
3. That additional rent based upon the annual operating
charges for the Building, as defined in the Lease, is payable by
Tenant. Tenant is currently paying $_____________ monthly as an
estimated amount for this additional rent. Tenant asserts no
right to audit or contest annual operating charges paid by Tenant
for _________ and all prior years.
4. That no advance rental or other payment has been made
in connection with the Lease, except rental for the current
month. There is no "free rent" or other concession under the
remaining term of the Lease, and the rent has been paid to and
including ___________, 19_____.
5. That a security deposit in the amount of
$__________________ is being held by Landlord, which amount is
not subject to any set-off or reduction or to any increase for
interest or other credit due to Tenant.
6. That all obligations and conditions under said Lease to
be performed to date by Landlord or Tenant have been satisfied,
free of defenses and set-offs including all construction work in
the Premises.
7. That the Lease is a valid lease and in full force and
effect and represents the entire agreement between the parties;
that there is no existing default on the part of Landlord or the
Tenant in any of the terms and conditions thereof and no event
has occurred which, with the passing of time or giving of notice
or both, would constitute an event of default; and that said
Lease has: (Initial one)
( ) not been amended, modified, supplemented, extended, renewed
or assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
8. That the Lease provides for a primary term of ________
months; the term of the Lease expires on the _______ day of
_____________, 19_____; and that (Initial one)
( ) neither the Lease nor any of the documents listed in
Paragraph 7 (if any) contain an option for any additional
term or terms.
( ) the Lease and/or the documents listed under Paragraph 7,
above, contain an option for _____________ additional
term(s) of ____________ year(s) and ___________ month(s)
(each) at a rent to be determined as follows:
____________________________________________
____________________________________________
9. That, to the best of Tenant's knowledge, there is no
apparent or likely contamination of the real property or the
Premises by Hazardous material, and Tenant does not use, nor has
Tenant disposed of, hazardous materials in violation of
environmental laws on the real property or the Premises.
10. That there are no actions, voluntary or involuntary,
pending against the Tenant under the bankruptcy laws of the
United States or any state thereof.
11. That this certification is made knowing that Landlord
is relying upon the representation herein made.
Tenant:
_____________________________________
Dated: ________________ By: ____________________
Typed Name:
Title: ____________________
<PAGE>
EXHIBIT "D"
FLOOR PLAN
<PAGE>
FIRST AMENDMENT TO LEASE
THIS AGREEMENT, made and entered into this ____ day of
___________, 19__ by and between Meadows Industrial, LLC
(hereinafter "Landlord") and Radiant Systems, Inc., a
Corporation (hereinafter "Tenant"):
WHEREAS, Landlord and Tenant have entered into a certain Lease
Agreement dated November 11, 1997 (hereinafter referred to as the
"Lease") for Suite A, 6610 Shiloh Road East, containing 54,798
square feet (hereinafter "Premises") in the Meadows XII Building,
Alpharetta, Georgia 30005;
WHEREAS, Landlord and Tenant desire to amend the Lease as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual agreements of the
undersigned and other good and valuable consideration, the Lease
is hereby amended effective the First Amendment Commencement Date
(as defined below) as follows:
1. By increasing the size of the Premises from 54,798 square feet
to 101,570 square feet. Please note the cross-hatched plan on
Exhibit "D-1" of this Agreement which delineates the location of
the added Premises. This change shall become effective upon the
First Amendment Commencement Date.
2. By modifying the base monthly rental set forth in Paragraph 2
of the Lease such that the new base monthly rental shall equal
"Forty Two Thousand Sixty Seven and 00/100 Dollars ($42,067.00)".
This change shall become effective upon the First Amendment
Commencement Date. Regardless of the First Amendment
Commencement Date, the Base Monthly Rental shall be increased on
every anniversary of the Commencement Date of the original Lease
(January 23, 1998) by 3% of the monthly rental due for the month
immediately preceding such anniversary, so as to guarantee a
monthly rental schedule as follows:
<TABLE>
<S> <C>
Beginning the First Amendment Commencement Date $42,067.00 per month or $4.97 per s.f.
Beginning January 23, 1999 $43,329.00 per month or $5.12 per s.f.
Beginning January 23, 2000 $44,629.00 per month or $5.27 per s.f.
Beginning January 23, 2001 $45,968.00 per month or $5.43 per s.f.
Beginning January 23, 2002 $47,347.00 per month or $5.59 per s.f.
Beginning January 23, 2003 $48,767.00 per month or $5.76 per s.f.
</TABLE>
3. For the purpose of calculating Tenant's Proportionate Share
of common area maintenance, Tenant's share shall be adjusted to
reflect 101,570/101,570 square feet (100%).
4. By increasing Landlord's obligation to contribute toward the
improvement of the Premises so as to fund an additional
$300,000.00 upon Tenant's request above and beyond the
improvements described in Exhibit B of the Lease. Landlord is
also obligated to fund the cost of creating the additional
parking area depicted on Exhibit D-2 of this Agreement. In the
event Tenant requests and cost-approves improvements to the
Premises in excess of Landlord's $300,000.00 contribution, such
excess cost will be borne by Tenant and paid by Tenant 1/2 upon
commencement of construction and 1/2 upon occupancy. Landlord
agrees that the excess cost described herein shall not exceed
$143,000 based on construction documents by Smith Cave &
Associates titled Radiant Systems Expansion sheets I-1 through
I-4, Job No. 9574.26 dated 8/14/98.
5. By extending the term of the Lease such that it will end
sixty (60) months after the First Amendment Commencement Date.
6. The First Amendment Commencement Date shall be October 1,
1998, or the date that Tenant takes occupancy of the added
Premises, whichever occurs last.
7. With respect to the added Premises, Landlord's obligation
under paragraph 5 of the original Lease shall commence as of the
First Amendment Commencement Date and shall continue for a period
of one (1) year.
8. Except as herein provided, all terms and conditions of the
Lease shall remain unchanged.
IN WITNESS WHEREOF, this First Amendment to Lease has been
executed as of the date and year first above written.
LANDLORD:
Meadows Industrial, LLC, a North Carolina
limited liability company,
Attest / Witness:
By: Childress Klein Properties, Inc.,
its Manager
Title: By: John R. Decker, Vice President
TENANT:
Radiant Systems, Inc.
Attest / Witness:
Title: By: Carlyle M. Taylor
Its: Vice President
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Equilease Financial Services, Inc., an Oregon corporation
Radiant Systems International, Inc., a Georgia corporation
Radiant Systems Central Europe, Inc., a Georgia corporation
Radiant Automotive, Inc., a Georgia corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into the
Company's previously filed Registration Statements on Form S-8
(File No's. 333-23237, 333-41291, 333-41327, 333-62157 and
333-62151).
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,537
<SECURITIES> 0
<RECEIVABLES> 18,395
<ALLOWANCES> (750)
<INVENTORY> 11,965
<CURRENT-ASSETS> 58,144
<PP&E> 13,987
<DEPRECIATION> (5,646)
<TOTAL-ASSETS> 84,166
<CURRENT-LIABILITIES> 10,815
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 69,245
<TOTAL-LIABILITY-AND-EQUITY> 84,166
<SALES> 82,935
<TOTAL-REVENUES> 82,935
<CGS> 49,165
<TOTAL-COSTS> 49,165
<OTHER-EXPENSES> 41,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,800)
<INCOME-PRETAX> (5,660)
<INCOME-TAX> (2,265)
<INCOME-CONTINUING> (3,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,395)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
