<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From ____________to _____________
Commission File Number 0-20532
LIFEQUEST MEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2559866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12961 Park Central, Suite 1300
San Antonio, Texas 78216
(Address of principal executive offices)
(Zip Code)
(210) 495-8787
(Registrant's telephone number, including area code)
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
------------
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
On August 7, 1997, there were outstanding 5,846,164 shares of Common
Stock, $.001 par value, of the registrant.
Page 1 of 13
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LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Consolidated Balance Sheets - December 31, 1996, and June 30, 1997 3
Consolidated Statements of Operations - For the Three Months and
Six Months Ended June 30, 1996 and 1997 4
Consolidated Statements of Cash Flows - For the Six Months Ended
June 30, 1996 and 1997 5
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1996 1997
----------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 289,508 $ 615,026
Short-term investments 2,464,743 1,610,772
Accounts receivable (net of allowance for doubtful accounts of
$231,891 in 1996 and $51,891 in 1997) 749,744 1,125,891
Accounts receivable from related party 11,845 18,625
Interest receivable 60,381 18,108
Inventories 1,517,959 1,539,303
Prepaid and other assets 92,315 47,098
----------------- ---------------------
Total current assets 5,186,495 4,974,823
----------------- -------------------
Property, Plant and Equipment 1,160,739 1,245,491
Less-Accumulated depreciation (748,438) (809,936)
----------------- ----------------
412,301 435,555
----------------- ----------------
Intangible Assets:
Licensed technology rights 427,273 427,273
Goodwill, net 2,677,337 2,543,471
----------------- ----------------
Total assets $ 8,703,406 $ 8,381,122
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,250,461 $ 1,498,915
Accrued expenses 995,022 320,989
Current portion of long-term debt and
capital lease obligations 11,577 682,500
---------------- ---------------
Total current liabilities 2,257,060 2,502,404
Long-term debt and capital lease obligations 695,291 9,358
----------------- ---------------
Total liabilities 2,952,351 2,511,762
----------------- ---------------
Minority Interest 120,380 117,839
---------------- --------------
Stockholder's Equity:
Common Stock, $.001 par value; 10,000,000 shares authorized;
shares issued and outstanding: 5,724,598 (1996)
and 5,846,164 (1997) 5,724 5,845
Additional paid-in capital 19,963,878 20,095,183
Accumulated deficit (14,338,927) (14,349,507)
----------------- ----------------
Total stockholders' equity 5,630,675 5,751,521
----------------- ----------------
Total liabilities and stockholders' equity $ 8,703,406 $ 8,381,122
================= ================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------- -------------------------------
1996 1997 1996 1997
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Retail Value of Product and Commission Sales $ 1,709,765 $ 3,510,950 $ 2,950,817 $ 6,813,242
============= ============ ============= =============
Net Sales
Product Sales $ 1,056,795 $ 2,560,635 $ 1,952,509 $ 5,288,817
Commissions Earned 48,902 160,088 95,289 262,135
------------- ------------ ------------- -------------
1,105,697 2,720,723 2,047,798 5,550,952
------------- ------------ ------------- -------------
Cost And Expenses:
Cost of sales 862,663 1,593,815 1,461,840 3,338,931
Research and development 85,230 5,049 177,931 29,658
Selling, general and administrative 503,883 979,567 1,231,104 1,998,493
Depreciation and amortization 29,435 97,087 56,203 196,754
------------- ------------ ------------- -------------
1,481,211 2,675,518 2,927,078 5,563,836
------------- ------------ ------------- -------------
Income (loss) from operations (375,514) 45,205 (879,280) (12,884)
------------- ------------ ------------- -------------
Other income(expense):
Investment income 55,456 27,551 119,280 57,908
Interest expense (13,461) (12,441) (29,313) (23,301)
------------- ------------ ------------- -------------
Net Income (Loss) Before Minority Interest (333,519) 60,315 (789,313) 21,723
Minority interest in net loss of
consolidated subsidiary 4,101 3,938 15,286 2,541
------------- ------------ ------------- -------------
Net Income (Loss) $ (329,418) $ 64,253 $ (774,027) $ 24,264
============= ============ ============= =============
Net Income (Loss) Per Share of Common Stock $ (.07) $ .01 $ (.18) $ .00
============= ============ ============= =============
Weighted Average Shares Used In Computing
Net Income (Loss) Per Share of Common Stock 4,407,867 6,222,862 4,402,261 6,180,238
============= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 5
LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-------------------------------
1996 1997
------------- ------------
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income (Loss) $ (774,027) $ 24,264
Adjustments to reconcile net income (net loss) to net cash
provided by (used in) operating activities -
Depreciation and amortization 56,203 196,754
Issuance of stock, marketing agreement expense 17,500 --
Minority interest in net (loss) income of consolidated subsidiary (15,286) (2,541)
Changes in operating assets and liabilities-
(Increase) in accounts receivable, net (87,932) (376,147)
(Increase) decrease in interest receivable (9,147) 42,273
Decrease in inventories (1,848) (21,344)
Decrease in prepaid and other assets 71,594 45,217
Decrease in accounts receivable from related part (19,119) (6,780)
(Decrease) increase in accounts payable (450,007) 248,454
Decrease in accrued expenses (12,862) (674,033)
--------------- ---------------
Net cash used in operating activities (1,224,931) (523,883)
--------------- ---------------
Cash Flows From Investing Activities:
Additions to property and equipment (124,790) (86,142)
Purchases of investments -- (2,004,352)
Investment maturities 1,085,292 2,858,323
-------------- --------------
Net cash provided by investing activities 960,502 767,829
-------------- --------------
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable 750,000 --
Proceeds from exercise of stock options 13,443 131,426
Payment on due to stockholder (7,272) (34,844)
Payments on long-term debt and capital lease obligations (419,216) (15,010)
(1,170)
Payments to Stockholder -------------- --------------
335,785 81,572
Net cash provided by financing activities ============= ==============
Net increase in cash and cash equivalents 71,356 325,518
Cash and cash equivalents, beginning of period 327,500 289,508
-------------- --------------
Cash and cash equivalents, end of period $ 398,856 $ 615,026
============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 6
LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------------
1996 1997
------------ -----------
S> <C> <C>
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the period for -
Interest $ 30,249 $ 23,301
Income taxes - -
</TABLE>
Noncash Investing And Financing Activities:
The Company issued 950,000 shares of common stock in connection with the
mergers of G. M. Engineering, Inc. and Klein Medical, Inc. For a discussion of
these mergers, see the Company's annual report on Form 10-KSB.
The Company also issued 57,143 shares of common stock in connection with the
merger of Trimedica, Inc. See note 5 in the financial statements.
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 7
LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of LifeQuest
Medical, Inc. (the "Company"), LifeQuest Endoscopic Technologies, Inc.
("LQET"), Klein Medical, Inc. ("KMI"), Val-U-Med, Inc. ("VMI"), wholly owned
subsidiaries of the Company, and the Company's 82% ownership interest in
ValQuest Medical, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation. The consolidated financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. However,
all adjustments have been made which are, in the opinion of the Company,
necessary for a fair presentation of the results of operations for the periods
covered. In addition, all such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is recommended that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto for the fiscal year ended December 31, 1996, included in the Company's
Form 10-KSB. Certain reclassifications have been made in the prior period
financial statements to conform with the current period presentation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Product sales are recognized upon the shipment of products to customers.
Commissions earned are recognized when customer orders are placed with product
suppliers. Retail Value of Product and Commission Sales as presented on the
consolidated statement of income includes product sales, plus the gross sales
of products for which the Company receives commissions and is presented for
informational purposes.
NOTE 3 - NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of Common Stock and common stock equivalents
outstanding during the period. Common stock equivalents are not considered in
the computation of net loss per share when their effect is antidilutive.
NOTE 4 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------------------------------
<S> <C> <C>
Raw materials $ 66,979 $ 47,977
Work-in-process 128,774 116,276
Finished Goods 1,322,206 1,375,050
------------ -------------
$ 1,517,959 $ 1,539,303
============ =============
</TABLE>
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<PAGE> 8
NOTE 5 - TRIMEDICA, INC. MERGER
Effective June 1997, Trimedica, Inc., a Colorado corporation ("Trimedica") was
acquired by the Company and merged into KMI a wholly owned subsidiary of the
Company. Trimedica was purchased for an aggregate of 57,143 shares of Common
Stock. The transaction was accounted for using the pooling-of-interests
accounting method, therefore, the assets, liabilities, and operations of
Trimedica are included in the consolidated financial statements for all periods
reported herein. Trimedica business activity will constitute the new orthopedic
distribution and marketing division of KMI.
NOTE 6 - STOCK OPTION PLAN
At the Annual Meeting of Stockholders held June 17, 1997, the proposal
to amend the Company's 1989 Stock Option Plan to increase the number of shares
authorized for issuance under the Option Plan to 1,500,000 was approved as
2,383,894 shares of Common Stock were voted "For", 666,753 shares were voted
"Against", 206,707 shares abstained from voting and 1,971,460 were unvoted.
- 8 -
<PAGE> 9
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
Certain statements contained in this Item 2, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," including
statements regarding the anticipated development and expansion of the Company's
business, expenditures, the intent, belief or current expectations of the
Company, its directors or its officers, primarily with respect to the future
operating performance of the Company and other statements contained herein
regarding matters that are not historical facts, are "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995). Because such statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, those discussed in the Company's Registration
Statement on Form S-3 filed on February 7, 1997, and the Company's annual and
quarterly reports filed with the Securities and Exchange Commission.
OVERVIEW
From inception through December 31, 1995, the Company was a
development stage enterprise whose efforts and resources were devoted primarily
to research and development activities related to its initial products. During
this development stage, the Company received minimal operating revenues and,
thus, was unprofitable. As of June 30, 1997, the Company had an accumulated
deficit of approximately $14,350,000. There can be no assurance that the
Company will be able to sustain profitability.
The Company's future operating results will depend on many factors,
including the Company's ability to manufacture and market its products on a
cost-effective basis, demand for the Company's products and the level of
competition in the market place.
Effective June 1997, Trimedica, Inc., a Colorado corporation
("Trimedica") was acquired by the Company and merged into Klein Medical, Inc.,
("KMI") a wholly owned subsidiary of the Company. Trimedica was purchased for
an aggregate of 57,143 shares of Common Stock. The transaction was accounted
for using the pooling-of-interests accounting method, therefore, the assets,
liabilities, and operations of Trimedica are included in the consolidated
financial statements for all periods reported herein. Trimedica business
activity will constitute the new orthopedic distribution and marketing division
of KMI.
In December, 1996, Val-U-Med, Inc., a Georgia corporation
("Val-U-Med") was acquired by the Company and merged into Val-U-Med Acquisition
Co., a Nevada corporation ("VMI") and newly-formed, wholly-owned subsidiary of
the Company. Val-U-Med was purchased for an aggregate of 1,200,000 shares of
Common Stock and an aggregate of $400,000. The transaction was accounted for
using the purchase method of accounting. VMI is involved in the distribution
and marketing of minimally invasive surgical products.
In November, 1996, Klein Medical, Inc., a Texas corporation ("Klein")
was acquired by the Company and merged into KMI, a Nevada corporation and
newly-formed, wholly-owned subsidiary of the Company. Klein was purchased for
an aggregate of 600,000 shares of Common Stock. The transaction was accounted
for using the pooling-of-interests accounting method, therefore, the assets,
liabilities, and operations of KMI and Klein are included in the consolidated
financial statements for all periods reported herein. KMI is involved in the
distribution and marketing of minimally invasive surgical products.
In February, 1996, the Company completed the merger of GM Engineering,
Inc., a California corporation, ("GME"), with and into LifeQuest Endoscopic
Technologies, Inc., ("LQET") a Nevada corporation and newly formed wholly owned
subsidiary of the Company. GME was purchased for 350,000 shares of Common
Stock. The transaction was recorded using the pooling-of-interests method of
accounting, therefore, the assets, liabilities, and operations of GME are
included in the consolidated financial statements for all periods reported
herein. LQET develops, manufactures, and markets surgical and related
instruments used in minimally invasive surgery.
In May, 1994, the Company and Valdor Fiber Optics ("Valdor") of San
Jose, California, formed a corporate joint venture called ValQuest Medical,
Inc. ("ValQuest"). In accordance with the terms of the joint venture
agreement, Valdor transferred to ValQuest the exclusive worldwide rights to
develop, manufacture, and market all present and future medical applications of
Valdor's patented fiber optic connector technology. The Company paid $100,000
to Valdor in consideration for the transfer of these rights to ValQuest.
Valdor contributed such rights, which had an initial value of $327,273 in the
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<PAGE> 10
consolidated financial statements, to ValQuest in exchange for a 45 percent
interest in ValQuest. The Company contributed $400,000 to be used as working
capital in exchange for a 55 percent interest in ValQuest. Currently,
subsequent purchases of stock have increased the Company's ownership interest
in ValQuest to 82 percent.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had current assets of $4,975,000 and
current liabilities of $2,502,000 resulting in working capital of $2,473,000.
This compares to a working capital position of $2,929,000 at December 31, 1996.
The decline in working capital is primarily due to costs related to the larger
infrastructure necessary to support the geographical expansion of the Company's
sales force.
Capital expenditures were $86,000 during the first six months of 1997.
The Company anticipates further capital expenditures as the Company's
geographical expansion continues.
On February 26, 1996, the Company borrowed $750,000 from a commercial
bank pledging a like amount of short-term investments as collateral. The loan
proceeds were used to replace more expensive debt, mainly capital equipment
leases, acquired with the acquisition of GME. The balance of this loan at June
30, 1997 is $683,000.
Based upon the current level of operations, the Company believes that
cash flow from operations plus the Company's cash from the realization of its
current assets will be adequate to meet its anticipated requirements for
working capital and capital expenditures. However, additional capital may be
required in order for the Company to take advantage of additional attractive
acquisition opportunities or to participate in future alliances or joint
ventures.
RESULTS OF OPERATIONS
For the three months ended June 30, 1997, the Company reported net
income of $64,000 or $.01 per share. This compares with a net loss of $329,000
for the three months ended June 30, 1996. For the six months ended June 30,
1997, the Company reported net income of $24,000 versus a net loss of $774,000
for the comparable period of 1996. The improvement in reported results was
primarily due to an increase in net sales, an increase in gross profit margins
and reduction of certain selling, general and administrative expenses.
Product sales increased 142% in the second quarter 1997 and 171% in
the first half of 1997 as compared with the same periods in 1996. Product sales
were $2,560,000 for the second quarter of 1997 and $1,057,000 for the second
quarter of 1996. Product sales for the first half of 1997 and 1996 were
$5,289,000 and $1,953,000 respectively. These increases were due to continued
sales growth throughout the Company and the acquisition of Val-U-Med.
Gross profit from product sales in the second quarter was $975,000 in
1997 versus $194,000 in 1996. The corresponding gross profit margins were 38%
in 1997 and 18% in 1996. For the six months, gross profit was $1,950,000 or
37% in 1997 and $488,000 or 25% in 1996. The increase in margins is a result
of the realization of the efficiencies incurred through expanding volumes and
economies of scale. On July 18, 1997, the Company completed its previously
announced relocation which combines its corporate offices, San Antonio
warehouse and distribution center, repair and service center, and manufacturing
facility in one new San Antonio location. The Company believes this move and
the related February 1997 move of VMI and the Atlanta distribution center into
a new larger facility prepares the Company for continual growth and positions
the Company to capture further operating efficiencies.
Research and development expenses have declined to de minimus levels
at June 30, 1997. This decline is due to the Company's decision to severely
curtail research activity and to concentrate its resources on sales growth
through geographical and product line expansion. Therefore, these expenses
should continue to decline in 1997.
For the second quarter, selling, general and administrative expenses,
which consist primarily of sales commissions, salaries and other costs
necessary to support the Company's infrastructure, increased to $980,000 in
1997 from $504,000 in 1996. For the six months, these expenses increased 62%
in 1997. These costs reflect higher sales commissions due to the Companywide
sales growth and overall increased activity due to the inclusion of VMI.
The minority interest in net loss of consolidated subsidiary reflects
the minority ownership share of ValQuest's operations.
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<PAGE> 11
Investment income represents interest earned on the Company's
short-term investments. Therefore, investment income declined as the level of
short-term investments declined from year to year.
As of June 30, 1997, the Company had net operating loss carryforwards
of approximately $13,088,000 for federal income tax purposes which are
available to reduce future taxable income and will expire in 2006 through 2011
if not utilized. For federal income tax purposes the Company deferred for
future amortization certain acquisition and research and development costs in
the amount of $2,453,000. Such costs, which have been expensed for financial
reporting purposes, will be amortized for tax purposes over future years when
commercial operations commence. The Company received IRS approval of its
request for a change of tax accounting method to expense research and
development costs for expenditures incurred in 1992 and future years. The
Company also has Research and development credit carryforwards available to
offset future income taxes and expire in 2005 through 2010.
The Company's ability to use its NOL carryforwards to offset future
taxable income is subject to restrictions enacted in the United States Internal
Revenue Code of 1986, as amended (the "Code"). These restrictions provide for
limitations on the Company's utilization of its NOL carryforwards following
certain ownership changes described in the Code. As a result of ownership
changes, the Company's existing NOL carryforwards are subject to the
limitation. Of the $13,088,000 of NOL carryforwards, $533,000 is subject to
limitation. Approximately $40,000 of the $533,000 can be utilized annually.
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<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not applicable
Item 2. Changes in Securities
(a) Not applicable.
(a) Not applicable.
(a) Pursuant to a Plan of Acquisition and Merger Agreement (the
"Agreement") among the Company, Klein Medical, Inc., a Nevada
corporation and wholly owned subsidiary of the Company,
Trimedica, Inc., a Colorado corporation ("Trimedica"), and
Mark Lovejoy ("Lovejoy") dated effective June 30, 1997,
whereby the Company acquired substantially all of the assets
of Trimedica, the Company issued 57,143 shares of common
stock, $.001 par value ("Common Stock"), to Mark Lovejoy. The
Common Stock was not registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to the
exemptions of such registration provided under Regulation D
("Regulation D") of the rules and regulations promulgated
under the Securities Act by the Securities and Exchange
Commission. The Company relied upon certain representations
and warranties of Lovejoy, including, among other things, as
to his ability, along with that of his Purchaser
Representative (as that term is defined in Rule 501(h) of
Regulation D), to evaluate the merits and risks of the
transactions contemplated in the Agreement and that the Common
Stock was acquired solely for his own account for investment
and not with a view to distribution.
Item 3. Defaults Upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on June 17, 1997.
(a) The following directors were elected to serve until the next
Annual Meeting of Stockholders or until their successors have
been elected and qualified.
Herbert H. Spoon Robert B. Johnson
Randall K. Boatright Jeffrey H. Berg
David J. Collette, M.D. Richard H. Klein
Robert L. Evans Kalford C. Fadem
(c) (1) The directors named in (b) above were elected by the
following votes:
<TABLE>
<CAPTION>
NO OF VOTES
NAME NO. OF VOTES FOR WITHHELD
---- ---------------- ----------
<S> <C> <C>
Richard H. Klein 5,162,370 66,444
Robert L. Evans 5,162,370 66,444
Randall K. Boatright 5,162,370 66,444
Herbert H. Spoon 5,161,970 66,844
Robert B. Johnson 5,162,370 66,444
Jeffrey H. Berg 5,162,370 66,444
David J. Collette, M.D. 5,162,370 66,444
Kalford C. Fadem 5,162,370 66,444
</TABLE>
(2) With respect to the proposal to amend the Company's 1989
Stock Option Plan to increase the number of shares
authorized for issuance under the Option Plan to 1,500,000
was approved as 2,383,894 shares of Common Stock were
voted "For", 666,753 shares were voted "Against",
206,707 shares abstained from voting and 1,971,460 were
unvoted;
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<PAGE> 13
(3) Of the 5,228,814 shares voting at the meeting, 5,208,634
voted for the ratification of the appointment of the
accounting firm of Arthur Andersen LLP as the Company's
independent accountants for 1997. The number of shares
that voted against the ratification was 2,530 and the
holders of 17,650 shares abstained from the voting.
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number 2.1*: Plan of Merger and Acquisition Agreement
Among the Company, Klein Medical, Inc.,
Trimedica, Inc. and Mark Lovejoy,
effective June 30, 1997.
Exhibit Number 10.1*: Lease Agreement dated April 28, 1997
between Interpark Jack Limited
Partnership and LifeQuest Medical, Inc.
Exhibit Number 10.2*: Lease Agreement dated March 1, 1997
between Williams North Fulton Group and
Val-U-Med, Inc.
Exhibit Number 11.0*: Computation of Earnings Per Share
Exhibit Number 27*: Financial Data Schedule
(b) Reports on Form 8-K: Not applicable
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIFEQUEST MEDICAL, INC. (Registrant)
Dated: August 11, 1997 By /s/ HERBERT H. SPOON
-------------------------------------
Herbert H. Spoon
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 11, 1997 By /s/ RANDALL K. BOATRIGHT
-------------------------------------
Randall K. Boatright
Vice President and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
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<PAGE> 14
Exhibit
No.: Description
------- --------------------------------------------
2.1 Plan of Merger and Acquisition Agreement
Among the Company, Klein Medical, Inc.,
Trimedica, Inc. and Mark Lovejoy,
effective June 30, 1997.
10.1 Lease Agreement dated April 28, 1997
between Interpark Jack Limited
Partnership and LifeQuest Medical, Inc.
10.2 Lease Agreement dated March 1, 1997
between Williams North Fulton Group and
Val-U-Med, Inc.
11 Computation of Earnings Per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 2.1
PLAN OF MERGER AND ACQUISITION AGREEMENT
among
LIFEQUEST MEDICAL, INC.
a Delaware corporation
KLEIN MEDICAL, INC.,
a Nevada corporation
and
TRIMEDICA, INC.
a Colorado corporation
Mark Lovejoy,
an individual
<PAGE> 2
THIS PLAN OF MERGER AND ACQUISITION AGREEMENT ("Agreement") executed
this ___ day of August, 1997, to be effective on June 30, 1997, by and among
TRIMEDICA, INC., a Colorado corporation ("Trimedica"), Mark Lovejoy, an
individual, as sole shareholder of Trimedica (referred to as the
"Shareholder"), LIFEQUEST MEDICAL, INC., a Delaware corporation ("LifeQuest"),
and KLEIN MEDICAL, INC., a Nevada corporation ("Purchaser," and together with
LifeQuest, the "LifeQuest Parties").
W I T N E S S E T H:
WHEREAS, LifeQuest is primarily in the business of developing and
commercializing minimally invasive surgery devices; and
WHEREAS, LifeQuest owns all of the issued and outstanding stock of
Purchaser; and
WHEREAS, Trimedica is in the business of selling minimally invasive
orthopaedic surgical products in Colorado, Wyoming, and Montana.
WHEREAS, the Shareholder is an individual constituting the sole
shareholder of Trimedica; holding 100% of the issued and outstanding stock of
Trimedica; and
WHEREAS, the respective boards of directors of Purchaser and Trimedica
have approved the merger of Trimedica with and into Purchaser (the "Merger")
pursuant to the terms and subject to the conditions of this Agreement; and
WHEREAS, this Agreement is intended to qualify under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Trimedica shall be merged with and
into Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth and as set forth:
ARTICLE 1
DEFINITIONS
Defined Terms. As used herein, the terms below shall have the following
meanings herein specified applicable to both the singular and plural forms of
any of the terms.
1.1 "Affiliate" shall mean, with respect to a Person, any Person
that, directly or indirectly, controls or is controlled by or is under common
control with the Person.
1.2 "Assets" shall mean the assets, properties and rights of
Trimedica of every nature, kind and description, wherever located, tangible and
intangible, real, personal and mixed, whether or not reflected in the books and
records of Trimedica necessary
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or desirable to permit the business of Trimedica to be carried on in the manner
as is presently conducted.
1.3 "Benefit Plans" shall mean bonus, deferred compensation,
severance, pension, profit sharing, retirement, stock purchase, stock option,
medical, hospitalization, accident insurance or any other employee benefit
plan, arrangement or practice, whether written or unwritten, which covers
employees of Trimedica.
1.4 "Certificate" shall mean each stock certificate representing
shares of Trimedica Stock.
1.5 "Closing" shall mean the meeting held on the Closing Date.
1.6 "Closing Date" shall have the meaning assigned to it in Article
7.
1.7 "Effective Time" shall mean the time at which a properly executed
certificate of merger in substantially the form attached to this agreement as
Exhibit A (together with other documents required by law to effect the Merger)
shall have been filed with the Secretary of State of Nevada, and in any other
jurisdiction where such a certificate of merger is required.
1.8 "Environmental Conditions" shall mean material conditions with
respect to soil, surface waters, ground waters, stream sediments, underground
tanks, asbestos and similar conditions on-site and off-site of properties
owned, occupied or used by Trimedica, as the case may be, related to the
presence or Release of Hazardous Substances, which conditions could require
remedial action or may result in claims, demands and liabilities against, upon
or, respectively, by third parties, including, without limitation, governmental
entities, adjacent property owners and any individuals suffering property
damage or personal injury.
1.9 "Environmental Laws" shall mean all federal, state and local
laws, rules, regulations, codes, judgments and decrees concerning pollution or
protection of the environment.
1.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.11 "Financial Statements" shall mean the balance sheets, statements
of income and retained earnings and changes in cash flows for the years or
periods ended June 30, 1997, December 31, 1996 and December 31, 1995.
1.12 "Former Trimedica Shareholder" shall mean each Person who was,
immediately before the Effective Time, a holder of issued and outstanding
shares of Trimedica Stock.
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1.13 "Hazardous Substances" shall include any dangerous substances,
toxic substances, hazardous materials or hazardous substances as defined in or
pursuant to the Resource Conservation and Recovery Act (42 U.S.C. Section 6901,
et seq.), as amended, the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601, et seq.) ("CERCLA"), as amended, or
any other Environmental Law.
1.14 "Intellectual Property" shall have the meaning assigned to it in
Section 3.8.
1.15 "IRS" shall mean the Internal Revenue Service.
1.16 "LifeQuest SEC Documents" shall mean each report, schedule,
registration statement and definitive proxy statement filed by LifeQuest with
the SEC since January 1, 1995.
1.17 "LifeQuest Stock" shall mean the common stock, $.001 par value of
LifeQuest.
1.18 "Losses" shall mean all damages, losses, obligations,
liabilities, claims, encumbrances, deficiencies, costs and expenses including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action, investigation, claim or proceeding.
1.19 "Market Price" shall mean the average of the closing bid and
asked prices of a share of LifeQuest Stock for the 10 consecutive trading days
immediately prior to the third trading day prior to the Effective Time, as
reported in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System.
1.20 "Merger Consideration" shall have the meaning assigned to it in
Section 2.6.
1.21 "Notice" shall mean any summons, citation, directive, order,
claim, litigation, proceeding, judgment, letter or other communication, written
or oral, actual or threatened, from the United States Environmental Protection
Agency or other federal, state or local agency or authority or any other entity
or any individual concerning any intentional or unintentional act or omission
which has resulted or may result in the Release of Hazardous Substances into
waters, or into the "environment" as such term is defined in CERCLA, from or on
property owned, occupied or used by Trimedica, and shall include the imposition
of any lien on property occupied or used by Trimedica, pursuant to any
violation of any Environmental Law, or any knowledge, after due inquiry and
investigation, of any acts that could give rise to any of the above.
1.22 "Person" shall mean an individual, corporation, partnership,
joint venture, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
1.23 "Purchaser Stock" shall mean the common stock, $.01 par value of
Purchaser.
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1.24 "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping.
1.25 "SEC" shall mean the United States Securities and Exchange
Commission.
1.26 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.27 "Trimedica Stock" shall mean the common stock, no par value, of
Trimedica.
1.28 "Trimedica's Contracts" shall mean (a) the contracts described on
Schedule 3.12, (b) purchase orders from customers accepted in the ordinary
course of business, and (c) employment contracts terminable on not more than 30
days' notice.
1.29 "Subsidiary" shall mean, with respect to any Person (the
"parent"), (i) any corporation, association, joint venture, partnership or
other business entity of which securities or other ownership interests
representing more than 50% of the ordinary voting power or beneficial interest
are, at the time as of which any determination is being made, owned or
controlled by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent and (ii) any joint venture or
partnership of which the parent or any Subsidiary of the parent is a general
partner or has responsibility for its management (provided, however, that the
term "Subsidiary" shall not include joint operating agreements).
1.30 "Surviving Corporation" shall mean the corporation existing at
and after the Effective Time as a result of the Merger.
ARTICLE 2
MERGER
2.1 The Merger. Subject to the terms and conditions of this
agreement, Trimedica shall be merged with and into Purchaser in accordance with
all applicable laws, with Purchaser being the Surviving Corporation. Purchaser
and Trimedica shall cause a certificate of merger to be filed with the
Secretary of State of Nevada, and in any other jurisdiction where such a
certificate of merger is required, on the Closing Date, unless legally
prohibited from doing so. The Merger shall be effective at the Effective Time.
2.2 Surviving Corporation. From and after the Effective Time, the
Surviving Corporation shall have the name "Klein Medical, Inc." and shall
possess all assets and property of every description, and every interest in the
assets and property, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature,
of each of Trimedica and Purchaser, and all debts and all other things in
action or belonging or due to each of Trimedica and Purchaser, all of which
shall be vested in the Surviving Corporation without further act or deed, and
title to any real estate or any interest in the real estate vested in either
Trimedica or Purchaser shall not revert or in any way be impaired.
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2.3 Liabilities. The Surviving Corporation shall be liable for all
the debts, liabilities and duties of each of Trimedica and Purchaser; any
action or proceeding pending, by or against either Trimedica or Purchaser, may
be prosecuted to judgment, with right of appeal, as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place, and all
the rights of creditors of each of Trimedica and Purchaser shall be preserved
unimpaired, and all liens upon the property of each of Trimedica and Purchaser
shall be preserved unimpaired, on only the property affected by the liens
immediately prior to the Effective Time.
2.4 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
2.5 Directors and Officers. The directors and officers of Purchaser
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors are duly elected or appointed
and qualified in the manner provided in the bylaws of the Surviving
Corporation, or as otherwise provided by law.
2.6 Conversion or Cancellation of Stock Upon Merger. In consideration
for the Merger and the non-competition agreement in Section 12 hereof, as of
the Effective Time, by virtue of the Merger and without any action on the part
of the holders of any shares of Trimedica Stock, or the holder of the shares of
Purchaser Stock, (a) the Trimedica Stock outstanding immediately before the
Effective Time shall be converted into the right to receive, subject to Section
2.7 below, an aggregate number of shares of LifeQuest Stock, equal to the
quotient of 250,000 divided by the Market Price of a share of LifeQuest Stock
(the "Merger Consideration") and (b) each share of Purchaser Stock outstanding
immediately before the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
2.7 Fractional Shares. Notwithstanding Section 2.6, no certificates
or scrip representing fractional shares of LifeQuest Stock shall be issued upon
the surrender for exchange of certificates that prior to the Effective Time
represented shares of Trimedica Stock, no dividend or distribution of LifeQuest
shall relate to any fractional share interest and no fractional share interest
shall entitle the owner thereof to vote or to exercise any rights of a
shareholder of LifeQuest. In the event that any Former Trimedica Shareholder
shall be entitled to any fractional share interest then any fractional amount
shall be rounded up to the nearest whole share.
2.8 Exchange Requirements. After the Effective Time, (a) each
outstanding Certificate shall, until duly surrendered to Purchaser, be deemed
to represent only the right to receive the Merger Consideration, (b) there
shall be no further transfer on the records of Trimedica of Certificates, and
(c) each share of Trimedica Stock presented or surrendered to Purchaser shall
be canceled in exchange for the Merger Consideration as contemplated by Section
2.6. In no event shall Purchaser be obligated to deliver Merger Consideration
to any holder of a Certificate until such holder surrenders such Certificate as
provided herein.
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2.9 Interim Dividends. No dividends or other distributions declared
after the Effective Time on LifeQuest Stock issuable pursuant to the Merger and
payable to any Former Trimedica Shareholder after the Effective Time shall be
paid to the holder of any unsurrendered certificates formerly representing
shares of Trimedica Stock until the certificates shall be surrendered as
provided herein, provided, however, that (a) upon surrender there shall be paid
to the shareholder in whose name the certificates representing the shares of
LifeQuest Stock shall be issued the amount of unpaid dividends with respect to
the holder's shares of LifeQuest Stock and (b) at the appropriate payment date,
or as soon as practicable thereafter, there shall be paid to the shareholder
the amount of dividends declared with respect to whole shares of LifeQuest
Stock with a record date on or after the Effective Time but before surrender
and a payment date subsequent to surrender, subject in any case to any
applicable escheat laws. No interest shall be payable with respect to the
payment of dividends or other distributions on surrender of outstanding
certificates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to the LifeQuest Parties as
follows:
3.1 Corporate Organization. Trimedica is a corporation duly
organized, validly existing and in good standing under the laws of Colorado,
and has full power and authority to own its properties and to carry on its
business as and in the places where such properties are now owned or such
business is now being conducted. Complete and correct copies of the Articles of
Incorporation of Trimedica and all amendments thereto, certified in each case
by the Secretary of State of the State of Colorado, and of the Bylaws of
Trimedica and all amendments thereto, certified by the Secretary of Trimedica,
heretofore have been delivered to LifeQuest. Trimedica is duly qualified to do
business and is in good standing in all jurisdictions (each such jurisdiction
is set forth on Schedule 3.1 attached hereto and made a part hereof) in which
such qualification is necessary because of the character of the properties
owned, leased or operated by it or the nature of its activities. Trimedica has
not knowingly taken any action, or failed to take any action which action or
failure will preclude or prevent Trimedica's business from being conducted in
substantially the same manner in which Trimedica has heretofore conducted the
same.
3.2 Subsidiaries. Trimedica has no subsidiaries.
3.3 Capitalization. Trimedica's authorized capital stock consists of
100 shares of Trimedica Stock, of which 100 shares are issued and outstanding
and are owned of record and beneficially by the Shareholder free and clear of
all liens, encumbrances or other obligations and issued without violation of
the preemptive, subscriptive or other similar rights of any person or entity.
There are no outstanding subscriptions, options, warrants, rights or other
agreements obligating Trimedica to issue any additional shares of Trimedica
Stock, except as set forth on Schedule 3.3 attached hereto and made a part
hereof.
3.4 Authorization. Trimedica has full power and authority, corporate
and otherwise, to enter into this Agreement and to assume and perform its
obligations
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hereunder. The execution and delivery of this Agreement and the performance by
Trimedica of its obligations hereunder have been duly authorized by the Board
of Directors and the shareholders of Trimedica and no further action or
approval, corporate or otherwise, by Trimedica is required in order to
constitute this Agreement as a binding and enforceable obligation of Trimedica.
The execution and delivery of this Agreement and the performance by Trimedica
of its obligations hereunder do not and will not violate any provisions of the
Articles of Incorporation or Bylaws of Trimedica and do not and will not
conflict with or result in any breach of any condition or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the Assets by reason of the terms of
any contract, mortgage, lien, lease, agreement, indenture, instrument or
judgment to which Trimedica is a party, or which is or purports to be binding
upon Trimedica or which affects or purports to affect any of the Assets.
3.5 Approvals and Consents. No action, approval, consent or
authorization, including, but not limited to, any action, approval, consent or
authorization by any governmental or quasi-governmental agency, commission,
board, bureau, or instrumentality is necessary as to Trimedica or the
Shareholder in order to constitute this Agreement as a valid, binding and
enforceable obligation of Trimedica and the Shareholder in accordance with its
terms.
3.6 Permits, Licenses, Etc. Trimedica has all permits, licenses,
orders and approvals, exclusive of those required under Environmental Laws, of
all federal, state, or local governmental or regulatory bodies required for it
to conduct its business as presently conducted. All such permits, licenses,
orders and approvals are in full force and effect and no suspension or
cancellation of any of them is threatened. Trimedica is operating in compliance
with all such permits, licenses, orders and approvals, and none of such
permits, licenses, orders or approvals will be adversely affected by the
consummation of the transactions contemplated by this Agreement. Trimedica is
in compliance in all material respects with each law, rule and regulation other
than Environmental Laws applicable to its business including, without
limitation, laws, rules and regulations respecting occupational safety and
employment practices. The conduct of the business of Trimedica and all assets
and properties utilized by Trimedica therein are in conformance with the
requirements and regulations of the Occupational Safety and Health
Administration ("OSHA").
3.7 Environmental Laws. Trimedica has all permits, licenses, orders
and approvals of, and has made all required filings with, all federal, state or
local governmental or regulatory bodies relating to, arising under or required
by the Environmental Laws. All such permits, licenses, orders and approvals are
in full force and effect and no suspension or cancellation of any of them is
pending or threatened. None of such permits, licenses, orders or approvals will
be adversely affected by the consummation of the transactions contemplated by
this Agreement. Trimedica is in compliance with all such permits, licenses,
orders and approvals and with all limitations, conditions, standards and
requirements contained in Environmental Laws applicable to it and the business
conducted by it. Schedule 3.7 attached hereto and made a part hereof contains a
description of each summons, citation, order, letter or other written
communication received by Trimedica from any federal, state or local
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governmental or regulatory body under any of the Environmental Laws during the
five-year period ending on the date hereof.
There are no currently existing Environmental Conditions with respect to
properties owned, occupied or used by Trimedica. Trimedica has received no
Notice with respect to any Environmental Condition at any time prior to the
date hereof.
3.8 Intellectual Property and Other Intangible Assets. Schedule 3.8
sets forth a description of all intellectual property owned, licensed or
claimed by Trimedica. Trimedica (a) owns or has the right to use all
inventions, discoveries, patents, copyrights, trademarks, trade names, service
marks, corporate names, licenses, trade secrets and know how and all other
intellectual property rights with respect to the foregoing, used in or
necessary for the conduct of its business as now conducted or as proposed to be
conducted without infringing upon or otherwise acting adversely to the right or
claimed right of any Person under or with respect to any of the foregoing (such
inventions, discoveries, patents, copyrights, trademarks, trade names, service
marks, corporate names, licenses, trade secrets and know how and all other
intellectual property rights with respect thereto being herein referred to as
the "Intellectual Property") and (b) is not obligated or under any liability or
claim whatsoever to make any payments by way of royalties, fees or otherwise to
any owner or licensee of, or other claimant to, any inventions, discoveries,
patents, copyrights, trademarks, trade names, service marks, corporate names,
licenses, trade secrets and know how and all other intellectual property
rights, with respect to the use thereof or in connection with the conduct of
its business or otherwise. A list of all such Intellectual Property and a
statement whether such Intellectual Property is owned or licensed is set forth
in Schedule 3.8 hereto. Except as specifically set forth in Schedule 3.8
hereto, the Intellectual Property has been duly registered or patented or
sought to be registered or patented with appropriate state, federal and foreign
jurisdictions and Trimedica is the sole and exclusive owner or has the sole and
exclusive right to use the Intellectual Property.
3.9 Financial Statements. Attached hereto as Schedule 3.9 and made a
part hereof are the Financial Statements, prepared in accordance with U.S.
generally accepted accounting principles consistently applied throughout the
periods indicated. The Financial Statements (a) are true, correct and complete,
(b) fairly, completely and accurately present the financial position of
Trimedica at the dates specified and the results of its operations for the
period covered, and (c) reflect expenses and liabilities of Trimedica in a
consistent manner throughout the periods to which the Financial Statements
relate. At the date of the Financial Statements, Trimedica had no liabilities
or obligations of any kind or nature, fixed or contingent, matured or unmatured
or otherwise, which are not fully reflected or reserved against on the
Financial Statements; nor does Trimedica have any liability or obligation of
any kind or nature arising since that date other than those incurred in the
ordinary course of business consistent with past practices, none of which are
material. Trimedica owns outright and has good and indefeasible title to all of
the Assets, including, without limitation, all of the assets and properties
reflected on the Financial Statements or acquired thereafter, free and clear of
any mortgage, lien, pledge, charge, claim, conditional sales or other
agreement, lease, right or encumbrance of any sort except: (x) to the extent
stated or reserved against on the Financial Statements and for changes
occurring in the
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ordinary course of business after the date thereof, none of which changes is
adverse, and (y) as set forth on Schedule 3.9A attached hereto and made a part
hereof. Each such asset and item has been fully operational in the ordinary
course of business for at least the six months immediately preceding the date
hereof. The Assets include all assets and properties (real, personal and mixed,
tangible and intangible) and all rights necessary or desirable to permit
Seller's business to be carried on as presently conducted by Seller, and
Trimedica has complete and unrestricted power and the unqualified right to
transfer, convey and assign the Assets.
3.10 Material Adverse Changes Since the Date of the Financial
Statements. Since June 30, 1997, except as set forth on Schedule 3.10, there
has been no material adverse change in the financial condition, assets,
liabilities, properties or business of Trimedica. Since June 30, 1997,
Trimedica has not:
(a) issued or sold any stock, notes, bonds or other securities,
or any option to purchase the same, or entered into any agreement with respect
thereto;
(b) declared, set aside or made any dividend or other
distribution on its capital stock or redeemed, purchased or acquired any shares
thereof or entered into any agreement in respect of the foregoing;
(c) incurred any damage, destruction or similar loss, whether or
not covered by insurance, materially affecting its business or properties;
(d) other than in the ordinary course of business, sold,
assigned or transferred any of its tangible assets or any trade name,
franchise, design, or other intangible assets or property;
(e) other than in the ordinary course of business, mortgaged,
pledged or granted or suffered to exist any lien or other encumbrance or charge
on any of its assets or properties, tangible or intangible;
(f) other than in the ordinary course of business, waived any
rights of material value or canceled or modified any material debts or claims;
(g) incurred any liability or obligation for borrowed money to
any shareholder of Trimedica or any Affiliate of Trimedica;
(h) incurred any obligation or liability (absolute or
contingent) except current liabilities and obligations incurred in the ordinary
course of its business or paid any liability or obligation (absolute or
contingent) other than current liabilities and obligations incurred in the
ordinary course of business, none of which were material;
(i) entered into any transaction other than in the ordinary
course of business;
(j) became obligated to make any payment to any shareholder or
any Affiliate of Trimedica in any capacity, or entered into any transaction of
any nature with any shareholder or any Affiliate of Trimedica in any capacity,
except in respect of
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the foregoing for compensation to shareholders or Affiliates who are employees
of Trimedica in their capacity as such;
(k) except for increases in the ordinary course and customary in
the business of Trimedica, which increases did not inure to officers, directors
or shareholders of Trimedica or to consultants to Trimedica, increased the
compensation payable to any employee of Trimedica or became obligated to
increase any such compensation, or their capacities as such; or
(l) entered into any transaction with any Affiliate of
Trimedica, except in respect of the foregoing for compensation to Affiliates
who are employees of Trimedica in their capacity as such.
3.11 Tax Returns. Trimedica has duly filed all federal, state, county
and local income, excise, sales and other tax returns and reports required to
have been filed by it to the date hereof, after giving effect to any extensions
of time to file duly obtained by Trimedica. Each such return and report is true
and correct and Trimedica has paid all taxes, interest and penalties shown on
such returns or reports to be due or claimed to be due prior to the date hereof
to any federal, state, county, local or other taxing authority. Trimedica has
no liability for any taxes, assessments, amounts, interest or penalties of any
nature whatsoever other than as shown on the Financial Statements and there is
no basis for any additional claim or assessment. The IRS has not examined the
federal income tax returns of Trimedica. No waiver of the statute of
limitations has been given with respect to any taxable year of Trimedica. No
government or governmental authority is now asserting or threatening to assert
any deficiency or assessment for additional taxes or any interest, penalties or
fines with respect to Trimedica. Complete and correct copies of the federal
income tax return of Trimedica for the fiscal year ended December 31, 1996, as
well as any other tax returns requested by LifeQuest, have been heretofore
delivered to LifeQuest.
3.12 Contracts. Trimedica is not a party to nor has any contract or
commitment of any kind or nature whatsoever, written or oral, including,
without limitation, any lease, license, franchise, employment, consultant or
commission agreement, pension, profit sharing, bonus, stock purchase,
retirement, hospitalization, insurance or other plan or arrangement involving
employee benefits, contract with any labor union or contract for services,
materials, supplies or equipment or for the sale or purchase of any of its
products or assets. Except as set forth therein, each of the Trimedica's
Contracts referred to on Schedule 3.12 is valid and existing, in full force and
effect and enforceable in accordance with its terms and no party thereto is in
default and no claim of default by any party has been made or is now pending
and there does not exist any event that with notice or the passing of time or
both would constitute a default or would excuse performance by any party
thereto. None of Trimedica's Contracts, except as expressly set forth therein,
requires any consents or approvals by any party to such contract to prevent a
breach or to protect and preserve the rights of the Surviving Corporation
thereunder subsequent to the consummation of the Merger. Trimedica has
heretofore delivered to LifeQuest complete and correct copies of each of
Trimedica's Contracts.
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3.13 Tangible Personal Property. Schedule 3.13 attached hereto and
made a part hereof is a true and complete list of all tangible personal
property owned by Trimedica having a book value at the date of the Financial
Statements. Trimedica owns and has good and indefeasible title in fee to all of
its assets and properties including, without limitation, all of the assets and
properties reflected in the Financial Statements and those identified on
Schedule 3.13, free and clear of any mortgage, lien, pledge, charge, claim,
conditional sales or other agreement, lease, right or encumbrance except (a) to
the extent stated or reserved against in the Financial Statements, (b) vendors'
or other statutory liens which may have resulted in the ordinary course of
business, (c) minor imperfections of title, liens and encumbrances which do not
materially detract from the value or the utility of the property subject
thereto or materially impair the operations of the owner thereof, and (d) as
set forth in Schedule 3.13 attached hereto and made a part hereof.
3.14 Real Property. Trimedica owns no real property. Except as set
forth on Schedule 3.14, Trimedica leases no real property. All leases of
property under which Trimedica purports to be a lessee are valid, binding and
in full force and effect, and Trimedica is not in default thereunder and there
is no event or fact which upon the passage of time or the giving of notice, or
both, could constitute a default by Trimedica under such lease.
3.15 Insurance. Schedule 3.15 attached hereto and made a part hereof,
is a true and complete list and brief description of all policies of fire,
liability and other forms of insurance owned or held by Trimedica. All of such
policies are valid and binding and in full force and effect as of the date
hereof and are in such amounts and cover such risks as are customarily carried
by other businesses similar to those conducted by Trimedica.
3.16 Banking. Schedule 3.16 attached hereto and made a part hereof is
a true and complete list setting forth the names and locations of all banks at
which Trimedica has an account or safe deposit box, the numbers of the accounts
and the names of all persons authorized to draw thereon.
3.17 Litigation. There are no actions, suits, proceedings or
investigations pending or threatened against or affecting the assets or the
business, operations or financial condition of Trimedica, at law or in equity,
in any court or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, nor is there
any basis for any such action, suit, proceeding or investigation. There are no
judgments outstanding against Trimedica and Trimedica is not in default in
respect of any judgment, order, writ, injunction, or decree of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
3.18 Labor. There are no threats of strikes, work stoppages or demands
for collective bargaining by any union or labor organization against or
including Trimedica, no grievances, disputes or controversies with any union or
any other organization of the employees of Trimedica, and no pending or
threatened arbitration proceedings involving an employment grievance, dispute
or controversy.
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3.19 Employee Benefit Plans. Except as set forth on Schedule 3.19
attached hereto and made a part hereof, Trimedica has no Benefit Plans,
including, without limitation, any "employee pension benefit plan" or "employee
welfare benefit plan" within the meaning of the Employee Retirement Income
Security Act of 1974, as amended (29 U.S.C. Section 1001, et seq.) ("ERISA"),
and the final regulations thereunder. True and complete copies of each written
Benefit Plan sponsored by Trimedica have heretofore been delivered to
LifeQuest. Trimedica has no commitment, written or oral, and whether legally
binding or not, to create any Benefit Plans in addition to those shown on
Schedule 3.19. Trimedica has no benefit plan that is a defined benefit plan
within the meaning of ERISA Section 3(35) maintained or contributed to by
Trimedica and that covers employees of Trimedica. Trimedica has no liability on
account of any Benefit Plans, including but not limited to liability for (a)
additional contributions accruing under such Benefit Plans with respect to
periods commencing on or prior to the Closing Date; (b) fiduciary breaches by
Trimedica, the trustees under the trust created under any of such plans, or any
other persons under ERISA, or any other applicable statute, regulation or rule;
or (c) income taxes by reason of non-qualification of such Benefit Plans. There
are no pending claims against any Benefit Plan (other than for benefits in
accordance with its terms), nor has any claim been threatened in writing by any
participant thereof or beneficiary thereunder. Without limiting the generality
of the foregoing, all Benefit Plans are in full compliance with all applicable
reporting, disclosure, filing and other administrative requirements pertaining
to employee benefit plans set forth in the Code and ERISA and rules and
regulations promulgated under either.
3.20 Inventory. Inventory reflected on the Financial Statements as of
the date thereof was determined in accordance with generally accepted
accounting principles consistently applied, stated, on an aggregate basis, at
the lower of cost (based on the first-in, first-out method) or market value and
consists solely of merchandise usable or saleable in the ordinary course of
business at not less than gross cost. The inventory conforms to customary trade
standards for marketable goods. Since the date of the Financial Statements,
there have been no changes in the inventory reflected on the Financial
Statements except in the ordinary course of business, none of which have been
material.
3.21 Accounts Receivable. Each account receivable reflected on the
Financial Statements constitutes a bona fide receivable resulting from a bona
fide sale to a customer in the ordinary course of business, the amount of which
was actually due on the date thereof and has been or will be collected in the
ordinary course of business, net of the allowance for doubtful accounts
reflected on the Financial Statements. There are no defenses, claims of
disabilities, counterclaims, offsets, refusals to pay or other rights of set-
off against any accounts receivable and there is no threatened, intended or
proposed defense, claim of disability, counterclaim, offset, refusal to pay or
other right of set-off with respect thereto. Each account receivable, each
document and instrument and each transaction underlying or relating thereto
conforms, including, without limitation, in respect of interest rates charged,
notices given and disclosures made, to the requirements and provisions of each
applicable law, rule, regulation or other relating to credit, consumer credit,
credit practices, credit advertising, credit reporting, retail installment
sales, credit cards, collections, usury, interest rates and truth-in-lending,
including, without limitation, the Federal Truth in Lending Act, as amended,
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and Regulation Z issued by the Board of Governors of the Federal Reserve System
thereunder. Each account receivable existing on the Closing Date will be paid
in full by not later than the 120th day after the closing. Such reserves and
allowances have been established on the basis of historical experience in
accordance with U.S. generally accepted accounting principles consistently
applied.
3.22 Employee and Other Compensation. Schedule 3.22 attached hereto
and made a part hereof is a complete and correct list of the names and current
annual salary, bonus, commission and perquisite arrangements, written or
unwritten, for each director, officer and employee of Trimedica, including
those whose compensation was paid in whole or in part by persons or entities
other than Trimedica. No current or former shareholder, director, officer,
employee or Affiliate of Trimedica, nor any relative, associate or agent of
such shareholder, director, officer, employee or Affiliate, has any interest in
any property of Trimedica except as a shareholder, or is a party, directly or
indirectly, to any contract for employment or otherwise or any lease or has
entered into any transaction with Trimedica including, without limitation, any
contract for the furnishing of services by, or rental of real or personal
property from or to, or requiring payments to, any such stockholder, director,
officer, employee, Affiliate, relative, associate or agent. To the best
knowledge of Trimedica and the Shareholder, no employee listed thereon intends
to terminate his employment relationship with Trimedica and Trimedica has no
contract for the future employment of any officer or employee not listed on
Schedule 3.22.
3.23 Customers and Suppliers. Schedule 3.23 attached hereto and made a
part hereof is a complete and correct list of the names and addresses of the 10
largest customers and suppliers, respectively, of Trimedica during the last
fiscal year, and the total sales to or purchases from such customers and
suppliers made by Trimedica during the last fiscal year. No supplier or
customer of Trimedica representing in excess of 5% of Trimedica's purchases or
sales during the last fiscal year has advised Trimedica, formally or
informally, that it intends to terminate, discontinue or substantially reduce
its business with Trimedica by reason of the transactions contemplated by this
Agreement or otherwise.
3.24 No Omission of Material Fact. No representation or warranty by
the Shareholder in this Agreement or under any documents, instruments,
certificates or schedules furnished pursuant hereto or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
3.25 Closing Date Effect. All of the representations and warranties of
the Shareholder are true and correct as of the date hereof and shall be true
and correct on and as of the Closing Date, with the same force and effect as if
such representations and warranties were made by the Shareholder to the
LifeQuest Parties on the Closing Date.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE LIFEQUEST PARTIES
The LifeQuest Parties represent and warrant to the Shareholder as
follows:
4.1 LifeQuest Corporate Organization. LifeQuest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to own its properties and to carry on
its business as and in the places where such properties are now owned or such
businesses are now being conducted.
4.2 Purchaser Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full power and authority to own its properties and to carry on
its business as and in the places where such properties are now owned or such
businesses are now being conducted.
4.3 Authorization. The LifeQuest Parties have full power and
authority, corporate and otherwise, to enter into this Agreement and to assume
and perform their respective obligations hereunder. The execution and delivery
of this Agreement and the performance by the LifeQuest Parties of their
respective obligations hereunder have been or will be duly authorized by the
Boards of Directors of the LifeQuest Parties and no further action or approval,
corporate or otherwise, by the LifeQuest Parties is or will be required in
order to constitute this Agreement as a binding and enforceable obligation of
the LifeQuest Parties.
ARTICLE 5
LIFEQUEST STOCK AND LIFEQUEST SEC DOCUMENTS
5.1 LifeQuest SEC Documents. LifeQuest has furnished the Shareholder
with a true and complete copy of the LifeQuest SEC Documents. As of its filing
date (and, with respect to any registration statement, the date on which it was
declared effective), each LifeQuest SEC Document was in compliance, in all
material respects, with the requirements of its form, contained no untrue
statement of a material fact and did not omit any statement of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of LifeQuest included in the LifeQuest SEC Documents
complied, at the time of filing with the SEC (and, with respect to any
registration statement, the date on which it was declared effective), as to
form, in all material respects, with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (subject, in the case of unaudited
statements, to the omission of certain footnotes) and fairly present, in all
material respects (subject, in the case of the unaudited statements, to normal,
recurring year-end audit adjustments) the consolidated financial position of
LifeQuest as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended. The
consolidated financial statements of LifeQuest as of March 31, 1997, included
in
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the LifeQuest SEC Documents disclose all liabilities of LifeQuest required to
be disclosed therein and contained adequate reserves for taxes and all other
material accrued liabilities. Since March 31, 1997, there has not been any
change in the business, assets, properties, condition (financial or otherwise),
results of operations or prospects of LifeQuest, and no condition exists, which
in any case would have or be a material adverse effect on, or with respect to,
LifeQuest.
5.2 No Omission of Material Fact. No representation or warranty by
the LifeQuest Parties in this Agreement or under any documents, instruments,
certificates or schedules furnished pursuant hereto or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
5.3 Closing Date Effect. All of the representations and warranties of
the LifeQuest Parties are true and correct as of the date hereof and shall be
true and correct on and as of the Closing Date with the same force and effect
as if such representations and warranties were made by the LifeQuest Parties to
Trimedica on the Closing Date.
ARTICLE 6
AGREEMENT AND PLAN OF REORGANIZATION
6.1 Tax Treatment. Trimedica and the Shareholder, LifeQuest and
Purchaser intend that the transactions contemplated hereunder constitute a tax-
free reorganization (a "Reorganization") under Section 368 of the Code, and
agree to treat and report the transactions hereunder as a Reorganization. This
Agreement shall be construed in a manner to result in treatment of the
transactions hereunder as a Reorganization.
ARTICLE 7
CLOSING
7.1 The closing of the transactions contemplated hereby shall take
place on the Closing Date, August __, 1997, at the offices of LifeQuest
Medical, Inc., 12961 Park Central, Suite 1300, San Antonio, Texas 78216, or at
such other place and on such other date as the parties shall agree. The date of
closing so determined is herein sometimes called the "closing" or the "Closing
Date."
ARTICLE 8
CONDITIONS OF CLOSING
8.1 LifeQuest Parties. The obligation of the LifeQuest Parties to
close hereunder shall be subject to the satisfaction of the following
conditions or the written waiver thereof by the LifeQuest Parties:
(a) Each of the agreements and covenants of Trimedica and the
Shareholder to be performed under this Agreement at or prior to the Closing
shall have been duly performed in all material respects.
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(b) The representations and warranties of Trimedica and the
Shareholder in this Agreement shall be true and correct in all material
respects on and as of the Closing Date.
(c) No injunction or restraining order shall be in effect to
forbid or enjoin the consummation of the transactions contemplated by this
Agreement and no Federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays the consummation
hereof.
(d) All consents, authorizations, orders or approvals of, and
filings or negotiations with, any Federal, state, local or foreign governmental
agency, commission, board or other regulatory body which are required for or in
connection with the execution, delivery and performance of this Agreement by
Trimedica and the Shareholder and the consummation of the transactions
contemplated hereby, and in order to permit or enable the Surviving
Corporation, after the closing to operate a business substantially similar to
Trimedica's business as conducted by Trimedica as of the date hereof, shall
have been duly obtained or made, including, but not limited to, any approvals
required under the Hart-Scott-Rodino Antitrust Improvement Act.
(e) LifeQuest shall have received a certified copy of
resolutions duly adopted by the Board of Directors and shareholders of
Trimedica authorizing and approving the execution and delivery of this
Agreement and performance by Trimedica of its obligations hereunder.
(f) Mark Lovejoy shall have executed and delivered to the
Company an Employment Agreement and a Non-Qualified Stock Option Agreement in
the forms attached hereto as Exhibit B and Exhibit C, respectively.
(g) LifeQuest shall have received such further certificates and
documents as shall have been reasonably requested by the LifeQuest Parties,
including consents of all requisite third parties.
(h) The LifeQuest Parties shall have completed their diligence
activities to their satisfaction.
8.2 The Shareholder and Trimedica. The obligation of the Shareholder
and Trimedica to close hereunder shall be subject to the satisfaction of the
following conditions or the written waiver thereof by the Shareholder and
Trimedica:
(a) Each of the agreements and covenants of the LifeQuest
Parties to be performed under this Agreement at or prior to the Closing shall
have been duly performed in all material respects.
(b) The representations and warranties of the LifeQuest Parties
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date.
(c) No injunction or restraining order shall be in effect to
forbid or enjoin the consummation of the transactions contemplated by this
Agreement and no Federal,
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state, local or foreign statute, rule or regulation shall have been enacted
which prohibits, restricts or delays the consummation hereof.
(d) The Shareholder shall have received the Merger
Consideration.
(e) The Shareholder shall have received such further
certificates and documents as he shall have reasonably requested.
ARTICLE 9
REMEDIES FOR BREACH
9.1 Arbitration. The Company and Shareholder agree that any dispute
or controversy arising out of or in connection with this Agreement or any
alleged breach hereof shall be settled by arbitration in San Antonio, Texas
pursuant to the rules of the American Arbitration Association. If the two
parties cannot jointly select a single arbitrator to determine the matter, one
arbitrator shall be chosen by each party (or, if a party fails to make a
choice, by the American Arbitration Association on behalf of such party) and
the two arbitrators so chosen will select a third. The decisions of the single
arbitrator jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and binding upon the
parties and the judgment of a court of competent jurisdiction may be entered
thereon. Fees of the arbitrators and costs of arbitration shall be borne by the
parties in such manner as shall be determined by the arbitrator or arbitrators.
9.2 Survival of Representations, Warranties and Agreements. All of
the representations, warranties, covenants and agreements made by the parties
to this Agreement shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereunder.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification. The Shareholder shall defend and indemnify the
LifeQuest Parties and save and hold them harmless from, against, for and in
respect of, and pay any and all Losses suffered, sustained, incurred or
required to be paid by the LifeQuest Parties by reason of any breach or failure
of observance or performance of any representation, warranty, covenant,
agreement or commitment made by Trimedica or the Shareholder hereunder or
relating to or as a result of any such representation, warranty, covenant,
agreement or commitment being untrue or incorrect, or, as to products currently
[manufactured] or sold by Trimedica, any action for infringement upon or use
adverse to the right or claimed right of any Person to use all inventions,
discoveries, patents, copyrights, trademarks, trade names, service marks,
corporate names, licenses, trade secrets and know how and all other
intellectual property rights with respect to the foregoing.
10.2 Procedure for Indemnification. In the event that the Shareholder
shall be obligated to the LifeQuest Parties pursuant to this Article, or in the
event that a suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Shareholder may become obligated to the
LifeQuest Parties hereunder, the
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LifeQuest Parties shall give prompt written notice to the Shareholder of the
occurrence of such event. The Shareholder agrees to defend, contest or
otherwise protect against any such suit, action, investigation, claim or
proceeding at the Shareholder's own cost and expense. The LifeQuest Parties
shall have the right, but not the obligation, to participate, at its own
expense, in the defense thereof by counsel of its own choice. In the event that
the Shareholder fails timely to defend, contest or otherwise protect against
any such suit, action, investigation, claim or proceeding, the LifeQuest
Parties shall have the right to defend, contest or otherwise protect against
the same, and, upon 10 days' written notice to the Shareholder, make any
compromise or settlement thereof and recover the entire cost thereof from the
Shareholder, including, without limitation, reasonable attorneys' fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or compromise or settlement thereof.
ARTICLE 11
REQUIREMENTS OF SECURITIES LAWS
11.1 Shareholders Representations and Warranties. The Shareholder
recognizes that the Merger Consideration is not being registered under the
Securities Act in reliance upon an exemption from the Securities Act which is
predicated, in part, on the representations and agreements of the Shareholder
set forth in this Agreement. The Shareholder represents and warrants to the
LifeQuest Parties that he, along with his purchaser representative, as that
term is defined in Rule 501(h) of the Securities Act (the "Purchaser
Representative"), has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the
transactions contemplated and contained herein, and that the Merger
Consideration is being acquired solely for his own account for investment and
not with a view to, or for offer or resale in connection with, a distribution
thereof within the meaning of the Securities Act. The Shareholder understands
that the effect of such representation and warranty is that the Merger
Consideration must be held indefinitely unless subsequently registered under
the Securities Act or an exemption from such registration is available at the
time for any proposed sale or other transfer thereof. The Shareholder also
understands that LifeQuest is under no obligation to file a registration
statement under the Securities Act covering the Merger Consideration or to take
any other action to enable the Shareholder to transfer or otherwise dispose of
the Merger Consideration. The Shareholder represents that he has consulted with
his counsel in regard to the Securities Act and that he is fully familiar with
the circumstances under which he is required to hold the Merger Consideration
and the limitations upon the transfer or other disposition thereof. The
Shareholder acknowledges that the LifeQuest Parties are relying upon the truth
and accuracy of the foregoing representations and warranties in issuing the
Merger Consideration under the Securities Act. The Shareholder agrees to
indemnify and hold the LifeQuest Parties harmless against all liabilities,
costs and expenses, including reasonable attorneys' fees, incurred by the
LifeQuest Parties as a result of any sale, transfer or other disposition by the
Shareholder of all or any part of the Merger Consideration in violation of the
Securities Act.
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11.2 Legend. The Merger Consideration shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT."
11.3 SEC Documents. The Shareholder acknowledges that he has been
furnished by the LifeQuest Parties with (a) a copy of the Annual Report to
Stockholders of Lifequest for the year ended December 31, 1996, (b) a copy of
the Annual Report on Form 10-KSB of LifeQuest for the fiscal year ended
December 31, 1996, in the form filed with the SEC, and (c) copies of all
filings since December 31, 1996, by LifeQuest with the SEC in compliance with
Section 13 or 14 of the Exchange Act. The Shareholder represents that he, or
his Purchaser Representative, has reviewed the foregoing documents and
acknowledges that they have been afforded the opportunity to obtain any
additional information necessary to verify the accuracy of the information
contained in the foregoing documents, including the opportunity to ask
questions of, and receive answers from, officers and representatives of
LifeQuest concerning the LifeQuest Parties and the terms and conditions of the
transactions contemplated by this Agreement. The Shareholder acknowledges that
The Law Firm of Jeffrey M. & Joan A. Goldsmith, LLC, attorneys at law, have
advised him during the course of the negotiation of this Agreement, and that he
has consulted The Law Firm of Jeffrey M. & Joan A. Goldsmith, LLC, attorneys at
law, with respect to the transactions contemplated by this Agreement.
11.4 Incidental Registration. If, at any time between the Effective
Time and the one-year anniversary of the Effective Time, LifeQuest proposes to
register any of the LifeQuest Stock (whether unissued, yet to be authorized or
held by any person) under the Securities Act, LifeQuest shall, at least 30 days
prior to the filing under the Securities Act of the registration statement
relating thereto, give written notice to the Shareholder of its intention to do
so, and, upon the written request of the Shareholder given within 10 days after
the giving of any such notice (which request shall state the proposed method of
distribution), LifeQuest shall include or cause to be included in any such
registration statement, up to 25% of the Merger Consideration; provided,
however, that LifeQuest may at any time withdraw or cease proceeding with any
such registration if it shall at the time withdraw or cease proceeding with the
registration of such LifeQuest Stock originally proposed to be registered; and
provided further, that if the registration proposed by LifeQuest relates to an
underwritten offering, the Shareholder shall not have any right to sell the
Merger Consideration in any manner or through any underwriter other than in the
manner and through the managing underwriter or underwriters being used by
LifeQuest.
(a) Notwithstanding any other provision of this Section 11.4,
if a registration pursuant to this Section 11.4 involves a firm commitment,
underwritten offering of the securities so being registered and if the managing
underwriter of such
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offering informs LifeQuest and the Shareholder by letter of its belief that
marketing factors require a limitation of the number of shares to be
underwritten, LifeQuest may limit the amount of Merger Consideration to be
included in the registration and underwriting; provided that no such reduction
shall reduce the securities being offered by LifeQuest for its own account; and
provided that those shares which are excluded from the underwritten offering
shall be withheld from the market by the holders thereof for a period, not to
exceed 180 days, which the managing underwriter reasonably determines as
necessary in order to effect the underwritten offering.
(b) Registration Procedures and Expenses. If and whenever
LifeQuest is required to include a portion of the Merger Consideration in a
registration statement under the Securities Act, as provided in Section 11.4
hereof, LifeQuest shall, as expeditiously as is reasonably practicable, do each
of the following:
(i) prepare and file with the SEC a registration statement
with respect to the Merger Consideration and, subject to the limitations
under Section 11.4 hereof, use its best efforts to cause such
registration statement to become effective;
(ii) cooperate with the Shareholder and any underwriter who
shall sell the Merger Consideration in connection with their review of
LifeQuest made in connection with such registration;
(iii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for 120 days from the date of its effectiveness, and
to comply with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all the Merger Consideration covered
by such registration statement for such period;
(iv) furnish to the Shareholder such number of copies of the
prospectus forming a part of such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as the Shareholder may
reasonably request in order to facilitate the disposition of the Merger
Consideration; and
(v) LifeQuest shall (a) notify the Shareholder at any time
when a prospectus relating to the Merger Consideration is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus forming a part of such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and (b) at the request of the
Shareholder, prepare and furnish to the Shareholder a reasonable number
of copies of any supplement to or any amendment of such prospectus that
may be necessary so that, as thereafter delivered to the purchasers of
the Merger Consideration, such prospectus shall not include any untrue
statement of a material fact or omit to state a material fact required
to be stated therein
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or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(c) Agreement by the Shareholder. In the event that the
Shareholder participates, pursuant to this Section 11.4, in the offering of the
Merger Consideration, the Shareholder shall;
(i) furnish LifeQuest all material information reasonably
requested by LifeQuest concerning the Shareholder and the proposed
method of sale or other disposition of the Merger Consideration and such
other information and undertakings as shall be reasonably required in
connection with the preparation and filing of the registration statement
covering the Merger Consideration in order to ensure full compliance
with the Securities Act and the rules and regulations of the SEC
thereunder;
(ii) cooperate in good faith with LifeQuest and its
underwriters, if any, in connection with such registration, including
placing the Merger Consideration in escrow or custody to facilitate the
sale and distribution thereof provided that such escrow or custody
arrangement shall be no more restrictive upon the Shareholder than upon
any other holder of LifeQuest Stock for the benefit of whom such
registration is undertaken; and
(iii) make no further sales or other dispositions, or offers
therefor, of the Merger Consideration under such registration statement
if, during the effectiveness of such registration statement, an
intervening event should occur which, in the opinion of counsel to
LifeQuest, makes the prospectus included in such registration statement
no longer comply with the Securities Act, so long as written notice
containing the facts and legal conclusions relied upon by LifeQuest in
this regard has been received by the Shareholder from LifeQuest, until
such time as the Shareholder has received from LifeQuest copies of a
new, amended or supplemented prospectus complying with the Securities
Act, which prospectus shall be delivered to the Shareholder by LifeQuest
as soon as practicable after such notice.
(d) Allocation of Expenses. If and whenever LifeQuest is
required by the provisions of this Section 11.4 to use its best efforts to
effect the registration of the Merger Consideration under the Securities Act,
LifeQuest shall pay the costs and expenses in connection therewith; provided,
however, that the Shareholder shall pay, in all events, all underwriting
discounts, selling commissions and stock transfer taxes attributable to the
Merger Consideration under such registration statement.
(e) Indemnification. In the event of any registration of any
of the Merger Consideration under the Securities Act pursuant to this Section
11.4, the Shareholder shall indemnify and hold harmless, LifeQuest, each
director of LifeQuest, each officer of LifeQuest who shall sign such
registration statement, each underwriter and any person who controls LifeQuest
or such underwriter within the meaning of the Securities Act, with respect to
any statement in or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, if such statement or omission was made in reliance
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upon and in conformity with written information furnished to LifeQuest or its
underwriter through an instrument duly executed by the Shareholder specifically
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus or amendment or supplement.
11.5 Rule 144 Stock. Notwithstanding the foregoing provisions of this
Article 11, LifeQuest shall not be obligated to effect a registration pursuant
to Section 11.4(a) with respect to the Merger Consideration which could then be
sold pursuant to Rule 144 under the Securities Act.
ARTICLE 12
NON-COMPETITION AGREEMENT
12.1 Customer Lists; Non-Solicitation. The Shareholder hereby further
covenants and agrees that the Shareholder shall not, commencing on the Closing
Date and ending on the first anniversary date of the Closing Date, directly or
indirectly, (a) use or make known to any person or entity the names or
addresses of any clients or customers of Trimedica or the LifeQuest Parties or
any other information pertaining to them, (b) call on, solicit, take away or
attempt to call on, solicit or take away any clients or customers of Trimedica
or the LifeQuest Parties, nor (c) solicit for employment, recruit, hire or
attempt to recruit or hire any employees of Trimedica or the LifeQuest Parties;
provided that the Shareholder shall not be prohibited from engaging in the
activities described in (a) and (b) above in connection with the manufacture,
marketing, sale or distribution of the product known as a surgical clip
applier.
12.2 Covenants Independent. The covenants of the Shareholder contained
in Section 12.1 of this Agreement will be construed as independent of any other
provision in this Agreement; and the existence of any claim or cause of action
by the Shareholder against the LifeQuest Parties will not constitute a defense
to the enforcement by the LifeQuest Parties of said provisions. The Shareholder
understands that the provisions contained in Section 12.1 are essential
elements of the transactions contemplated by this Agreement and, but for the
agreement of the Shareholder to Section 12.1, the LifeQuest Parties would not
have agreed to enter into this Agreement and the transactions contemplated
herein. The Shareholder has been advised to consult with counsel in order to be
informed in all respects concerning the reasonableness and propriety of Section
12.1 with specific regard to the nature of the business conducted by Trimedica
and the LifeQuest Parties and the Shareholder acknowledges that Section 12.1 is
reasonable in all respects.
12.3 Remedies. In the event of a breach or a threatened breach by the
Shareholder of any of the provisions contained in Sections 12.1, 12.2 or 12.3
of this Agreement, the Shareholder acknowledges that the LifeQuest Parties will
suffer irreparable injury not fully compensable by money damages and,
therefore, will not have an adequate remedy available at law. Accordingly, the
LifeQuest Parties shall be entitled to obtain such injunctive relief or other
equitable remedy from any court of competent jurisdiction as may be necessary
or appropriate to prevent or curtail any such breach, threatened or actual. The
foregoing shall be in addition to and without prejudice to any other rights
that the LifeQuest Parties may have under this
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Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
ARTICLE 13
CONFIDENTIALITY
13.1 Nondisclosure. The Shareholder shall not, without the prior
written consent of the Board of Directors of LifeQuest, disclose or use for any
purpose confidential information or proprietary data of Trimedica, Purchaser or
LifeQuest (or any of their respective subsidiaries), except as required by
applicable law or legal process; provided, however, that confidential
information shall not include any information known generally to the public or
ascertainable from public or published information (other than as a result of
unauthorized disclosure by such Shareholder) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by Trimedica or LifeQuest (or any of their
respective subsidiaries).
ARTICLE 14
GENERAL PROVISIONS
14.1 Expenses. Each of the parties hereto shall pay all expenses
incurred by it incident to preparing for, entering into and carrying into
effect this Agreement.
14.2 Notices. Any notice, report, demand or payment required,
permitted or desired to be given pursuant to any of the provisions of this
Agreement shall be deemed to have been sufficiently given or served for all
purposes if hand delivered or delivered by responsible overnight courier or
sent by certified or registered air mail, return receipt requested, and postage
prepaid as follows:
If to the LifeQuest Parties:
LifeQuest Medical, Inc.
9601 McAllister Freeway, Suite 1120
San Antonio, Texas 78216
Attn: Randall K. Boatright
with a copy to: Fulbright & Jaworski L.L.P.
300 Convent Street
San Antonio, Texas 78205
Attn: Phillip M. Renfro, Esq.
Facsimile No. (210) 270-7205
If to the Shareholder: Mark Lovejoy
755 Grey Eagle Circle North
Colorado Springs, Colorado 80919
23
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with a copy to: Jeffrey M. Goldsmith
The Law Firm of Jeffrey M. & Joan A. Goldsmith, LLC
6665 Delmonico Dr., Suite D
Colorado Springs, CO 80919
Any of the foregoing parties may at any time and from time to time
change the address to which notice shall be sent hereunder, by notice to the
other parties given under this subsection. The date of the giving of such
notice delivered by hand or by responsible overnight courier shall be the date
of its delivery, and the date of the giving of such notice by certified or
registered mail shall be the date three days after the posting of the mail.
14.3 Finders. Each of the parties covenants and represents to the
other that there are no claims for brokerage commissions or finder's fees in
connection with the negotiation of this Agreement and the performance of the
transactions contemplated hereunder resulting from any action taken by it. Each
of the parties agrees to indemnify and hold harmless the other in respect of
any and all Losses sustained by the other as a result of any liability to any
broker or finder on the basis of any arrangement, agreement or acts made by or
on behalf of such party with any other person or persons whatsoever.
14.4 Complete Agreement. The representations, warranties, covenants
and agreements set forth in this Agreement and in any financial statement,
schedule or exhibit delivered pursuant hereto, constitute all of the
representations, warranties, covenants and agreements among the parties hereto
and upon which the parties have relied, and, except as may be specifically
provided herein, no change, modification, addition or termination of the
Agreement or any part thereof shall be valid unless in writing and signed by or
on behalf of the party to be charged therewith.
14.5 Prior Agreements. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
prior agreements relating thereto.
14.6 No Waiver. No waiver of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, either of similar or different nature unless
expressly so stated in writing.
14.7 Headings. The headings or captions under Sections of this
Agreement are for convenience and reference only, and do not form a part
hereof, and do not in any way modify, interpret or construe the intent of the
parties or affect any of the provisions of this Agreement.
14.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. NON-
EXCLUSIVE VENUE FOR ANY ACTION PERMITTED HEREUNDER SHALL BE PROPER IN SAN
ANTONIO, BEXAR COUNTY, TEXAS, AND EMPLOYEE CONSENTS TO SUCH VENUE.
24
<PAGE> 26
14.9 Assignment. Neither this Agreement nor the rights of the parties
hereto shall not be assignable, unless otherwise specifically provided.
14.10 Severability. If any term or provision of this Agreement shall be
held to be invalid or unenforceable for any reason, such term or provision
shall be ineffective to the extent of such invalidity or unenforceability
without invalidating the remaining terms and provisions hereof, and this
Agreement shall be construed as if such invalid or unenforceable term or
provision had not been contained herein. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
14.11 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
25
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
and Acquisition Agreement to be signed on the date and year first above
written.
LIFEQUEST MEDICAL, INC.
By:
------------------------------------------
Herbert H. Spoon,
President and Chief Executive Officer
KLEIN MEDICAL, INC.
By:
------------------------------------------
Herbert H. Spoon,
President and Chief Executive Officer
TRIMEDICA, INC.
By:
------------------------------------------
Mark Lovejoy
President
SHAREHOLDER
---------------------------------------------
Mark Lovejoy
26
<PAGE> 1
EXHIBIT 10.1
STANDARD LEASE
1. PARTIES
1.1 This Lease is entered into between INTERPARK JACK LIMITED
PARTNERSHIP, "LANDLORD", and LIFEQUEST MEDICAL, INC.,"Tenant".
2. PREMISES
2.1 Landlord Leases to Tenant and Tenant Leases from Landlord the
following premises (hereinafter sometimes called "the premises", the "demised
premises", or the "leased premises"), situated in the City of San Antonio,
County of Bexar, State of Texas, such premises being part of INTERPARK II
BUSINESS CENTER, BUILDING 13 hereinafter referred to as "the Project" (see
Exhibit "C" attached hereto for further description); with the following legal
description:
approximately 17,010 square feet as more particularly shown as the
hatched area on Exhibit "C" attached hereto, of office/warehouse space
with an address of 12961 Park Central, Suite 1300, in a 30,900 square
foot facility in Interpark II Business Center, said project consisting
of two (2) buildings totaling 79,000 square feet situated on Lot 12,
Block 1, NCB 17262, AmberJack Distribution Center Subdivision, in the
City of San Antonio, Bexar County, Texas.
Landlord also grants to Tenant the non-exclusive right to use the designated
parking areas, common service drives, and rail spur (if any) appurtenant to
the Leased premises and any other common areas associated with the Project.
3. TERM
3.1 The term of this Lease shall be for a period of SIXTY (60)
MONTHS with a commencement date of the 1st day of June, 1997, and a termination
date of the 31st day of May, 2002. Tenant may occupy the premises on the 15th
day of May 1997, (hereinafter known as "Precommencement Date") under all of the
same terms and conditions of this Lease as if the Lease had commenced. The
total rent for the partial month shall be prorated based upon the number of
days occupied within the month and shall be paid at occupancy.
4. BASE RENT
4.1 The Base Rent referenced in this Lease shall be TEN THOUSAND
FIVE HUNDRED FORTY-SIX DOLLARS ($10,546.00 per month) commending 5/15/97.
5. PERMITTED USE
5.1 The permitted use for the Leased premises (hereinafter
referred to as "permitted use") shall be office and storage, manufacture,
repairing and assembling of medical equipment and related supplies.
6. SECURITY DEPOSIT
6.1 The security deposit referenced in this Lease shall be
SEE PAGE 1a DOLLARS ($ ).
7. NOTICE
7.1 All notices or demands of any kind required to be given by
Landlord or Tenant hereunder shall be in writing and shall be deemed delivered
forty-eight (48) hours after depositing the notice or demand in the United
States mail, certified or registered, postage prepaid at the following
addresses, or such other address as shall be designated by either party in
compliance with the provisions of this paragraph, or to such other address as
shall have been last designated by notice in writing from one party to the
other, to wit:
LANDLORD: TENANT:
AEQUUS PROPERTY MANAGEMENT COMPANY LIFEQUEST MEDICAL, INC.
1335 N.E. Loop 410 12961 Park Central, Suite 1330
San Antonio, TX 78209-1515 San Antonio, TX 78216
with a copy to: with a copy to:
Fulbright & Jaworski LLP
300 Convent, Suite 2200
San Antonio, TX 78205
Attn: Phillip Renfro
8. DEFINITIONS
8.1 "Base Real Property Taxes" for purposes of Paragraph 15.2 are
real property taxes applicable to the Project and shall be $1.00 per square
foot per Year.
8.2 "Base Insurance" for purposes of Paragraph 15.3 shall be $0.07
per square foot per year
9. ADDITIONAL PARAGRAPHS
9.1 Paragraphs 9.2-9.17 on pages, 1a, 1b, 1c and exhibits A, B, C,
D, E attached hereto have been added prior to the execution hereof and by this
reference are deemed a part of this Lease.
INITIALS
<PAGE> 2
9.2 ADDENDUM TO PARAGRAPH 6.1 - SECURITY DEPOSIT
Landlord has accepted an Irrevocable Letter of Credit in the amount of
ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) in a form
acceptable to Landlord as the security deposit required under Paragraphs 6.1
and 12.1 for the first twenty-four (24) months of the primary Lease term. Prior
to end of the twenty-third (23rd) month of the primary Lease term, Tenant shall
deposit with Landlord the amount of TEN THOUSAND FIVE HUNDRED FORTY-SIX AND
NO/100 DOLLARS ($10,546.00) as the security deposit required under Paragraphs
6.1 and 12.1 for the remainder of the Lease term. Failure to deposit this
$10,546.00 prior to the end of the 23rd month of the primary Lease term shall
constitute a default under the terms of this Lease.
9.3 ADDENDUM TO PARAGRAPH 10.2(d) - ADJUSTMENTS
Add the following at the end of the first sentence of this paragraph
after "... Landlord's work": "as reasonably determined by Landlord and Tenant
and the premises are ready for Tenant to immediately occupy and open for
business."
9.4 ADDENDUM TO PARAGRAPH 13.1-THE LEASED PREMISES
Tenant shall have the non-exclusive right to thirty-five (35) parking
spaces on the front of Building 13 and the exclusive right to from five (5) to
eight (8) reserved canopy parking spaces in the rear of Building 13 as shown on
Exhibit "D". Such canopy parking spaces and the area labeled #148 (construction
of compressor) on Exhibit "D" are subject to final approval of the
Architectural Committee overseeing the Property.
9.5 ADDENDUM TO PARAGRAPH 14.2 UTILITIES - PAYMENT
The existing paragraph 14.2 shall be deleted in its entirety and shall
be replaced with the following:
"14.2 PAYMENT. Tenant shall pay, prior to delinquency, for all gas,
heat, electricity, telephone, air conditioning and ventilating, janitorial and
other materials and services which are used by Tenant during the term of this
Lease. Common meter water and sewer shall be apportioned pro rata among Tenants
on the basis of square footage of leased areas. It is the intention of the
parties hereto that such apportionment of common meter water and sewer charges
equitably represent each Tenant's usage of such utilities. In the event of
disproportionate use of common meter water and sewer services by Tenant or any
other Tenant, Landlord shall allocate the cost of the same among such Tenants
in an equitable manner. In the event that Tenant occupies the premises prior to
the effective transfer of utility service charges to Tenant's own name, then
Tenant agrees to reimburse Landlord for Tenant's pro rata share of common meter
gas and electrical service charges, such share to be based upon the square
footage of Leased areas of the Tenants being served by such common meter."
9.6 ADDENDUM TO PARAGRAPH 15.2 - REAL PROPERTY TAX
Following is a sample calculation of the allocated tax:
1) Total Real Property Tax Bill for Base Year x 44.67% = Base Year
Allocated Tax (BYAT)
2) Total Real Property Tax Bill for Next Year x 44.67% = Next Year
Allocated Tax (NYAT)
3) NYAT - BYAT x (Tenant's Square Footage/Square Feet of Project) =
Tenant's Share of Allocated Tax
9.7 ADDENDUM TO PARAGRAPH 16.2 - TENANT'S DUTIES
Add the following at the end of Paragraph 16.2: "Notwithstanding any
other provisions herein to the contrary, Tenant's responsibilities under this
Paragraph 16.2 do not include (i) any responsibilities in Paragraph 16.1 or
(ii) any costs or expenses that are included in the Common Area Services costs
under Paragraph 15.4 above."
9.8 ADDENDUM TO PARAGRAPH 16.5 - CONDITION AT END OF TERM
The first sentence of Paragraph 16.5 shall be amended to read as
follows: "Upon the termination of this Lease or upon the expiration of the term
of this Lease, Tenant shall surrender the premises in the same condition as
received, normal wear and tear, repairs and/or restorations that are Landlord's
responsibility hereunder and damage by earthquake, act of God, or the elements
alone or any casualty not covered by the insurance required to be carried by
Tenant under Paragraph 22.2 below excepted."
9.9 ADDENDUM TO PARAGRAPH 20.1-ASSIGNMENT AND SUBLETTING
Add the following at the end of Paragraph 20.1: "Notwithstanding the
foregoing to the contrary, Tenant may assign this Lease or sublet the premises
in connection with the merger of Tenant with another entity, the purchase and
sale of all or substantially all of the assets of Tenant or the reorganization
of Tenant with others, provided that any sole surviving entity is of equal or
greater creditworthiness as Tenant."
Page 1a
INITIALS
<PAGE> 3
9.10 ADDENDUM TO PARAGRAPH 22.2 - FIRE INSURANCE
Delete the existing Paragraph 22.2 in its entirety and replace it with
the following:
"22.2 FIRE INSURANCE. Landlord shall take out and keep in force during
the term of this Lease, at Landlord's expense, fire and extended coverage
insurance with an "all risk" or "special form" endorsement covering all of the
buildings in the project which contains the premises as shown on Exhibit "C"
attached hereto to the extent of 100% of their full replacement cost. The term
"full replacement cost" shall mean the cost of replacing the buildings in the
Project which contains the premises as shown on Exhibit "C" attached hereto,
exclusive of the cost of excavations, foundations and footings. The proceeds
shall be applied by Landlord pursuant to the provisions of Paragraph 27. Tenant
will carry, at Tenant's own expense, adequate insurance on all of Tenant's
property located in, about or on the premises."
9.11 ADDENDUM TO PARAGRAPH 24.1 - LANDLORD'S LIEN
The existing paragraph is hereby deleted in its entirety and shall be
replaced with the following:
"24.1 WAIVER OF LANDLORD'S LIENS. Landlord hereby waives any and all
of its liens upon and security interests in any and all of Tenant's property
now or hereafter placed in or upon the premises by Tenant."
9.12 ADDENDA TO PARAGRAPH 28.1- HAZARDOUS SUBSTANCES
The second line of Paragraph 28.1(c) shall be amended to read as
follows: ". . .environmental condition on, about, or under the premises caused
by Tenant, Tenant's employees, agents or contractors and required as a result
of Tenant's use or occupancy of the premises;".
Paragraph 28.1(d) shall be amended to read as follows: "To keep the
premises free of any lien imposed pursuant to any Environmental Laws resulting
from actions of Tenant, Tenant's employees, agents or contractors during the
term of this Lease;".
9.13 ADDENDUM TO PARAGRAPH 31.1- SUBORDINATION
Add the following sentence at the beginning of paragraph 31.1:
"Landlord hereby represents and warrants to Tenant that, as of the date of
execution of, this Lease, there is no mortgage in existence which affects the
real property of which the premises constitutes a portion."
9.14 ADDENDA TO PARAGRAPH 34 - MISCELLANEOUS
34.12 BROKERAGE. Tenant warrants that it has had no dealings with
any broker or agents other than Roalson Interests, Inc., and Aequus Property
Management Company in connection with this Lease and covenants to pay, hold
harmless and indemnify Landlord from and against any and all cost, expense or
liability for any compensation, commissions, charges claimed by any other
broker or agent with respect to this Lease or negotiation thereof. Landlord
warrants that it has had no dealings with any broker or agents other than
Aequus Property Management Company in connection with this Lease and covenants
to pay, hold harmless and indemnify Tenant from and against any and all cost,
expense or liability for any compensation, commissions, charges claimed by any
broker or agent with respect to this Lease or negotiation thereof.
34.13 AUTHORIZATION TO EXECUTE. If Tenant or Landlord is a
corporation or if Tenant or Landlord is a partnership on whose behalf a partner
which is a corporation executes this Lease, then in either of such cases each
individual executing this Lease on behalf of such corporation represents and
warrants that he or she is duly authorized to execute and deliver this Lease on
behalf of said corporation and partnership, as the case may be, in accordance
with a duly adopted resolution of the Board of Directors of such corporation.
If a corporation acting as the manager for the Landlord executes this Lease on
behalf of Landlord, such corporation represents and warrants that it is duly
authorized by Landlord to execute and deliver this Lease on behalf of the
Landlord and each individual executing this Lease on behalf of such corporation
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said corporation in accordance with a duly
adopted resolution of the Board of Directors of such corporation.
9.15 IMPROVEMENTS TO PREMISES
Landlord will grant an allowance of up to $150,000.00 for the
construction of Tenant improvements as shown on Exhibit "D" to be made by
Landlord or Landlord's authorized contractor. All costs of construction,
including, but not limited to, heating, ventilating and air conditioning
systems and hookup, ceilings, restrooms and plumbing, cabinetry and fixtures,
electrical distribution and hookup, interior wall construction, canopy parking,
demising walls, personnel doors, floor finishes, permits and construction
drawings will be applied by Landlord against this allowance. In the event the
total cost of said Tenant improvements should exceed $150,000.00, then Tenant
agrees to pay to Landlord the amount by which the cost of such improvements
exceeds such allowance prior to Landlord's commencing work on such excess
improvements. Furthermore, prior to the termination of this Lease, Tenant will,
at Tenant's sole cost and expense, remove all canopy parking, compressors,
cinder block walls and ceiling around compressor area #148, rooms 134-137, and
rooms 141-144 as shown on Exhibit "D". Such removal shall be made in a good and
workmanlike manner and the premises restored in these areas to their original
condition, wear and tear and casualty damage excepted.
Page 1b
INITIALS
<PAGE> 4
9.16 OPTION TO RENEW
So long as Tenant is not in default under the terms of this Lease,
Tenant shall have the option to renew this Primary Lease for a period of five
(5) years, such renewal term to begin upon the expiration of the original term
of this Lease, and all of the terms, covenants and provisions of this Lease
shall apply to such extended term, except that the monthly rental payable shall
be increased to a rate to be negotiated by the parties at the time said option
is exercised. In the event that the parties to this Lease Agreement are unable
to agree upon a rental rate for such extended term within ninety (90) days
prior to the primary term expiration, then all of Landlord's obligations
hereunder shall terminate upon the expiration of the original term of this
Lease. If Tenant should elect to exercise its option, it shall do so by written
notice given to Landlord no later than one hundred twenty (120) days prior to
the expiration of the term of this Lease. The base lease year of such renewal
term shall be that of the original term for the purposes of determining ad
valorem tax and insurance escalations under Section 15 of this Lease.
9.17 RIGHT OF FIRST REFUSAL
So long as Tenant is not in default under the terms of this Lease,
Tenant shall have the continuing right of first refusal, during the primary
term of this Lease only, to Lease the adjacent 2,910 square feet of
office/warehouse space described as "Option Space" on Exhibit "C" attached
hereto, such space to be Leased in an "as-is" condition under the same terms,
covenants and provisions of this Lease, except that the monthly rental payable
shall be the rate to be the "as-is" rate negotiated by Landlord and Tenant. In
the event that Landlord proposes to Lease to a third party a part of or all of
the Option Space during Tenant's primary Lease term, Landlord shall give Tenant
written notice of such prospect, then Tenant shall have five (5) business days
after receipt of amendment from Landlord in which to execute such amendment
modifying the terms and conditions of this original Lease to reflect the
increased total square footage and the increased total rental. In the event
Tenant and Landlord are unable to reach an agreement and execute an amendment
in five (5) business days, this Right of First Refusal is null and void.
INITIALS
Page 1c
<PAGE> 5
10. OCCUPANCY OF THE PREMISES
10.1 Acceptance of the Premises. Tenant acknowledges that it has
fully inspected the demised premises and that Tenant is not aware of any
defects in the premises and common areas surrounding the premises that are
vital to the use of the premises for their intended commercial purpose as
defined in Paragraphs 5.1 and 13.1, subject only to the completion of
Landlord's work (Exhibit "D" hereto), hereinafter referred to as "Landlord's
work". Tenant shall pay for the cost of the Certificate of Occupancy and any
required inspection related to Tenant's occupancy of the premises.
10.2 Adjustments.
(a) In the event that construction of the premises is not
completed at the date of the execution of this Lease, Landlord agrees to use
reasonable best efforts to complete Landlord's work on or before the earlier of
the precommencement date or the commencement date as specified above. Tenant
hereby accepts exhibit "D" as the final and complete description of Landlord's
work and Tenant further acknowledges that any changes in the plans which are
subsequently requested by Tenant or required, by virtue of Tenant's occupancy
or use of the premises in order to secure a Certificate of Occupancy, will be
made at Tenant's expense.
(b) In the event Landlord is unable to complete Landlord's work or
make the premises available on the first day of a month, the initial term of
this Lease shall commence on the first full day of the month following the
occupancy of the premises (hereinafter known as the "adjusted commencement
date"). The length of the Lease shall be the same as that which is identified
in Paragraph 3.1.
(c) If the premises are occupied prior to the adjusted
commencement date, then the partial month of occupancy shall be on a pro rated
basis under all of the same terms and conditions of this Lease as if the Lease
had commenced; however, the term shall not decrease the length of the Lease as
defined in paragraph 3.1.
(d) The premises shall be deemed "ready for occupancy" on the date
that Landlord has substantially completed all of Landlord's work (see page 1a).
In the event of any delay in the completion of Landlord's work, Landlord shall
not be liable for any damage caused thereby, however, if such completion is
delayed for more than ninety (90) days beyond the commencement date identified
in Paragraph 3.1, then either Tenant or Landlord may declare this Lease to be
null and void.
(e) The parties agree that in the event the commencement date or
termination date is different from that stipulated in Paragraph 3.1, the
parties shall execute a written stipulation acknowledging the revised
commencement date and termination date (hereinafter known as "term dates"). If
Landlord has not received the agreement executed by Tenant within thirty (30)
days after Landlord has notified Tenant of the adjusted term dates in writing,
then for all purposes of this Lease the term dates shall be deemed adjusted as
specified by Landlord in the notification agreement.
10.3 OCCUPANCY PRIOR TO COMPLETION OF LANDLORD'S WORK. In the
event that Tenant takes occupancy prior to the completion of Landlord's work,
Landlord shall not be relieved of its duty to timely complete its work. Tenant
shall provide uninterrupted access to Landlord, its subcontractors, employees,
agents or representatives, and any and all inspectors from any governmental
authority or agency, between the hours of 7:30 a.m. and 5:00 p.m. Monday
through Friday of each week, until a Certificate of Occupancy has been issued
by the City of San Antonio and Landlord's work is complete.
11. RENT
11.1 Tenant, throughout the term of this Lease, and without prior
notice or demand, shall pay to Landlord, in advance, at the address set out
after the signature of Landlord or at such place or places as Landlord may from
time to time direct, Base Rent on the first day of each month in lawful money
of the United States of America. In the event the Tenant occupies the premises
prior to the commencement date or the adjusted commencement date, the prorated
Rent shall be paid on the first day of occupancy. Base Rent for any partial
month shall be prorated using the percentage which the number of days in such
partial month bears to the total number of days in said month. The covenant of
Tenant to pay rent hereunder is and shall be deemed a separate and individual
covenant, and Tenant shall have no right to deduction or setoff whatsoever. In
the event Tenant shall fail to pay the rent within five (5) days after the date
that such installment is due hereunder, Tenant shall be liable for and Landlord
may collect a late charge of five percent (5%) of any monthly installment of
rent or other sums due hereunder, such charge to be in addition to and not in
lieu of any other remedy of Landlord hereunder. All monies received from Tenant
shall be credited first to non-rent items and last to rent regardless of
notations on checks. Any notation on any payment received by Landlord
purporting to effect an accord and satisfaction shall be completely void unless
specifically agreed to in writing by Landlord after receipt of such payment.
12. SECURITY DEPOSIT
12.1 Tenant has deposited with Landlord the security deposit as
security for the full performance of all the provisions of this Lease and shall
not be considered as the last rental payment due under the Lease. If at any
time during the term hereof, or the term as it may be extended, Tenant shall be
in default in payment of rent or any other sum due Landlord as additional rent,
Landlord may apply all or a part of the security deposit for such payment after
the expiration of the applicable notice and cure period described in Paragraph
23 hereof. Should Landlord be required to use all or a part of the security
deposit, Tenant, upon demand from Landlord, shall immediately replenish the
funds so expended to maintain the security deposit at the amount stated
hereinabove. Landlord may also apply all or a part of the deposit to clean or
repair damages to the Leased premises. If Tenant is not in default at the
termination of the Lease, Landlord shall return the remaining deposit to Tenant
within forty (40) days after the termination of the Lease. Landlord shall not
be required to keep this security deposit separate from its general funds, and
Tenant shall not be entitled to interest on such deposit.
13. USE
13.1 THE LEASED PREMISES. The Leased premises may be used and
occupied only for the permitted use identified in paragraph 5.1 and for no
other purpose or purposes without Landlord's prior written consent. Tenant
shall promptly comply with all governmental laws, ordinances, orders and
regulations and reasonable Landlord's rules which are described in Paragraph
34.11 and Exhibit "A" affecting the Leased premises and their cleanliness,
safety, occupation and use. Tenant, Tenant's employees and invited guests will
not perform any act or carry on any practices that may injure the building or
disturb the rights, comforts or conveniences of persons at adjoining premises.
Tenant may not store any trash, equipment, vehicles or merchandise on any
outside parking areas or loading areas, except in areas specifically designated
and approved in writing by Landlord for such purposes. Landlord will provide
sanitary receptacles for any and all trash,
2
initials
<PAGE> 6
rubbish or discarded merchandise. Such receptacles will be emptied as required
to maintain the premises in a clean and sanitary fashion. All such expenses of
trash storage and removal will be borne by Tenant. Vehicles owned or operated
by or for Tenant, Tenant's employees, agents or invitees may be parked only in
those areas designated by Landlord immediately in front of or behind the
premises. SEE PAGE 1a.
13.2 INSURANCE. No use shall be made or permitted to be made of the
premises by Tenant or acts done by Tenant which solely increase the cost of
Landlord's insurance as provided for in paragraph 22.2 of this Lease or which
solely increase the cost of insurance as carried by any other Tenant of the
Project. In the event that any such use or act is performed or permitted by
Tenant, Tenant will pay to Landlord promptly upon demand the amount of any such
increase in Landlord's insurance costs, together with the amounts of any such
increases in other Tenants' insurance costs as Landlord shall have reasonably
paid as reimbursement to such other Tenants. Tenant will not, in any event,
permit or perform any use or act within the premises which will cause the
cancellation of any insurance policy concerning the premises or the contents
thereof and agrees to indemnify Landlord against all claims or actions for loss
which result from any such act of cancellation.
13.3 FIRE PROTECTION SYSTEM. Deleted
13.4 COMBUSTIBLE MATERIAL. Tenant shall not use the premises for
storage of polystyrene trays or any other highly flammable/combustible
materials or of any other material which is prohibited by Landlord's insurance
carrier except materials as specified on Exhibit "E".
14. UTILITIES
14.1 RESPONSIBILITY. Landlord's responsibility with respect to
natural gas and electrical utility services hereunder shall be limited to the
connection of service lines and meters to the premises as required to service
the premises. Tenant shall have the entire responsibility to contract for and
maintain gas and electrical utility services through such service lines and
Tenant shall not in any event be relieved of any of Tenant's obligations under
this Lease by reason of Tenant's failure or inability to contract for or
maintain any such service.
14.2 PAYMENT. SEE PAGE 1a.
15. ADDITIONAL EXPENSES
15.1 Tenant shall also be obligated to pay to Landlord, as
additional expenses hereunder, Tenant's pro rata share of additional taxes,
additional insurance and Common Area Services costs, such share being the
percentage that the square foot area of the premises bears to the total square
foot area of the building(s) comprising the project.
15.2 REAL PROPERTY TAX.
(a) Landlord shall pay the "Base Real Property Taxes" on the
Project during the Lease term.
(b) Tenant shall pay Landlord the amount, if any, by which the
Real Property Taxes during each calendar year of the Lease term exceeds the
Base Real Property Taxes (hereinafter known as "Additional Taxes").
(c) The Project consists of two unique property types (hereinafter
known as "property types") which have different property values relative to the
overall valuation of the total Project. If the total Project is not separately
assessed among the different property types within the total Project, then
Landlord shall allocate the total Real Property Tax among the two property
types based upon the following percentages hereinafter known as "allocated
tax"):
44.67% of the total real property tax bill shall be allocated to
suites located in buildings 1300; 55.33% of the total real property
tax bill shall be allocated to suites located in building 1400. SEE
SAMPLE "ALLOCATED TAX" ON PAGE 1a.
Once the total Real Property Tax is allocated to the property type,
then Tenant's share of the allocated tax shall bear the same relationship to
the Additional Taxes as the square footage of the Leased premises bears to the
total square footage of the buildings comprising the property type.
(d) "Real property tax" as used herein shall be deemed to mean
property tax consulting and attorneys' fees and taxes and assessments
(including but not limited to real property taxes and assessments or taxes and
assessments imposed in lieu thereof), licenses and levies of every kind or
character, whether general, special, ordinary or extraordinary, which may
lawfully taxed, charged, levied or imposed by the municipality or other
governmental authority (state, local or federal, upon or against the premises,
the leasehold estate created, or which may arise out of the use and operation
by Tenant of the premises, or which may be imposed against the project as a
whole. Notwithstanding any other provision contained herein, real property tax
does not include Landlord's federal or state income, franchise, business
activity, inheritance or estate taxes.
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15.3 INSURANCE.
(a) Landlord shall pay the "Base Insurance" on the Project during
the Lease term.
(b) Tenant shall pay Landlord the amount, if any, by which
Insurance costs during each year of the Lease term exceeds the Base Insurance
(hereinafter known as "Additional Insurance").
(c) If the Project is not separately assessed for real estate tax
purposes, Tenant's share of the Base Insurance payable by Tenant shall bear the
same relationship to the Additional Insurance as the square footage of the
Leased premises bears to the total square footage of the building(s) comprising
the Project.
(d) "Insurance" as used herein shall include Landlord's insurance
as provided for in Paragraphs 22.1 and 22.2 hereof.
15.4 COMMON AREA SERVICES. "Common Area Services" costs shall
include without limitation the cost of electricity, water/sewer, gas, trash
removal, fire sprinkler inspections and maintenance, exterior painting, water
blasting, interior termite control and exterior pest control, window washing,
HVAC filter replacements, landscaping, lawn sprinkler repairs and maintenance,
parking lot, service area and appurtenant street cleaning, repair, repaving and
striping, replacement and maintenance of exterior lighting fixtures and bulbs;
courtesy patrol (if offered); property management fees paid by Landlord,
including an allocation of such manager's property manager, maintenance
technician and other personnel costs; Amortized Repairs, and maintenance costs
other than those associated with Landlord's duties as defined in paragraph
16.1. Amortized Repairs are those repairs not specified in Paragraph 16.1
herein which are made to the project and in Landlord's option should be
reasonably billed to the Tenants over a multi-year period, which period shall
be determined by Landlord in Landlord's sole opinion. Landlord and Tenant
expressly agree that all services to be performed by Landlord including
maintenance, repairs and property management of the premises and the common
area surrounding the premises exclusively involve the exercise of professional
judgment by Landlord and Landlord's agents, and Tenant expressly waives any
claims for breach of warranty arising from the performance of such services.
15.5 PAYMENT OF ADDITIONAL EXPENSES. For each month during the
Term, Tenant shall pay one-twelfth (1/12th) of its proportionate share of the
estimated annual amount of Additional Expenses at the same time and same place
as the payment of Base Rent for each month. The amount of the annual real
property tax, insurance and common area maintenance estimates shall be
reasonably determined by Landlord, such estimates to be subject to adjustment
not more than two (2) times in any twelve (12) month period upon written notice
to Tenant. If, upon determination of the Additional Expenses pursuant to
paragraphs 15.2(b), 15.3(b) and the actual Common Area services per Paragraph
15.4, the sum of the additional amounts for taxes, insurance and the actual
amount for Common Area services differs from the total estimated monthly
payments which Tenant has paid to Landlord, a cash adjustment shall be made
between Landlord and Tenant within thirty (30) days after request by either
party.
15.6 PERSONAL PROPERTY. Tenant shall pay before delinquency any and
all taxes, assessments, licenses, fees and public charges lawfully levied,
assessed or imposed and which become payable during the term of the Lease upon
Tenant's fixtures, furniture, appliances and personal property installed or
located in or about the Leased premises.
15.7 RECORDS. Landlord, for a period of ninety (90) days after its
demand for payment, shall make available to Tenant during reasonable business
hours after reasonable notice, for inspection and copying, all records of
Landlord relating to the Real Property Taxes, insurance payments and Common
Area Services made by Tenant.
16. MAINTENANCE AND REPAIRS
16.1 LANDLORD'S DUTIES. Landlord, at its sole cost and expense,
shall maintain in a good state of repair the exterior of the roof and exterior
walls (excluding glass windows and doors) and all structural portions of the
roof, exterior walls (excluding glass windows and doors), floors and foundations
of the premises, except for any repairs caused by the negligent acts or
omissions of Tenant, Tenant's agents, employees or invitees. Landlord shall
maintain heating and air conditioning systems within the Leased premises for
the first year of this Lease term only. The preceding are the sole expenses
paid by Landlord and all other expenses of the Project shall be paid directly
by Tenant or reimbursed pursuant to Paragraph 15.4.
16.2 TENANT'S DUTIES. Tenant, at its sole cost and expense shall
provide interior pest extermination services and shall maintain in a clean and
sanitary condition and in a good state of repair all other portions of the
premises, including, but in no way limited to, all plumbing, wiring, glazing,
interior and exterior windows, interior and exterior doors, floors, ceilings,
interior walls and the interior surface of exterior walls, all fixtures, fire
protection systems, equipment and signs, except for repairs caused by the
negligent acts or omissions of Landlord and its agents. Tenant shall assume the
responsibility for repair and replacement of heating and air conditioning
systems after the first year of the primary Lease term. Before the end of the
first year of the primary term of this Lease, Tenant shall provide Landlord
with evidence satisfactory to Landlord that Tenant has entered into a
preventive maintenance contract for customary and routine preventive
maintenance of all air conditioning and heating systems within the premises. If
Landlord is not provided evidence of Tenant's entering into a service contract
which is reasonably satisfactory to Landlord within thirty (30) days of
Landlord's request, Landlord may incur such expense and Tenant shall pay for
same within ten (10) days of written request. SEE PAGE 1a.
16.3 PARKING LOT DAMAGE. Tenant shall not be permitted to dump or
drain any garbage, waste water, refuse, liquids or any other materials directly
onto the parking lot surface within the project without the prior written
consent of Landlord. Tenant shall also be responsible for any damage to the
parking lot caused by vehicles and equipment utilized in connection with
Tenant's use of the Leased premises.
16.4 FAILURE TO PERFORM. In the event Tenant fails to maintain the
premises pursuant to the above provisions, Landlord shall give Tenant notice to
do such acts as are reasonably required to so maintain the premises. In the
event Tenant fails to promptly commence such work and diligently pursue it to
completion, then Landlord shall have the right to do such acts and expend such
funds at the expense of Tenant as are reasonably required to perform such work.
Any amount so expended by Landlord shall be paid by Tenant promptly after
demand or deducted by Landlord from Tenant's security deposit. Landlord shall
have no liability to Tenant for any damage, inconvenience or interference with
the use of the premises by Tenant as a result of performing any such work.
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16.5 CONDITION AT END OF TERM. SEE PAGE 1a. Specifically Tenant
will restore or replace any portion of the floor, door or wall surfaces within
the Leased premises which have been scratched, gouged, broken, or otherwise
marred by Tenant's operations within the premises except due to normal wear and
tear and agrees to reasonably clean such surfaces of dirt, grease, paint, tire
marks or other discoloration prior to surrendering the premises to Landlord
upon the termination of this Lease. Tenant's duties hereunder shall include
the duty to clean the premises and to deliver the current keys to Landlord.
Failure to do so shall constitute a failure to perform under paragraph 16.4
above.
17. ALTERATIONS
17.1 Tenant shall not make or permit to be made any alterations or
changes in or additions to the exterior or structural interior of the premises
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant shall, unless otherwise specifically waived in
writing by Landlord (if not in default hereunder), prior to the expiration of
this Lease or any extension thereof, remove all trade fixtures, equipment and
improvements which Tenant has placed in the premises, and repair all damages to
the premises caused by such removal and restore the premises to their original
condition (the condition existing as of the earlier of the Lease Commencement
Date or the Precommencement Date) as provided in and subject to Paragraph 16.5
above.
18. LIENS
18.1 Tenant shall keep the premises, and any building of which the
premises are a part, free and clear of any liens arising out of work performed
or caused to be performed by Tenant and shall indemnify, hold harmless and
defend Landlord from any liens and encumbrances arising out of any work
performed or materials furnished by or at the direction of Tenant excluding any
work performed by Landlord. In the event any lien is filed, Tenant shall do
all acts necessary to discharge such lien within thirty (30) days after Tenant
receives actual notice of its filing; or, if Tenant desires to contest any
lien, then Tenant may also bond around lien or Tenant shall deposit with
Landlord such security as Landlord shall reasonably demand to ensure the
payment of the lien claim. In the event Tenant shall fail to pay any lien claim
when due or shall fail to deposit the security with Landlord, then Landlord
shall have the right to expend all sums necessary to discharge the lien claim,
and Tenant shall pay promptly after demand all sums expended by Landlord in
discharging any lien, including attorneys' fees and costs.
19. ENTRY
19.1 Landlord and its agents shall have the right during Tenant's
usual business hours with 24 hours notice of the time of inspection except in
emergencies to enter upon the premises for the purposes of inspection,
construction, serving or posting notices, showing to a prospective purchaser or
making any changes or alterations or repairs which Landlord shall deem
necessary for the protection, improvement or preservation of the premises or
the building of which the premises are a part, or for any lawful purpose. At
any time within ninety (90) days prior to the expiration of the term of the
Lease, Landlord may place thereon any usual or ordinary "For Lease" signs.
Landlord may also show the premises to prospective Tenants during the last 90
days of the Lease term with 24 hours notice prior to the time of the showing of
the premises.
20. ASSIGNMENT AND SUBLETTING
20.1 Tenant shall not assign, pledge or encumber this Lease, or
sublet the whole or any part of the premises without the prior written consent
of Landlord, which consent shall not be unreasonably withheld. This prohibition
against assigning or subletting shall be construed to include a prohibition
against any assignment or subletting by operation of law. In the event of any
assignment or subletting of this Lease made with or without Landlord's consent,
Tenant shall nevertheless remain liable for the performance of all of the
terms, conditions and covenants of this Lease. Tenant shall promptly remit to
Landlord all sums which Tenant receives as the result of any such subletting or
assignment in excess of the fixed rental payments to Landlord required
hereunder, whether or not such subletting or assignment is consented to by
Landlord. Any such assignment or subletting without the prior written consent
of Landlord shall be void and constitute a breach of the Lease and shall, at
the option of the Landlord, terminate the Lease. No consent to any assignment,
voluntarily or by operation of law, of this Lease or any subletting of said
premises shall be deemed to be a consent to any subsequent assignment or
subletting, except as to the specific instance covered thereby. SEE PAGE 1a.
21. INDEMNIFICATION
21.1 Tenant's obligation. Tenant shall hold harmless, indemnify and
defend Landlord and Landlord's management company and their employees, agents,
owners, directors and officers against all claims, demands and actions for
loss, liability, damage, cost and expense (including attorneys' fees) resulting
from injury or death to any person and damage to property caused by the willful
act or negligence of Tenant, its agents or employees except for loss or damage
caused by the willful act or negligence of Landlord and/or Landlord's
management company, their employees and agents, while in, upon or connected in
any way with the premises or surrounding common areas during the term of this
Lease or any occupancy hereunder.
21.2 Landlord's obligation. Landlord shall hold harmless, indemnify
and defend Tenant, its employees, agents, owners, directors and officers
against all claims, demands and actions for loss, liability, damage, cost and
expense (including attorneys' fees) resulting from injury or death to any
person and damage to property caused by the willful act or negligence of
Landlord, its management company and their employees, agents, owners, directors,
and officers while in, upon or connected in any way with the Project including
the common areas during the term of this Lease or any occupancy hereunder.
22. INSURANCE COVERAGE
22.1 PUBLIC LIABILITY. Tenant shall take out and keep in force
during the term of this Lease, at Tenant's expense, comprehensive general
liability insurance protection in the limit of $1,000,000 for personal injury
and property damage liability protection per each occurrence and a general
annual aggregate of $1,000,000. Landlord shall be named as an additional
insured under Tenant's insurance policy. Landlord shall maintain comprehensive
general liability insurance protection with at least equivalent limits, at
Landlord's expense.
22.2 FIRE INSURANCE. SEE PAGE 1b.
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22.3 WAIVER OF SUBROGATION. Landlord and Tenant hereby release
each other and their officers, owners, directors, employees and agents from any
and all liability or responsibility to the other or anyone claiming through or
under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any of the extended coverage or supplementary
contract casualties, even if such fire or other casualty shall hare been caused
by the fault or negligence of the other party or anyone for whom such party may
be responsible. All fire and extended coverage insurance carried by either
Landlord or Tenant covering losses arising out of the destruction of or damage
to the demised premises or its contents shall provide for a waiver of rights or
subrogation against Landlord and Tenant and their officers, owners, directors,
employees and agents on the part of the insurance carrier.
22.4 PROCEDURE. The policies required by Paragraphs 22.1 and 22.2
shall be with a Best's A+, Class X company. A certificate as to such
Tenant insurance shall be presented to Landlord upon demand, and renewals
thereof as required shall be delivered to Landlord at least ten (10) days prior
to the expiration of the respective policy terms. Tenant and Landlord shall
have the right to provide such insurance coverage pursuant to blanket policies,
provided such blanket policies expressly afford coverage to the premises and to
Tenant and Landlord as required by this Lease. Tenant shall obtain a written
obligation on the part of any such insurance company to notify Landlord in
writing of any delinquency in premium payments and at least ten (10) days prior
thereto of any cancellation of any such policy. Tenant agrees that if Tenant
does not take out such insurance or keep the same in full force and effect,
Landlord may take out the necessary insurance and pay the premium therefor, and
Tenant shall promptly repay to Landlord the amount so paid after demand, as
Additional Rental.
23. DEFAULT BY TENANT
23.1 Tenant shall be deemed in default hereof in the event Tenant
should:
(a) Default in the prompt payment of rent or any additional
expenses when the same is due and continue in such default for ten (10) days
after receipt of written notice to be given not more than twice in a calendar
year; or
(b) Remain in violation of any other of the covenants to be
performed by Tenant hereunder after the expiration of thirty (30) days
following the receipt of written notice of such violation so long as Tenant
commences to cure the default within the 30-day period and diligently proceeds
to cure same thereafter; or
(c) File a voluntary petition in bankruptcy, be adjudged bankrupt,
be placed in or subjected to receivership, or make an assignment for benefit of
creditors; or
(d) Abandon all of the premises.
Upon default, (i) all rental payments and other estimated Landlord
charges due pursuant to the current term of this Lease shall become immediately
due and payable without additional notice or demand; and (ii) Landlord may alter
any and all locks and other security devices denying access to the Leased
premises without notice; or (iii) either cancel this Lease or relet the premises
as agent for Tenant or otherwise and receive the rent therefor, applying the
same first to the payment of such expenses hereunder, the balance, if any, to be
paid to Tenant, who shall remain liable for any deficiency. Upon the reentering
of said premises, Landlord may remove all or any part of the personal property
of Tenant remaining on the premises and store the same at Tenant's expense.
24. LANDLORD'S LIEN - SEE PAGE 1b.
25. BANKRUPTCY OF TENANT
25.1 If this Lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code, 11 U.S.C. paragraph 101 et seq., any and
all funds payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
funds or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid or delivered to Landlord. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
all of the obligations arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption.
26. COST OF SUIT
26.1 WAIVER OF JURY TRIAL. If legal action shall be brought by
either party because of the breach of any term or provision hereof, then the
prevailing party shall be entitled to recover costs of suit, reasonable
attorney's fees, administrative expenses and collection costs incurred in the
action. Landlord and Tenant hereby irrevocably waive any right to trial by jury
in any lawsuit, proceeding or counterclaim brought by either party against the
other on any matter arising out of or connected with this Lease.
27. DAMAGE TO PREMISES BY FIRE OR OTHER CASUALTY
27.1 RESTORATION OF THE PREMISES. In the event that the Leased
premises are damaged by fire or other casualty, Tenant shall give immediate
written notice of such damage to Landlord and to any mortgagee of the premises
whose address shall have been furnished it, and Landlord shall proceed with all
reasonable diligence to commence and complete restoration of the premises
within one hundred twenty (120) days from the date of such damage, during which
restoration period this Lease shall remain in full force and effect, except
that Total Rent shall be reduced in proportion to the percentage which the area
of the unusable portion of the premises bears to the area of the entire
premises. Landlord must restore the premises to substantially the same
condition as immediately prior to the casualty except that Landlord's
obligation to restore the premises shall be limited to the scope of
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Landlord's original work and to the amount of insurance proceeds actually
received, and Tenant shall be entirely responsible for the restoration of
improvements by Tenant or Tenant's personal property. In the event that the
Leased premises cannot be restored within one hundred twenty (120) days of such
damage, then either Landlord or Tenant may cancel this Lease effective upon
written notice of such cancellation given to the other party.
27.2 NO RESTORATION. Notwithstanding anything contained hereinabove
to the contrary, in the event that any mortgagee of the premises refuses to
make the proceeds of Landlord's insurance immediately available to Landlord for
the restoration of the premises, or in the event that the cost of such
restoration is estimated to exceed eighty percent (80%) of the replacement cost
of the entire premises, then Landlord, at Landlord's option, shall be released
from the obligation to restore the premises by giving notice of such event and
of Landlord's election not to so restore, which notice must be given to Tenant
within forty-five (45) days of the date of the damage, in which event Tenant
may terminate the Lease effective upon the date of destruction and receive a
refund of any rents paid for the period of time after the destruction.
28. HAZARDOUS SUBSTANCES
28.1 Tenant shall not cause or permit the release, discharge, or
disposal nor the presence, use, transportation, generation, or storage of any
Hazardous Material (as hereafter defined) in, on, under, about, to, or from the
Premises by either Tenant, Tenant's employees, agents, contractors, or invitees
(collectively the "Tenant") other than the use of such materials in de minimum
quantities reasonably necessitated by the Tenant's regular business activities.
Tenant further agrees and covenants to Landlord, its agents,
employees, affiliates and shareholders (collectively the "Landlord") the
following:
a. To comply with all Environmental Laws in effect, or may come
into effect, applicable to the Tenant or Tenant's use and
occupancy of the premises;
b. To immediately notify Landlord, in writing, of any existing,
pending or threatened (1) investigation, inquiry, claim or
action by any governmental authority in connection with any
Environmental Laws; (2) third party claims (3) regulatory
actions; and/or (4) contamination of the premises;
c. Tenant shall, at Tenant's expense, investigate, monitor,
remediate, and/or clean up any Hazardous Material or other
environmental condition on, about, or under the premises
required as a result of Tenant's use or occupancy of the
premises; SEE PAGE 1b
d. To keep the premises free of any lien imposed pursuant to any
Environmental Laws; SEE PAGE 1b; and
e. To indemnify, defend, and save Landlord harmless from and
against any and all claims (including personal injury, real,
or personal property damage), actions, judgments, damages,
penalties, fines, costs, liabilities, interest, or attorneys'
fees that arise, directly or indirectly, from Tenant's
violation of any Environmental Laws or the presence of any
Hazardous Materials caused by Tenant on, under or about the
premises.
The Tenant's obligations, responsibilities, and liabilities under this
paragraph shall survive the expiration of this Lease.
For purposes of this paragraph the following definitions apply:
"Hazardous Materials" shall mean: (a) any "hazardous waste" and/or
"hazardous substance" defined pursuant to any Environmental Laws; (b) asbestos
or any substance containing asbestos; (c) polychlorinated biphenyls; (d) lead;
(e) radon; (f) pesticides; (g) petroleum or any other substance containing
hydrocarbons; (h) any substance which, when on the premises, is prohibited by
any Environmental Laws; and (i) any other substance, material, or waste which,
(1) by any Environmental Laws requires special handling or notification of any
governmental authority in its collection, storage, treatment, or disposal, or
(2) is defined or classified as hazardous, dangerous or toxic pursuant to any
legal requirements.
"Environmental Laws" shall mean: any and all federal, state and local
laws, statutes, codes, ordinances, regulations, rules or other requirements,
relating to human health or safety or to the environment, including, but not
limited to, those applicable to the storage, treatment, disposal, handling and
release of any Hazardous Materials, all as amended or modified from time to
time.
29. EMINENT DOMAIN
29.1 PREMISES TAKEN. If the premises or any portion thereof are
taken under the power of eminent domain or sold under the threat of the
exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than ten
percent (10%) of the floor area of the premises, or more then twenty-five
percept (25%) of the parking area of the Project is taken by condemnation and
cannot be replaced by Landlord, Tenant may, at Tenant's option, to be exercised
in writing only within thirty (30) days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within thirty
(30) days after the condemning authority shall have taken possession), terminate
this Lease as of the date the condemning authority takes such possession.
29.2 PREMISES REMAINING. If Tenant does not terminate this Lease in
accordance with the foregoing, Landlord, at its expense, shall restore the
improvements with reasonable diligence to an architectural whole, and this
Lease shall remain in full force and effect as to the portion of the premises
remaining, except that the rent shall be reduced in the proportion that the
floor area of the premises taken bears to the total floor area of the original
premises. Any award for the taking of all or any part of the premises under the
power of eminent domain, or any payment made under threat of the exercise of
such power, shall be the property of the Landlord, whether such award shall be
made as compensation for diminution in value of the leasehold or for the taking
of the fee, or as severance damages; provided, however, that Tenant shall se
entitled to any award for loss or damage to Tenant's trade fixtures, leasehold
estate, removable personal property, equipment and improvements which were made
by Tenant.
30. HOLDING OVER
30.1 Should Tenant continue to occupy the premises after the
expiration of the term hereof, whether with or against the consent of Landlord,
such tenancy shall be from month to month and under all the terms, covenants
and conditions of this Lease, but at 50% of the Base Rent last charged Tenant
during the primary Lease or any renewal or extension thereof, subject to the
right of either party to terminate upon thirty (30) days written notice to the
other party.
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31. SUBORDINATION AND STATEMENT OF CONDITION OF LEASE
31.1 SUBORDINATION. Tenant accepts this Lease subject and
subordinate to any mortgage presently existing or to hereinafter come into
existence upon the demised premises or upon the entire premises and to any
renewals and extensions thereof, but Tenant agrees that any mortgagee shall
have the right at any time to subordinate such mortgage to this Lease on such
terms and subject to such conditions as the mortgagee may deem appropriate in
its discretion. This subordination shall be self-operative without the
necessity of the execution of any further instruments by Tenant, but upon the
request of any present or future mortgagee, Landlord is hereby irrevocably
vested with full power and authority, if it so elects, at any time, to
subordinate this Lease to any mortgage hereafter placed upon the demised
premises or upon the entire premises by executing a written subordination
instrument as attorney-in-fact for Tenant, and Tenant further agrees upon
demand to execute any additional instruments subordinating this Lease as
Landlord may request. Any such subordination provided for in this Paragraph
shall be upon the express condition that: (a) upon foreclosure, exercise of
power of sale or other exercise of the mortgagee's rights, Tenant's possession
of the demised premises shall not be disturbed so long as Tenant shall continue
to perform all of the covenants and conditions of this Lease; and (b) that
Tenant's obligation to perform such covenants and conditions shall not be in
any way diminished thereby. SEE PAGE 1b.
31.2 CONDITION OF LEASE. Tenant shall execute, acknowledge and
deliver to Landlord, without any charge, at any time within ten (10) days after
request by Landlord, a written statement or estoppel certificate as may be
required by any mortgagee or purchaser of the premises to the effect that this
Lease, as of said date, is unmodified and in full force and effect (or if there
have been modifications, that this Lease is in full force and effect as
modified), the date of commencement of this Lease, the date on which rental has
been last paid, the existence of any default, and such other information as
Landlord shall reasonably request. Any such statement by Tenant shall be used
by Landlord for delivery to and reliance upon by prospective purchasers and
lenders whose security will consist of liens upon the premises and buildings of
which the premises are a part and shall not affect Tenant's right to later
assert any subsequent default or modification. Upon request by Tenant, Landlord
shall execute a similar letter without any charge to Tenant.
32. SIGNS
32.1 Tenant, at Tenant's expense, may affix one sign to the
exterior of the premises in a location previously designated by Landlord. Such
sign must meet Landlord's reasonable requirements with respect to size, shape,
construction, materials, design and color, (Exhibit "B") and must be approved
in writing by Landlord prior to its installation by Tenant. Landlord reserves
the right to the use of the exterior walls and the roof of the premises and the
building of which the premises are a part.
33. SECURITY
33.1 Tenant, at Tenant's own expense, shall provide whatever
security and/or alarm systems which Tenant deems necessary and appropriate for
the protection of the leased premises and of Tenant's fixtures, inventory and
equipment located therein. In no event shall Landlord be responsible for the
loss of or damage to any of Tenant's personal property, fixtures, inventory and
equipment situated in the premises, even though Landlord may have provided
general area security or guard services. Tenant is expressly advised that if
Tenant should place any fixtures, inventory and equipment within the premises
prior to the time the premises are completed and delivered to Tenant, the risk
of loss or damage to the same will be greatly increased in view of the fact
that numerous people will, out of necessity, be permitted access to the
premises for the purpose of completing the same. Landlord may provide general
area security or guard services as Landlord reasonably deems necessary, in
which event Tenant shall pay to Landlord, promptly after demand, Tenant's pro
rata share of the costs incurred by Landlord in having such services performed,
such pro-rata share to be determined by the percentage which the square footage
of the leased premises bears to the total square footage of the building(s)
benefiting from such services. Tenant is hereby notified that Landlord
maintains no security with respect to keys and that Tenant may (at Tenant's
expense) change or re-key the premises' locks as deemed necessary by Tenant
without Landlord's consent. Upon default per Paragraph 23.1 of this Lease,
Landlord may change or re-key the premises locks without Tenant's consent or
notice to Tenant.
34. MISCELLANEOUS
34.1 CAPTIONS. The captions of the Paragraphs contained in this
Lease are for convenience only and shall not be deemed to be relevant in
resolving any questions of interpretation or construction of any Paragraph of
this Lease.
34.2 SUCCESSORS AND ASSIGNS. All of the terms, covenants and
conditions of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns, except that nothing in this provision
shall be deemed to permit any assignment, subletting or use of the premises
other than as provided for herein.
34.3 APPLICABLE LAW. This Lease shall be governed and interpreted
solely by the laws of the State of Texas then in force. Each number, singular
or plural, as used in this Lease, shall include all numbers, and each gender
shall be deemed to include all genders.
34.4 TIME AND JOINT AND SEVERAL LIABILITY. Time is of the essence
in each and every provision of this Lease. All the terms, covenants and
conditions contained in this Lease to be performed by either party, if such
party shall consist of more than one person or organization, shall be deemed to
be joint and several, and all rights and remedies of the parties shall be
cumulative and nonexclusive of any other remedy.
34.5 NON WAIVER. No covenant, term or condition or breach thereof
shall be deemed waived, except by written consent of the party against whom the
waiver is claimed, and any waiver or the breach of any covenant, term or
condition shall not be deemed to be a waiver of any preceding or succeeding
breach of the same or any other covenant, term or condition. Acceptance of all
or any portion of rent at any time shall not be deemed to be a waiver of any
covenant, term or condition as to the rent payment accepted.
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<PAGE> 12
34.6 WITHHOLDING OF CONSENT. DELETED
34.7 ENTIRETY CLAUSE. This Lease contains and embraces the entire
agreement between the parties hereto, and it or any part of it may not be
changed, altered, modified, limited, terminated, or extended orally or by any
agreement between the parties unless such agreement be expressed in writing,
signed and acknowledged by the parties hereto, their legal representatives,
successors and assigns, except as may be expressly otherwise provided herein.
34.8 NO REPRESENTATIONS. Landlord or Landlord's agent have made no
expressed or implied representations or promises now or in the future with
respect to the building, the land upon which the building is erected, or the
premises except as herein expressly set forth, and no rights, easements or
licenses are acquired by Tenant, by implication or otherwise, except as
expressly set forth.
34.9 QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease on payment of the rent and observing, keeping and performing all
the terms or provisions of this Lease on its part to be observed, kept and
performed shall lawfully, peacefully and quietly have, hold and enjoy the
premises during the term hereof on and after the term Commencement Date without
hindrance or ejection, subject, nevertheless, to the terms and conditions of
this Lease. It is understood and agreed, however, that this covenant and any
and all other covenants of Landlord contained in this Lease shall be binding
upon Landlord and its successors only with respect to breaches occurring during
its and their respective ownership of Landlord's interest hereunder.
34.10 LIMITATION OF LANDLORD'S REPRESENTATIVE. Landlord's
representative, unless authorized by Landlord, does not and will not have
authority to (a) make exceptions, changes or amendments to this Lease, (b)
waive any right, requirement, or provision of this Lease, or (c) release Tenant
from all or part of this Lease, unless such action is in writing.
34.11 RULES AND REGULATIONS. Tenant and Tenant's agents, employees
and invitees will comply fully with any reasonable rules and regulations
including those on Exhibit "A" governing the operation and use of the premises
or the common service drives, parking areas, and railroad spur (if any)
situated upon the project which are hereinafter imposed by Landlord upon all
Tenants of the Project in order to preserve the rights and peaceful occupancy
of all Tenants of the Project.
SEE PAGE 1b.
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<PAGE> 13
EXECUTED THIS 28th day of April, 1997
LANDLORD: TENANT:
AEQUUS PROPERTY MANAGEMENT COMPANY, LIFEQUEST MEDICAL, INC.
AS MANAGER FOR INTERPARK JACK LIMITED
PARTNERSHIP
BY: /s/ RUSSELL T. NOLL BY: /s/ HERB SPOON
-------------------------------------- ---------------------------------
RUSSELL T. NOLL, PRESIDENT HERB SPOON, PRESIDENT
BY: /s/ DEBORAH K. MADDEN BY:
-------------------------------------- ---------------------------------
DEBORAH K. MADDEN, SECRETARY
AEQUUS PROPERTY MANAGEMENT COMPANY
BY: BY:
-------------------------------------- ----------------------------------
LANDLORD'S ADDRESS: TENANT'S ADDRESS:
1335 N.E. Loop 410 9601 McAllister FreewaY, #1120
San Antonio, Tx 78209-1515 San Antonio, Texas 78216
Home Office Telephone No.: _________
TAX I.D. #: 37-1248357 Local Office Telephone No.:_________
Interpark Jack Limited Partnership (210) 366-2100
Emergency Telephone No.: __________
SIC Code: __________________________
Landlord'S PROPERTY MANAGER:
Aequus Property Management Company
1335 N.E. Loop 410
San Antonio, Tx 78209-1515
(512) 828-5050
TAX I.D. #: 74-2255830
10
INITIALS
<PAGE> 1
EXHIBIT 10.2
[WILLIAMS-ADAIR REALTY CORP. LETTERHEAD]
LEASE AGREEMENT FOR FULTON FOUR HUNDRED CORPORATE CENTER
THIS LEASE AGREEMENT, made and entered into as of this ______
DAY OF JANUARY, 1997, by and between WILLIAMS NORTH FULTON GROUP, (hereinafter
referred to as "Landlord"), and VAL-U-MED, INC., (hereinafter referred to as
"Tenant");
W I T N E S S E T H:
1.0 PREMISES. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, SUITE 700 in the FULTON FOUR HUNDRED
CORPORATE CENTER (hereinafter referred to as "Building") located at 1495
HEMBREE ROAD, ROSWELL, FULTON COUNTY, GEORGIA. The space leased in the
BUILDING (hereinafter referred to as "Leased Premises") consists of
approximately 9,600 SQUARE FEET and it outlined and hatched in the drawing
attached as EXHIBIT "A". For purposes of this Lease Agreement, the Building
shall be deemed to consist of 91,200 SQUARE FEET of floor space. The Building,
together with the parcel of land on which it, other buildings in the Fulton
Four Hundred Corporate Center, the parking, landscaping, driveways and service
areas are located is referred to herein as the "Complex". Landlord shall have
the right at any time from time to time to change the Building name and to make
alterations to the Complex. This Lease shall confer no rights on Tenant with
respect to the Complex other than tenancy of the Leased Premises and the
non-exclusive license to use, in common with others authorized by Landlord, the
"Common Areas":. No easement for light and air is included in the Leased
Premises.
2.0 DEFINED TERMS. Certain basic terms of this Lease
Agreement are defined or set forth on EXHIBIT "B". Capitalized terms not
otherwise defined herein shall have the meanings set forth on EXHIBIT "B".
3.0 TERM. The term of this Lease Agreement shall
commence on the Lease Commencement Date and shall expire at midnight on the
last day of the SIXTIETH (60TH) MONTH after the month in which the Lease
Commencement Date occurs. The Lease Commencement shall begin on THE 1ST DAY OF
MARCH, 1997, and end on THE 28TH DAY OF FEBRUARY, 2002 at midnight, unless
sooner terminated as hereinafter provided. At the request of either, Tenant
and Landlord will from time to time execute memoranda or letters stating the
commencement and termination dates of this Lease Agreement.
4.0 CONSTRUCTION WORK. See Bid Detail attached as
EXHIBIT "C" and incorporated by reference herein for all purposes.
5.0 RENTAL. See Special Stipulations attached as EXHIBIT
"D" and incorporated by reference herein for all purposes.
5.1 As "Base Rent" for the Lease Agreement and use of the
Leased Premises, Tenant will pay Landlord or Landlord's assigns the sum per
Special Stipulations, EXHIBIT "D", Paragraph 1.0, subject to adjustment, as set
forth in subsection 5.2 below; and for each succeeding calendar year or part
thereof during the Lease Term, the monthly sum computed pursuant to subsection
5.2. Base Rent shall be paid monthly in advance on the first day of each month
in lawful money of the United States, without prior notice or demand and
without deduction, abatement or setoff except as expressly provided in this
Lease Agreement; partial months shall be prorated. The terms "rent" or "rental"
shall include all sums payable by Tenant to Landlord in addition to Base Rent,
including without limitation, those sums payable pursuant to Sections 6.0 and
9.0. Upon execution of this Lease Agreement, Tenant is to pay to Landlord an
amount equal to the first and last months' Base Rent and said amount shall be
immediately disbursed to Landlord. In the event the Lease Agreement does not
commence on the first day of a month or terminate on the last day thereof the
Base Rental for such month shall be prorated on a daily basis.
<PAGE> 2
6.0 ESCALATIONS.
6.1 Tenant shall pay upon demand, as additional rental
during the term of this Lease Agreement any extension or renewal thereof, the
amount by which all taxes (including, but not limited to, ad valorem taxes,
special assessments and any other governmental charges) on the Leased Premises
for each tax year exceed Landlord's tax Contribution. In the event the Leased
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Leased Premises
shall be determined by proration on the basis that the rentable floor area of
the Leased Premises bears to the rentable floor area of the entire property
assessed. If the final year of the Lease Term fails to coincide with the end
of the tax year, then as excess for the tax year during which the term ends
shall be reduced by the pro rata part of such tax year that extends beyond the
Lease Term. If such taxes for the year in which the Lease Agreement terminates
are not ascertainable before payment of the last month's rental, then the
amount of such taxes assessed against the property for the previous tax year
shall be used as a basis of determining the pro rata share, if any, to be paid
by Tenant for that portion of the last Lease Year. Tenant's pro rata portion
of increased taxes, as provided herein, hall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
6.3 Tenant shall pay upon demand, as additional rental
during the term of this Lease Agreement and any extension or renewal thereof,
Tenant's "pro rata share" of the amount by which Landlord's costs of
maintaining casualty and public liability insurance covering the Complex
exceeds Landlord's Insurance Contribution. For these purposes, Tenant's "pro
rata share" of such costs and the method by which Tenant's "pro rata share"
shall be computed in the event of a partial year shall be calculated in
accordance with subsection 6.2 above.
7.0 SECURITY DEPOSIT. Tenant agrees to deposit with
Landlord on the date hereof the Security Deposit, which Security Deposit shall
be held by Landlord, without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this Lease Agreement, it
being expressly understood and agreed that the Security 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 the Security Deposit to the extent necessary to make good
any arrears of rent 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. If
Tenant is not then in default hereunder, any remaining balance of the Security
Deposit shall be returned by Landlord to Tenant upon termination of this Lease
Agreement. In the event of bankruptcy or other creditor-debtor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to
payment of rent and other charges due Landlord for all periods prior to filing
such proceedings.
8.0 USE. Tenant will use the Leased Premises solely as
an office and a warehouse facility. Tenant will not permit carry-out sales of
any type from the Leased Premises. Tenant will not in any way use or obstruct
any area outside the Leased Premises. Loading or unloading of trucks at the
Building shall be strictly limited to the areas specifically designed by
Landlord and at such times as are designated by Landlord. There will be no
outside storage of trash, goods or materials or equipment; Tenant agrees to
keep the areas immediately in front of , beside and behind the Leased Premises
clean and free of trash or debris. Tenant, at its expense, will comply with
reasonable Rules and Regulations from time to time promulgated by Landlord.
Tenant shall not do or permit to be done in or about the Leased Premises
anything which would increase the rate or cause cancellation of any insurance
on the Building or its contents, whether the insurance is maintained by
Landlord, Tenant or other tenants. Tenant shall, at its sole expense, comply
with all laws, ordinances, rules and regulations then applicable to the use and
occupancy of Leased Premises. Tenant shall not obstruct, injure, annoy or
interfere with the rights of other occupants or tenants of the Complex, their
employees, contractors, agents or invitees, or with the rights of Landlord of
Landlord's agents. Tenant shall not cause or maintain any nuisance in or about
the Complex or engage in any course of conduct which might damage Landlord's
goodwill or reputation.
9.0 SERVICE AND UTILITIES.
9.1 Tenant shall be responsible for an promptly pay all
charges for separately metered gas, electricity and other utilities used or
consumed in the Leased Premises directly to the provider of such services. No
interruption or malfunction of any utility services or other services shall
constitute an eviction or disturbance or Tenant or a breach by Landlord of any
of its obligations or grant any right of see off or recoupment. Tenant will
pay to Landlord Tenant's Contribution for water and sewer services for the
garbage collection, as set forth on EXHIBIT "B".
9.2 Landlord shall furnish janitorial and groundkeeping
services for portions of the Complex not leased to specific tenants and
intended for general use ("Common Areas"). Day to day and periodic maintenance
relating to the heating ventilation and air conditioning system service the
Leased Premises, such as lubrication, changing the filters, fan belts, etc.
shall be the responsibility of Tenant. Maintenance of major components of the
system, such as the compressor, except in the event of failure caused by the
failure of Tenant to perform its periodic maintenance obligations, shall be the
responsibility of Landlord.
2
<PAGE> 3
10.0 REPAIRS OF DAMAGE.
10.1 Landlord will, at its own expense, repair damage to
the roof, the exterior portion or exterior walls and the structural members of
the Building, and to the Common Areas. If such damage is caused by acts or
omissions of Tenant, its agents, employees, customers or invitees, then Tenant
shall bear the total cost of such repairs. Under no circumstances shall decor
items, signs, glass, doors or associated hardware be deemed to constitute any
part of the exterior walls.
10.2 All damages to the Leased Premises other than that
which Landlord undertakes to repair will be repaired at Tenant's cost and
expense. Repair and maintenance shall be by workmen of Landlord, except for
guaranty or warranty work performed by third parties previously approved by
Landlord; however, no such guaranty or warranty work shall be performed unless
approved in advance by Landlord. Upon Tenant's failure or refusal promptly to
discharge its duties to repair and maintain (and in any event, in case of
emergency), Landlord shall have the right, but shall not be obligated, to
perform such maintenance or make such repair or replacement (Tenant waiving any
damage caused thereby) and Tenant will, at Landlord's demand, pay for the cost
of such repair. Such cost may be treated by Landlord as Additional Rent for
purposes of determining Landlord's remedies in the event of any failure by
Tenant to pay. If Landlord makes or undertakes any repairs, Tenant shall
indemnify and hold Landlord harmless with respect to all loss or damage that
may occur to Tenant's merchandise, fixtures or other property or to Tenant's
business incident to such action by Landlord.
10.3 Tenant will not commit waste and will not injure the
Leased Premises or the Complex, but will maintain the Leased Premises in a
clean, attractive condition and in good repair. Upon expiration of this Lease,
Tenant will surrender the Leased Premises to Landlord broom-clean and in good
condition excepting only ordinary wear and tear and damage arising from any
cause not required to be repaired by Tenant.
11.0 ADDITIONS AND FIXTURES. Tenant will make no
alterations or additions to the Leased Premises without the prior written
consent of Landlord. At such times as Tenant requests such written consent of
Landlord, Tenant shall submit plans and specifications for such alterations or
additions to landlord. Tenant may only remove "Removable Trade Fixtures" and
signs purchased and installed at its own cost and expense provided:
a. the removal is made prior to the termination
of the term of this Lease Agreement;
b. Tenant is not in default in the performance
of any obligation or covenant under this Lease at the time of removal; and
c. removal may be effected without damage to the
Leased Premises or the Building, and Tenant promptly repair all damage caused
by such removal.
If Landlord requests in writing, Tenant will, by the
expiration of the Lease Term, remove any or all alterations, additions,
fixtures, equipment and property installed by it in the Leased Premises and
will repair any damage caused by such removal and restore the Leased Premises
to as good a condition as at the time Tenant opened for business, excepting
only ordinary wear and tear and damage not otherwise required to be repaired by
Tenant. The phrase "Removable Trade Fixtures" shall mean counters, tables,
chairs, desks, racks, shelves, signs, merchandisers and displayers, standards,
wall brackets, hang-rods, mirrors, marking equipment, cash registers and other
business machines.
12.0 FIRE OR OTHER CASUALTY.
12.1 If at any time during the Lease Term, the Leased
Premises or any portion of the Building
shall be damaged or destroyed by fire or other casualty, then Landlord shall
have the election to terminate this Lease Agreement or to repair and restore
the Leased Premises and the Building to the condition in which they existed
immediately prior to such damage or destruction. If Landlord elects to repair
and restore, its obligations shall extend only to the construction originally
undertaken by Landlord and shall not include any improvements installed by
Tenant or at Tenant's expense. Landlord shall give Tenant notice of its
election within sixty (60) days of the date of such damage or destruction.
12.2 If this Lease Agreement is terminated, Landlord shall
refund to Tenant any prepaid unaccrued rent, less any sum then owing Landlord
by Tenant. If Landlord has elected to repair and restore the Leased Premises,
Base Rent shall abate proportionately during the period and to the extend that
the Leased Premises are unfit for use and not actually used by Tenant in the
ordinary conduct of its business. Repairs will be made within a reasonable
time, subject to delays arising from shortages of labor or material, acts of
God, war or other conditions beyond Landlord's reasonable control. If Landlord
repairs and reconstructs the Leased Premises, the Lease Term may be extended by
Landlord for a period of time equal to the period of the repair and
reconstruction.
13.0 TENANT'S INSURANCE.
13.1 Tenant will maintain a policy of fire and extended
coverage insurance and a policy protecting against sprinkler leakage on its
fixtures, leasehold improvements, equipment, merchandise and all other property
placed at the Leased Premises, insuring all such property for its full
replacement value. To the extent that Tenant fails to take out or maintain the
policy, such failure shall be a default under this Lease and shall be a defense
to any claim asserted by Tenant against Landlord by reason of any loss
sustained by Tenant due to fire or other casualty, notwithstanding that such
loss might have been approximately caused solely by the negligence of Landlord.
Such insurance policy shall contain an endorsement showing Landlord's lien and
security interest with respect to the insured property.
3
<PAGE> 4
13.2 Tenant will maintain
(i) comprehensive general liability insurance
(including coverage for bodily injury and death, property damage and products
liability coverage) in a minimum amount of $100,000.00 for property damage and
$1,000,000.00 for injury to or death of one or more persons in each occurrence;
(ii) contractual liability coverage insuring the
obligations of Tenant under the terms of this Lease in the amounts referred to
immediately above; and
(iii) plate glass insurance insuring damage or
destruction of all store front plate glass and any other plate glass or window
glass in the Leased Premises to its full replacement value.
The liability policies shall name Landlord and
Landlord's mortgagee as additional insureds and shall be non-cancelable with
respect to them except after ten (10) days' written notice.
13.3 Tenant's insurance shall be in a form and with
companies acceptable to Landlord. If Tenant fails to have current
certificates of such insurance on deposit with Landlord at all times during the
lease term (or subsequent to the termination date hereof in the event of a
holdover), then Landlord shall have the right to take out and maintain any
insurance policy required under this Lease, and Tenant shall be obligated to
pay Landlord as Additional Rent the amount of the premium applicable to such
policy of insurance.
13.4 Landlord and Tenant each waive any and all rights of
recovery, claim or cause of action, against the other, its agents, officers or
employees, for any loss or damage that may occur to the Leased Premises or the
Building, or any improvements, or any personal property of such party, by
reason of fire, the elements, or any other cause which could be insured against
under the terms of a Georgia standard fire and extended coverage insurance
policy or which is, in fact, insured against by Landlord or Tenant, regardless
of cause or origin, including negligence of the other party, its agents,
officers of employees, and covenants that no insurer shall hold any right of
subrogation against such other party, by reason of any such loss or damage.
14.0 LIABILITY AND INDEMNITY.
14.1 Tenant agrees to indemnify and save Landlord harmless
from all claims, including costs and expenses of defending against such claims,
arising or alleged to arise from any act or omission of Tenant or Tenant's
agents, employees, contractors, customers or invitees, or arising from any
injury to any person or damage to the property or any person occurring during
the term of this Lease in or about the Leased Premises. Tenant agrees to use
and occupy the Leased Premises and other facilities of the Complex at its own
risk and releases Landlord, its agents and employees from all claims for any
damage to injury to the full extent permitted by law. Landlord shall not be
responsible or liable to Tenant, its employees, agents, customers or invitees
for personal injury or bodily injury (fatal or non-fatal) or property damage
occasioned by the acts or omissions of any other tenant or such other tenant's
employees, agents, contractors, customers or invitees.
14.2 Tenant hereby agrees that Landlord shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water rain or snow or
leaks from any part of the Leased Premises or from the pipes, appliances or
plumbing works or from the roof, street or subsurface or from any other place
or by dampness or by any other cause of whatsoever nature. Landlord shall not
be liable for any such damage caused by other tenants or persons in the
Complex, occupants of adjacent property, or the public, or caused by operations
and construction of any private, public or quasi-public work. Landlord shall
not be liable for any latent defect in the Leased Premises or in the Building
except for a period of one (1) year from the date Tenant takes possession of
the Leased Premises. All property of Tenant kept or stored on the Leased
Premises shall be so kept or stored at the risk of Tenant only and Tenant
shall hold Landlord harmless from any claims arising out of damage to the same,
including subrogation claims by Tenant's insurance carrier, unless such damage
shall be caused by the willful act or gross neglect of Landlord.
15.0 PERSONAL PROPERTY AND OTHER TAXES. Tenant shall pay,
before delinquency, all taxes and assessments levied, assessed or imposed upon
Tenant's Removable Trade Fixtures, merchandise, inventory, other personal
property and improvements in the Leased Premises owned by Tenant, whether such
improvements were installed or paid for by Landlord or Tenant. Tenant shall
also pay, before delinquency, all sales, excise, use, business, occupation or
other taxes, assessments, license fees or charges levied, assessed or imposed
upon Tenant's business operations conducted at the Leased Premises. Tenant
shall pay, or reimburse Landlord on demand if any of the above taxes,
assessments, fees and charges payable by Tenant are imposed upon Landlord or
the Complex, and payment may be made by Landlord regardless of the validity of
such taxes, assessments, fees and charges. Tenant shall pay, or reimburse
Landlord on demand if Landlord is assessed, any excise, gross receipts or other
tax (however designated and whether charged to Landlord, Tenant or both() which
is imposed or based on rentals paid, on an estate or interest of Tenant, or on
Tenant's occupancy, use or possession of the Leased Premises. Nothing
contained herein shall be construed as requiring Tenant to pay any inheritance,
estate, succession, transfer, gift, franchise, net income or profits tax
imposed upon Landlord.
16.0 LANDLORD'S LIEN. Tenant gives to Landlord an express
first and prior contract lien and security interest on property which may be
placed in the Leased Premises, and upon all proceeds of any insurance which may
accrue to Tenant by reason of destruction of or damage to any such property.
This lien and security interest may be foreclosed with or without court
proceedings by public or private sale and is given in addition to the
Landlord's statutory lien and shall be cumulative thereto. Tenant agrees that
this Lease may be filed as a non-conforming financing statement pursuant to the
Georgia Uniform Commercial Code.
4
<PAGE> 5
17.0 ASSIGNMENTS AND SUBLETTING.
17.1 Neither Tenant nor Tenant's legal representatives or
successors in interest by operation or law or otherwise shall assign this Lease
or sublease the Leased Premises or any part thereof or mortgage, pledge or
hypothecate its leasehold interest or grant any concession or license within
the Leased Premises without the prior written permission of Landlord, which
shall not be unreasonably withheld. Should Landlord's consent be granted,
Tenant shall remain primarily liable under this Lease, and Landlord may enforce
the provisions of this Lease against Tenant and/or any assignee, sublessee or
other transferee.
17.2 Any time Tenant requests permission to assign,
sublease or engage in any other transaction contemplated under this Section
17.0, Landlord, by notice to Tenant within fifteen (15) days after Tenant's
request, may cancel and terminate this Lease for the portion of the Leased
Premises affected by the assignment, sublease or other transaction. In the
event of such cancellation and termination, this Lease shall apply to the
remainder of the Leased Premises (if any) with Base Rent and other charges
proportionately reduced.
18.0 SIGNS AND DISPLAYS. All designs, fixtures and
displays in the Leased Premises visible from the Common Areas, shall be subject
to Landlord's approval. No sign, logo, name, placard picture, advertisement or
notice shall be placed, displayed, installed or maintained by Tenant in or on
the Leased Premises or any part of the Complex without Landlord's prior written
approval, which approval may be granted or withheld in Landlord's sole
discretion.
19.0 LANDLORD'S MORTGAGEE.
19.1 Tenant accepts this Lease subject and subordinate to
any mortgage, deed to secure debt or other lien, or other matters of record
presently existing or hereafter placed upon the Complex, and to any renewals
and extensions thereof. Tenant agrees that any such mortgagee and/or
beneficiary of any deed to secure debt or other lien ("Landlord's Mortgagee")
and/or Landlord shall have the right at any time to subordinate such mortgage,
deed to secure debt or other lien to this Lease on such terms and subject to
such conditions as such Landlord or Landlord's Mortgagee may deem appropriate.
Tenant agrees to execute further instruments subordinating this Lease, as
Landlord or Landlord's Mortgagee may request.
19.2 In any instance in which Tenant gives a notice to
Landlord alleging default by Landlord, Tenant will also simultaneously give a
copy of such notice to each Landlord's Mortgagee (provided Landlord or
Landlord's Mortgagee shall have advised Tenant of the name and address of
Landlord's Mortgagee) and each Landlord's Mortgagee shall have the right to
cure or remedy such default during the period that is permitted to Landlord,
plus an additional period of thirty (30) days, and Tenant will accept such
curative or remedial action (if any) taken by Landlord's Mortgagee with the
same effect as if such action had been taken by Landlord.
19.3 If requested from time to time, Landlord and Tenant
shall execute and deliver to each other or any mortgagee an estoppel
certificate verifying the terms of the Lease and other reasonably requested
information.
20.0 EMINENT DOMAIN. If during the lease term any part
of the Leased Premises or the Complex is taken by power of eminent domain,
Landlord may elect to terminate this Lease. In the event of any such taking or
private purchase in lieu thereof, the entire award or compensation, whether as
compensation for diminution in value of the leasehold or to the fee of the
Leased Premises shall be paid to and belong to Landlord; provided, however,
that any award made to Tenant for moving expenses or for the value of any trade
fixtures or equipment installed by or belonging to Tenant shall be paid to and
belong to Tenant.
21.0 EVENTS OF DEFAULT. The following events shall be
deemed to be events of default to Tenant under this Lease Agreement:
21.1 Tenant shall fail to pay any installment of the rent
hereby reserved when due, and such failure shall continue for a period of five
(5) days from the date such installment was due;
21.2 Tenant shall become insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment for the benefit of
creditors;
21.3 Tenant shall file a petition under any section or
chapter of the National Bankruptcy Act, as amended, or under nay similar law or
statute of the United States or any state thereof; or an order for relief shall
be entered against Tenant in bankruptcy or insolvency in proceedings filed
against Tenant;
21.4 A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant;
21.5 Should the Leased Premises or Tenant's effects or
interest therein by levied upon or attached under process against Tenant, and
not satisfied or dissolved within sixty (60) days after written notice from
Landlord to Tenant to obtain satisfaction thereof;
21.6 Tenant shall desert or vacate any substantial portion
of the Leased Premises;
21.7 Tenant shall fail to comply with any term, provision
or covenant of this Lease (other than the foregoing in this Section 21.0) and
shall not cure such failure within twenty (20) days after written notice
thereof to Tenant.
5
<PAGE> 6
22.0 REMEDIES. Upon the occurrence of any of such events
of default described in Section 21 hereof, Landlord shall have the option to
pursue any one or more of the following remedies without an notice or demand
whatsoever;
22.1 Terminate this Lease, in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
Leased Premises and expel or remove Tenant and any other person who may be
occupying the Leased Premises or any part thereof, by force if necessary,
without being liable for prosecution or any claim of damages therefore; and
Tenant agrees to pay to Landlord on demand the amount of all loss and damage
which Landlord may suffer by reason of such termination, whether through
inability to relet the Leased Premises on terms satisfactory to Landlord or
otherwise.
22.2 Enter upon and take possession of the Leased Premises
and expel or remove Tenant and any other person who may be occupying such
Leased Premises or any part thereof, by force if necessary, without being
liable for prosecution or any claim for damage therefore, and relet the Leased
Premises and receive the rent therefore; and Tenant agrees to pay to Landlord
on demand all costs incurred by Landlord and any deficiency that may arise by
reason of such reletting.
22.3 Enter upon the Leased Premises, by force if
necessary, without being liable for prosecution or any claim for damages
therefore, and do whatever Tenant is obligated to do under the terms of this
Lease; and Tenant agrees to reimburse Landlord on demand for any expenses which
Landlord may incur in this effecting compliance with Tenant's obligations under
this Lease, and Tenant further agrees that Landlord shall not be liable for any
damages resulting to Tenant from such action, whether caused by the negligence
of Landlord or otherwise.
In the event Tenant fails to pay any installment of
rent hereunder as and when such installment is due, Tenant shall pay to
Landlord on demand a late charge in an amount equal to five percent (5%) of
such installment; and the failure to pay such amount within ten (10) days after
demand therefore shall be an event of default hereunder. The provision for
such late charge shall be in addition to all of Landlord's other rights and
remedies hereunder or at law and shall not be construed as liquidated damages
or as limiting Landlord's remedies in any manner.
Pursuit of any of the foregoing remedies shall not
preclude pursuit of any of the other remedies herein provided or any other
remedies provided by law, nor shall pursuit of any remedy herein provided
constitute a forfeiture of waiver of any rent due to Landlord hereunder or of
any damages accruing to Landlord by reason of the violation of any of the
terms, provisions and covenants herein contained. No waiver by Landlord of any
violation or breach of any of the terms, provisions and covenants herein
contained shall be deemed or construed to constitute a waiver of any other
violation or breach of any of the terms, provisions and covenants herein
contained. Landlord's acceptance of the payment of rental or other payments
hereunder after the occurrence of an event of default shall not be construed as
a waiver of such default, unless Landlord so notifies Tenant in writing, and
the receipt by Landlord of rent with knowledge of the breach of any covenant or
other provision contained in this Lease shall not be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants contained herein. Forbearance by Landlord to enforce
one or more of the remedies herein provided upon an event of default shall not
be deemed or construed to constitute a waiver of such default. If, on account
of any breach or default by Tenant in Tenant's obligations under the terms and
conditions of this Lease, it shall become necessary or appropriate for Landlord
to employ or consult with an attorney concerning or to enforce or defend any of
Landlord's rights or remedies hereunder, Tenant agrees to pay any reasonable
attorneys' fees. No act or thing done by Landlord or its agents during the
term hereby granted shall be deemed an acceptance of the surrender of the
Leased Premises, and no agreement to accept a surrender of the Leased Premises
shall be valid unless in writing signed by Landlord.
23.0 HOLDING OVER. If Tenant should remain in possession
of the Leased Premises after the expiration of the term of this Lease, then
Tenant shall e deemed to be occupying the Leased Premises as a tenant from
month-to-month, subject to all the covenants and obligations of this Lease and
at a monthly Base Rent equal to twice the Base Rent for the month immediately
prior to such expiration.
24.0 ACCESS BY LANDLORD. Landlord and any Landlord's
Mortgagee shall have a right to enter the Leased Premises at any reasonable
time to inspect its condition, to make necessary repairs and improvements, or
to repair or maintain pipes, wires and other facilities serving its nearby
property, to show the Leased Premises to prospective purchasers or Complex
tenants, and for any other reasonable purpose.
25.0 NON-WAIVER. Neither acceptance of rent by Landlord
nor failure by Landlord to complain of any action, non-action or default by
Tenant shall constitute a waiver of any of Landlord's rights. Waiver by
Landlord of any right for any default of Tenant shall not constitute a waiver
of any right for either a subsequent default of the same obligation or any
other default.
26.0 NOTICE. Any notice which may or shall be given
under the terms of this Lease shall be in writing and shall be either delivered
by hand or sent by United States registered or certified mail, postage prepaid,
if for Landlord, to WILLIAMS-ADAIR EQUITY CORPORATION, 2056-A WEST PARK PLACE,
STONE MOUNTAIN, GEORGIA 30087; or if for Tenant, to Tenant's address as set
forth on EXHIBIT "B" prior to commencement of the lease term and to the Leased
Premises after commencement of the lease term. Such address may be changed
from time to time by either party giving written notice to the other party in
the manner herein provided.
6
<PAGE> 7
27.0 PARKING. Tenant shall have no rights with respect to
any parking facilities offered to tenants or users of the Building, except the
right to use such facilities on the same basis as other tenants. Landlord
shall not be responsible for any loss or damage to any vehicle or property
therein or for fatal or non-fatal injuries to persons occurring in connection
with use of the parking facilities.
28.0 TERMINOLOGY AND MISCELLANEOUS.
28.1 With respect to terminology in this Lease, each
number (singular or plural) shall include all numbers, and each gender (male,
female or neuter) shall include all genders. If any provision of this Lease
shall ever be held to be invalid or unenforceable, such invalidity or
enforceability shall not affect any other provision of the Lease, but such
other provisions shall continue in full force and effect. The titles of the
paragraphs in this Lease shall have no effect and shall neither limit or
amplify the provisions of the Lease itself.
28.2 In all instances where Tenant is required to pay any
sum or do any act at a particular indicated time or within an indicated period,
it is understood that time is of the essence.
28.3 The obligation of Tenant to pay all rent and other
sums to be paid by Tenant and the obligation of Tenant to perform Tenant's
other covenants and duties constitute independent, unconditional obligations to
be performed at all times provided, ,save and except only when an abatement or
reduction is expressly provided for in this Lease and not otherwise. Tenant
waives and relinquishes all rights which Tenant might have to claim any nature
of lien against or withhold, or deduct from or offset against any rent and
other sums to be paid Landlord by Tenant. Tenant waives and relinquishes any
right to assert, either as a claim or as a defense, that Landlord is bound to
perform or liable for the non-performance of any implied covenant or implied
duty not expressly herein set forth.
28.4 Under no circumstances whatsoever shall Landlord ever
be liable for consequential damages or special damages; and all liability of
Landlord for breach of any of its covenants, duties or obligations may be
satisfied only out of its interest in the Complex and the rents issues and
profits therefrom arising after the time any such liability is adjudicated in a
proceeding as to which the judgment adjudicating such liability is
non-appealable and not subject to further review.
29.0 SPECIAL STIPULATIONS. Anything to the contrary
herein notwithstanding, the Special Stipulations set forth as EXHIBIT "D",
which is attached hereto and incorporated herein by reference, shall in all
cases be controlling.
30.0 ENTIRE AGREEMENT AND BINDING EFFECT. This Lease and
the attached exhibits referenced herein constitute the entire agreement between
Landlord and Tenant; no prior written or prior or contemporaneous oral promises
or representations shall be binding. This Lease shall not be extended except
by written instrument signed by both parties. This Lease shall be binding upon
and shall accrue to the benefit of Landlord, Tenant and their successors and
assigns (or heirs, executors and administrators, as the case may be ); however,
this clause does not constitute a consent by Landlord to any assignment by
Tenant. Anything to the contrary herein notwithstanding, the Special
Stipulations set forth in EXHIBIT D", which is attached hereto and incorporated
herein by reference, shall in all cases be controlling.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals, in triplicate, the _________ DAY OF JANUARY, 1997.
<TABLE>
<CAPTION>
LANDLORD:
<S> <C>
WILLIAMS-ADAIR REALTY CORPORATION
Signed, sealed and delivered as to Landlord, AS MANAGING AGENT FOR:
in the presence of: THE WILLIAMS NORTH FULTON GROUP
_________________________________________ BY: ___________________________________
Witness FORREST L. ADAIR, PRESIDENT
_________________________________________
Witness
</TABLE>
<TABLE>
<CAPTION>
TENANT:
<S> <C>
Signed, sealed and delivered as to Tenant, in the VAL-U-MED, INC.
in the presence of:
_________________________________________ BY: ___________________________________
Witness K. C. FADEM, PRESIDENT
_________________________________________
Witness [SEAL]
</TABLE>
7
<PAGE> 1
Exhibit 11.1
LIFEQUEST MEDICAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Loss (329,418) 64,253 (774,027) 24,264
========== ========== ========== ==========
Weighted average number of shares of Common
Stock and Common Stock equivalents
outstanding:
Weighted average number of Common Stock
outstanding 4,407,867 5,781,599 4,402,261 5,734,529
Weighted average number of Common Stock
equivalents applicable to stock
options and warrants -- 441,263 -- 445,709
---------- ---------- ---------- ----------
Common Stock and Common Stock equivalents 4,407,867 6,222,862 4,402,261 6,180,238
========== ========== ========== ==========
Earnings per share - primary (0.07) 0.01 (0.18) 0.00
========== ========== ========== ==========
Net Loss (329,418) 64,253 (774,027) 24,264
========== ========== ========== ==========
Weighted average number of Common Stock and
Common Stock equivalents outstanding
Weight average number of shares of
Common Stock outstanding 4,407,867 5,781,599 4,402,261 5,734,529
Weighted average number of Common Stock
equivalents applicable to stock
options and warrants -- 441,263 -- 448,693
---------- ---------- ---------- ----------
Common Stock and Common Stock equivalent,
assuming full dilution 4,407,867 6,222,862 4,402,261 6,183,222
========== ========== ========== ==========
Earnings per share - fully diluted(1) (0.07) 0.01 (0.18) 0.00
========== ========== ========== ==========
</TABLE>
(1) This calculation is submitted in accordance with item 601(b)11 of
regulation S-K although it is not required by APB Opinion No. 15
because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 615,026
<SECURITIES> 1,610,772
<RECEIVABLES> 1,177,782
<ALLOWANCES> 51,891
<INVENTORY> 1,539,303
<CURRENT-ASSETS> 4,974,823
<PP&E> 1,245,491
<DEPRECIATION> 809,936
<TOTAL-ASSETS> 8,381,122
<CURRENT-LIABILITIES> 2,502,404
<BONDS> 9,358
0
0
<COMMON> 5,845
<OTHER-SE> 5,745,676
<TOTAL-LIABILITY-AND-EQUITY> 8,381,122
<SALES> 5,550,952
<TOTAL-REVENUES> 5,608,860
<CGS> 3,338,931
<TOTAL-COSTS> 5,563,836
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,301
<INCOME-PRETAX> 24,264
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,264
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
