<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1999 Commission File Number 34-0-20400
UNIVERSAL STANDARD HEALTHCARE, INC.
Michigan 38-2986640
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Attn: Alan S. Ker, Chief Financial Officer
29200 Northwestern Highway, Suite 300, Southfield, Michigan 48034
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (248) 358-0810
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
---
Number of shares of common stock, no par value, outstanding as of May 4, 1999:
9,164,842
<PAGE> 2
UNIVERSAL STANDARD HEALTHCARE, INC.
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
at March 31, 1999 and December 31, 1998
Condensed Consolidated Statements of 4
Income for the three months ended
March 31, 1999 and 1998
Condensed Consolidated Statements of 5
Cash Flows for the three months ended
March 31, 1999 and 1998
Notes to Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations
Part II. OTHER INFORMATION 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 674 $ 556
Accounts receivable 807 824
Prepaid expenses and other 599 348
Assets of discontinued operations (26) 425
--------- -----------
Total current assets 2,054 2,153
Property and equipment, net 2,639 2,660
Intangible assets, net 3,127 3,561
Other assets 960 1,151
--------- -----------
Total assets $ 8,780 $ 9,525
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 675 $1,139
Accounts payable 1,221 631
Accrued liabilities 5,812 5,765
Laboratory-related and other liabilities 19,509 20,562
--------- ===========
Total current liabilities 27,217 28,097
Long-term debt, net of current portion 668 678
--------- -----------
Total liabilities 27,885 28,775
--------- -----------
Redeemable common stock 4,399 4,399
Common stock, no par; 20,000,000 shares
authorized; 6,980,323 and 6,828,968 shares issued and 34,247 34,247
outstanding at March 31, 1999 and December 31, 1998,
respectively
Paid-in-capital 129 129
Retained earnings (deficit) (57,880) (58,025)
--------- -----------
Total stockholder's equity (23,504) (23,649)
--------- -----------
Total liabilities and stockholders' equity $ 8,780 $ 9,525
========= ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Net managed care revenue $ 4,992 $ 6,941
-----------------------
Operating expenses:
Claims and Processing 3,495 5,085
Selling, general, and administrative 937 1,343
Depreciation 153 56
Amortization 87 56
-----------------------
Total operating expenses 4,672 6,540
-----------------------
Operating Income (loss) 320 401
Interest expense 54 243
Other income, net (262) (14)
-----------------------
Income (loss) before income taxes 528 172
-----------------------
Income tax expense -- --
-----------------------
Net Income (loss) from continuing operations 528 172
-----------------------
Loss from discontinued operations of laboratory division -- (370)
Loss on disposal of laboratory division --
-----------------------
Net income (loss) 528 (198)
=======================
Income (loss) per share from continuing operations $ 0.07 $ 0.03
Income (loss) per share from discontinued operations $ -- $ (0.05)
Income (loss) per share (basic and diluted) $ 0.07 $ (0.03)
Average share outstanding and common stock equivalents 7,748 6,856
EBITDA from continuing operations $ 560 $ 513
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
4
<PAGE> 5
UNIVERSAL STANDARD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
-------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 438 ($154)
-------- ---------
Cash flows from investing activities:
Purchase of property and equipment (288) (754)
Restricted cash investment 0 0
Other investing activities 0 0
-------- ---------
Net cash used in investing activities (288) (754)
-------- ---------
Cash flows from financing activities:
Payments on long-term debt (32) (39)
Long-term/Short-term borrowings 0 748
Payments of financing costs 0 (115)
Other financing activities 0 0
-------- ---------
Net cash provided by (used in) financing activities (32) 594
-------- ---------
Net increase (decrease) in cash and cash equivalents 118 (313)
Cash and cash equivalents, beginning of period 556 1,252
-------- ---------
Cash and cash equivalents, end of period $ 674 $ 939
======== =========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
UNIVERSAL STANDARD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
In the opinion of management, the condensed consolidated financial statements
include all adjustments, consisting of normal recurring items, necessary for a
fair presentation of financial position and results of operations. The results
of operations are not necessarily indicative of the results which may be
expected for the full year.
2. Income Taxes
The effective income tax rate of (0.0%) for the three months ended March 31,
1999 is less than the statutory rate of 34% principally due to the Company's net
operating loss carry-forward ("N.O.L.,"). The tax liability for the first
quarter March 31, 1999 is being offset against the Company's net operating loss
carry-forward for accounting purposes and the remaining N.O.L. may be used to
offset future profits of the Company.
3. Net Income Per Share
Net income per share has been computed by dividing net income by the weighted
average number of shares of common stock outstanding. The per share amounts
reflected in the consolidated statements of operations are presented in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings per Share"; the amounts of the Company's "basic" and "diluted"
earnings per share (as defined in SFAS No. 128) are the same.
4. Discontinued Operations
In August 1998, the Company sold certain assets related to its clinical
laboratory operations, including customer lists, inventories, and other tangible
assets to Laboratory Corporation of America for $9 million. Accordingly, this
division is being reported as a discontinued operation in the accompanying
financial statements.
5. Liability Restructuring Plan
There are still liabilities relating to the discontinued laboratory operations,
which have been recorded on the financial statements but not yet resolved,
recorded at, approximately $20 million. The Company is currently working with
its bank, the creditors committee and other creditors to resolve this liability
through an out of court settlement.
6
<PAGE> 7
6. Contingencies
The Company is also a defendant and plaintiff in various lawsuits. While it is
not feasible to predict or determine the outcome of any of these cases, it is
the Company's opinion that the outcome of this litigation will have no material
adverse effect on the accompanying financial statements. The Company has
recorded total litigation-related reserves of approximately $1.7 million at
December 31, 1998 (see Note 7) for several lawsuits relating to the discontinued
laboratory operations; management believes these reserves are adequate to cover
future adverse judgements against the Company with respect to these existing
lawsuits.
7. Long-Term Debt
The Company's revolving line of credit (the "NBD Loan") with NBD Bank (the
"Bank") is in default. The Bank has agreed in principle to forbear from taking
action to collect the principal balance of the NBD Loan until June 1, 1999. A
definitive agreement is currently being negotiated. The Company is required to
apply proceeds from the sale of the collateral pledged to the Bank, including
collection of the Company's clinical laboratory accounts receivable and sale of
the Company's clinical laboratory assets, to the repayment of the NBD Loan and
the remainder of the Bank's credit facility, except for certain payments due to
Laboratory Corporation of America ("LabCorp"). The outstanding principal balance
of the NBD Loan is $374,000 at May 12, 1999.
The Bank has the right to sell the stock of the Company's subsidiaries pledged
to it upon ten days notice to the Company and subject to restrictions under
applicable Michigan and Ohio Insurance Bureau restrictions. The Company is also
required to apply 20% of any proceeds from the issuance of its equity to, or to
secure, the obligations to the Bank.
On March 8, 1999, the Company sold 587,345 shares of Common Stock (the "Landlord
Common Stock") to 26500 Northwestern Associates Limited Partnership (the
"Landlord") in exchange for $258,432 of the Company's obligation to the Landlord
upon termination of the lease on its former headquarters building. Universal
Standard HealthCare of Delaware, Inc. ("Delaware"), a wholly owned subsidiary of
the Company, repurchased the Landlord Common Stock for $258,432, payable
interest only at the rate of 10% per annum on the first date of each month from
April 1, 1999 through September 1, 1999 and thereafter in 30 equal monthly
payments of principal and interest on the first day of each month from October
1, 1999 through March 1, 2002. Delaware's obligation to the Landlord is secured
by a pledge by Delaware of the Landlord Common Stock.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
revenue represented by items in the statements of income.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Net managed care revenue 100% 100%
Operating Expenses:
Claims and processing 70% 73%
Selling, general and administrative 19% 19%
Depreciation 3% 1%
Amortization 2% 1%
Operating income (loss) 6% 6%
Interest expense 1% 4%
Other income, net (5%) 0%
---- ----
Income (loss) from continuing operations before income tax 10% 2%
expense
Income tax expense 0% 0%
Net income (loss) from continuing operations 10% 2%
Loss from operations of laboratory division, net of 0% 5%
---- ----
Applicable income tax benefit
Net income (loss) 10% (3%)
EBITDA 11% 7%
Net cash provided by (used in) operating
activities** 9% (2%)
</TABLE>
* EBITDA represents earnings from the Company's continuing managed care
operations before interest, taxes, depreciation, amortization and other (income)
expense and does not include losses associated with the Company's discontinued
laboratory operations. The Company and managed care industry analysts use EBITDA
as a method of measuring and comparing the financial performance of managed care
companies, many of which were formed by combining with and acquiring other
companies, because it eliminates the effects of goodwill amortization and
acquisition expenses on net income. EBITDA should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or to cash flows as a measure of the Company's liquidity.
* Net cash provided by (used in) operating activities is determined in
accordance with generally accepted accounting principles and is included in the
Company's Condensed Consolidated Statements of Cash Flows.
8
<PAGE> 9
The amount for each period is determined by adjusting net income for the period
for non-cash expense items, including restructuring and special charge,
depreciation and amortization, extraordinary item and deferred income taxes, and
for increases and decreases in asset and liability items other than those
relating to financing and investing activities.
Net Revenue. The Company's net revenue from continuing operations is generated
from managed care laboratory programs with major employers, union and government
benefit plans, and large purchasing organizations as a means of controlling
health care costs. In the Managed Care Programs, for a fixed monthly payment,
the Company is the designated provider of substantially all non-hospital
clinical laboratory testing which may be ordered by a Program Member's physician
of choice, home medical services (including durable medical equipment,
respiration therapy, infusion, orthotic and prosthetic appliances and related
supplies), and outpatient diagnostic imaging services. The Company's managed
care revenues are not affected by seasonal trends.
Total net revenue from continuing operations decreased to $5.0 million for the
first quarter of 1999 from $6.9 million for the first quarter of 1998, a
decrease of $1.9 million, or 27.5%. The decrease in managed care revenue for the
first quarter of 1999 was primarily due to the termination of the General Motors
Corporation administrative services contract on October 31,1998 which was not
profitable to the Company. Managed Care revenues, other than from the General
Motors Corporation contract increased in the first quarter of 1999 as compared
to the same period last year due to new Whirlpool Corporation contract.
Since March 31, 1999, a number of the Company's managed care customers have
threatened to or have given the Company cancellation notices on their managed
care contracts. The Company is currently working with such customers to resolve
their concerns and to have agreements reinstated before their cancellation
notice dates. There is no assurance that the Company will be successful in such
efforts. If the Company is not successful in these efforts, it may be unable to
continue its operations.
Claims and Processing Expenses. Claims and processing expense was $3.5 million
for the first quarter 1999 compared to $5.1 million for the first quarter 1998.
This decrease of $1.6 million is due to the termination of the unprofitable
General Motors Corporation administrative services contract. As percentage of
net revenue, claims and processing expenses decreased from 73% for first quarter
1998 to 70% for the first quarter 1999. The decrease relates to the improved
network contracting and claims processing automation implemented during 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $1.3 million for the first quarter of
1998 to $.9 million for the first quarter of 1999, a decrease of $.4 million, or
30.8%. The decrease is primarily due to the streamlining of administrative
functions. As a percentage of net revenue, selling, general and administrative
expenses was 19% for both the first quarter of 1998 and for the first quarter of
1999.
EBITDA. EBITDA was $.6 million or 11.2% of net revenue for the first quarter of
1999, compared to $.5 million, or 7.4% of net revenue for the first quarter of
1998. The Company attributes this increase principally due to the previously
mentioned termination of the unprofitable General Motors Corporation
administrative service contract and improved network contracting.
Other Income, net. Other income net, was $260,000 in the first quarter of 1999
as compared to $14,000 in the first quarter of 1998. This increase is primarily
due to proceeds from the sale of discontinued operations assets.
9
<PAGE> 10
Interest Expense. Interest expenses were $54,000 in the first quarter of 1999 as
compared to $243,000 in the first quarter of 1998. This decrease is primarily
due to lower interest bearing debt levels in 1999.
Income Taxes. The effective income tax rate of (0.0%) for the three months ended
March 31, 1999 is less than the statutory rate of 34% principally due to the
Company's use of its net operating loss carry-forward. The remaining net
operating loss carry forward for accounting purposes of approximately $43
million may be used to offset future profits of the Company.
Liquidity and Capital Resources
The Company's working capital ratio was .8 to 1.0 at March 31, 1999 and .8 to
1.0 on December 31, 1998. Working capital was ($25.2) million at March 31, 1999
and ($25.9) million at December 31, 1998. The change in working capital is
principally due to lower liabilities associated with the discontinued laboratory
operations. Included in cash and cash equivalents at March 31, 1998 is $587,000
in cash deposits of one of the Company's wholly owned managed care subsidiaries,
which is generally permitted to make distributions to the Company only out of
the subsidiary's earned surplus and to the extent certain other regulatory
requirements are satisfied.
Net cash flow from operating activities was $438,000 for the first quarter of
1999 compared to ($154,000) for the year-earlier quarter, principally due to
improved operating performances of the Company after termination of its
unprofitable accounts.
As of May 12, 1999, the Company's credit facility consists of $374,000
outstanding on the revolving line of credit, $3.6 million of Letter of Credits
expiring April 30, 2000 and a capital lease for $670,000. The Company's credit
facility had no available borrowings. The interest rate on the revolving line is
at 1% above the bank's prime rate. The credit facility is collateralized by
substantially all of the assets of the Company and its subsidiaries (including
the stock of the Company's Managed Care subsidiaries), except for the assets of
the Company's Managed Care subsidiaries.
The Company's credit facility is in default. The Bank has agreed in principle to
forbear from taking action to collect the principal balance of the revolving
line of credit until June 1, 1999. A definitive agreement is currently being
negotiated. The Company is required to apply proceeds from the sale of the
collateral pledged to the Bank, including collection of the Company's clinical
laboratory accounts receivable and sale of the Company's clinical laboratory
assets, to the repayment of the revolving line of credit and the other
facilities outstanding under the credit facility, except for payments due to
LabCorp as described below. In addition, the Bank also has the right to sell the
stock of the Company's subsidiaries pledged to it upon ten days notice to the
Company and subject to restrictions under applicable Michigan and Ohio Insurance
Bureau restrictions. The Company is also required to apply 20% of any proceeds
from the issuance of its equity to, or to secure, the obligations to the Bank.
The Company is currently seeking a new credit facility to replace the Company's
existing credit facility. There can be no assurance that the Company will be
able to obtain a replacement credit facility.
The Company has entered into an agreement with Laboratory Corporation of America
Holdings ("LabCorp") requiring it to pay LabCorp at least $550,000 per month and
requiring the Company to secure its outstanding receivable by a security
interest in substantially all of the assets of the Company and its subsidiaries,
subordinated only to the credit facility.
10
<PAGE> 11
The Company has defaulted on the February 1, 1999 payment of interest on its
Debentures and has defaulted in its payment obligations to certain creditors of
the Company's former clinical laboratory division, Universal Diagnostics.
The Company is negotiating a Work Out Strategy with creditors of its former
laboratory operation and the holders of its outstanding Debentures. The proposed
Work Out Strategy provides for these creditors to receive payments of only a
portion of the amount due to them and could include the issuance of Common Stock
to certain of these creditors. There can be no assurance that the Company will
be able to negotiate an acceptable Work Out Strategy with its creditors and
holders of Debentures or that a sufficient number of such creditors and holders
of Dentures or that a sufficient number of such creditors and holders of
Debentures will accept the Work Out Strategy to permit it to be successfully
implemented. A number of these creditors have initiated legal action or have
threatened to do so if the amounts due to them are not paid in full.
The Company expects to incur capital expenditures of approximately $200,000
during the remainder of 1999 for new systems automation projects.
The Company expects to fund its working capital needs, capital expenditures
required for the operation of its business and debt service requirements from
its operating cash flow, including cash flow from its subsidiary conducting
managed care operations in Michigan, capitalized leases, the sale of certain
assets and/or the proceeds from additional equity or debt financings.
The Company expects its managed care subsidiaries, including the Michigan
Managed Care Subsidiary, to generate sufficient operating cash to fund their
current operations and planned expansion and make limited distributions to the
Company. The foregoing statement may be a "forward looking statement" within the
meaning of the Securities Exchange Act of 1934. The ability of the Company to
generate operating cash is subject to a number of uncertainties described below.
From time to time the Company's required managed care subsidiaries may not be
able to make cash distributions to the Company at levels required to fund the
Company's operating cash flow needs without violating applicable regulatory
requirements. The Company's Michigan Managed Care Subsidiary proposes to enter
into an agreement with the Michigan Insurance Bureau agreeing not to engage in
certain transactions which result in the transfer of cash to affiliates without
30 days prior notice to the MIB and provided that the MIB does not disapprove
such transactions within such 30 day period. As a result, future cash transfers
from the Michigan Managed Care Subsidiary to the Company are likely to be
limited to payments for services rendered and dividends payable from the
Michigan Managed Care negotiations with LabCorp, the Company's principal
clinical laboratory provider, regarding a payment plan for the payment by the
Company of LabCorp's ongoing and past claims for laboratory services. The
Company's ability to generate sufficient cash to fund its cash flow needs is
dependent upon the successful completion of those negotiations.
The Company expects to fund its ongoing working capital needs and the Work Out
Strategy from its operating cash flow, including distributions from its managed
care subsidiaries as described above, the collection of its amounts receivable
and proceeds from the sale of its clinical laboratory equipment and capitalized
leases. The Company is also considering the issuance of debt or the sale of
additional equity as a means of generating additional cash to support the
Company's operations, satisfy its debt service requirements and fund expansion
of its managed care operations. The foregoing statements may be "forward looking
statements" within the meaning of the Securities Exchange Act of 1934. The
Company's ability to sell certain assets and to raise additional debt or equity
financing is subject to a number of uncertainties, including the limited demand
for clinical laboratory equipment, and the price
11
<PAGE> 12
interested parties may be willing to offer for such equipment, the Company's
current financial position and recent operating results, the financial condition
of other parties in the industry and the current economic condition of the
health care industry in general.
Factors that could adversely affect the Company's operating cash include
uncertainties inherent in the Company's efforts to successfully complete the
Work Out Strategy; increase competition in the managed care business,
particularly from larger, better capitalized companies; dependence of the
Company on third parties to provide services under its managed care programs;
uncertainties due to the fact that the Company's programs are generally
terminable by the customer on short notice and many of the Company's service
arrangements are terminable on short notice; periodic disputes between the
Company and its primary clinical laboratory provider, LabCorp, and related
threats by LabCorp to terminate the existing Laboratory Services Agreement for
alleged breaches by the Company; the impact of the highly regulated nature of
the managed care business on the Company's continuing operations; the cost and
the ability of the Company to continue to satisfy increasing regulatory
requirements relating to the managed care business; the long sales cycle
involved in the managed care business; the dependence of the Company on a
limited number of large customers for its revenue and growth, most of whom are
involved in the automotive industry; the ability of the Company to develop new
managed care products; the level of interest that existing and potential new
customers have in managed care products offered by the Company; the ability of
the Company to identify and satisfy market needs; potential increases in
operating costs resulting from the failure of the Company's principal suppliers
to become year 2000 compliant; and economic conditions in the health care an
automotive industries in general.
In the event that the Company is not able to generate cash to the extent
required to fund the Company's operations from the sources described above, the
Company will have to consider disposition of assets relating to its managed care
business.
The Company has from time to time experienced compliance reviews, including
reviews of its billing practices, by its third-party payors. The Company has not
yet received a final determination notice from a compliance review conducted by
one of its largest third-party payors. The ultimate effect, if any, of these
compliance reviews cannot be determined at this time and no liability has been
accrued by the Company.
YEAR 2000 READINESS DISCLOSURE
These materials contain certain information regarding Year 2000 readiness which
constitutes a "Year 2000 Readiness Disclosure" as defined in the Year 2000
Readiness Disclosure Act.
The year 2000 issue is the result of computer programs and microprocessors using
two digits rather than four to define the applicable year (the "Year 2000
Issue"). Such programs or microprocessors may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system failures or
miscalculations leading to disruptions in the Company's activities and
operations. If the Company or third parties with which it has a significant
relationship fail to make necessary modifications, conversions and contingency
plans on a timely basis, the Year 2000 Issue could have a material adverse
effect on the Company's business, financial condition and results of operations.
However, the effect cannot be quantified at this time because the Company cannot
accurately estimate the magnitude, duration or ultimate impact of noncompliance
by vendors and other third parties. The Company believes
12
<PAGE> 13
that its competitors face a similar risk. Although the risk is not presently
quantifiable, the disclosure below is intended to summarize the Company's
actions to minimize its risk from the Year 2000 Issue. Programs that will
operate in the year 2000 unaffected by the change in year from 1999 to 2000 are
referred to herein as "year 2000 compliant."
The Company began addressing the Year 2000 issue in June 1997. It identified
three general categories of systems that require attention: (1) information
technology ("IT") systems, (2) non-IT systems, such as climate control systems,
telephone systems and security systems, which may contain embedded
date-sensitive microprocessors, and (3) IT and non-IT systems of third parties.
The Company currently has three major IT systems: its managed care computer
software, its accounting software and its internal personal computer system and
related software. The managed care software, which has purchased and installed
in late 1997, is used for client billings and operates from the Company's
personal computer network. The Company has forward-date tested the system and
believes that the managed care software is year 2000 compliant. The Company's
accounting software, which was recently purchased and installed before the end
of December 1998, will operate from the Company's personal computer network. The
vendor of the software has represented to the Company that the software is year
2000 compliant. The software will be tested to verify compliance and, in the
event of a breach of the representation, the Company would expect to avail
itself of its legal remedies. The Company's personal computer system otherwise
operates using "shrink wrapped" software (such as Microsoft Windows NT,
Microsoft Word and Excel). To the extent any of the programs used by the
personal computer system are not year 2000 compliant, the Company believes that
year 2000 compliant upgrades are or will be readily available for purchase. The
Company intends to test the hardware components of its personal computer system
for the year 2000 compliance during 1999 and expects any disruption due to the
Year 2000 Issue with respect to the hardware or software used by its personal
computer system to be minimal.
The Company's major non-IT system is its telephone system. Testing of the
telephone system is complete and replacement equipment will be purchased in the
first half of 1999 to remediate the portion of the system which was not year
2000 compliant. Testing of the upgraded equipment is expected to be completed by
June 1999. The Company intends to assess, in the second quarter of 1999, the
year 2000 compliance of its new headquarters facility and related non-IT
embedded systems and will determine at that time the need for and cost of
remediation.
The Company has relationships with, and is to varying degrees dependent upon,
various third parties that provide funds, information, goods and services to the
Company. These include the Company's bank lender, utility providers and other
vendors, such as LabCorp, with whom it subcontracts to provide services under
its managed care contracts. The Company is attempting, through informal
contacts, to assess the compliance of these third parties. These vendors have
been giving the Company updates on their progress. The year 2000 compliance of
the systems of these third parties is outside the Company's control. There can
be no assurance that any of these third parties will not experience a systems
failure due to the Year 2000 Issue.
Because the Company expects that the systems within its control will be year
2000 compliant before the end of 1999, the Company believes that the most
reasonably likely worst case scenario is a compliance failure by one or more of
the third parties described above. Such a failure would likely have an effect on
the Company's business, financial condition and results of operations. The
magnitude of that effect,
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<PAGE> 14
however, cannot be quantified at this time because of variables such as the type
and importance of the third party, the possible effect on the Company's
operations and the Company's ability to respond.
Thus,
there can be no assurance that there will not be a material adverse effect on
the Company if such third parties do not remediate their systems in a timely
manner and in a way that is compatible with the Company's systems.
As a result, the Company will develop contingency plans that assume some
estimated level of noncompliance by, or business disruption to, these third
parties. The Company intends to have contingency plans developed by June 30,
1999 for third parties determined to be at high risk of noncompliance or
business disruption or whose noncompliance or disruption could materially affect
the Company. The contingency plans will be developed on a case-by-case basis,
and may include alternative vendors that can assure year 2000 compliance.
Judgements regarding contingency plans are subject to many uncertainties and
there can be assurance that the Company will correctly anticipate the level,
impact or duration of noncompliance or that its contingency plans will be
sufficient to mitigate the impact of any noncompliance. Some material adverse
effect to the Company may result despite such contingency plans.
To date, the Company has expended approximately $915,000 to remediate year 2000
problems, principally to replace its managed care and accounting software.
Replacement of the managed care claim processing system, represents $850,000 of
this expenditure. These costs have been expensed or capitalized in the period
incurred. The Company estimates total year 2000 remediation costs at less than
$1 million, with the remaining costs to be incurred over the next three
quarters. Estimates of time, cost and risks are based on currently available
information. Developments that could affect estimates include, without
limitation, the availability of trained personnel, the ability to locate and
correct all noncompliant systems, cooperation and remediation success of third
parties material to the Company, and the ability to correctly anticipate risks
and implement suitable contingency plans in the event of system failures at the
Company or third parties.
The foregoing discussion of the Year 2000 Issue contains various "forward
looking statements", within the meaning of the Securities Exchange Act of 1934,
and are subject to uncertainties which are described in the foregoing
discussion.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Position (SOP) 98-5, "Reporting on the Cost of Start-Up
Activities", was issued in April 1998 and SFAS 133, and "Accounting for
Derivative Instruments and Hedging Activities", was issued in June 1998. These
statements are effective in 1999 and 2000, respectively, and are not expected to
have a material impact on the consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On March 8, 1999, the Company sold 587,345 shares of Common Stock (the "Landlord
Common Stock") to 26500 Northwestern Associates Limited Partnership (the
"Landlord") in exchange for $258,432 of the Company's obligation to the Landlord
upon termination of the lease on its former headquarters building. The Company
did not register the shares of Common Stock issued to the Landlord under the
Securities Act of 1933, as amended, (the "Act") based upon exemptions from
registration set forth in Section 4(2) of the Act.
14
<PAGE> 15
Universal Standard HealthCare of Delaware, Inc. ("Delaware"), a wholly owned
subsidiary of the Company, repurchased the Landlord Common Stock for $258,432,
payable interest only at the rate of 10% per annum on the first day of each
month from April 1, 1999 through September 1, 1999 and thereafter in 30 equal
monthly payments of principal and interest on the first day of each month from
October 1, 1999 through March 1, 2002. Delaware's obligation to the Landlord is
secured by a pledge by Delaware of the Landlord Common Stock.
Item 3. Defaults Upon Senior Securities
The Company has defaulted on the February 1, 1999 payment of interest due on its
8.25% Convertible Subordinated Debentures due February 1, 2006, totaling
$478,000. See "Item 2- Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources."
The Company's revolving line of credit and related credit facility with NBD Bank
(the "Bank") is in default. The Bank has agreed in principle to forbear from
taking action to collect the principal balance of the NBD Loan or other
obligations under the credit facility until June 1, 1999. The Company is
required to apply proceeds from the sale of the collateral pledged to the Bank,
including collection of the Company's clinical laboratory accounts receivable
and sale of the Company's clinical laboratory assets, to the repayment of the
revolving line of credit and the remainder of the Bank's credit facility, except
for certain payments due to LabCorp. The outstanding principal balance of the
revolving line of credit is $374,000 at May 12,1999 and there is outstanding
under the credit facility a capital lease for $670,000 and letters of credit
totaling $3.6 million.
Item 5. Other Information
LabCorp has rescinded its notice of termination of its Laboratory Services
Agreement with the Company and has reached agreement to continue providing
laboratory services to the Company and its customers.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Sale, Escrow and Voting Agreement dated March 8, 1999
among 26500 Northwestern Associates Limited Partnership
("26500"), the Company and Universal Standard HealthCare of
Delaware, Inc.
10.2 Lease Termination Agreement dated March 8, 1999 among 26500 and
the Company.
10.3 Agreement dated March 8, 1999 among World Wide Financial
Services, Inc. and the Company.
10.4 Lease Agreement dated March 8, 1999 among 29200 Northwestern
Development Associates Limited Partnership and Universal Standard
HealthCare of Delaware, Inc.
(b) Reports on Form 8-K.
On February 16, 1999, the Company filed a Current Report on Form 8-K,
dated February 16, 1999, whereby it reported under Item 5 that the
Company intended to present an out of court restructuring plan to the
creditors of Universal Diagnostics, the Company's former clinical
laboratory division, and had determined not to pay the interest payment
on its outstanding 8.25% Convertible Debentures, due February 1, 1999.
15
<PAGE> 16
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.
UNIVERSAL STANDARD HEALTHCARE, INC.
(Registrant)
Date: May 14, 1998 By: /s/ Eugene E. Jennings
--------------------------
Eugene E. Jennings
President and
Chief Executive Officer
Date: May 14, 1998 By: /s/ Alan S. Ker
--------------------------
Alan S. Ker
Vice President, Finance,
Chief Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Ex-10.1 Stock Sale, Escrow and Voting Agreement
Ex-10.2 Lease Termination Agreement
Ex-10.3 Agreement dated March 8, 1999 among World Wide
Financial Services, Inc. and the company
Ex-10.4 Lease Agreement dated March 8, 1999 among 29200
Northwestern Development Associates Limited
Partnership and Universal Standard Healthcare of
Delaware, Inc.
Ex-27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
STOCK SALE, ESCROW AND VOTING AGREEMENT
This Stock Sale, Escrow and Voting Agreement ("Agreement") is made as
of March __, 1999, among 26500 Development Associates Limited Partnership, a
Michigan limited partnership ("Seller"), Universal Standard Healthcare of
Delaware, Inc., a Delaware corporation ("Purchaser"), Universal Standard
Healthcare, Inc., a Michigan corporation (the "Company"), and Honigman Miller
Schwartz and Cohn, as escrow agent (the "Escrow Agent").
Recitals
A. Seller is the owner of 587,345 shares (the "Stock") of the Common
Stock of the Company.
B. Purchaser desires to purchase the Stock from Seller, and Seller is
willing to sell the Stock to the Purchaser. Purchaser and Seller desire to enter
into an escrow arrangement in that regard.
C. Seller desires to grant to Purchaser the right to vote the Stock, on
the terms and conditions set forth in this Agreement.
Therefore, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Sale of Stock. Seller hereby sells the Stock to Purchaser for the
sum of $258,432. Such purchase price shall be paid by Purchaser to Seller as
follows: Interest only on the purchase price, at the rate per annum of 10% (or
$2,153.60 per month) shall be paid by Purchaser on the first day of each month
from April 1, 1999 through September 1, 1999; thereafter, Purchaser shall pay
Seller the purchase price in 30 equal, consecutive, monthly payments of
principal and interest (at the rate of 10% per annum) in the amount of $9,771.68
each, on the first day of each month from October 1, 1999 through March 1, 2002.
Seller's sale of the Stock is without representation or warranty of any kind or
nature, other than as to Seller's ownership of and title to the Stock. Seller
represents and warrants to the Purchaser that it is the lawful owner of the
Stock, free and clear of all security interests, liens and encumbrances, except
as created by this Agreement. Purchaser acknowledges that it is acquiring the
Stock for its own account, for investment purposes only, and without any
intention to distribute the Stock, that the Stock constitutes restricted
securities, and that the transfer to Purchaser of the Stock has not been
registered under the Securities Act of 1933 or any state securities statute. The
Purchaser shall have the right to prepay all or a portion of the remaining
principal amount of the purchase price plus accrued interest through the date of
the prepayment on the principal amount so prepaid, without premium or penalty,
and, in the case of a partial prepayment, the remaining monthly payments will be
adjusted accordingly to reflect such prepayment. All cash dividends,
distributions or payments on or arising in connection with or in exchange for
the Stock shall be used to prepay the purchase price as set forth above.
2. Escrow.
2.1 Delivery of Certificates and Stock Powers to the Escrow Agent.
Concurrently with the execution and delivery of this Agreement, Seller is
delivering certificate(s) evidencing the Stock to the Escrow Agent, accompanied
by executed, undated stock powers relating to the Subject Shares (collectively,
the "Escrow Instruments"). The Escrow Agent will hold and deliver the Escrow
Instruments in accordance with the terms and conditions of this Agreement,
unless otherwise directed by a court of competent jurisdiction or by written
agreement of Seller and Purchaser delivered to the Escrow Agent.
<PAGE> 2
2.2 Duties of the Escrow Agent.
(a) The Escrow Agent undertakes to perform only such
duties as are specifically set forth in this Agreement. The sole duties
of the Escrow Agent under this Agreement will consist of receiving,
holding and delivering the Escrow Instruments in accordance with this
Agreement.
(b) The Escrow Agent will have no responsibility to
inquire into or to determine the genuineness, authenticity or
sufficiency of any document or instrument submitted to it in connection
with its duties under this Agreement.
(c) The Escrow Agent will be entitled to deem the
signatories of any documents or instruments submitted to it under this
Agreement as being those purported to be authorized to sign such
documents or instruments on behalf of the parties to this Agreement and
will be entitled to rely upon the genuineness of the signatures of such
signatories without inquiry and without requiring any substantiating
evidence.
(d) The Escrow Agent will have no responsibility or
liability to effectuate any transfer of any of the Stock or to pay any
fees or taxes relating to any such transfer.
(e) Without limiting the generality of the foregoing,
the Escrow Agent will not be liable for any action taken or omitted by
it in good faith and in accordance with this Agreement and will not be
liable for any acts or omissions of any kind unless caused by the
Escrow Agent's own willful misconduct or gross negligence.
2.3 Disputes. In the event of any dispute under this Agreement, the
Escrow Agent (a) may elect, in its sole discretion, not to deliver any of the
Escrow Instruments, (b) will not be required to commence any action against any
party, and (c) may, in its sole discretion, deposit any of the Escrow
Instruments with a court of competent jurisdiction.
2.4 Indemnification. Seller and the Purchaser will jointly and
severally reimburse, indemnify and save the Escrow Agent harmless from all
losses, costs, liabilities and expenses (including court costs and attorney's
fees) that it may incur as a result of its performance of its duties in
connection with this Agreement.
2.5 Resignation of the Escrow Agent; Replacement. The Escrow Agent
may resign as such at any time upon 15 days' prior written notice to Seller and
Purchaser. In such event, Seller and Purchaser will appoint a successor in
writing, but if such a successor is not so appointed or does not accept such
appointment at least five days before the Escrow Agent's resignation becomes
effective, the Escrow Agent may (but will not be obligated to) appoint a
temporary successor (who will not be the Seller, the Purchaser or their
affiliates or any of their officers, directors, partners or employees) to act
until such appointment by Seller and Purchaser is made and accepted. Any
successor to the Escrow Agent will execute and deliver to the parties an
instrument accepting such appointment and thereupon such successor to the Escrow
Agent, without further act, deed, conveyance or transfer, will become vested
with all of the rights, interests, powers, authorities and obligations of its
predecessor under this Agreement, with like effect as if originally named as the
Escrow Agent under this Agreement. Upon request of such successor to the Escrow
Agent, the parties will execute and deliver such instruments of conveyance,
assignment and further assurance
2
<PAGE> 3
and do such other things as may reasonably be required to more fully and
certainly vest and confirm in such successor to the Escrow Agent all such
rights, interests, powers, authorities and obligations.
2.6 Representation of Seller by Escrow Agent. Purchaser acknowledges
that the Escrow Agent is the legal counsel to Seller and to certain of Seller's
affiliates, and that the Escrow Agent shall not be prevented from representing
Seller or any of its affiliates, with respect to the transactions contemplated
by this Agreement or any disputes arising hereunder or relating hereto or
otherwise, by virtue of its agreement to act as escrow agent hereunder.
2.7 Delivery of Escrow Instruments. Five days after receipt by the
Escrow Agent of a notice from Purchaser that the purchase price provided for in
Section 1 and all interest thereon have been paid in full, the Escrow Agent
shall deliver the Escrow Instruments to Purchaser unless Seller shall have
notified the Escrow Agent that it objects to such delivery. Five days after
receipt by the Escrow Agent of a notice from Seller that Purchaser has defaulted
in any payment of purchase price provided for in Section 1 or in any payment of
interest thereon, the Escrow Agent shall deliver the Escrow Instruments to
Seller, unless Purchaser shall have notified the Escrow Agent that it objects to
such delivery. The party providing a notice to the Escrow Agent shall
simultaneously send such notice to the other parties to this Agreement.
3. Voting Agreement and Irrevocable Proxy.
3.1 Agreement to Vote. From and after the date of this Agreement and
until the Stock is released from escrow hereunder, at all annual and special
meetings of shareholders of the Company, Seller will vote (or in lieu thereof,
will execute one or more written consents with regard to) all of the Stock as
directed by, and in accordance with instructions from, Purchaser. Purchaser will
direct the manner of voting of all of the Stock and the associated written
proxies with regard to all matters which may come before the shareholders of the
Company in proportion to the manner in which all other shares of the Company's
common stock are voted.
3.2. Irrevocable Proxy. In order to secure Seller's obligation to
vote the Stock in accordance with the provisions of Section 3.1, Seller hereby
irrevocably designates, makes, constitutes and appoints Purchaser, or such other
person(s) or entit(y)(ies) as Purchaser may designate from time to time, or any
one or more of them, as Seller's true and lawful irrevocable proxy and
attorney-in-fact, with full power of substitution, to represent and vote (or
execute written consents in lieu thereof), in Purchaser's discretion, all of the
Stock for any and all matters which may come before the shareholders of the
Company.
4. Adjustments for Certain Events. After any stock split, stock
dividend, reverse stock split, recapitalization, reclassification, merger,
consolidation, statutory share exchange, sale of all or substantially all of the
Company's assets, combination or exchange of shares, separation, reorganization
or liquidation of the Company occurring after the date of this Agreement (each a
"Special Event"), as a result of which (a) shares or other securities of any
class, or rights to purchase shares or other securities of any class, are issued
in respect of outstanding shares of common stock of the Company (or are issuable
in respect of securities convertible into shares of common stock of the Company)
or (b) shares of common stock of the Company are changed into the same or a
different number of shares of the same or another class or classes, other
securities, cash or other assets or rights to receive any of the foregoing, then
all shares of common stock of the Company or shares of another class or classes,
other securities, cash or other assets or rights to receive any of the foregoing
relating to any of the Stock and received in connection with any such Special
Event will be subject to
3
<PAGE> 4
this Agreement, and deemed to be "Stock" and will be immediately delivered to
the Escrow Agent and held by the Escrow Agent in accordance with the terms of
this Agreement.
5. Transferability. Upon any default by Purchaser in its obligations to
pay to Seller the purchase price for the Stock or any interest thereon which is
not cured within five (5) days after Purchaser's receipt of written notice of
such default from Seller. Seller shall have the right, without the consent of
Purchaser, to sell any or all of the Stock in any commercially reasonable manner
(including but not limited to any sale of the Stock into any market in which the
Company's common stock is then traded or any private sale if the Stock is not
then publicly traded or publicly tradeable without restriction). The Seller
shall give Purchaser reasonable advance notice of the terms of any proposed
private sale and of its intention to sell the Stock in any public market. At any
time prior to the sale by Seller of the Stock as provided above, but following
its delivery to Seller as provided in Section 2.7, the Purchaser may complete
the purchase of the Stock from the Seller by paying the Seller the remaining
unpaid purchase price, plus accrued interest thereon through the date of such
payment. No such sale of the Stock for less than the unpaid portion of the
purchase price, plus interest, shall relieve Purchaser of its obligation to pay
Seller the full purchase price, plus interest (less any amounts received upon
such sales of the Stock), even if all of the shares of Stock have been sold
following a default by Purchaser. Any amount received upon the sale of the Stock
following a default by Purchaser in excess of the unpaid portion of the purchase
price for the Stock, plus interest, shall be promptly paid to Purchaser. The
Seller shall not, directly or indirectly, sell, assign, transfer, pledge or in
any way encumber or dispose of the Stock except as set forth in this Agreement.
Encumbrances or dispositions which are contrary to the terms of this subsection
shall be void.
6. Miscellaneous.
6.1 Notices. Any notice or other communication required or permitted
to be given under this Agreement will be in writing and delivered personally,
telecopied or mailed (by certified, registered or first class mail or by
recognized overnight courier), postage prepaid, and will be deemed given when so
delivered personally, telecopied or if mailed by certified, registered or first
class mail, or by recognized overnight courier, one day after the date of
mailing, as follows:
If to Seller: 26500 Development Associates Limited
Partnership
1400 North Woodward Avenue
Suite 250
Bloomfield Hills, Michigan 48304-2876
If to Purchaser: Universal Standard Healthcare of
Delaware, Inc.
29200 Northwestern Highway
Southfield, Michigan 48076
Attn: President
With a copy to: Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Attn: Thomas S. Vaughn
4
<PAGE> 5
If to the Company: Universal Standard Healthcare, Inc.
29200 Northwestern Highway
Southfield, Michigan 48076
Attn: President
With a copy to: Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Attn: Thomas S. Vaughn
If to the Escrow Agent: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: William J. Zousmer
6.2 Entire Agreement. This Agreement contains the entire agreement
among the parties with regard to the transactions contemplated by this Agreement
and supersedes all prior agreements, commitments, correspondence and
communications, written or oral, with regard thereto.
6.3 Amendments and Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions of this
Agreement may be waived, only by a written instrument signed by the parties or,
in the case of a waiver, by the party waiving compliance. No delay on the part
of any party in exercising any right, power or privilege under this Agreement
will operate as a waiver of such right, power or privilege, nor will any waiver
on the part of any party of any right, power or privilege under this Agreement
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege under this Agreement.
6.4 Governing Law, Jurisdiction. The laws of the State of Michigan,
without regard to principles of conflicts of laws, will govern this Agreement
and its subject matter, construction and the determination of any rights, duties
or remedies of the parties arising out of or relating to this Agreement, its
subject matter or any of the transactions contemplated by this Agreement. The
parties acknowledge that the United States District Court for the Eastern
District of Michigan or the Michigan Circuit Court for the County of Wayne will
have exclusive jurisdiction over any case or controversy arising out of or
relating to this Agreement, its subject matter or any of the transactions
contemplated by this Agreement and that all litigation arising out of or
relating to this Agreement, its subject matter or any of the transactions
contemplated by this Agreement will be commenced in the United States District
Court for the Eastern District Court of Michigan or in the Michigan Circuit
Court for the County of Wayne.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
6.6 Headings. The headings in this Agreement are for reference
purposes only and will not in any way affect the meaning or interpretation of
this Agreement.
5
<PAGE> 6
6.7 Severability. If any provision of this Agreement is determined
to be illegal or invalid, such illegality or invalidity will have no effect on
the other provisions of this Agreement, which will remain valid, operative and
enforceable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
SELLER:
26500 DEVELOPMENT ASSOCIATES LIMITED
PARTNERSHIP
By 26500 Investment Corporation
By: /s/ Mike Kojaian
---------------------------------
Mike Kojaian, its President
PURCHASER:
UNIVERSAL STANDARD HEALTHCARE
OF DELAWARE, INC.
By: /s/ Alan S. Ker
------------------------------------------
Its: CFO
--------------------------------
THE COMPANY:
UNIVERSAL STANDARD HEALTHCARE, INC.
By: Alan S. Ker
-------------------------------------------
Its: CFO
--------------------------------
ESCROW AGENT:
HONIGMAN MILLER SCHWARTZ AND COHN
By: /s/ William J. Zousmer
-------------------------------------------
William J. Zousmer, Partner
6
<PAGE> 1
EXHIBIT 10.2
LEASE TERMINATION AGREEMENT
THIS LEASE TERMINATION AGREEMENT is entered into this 8th day of March,
1999, by and among 26500 DEVELOPMENT ASSOCIATES LIMITED PARTNERSHIP ("26500"),
whose address is 1400 North Woodward Avenue, Suite 250, Bloomfield Hills,
Michigan 48304, and UNIVERSAL STANDARD HEALTH CARE, INC. ("USML"), whose address
is 26500 Northwestern Highway, Suite 400, Southfield, Michigan 48076.
R E C I T A L S:
A. 26500 is the owner of certain real estate upon which is located an
approximate ninety-one thousand (91,000) square foot office building (the
"Building"), located at 26500 Northwestern Highway, Southfield, Michigan.
B. On November 18, 1994, 26500's predecessor-in-interest, entered into
a Lease with USML's predecessor-in-interest for certain space in the Building,
which Lease was amended by First Amendment to Lease, dated April 3, 1994, Second
Amendment to Lease, dated October 19, 1995, Third Amendment to Lease, dated
November 14, 1995, and Fourth Amendment to Lease, dated December 15, 1995
(collectively the "USML Lease"). Under the USML Lease, USML leases the entire
rentable square foot area of the Building. USML has subleased certain portions
of the Building to four (4) different subtenants (the "Subtenants"), pursuant to
subleases and certain amendments thereto (the "Subleases").
C. On October 23, 1998, 26500 entered into an Agreement for Purchase
and Sale as amended with the predecessor in interest to 26500 Northwestern
Building LLC ("Purchaser") (the "Purchase Agreement") for the purchase of the
Building.
D. The parties wish to set forth their understanding with regard to the
termination of the USML Lease, and provide for certain other related terms and
conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. (a) 26500 and USML agree that the USML Lease shall terminate
effective on the date hereof (the "Termination Date").
(b) Notwithstanding the termination of the USML Lease on the
Termination Date, USML shall have the continuing right to occupy the fourth
floor only of the Building currently occupied by it through and including March
31, 1999 (the "Vacation Date") as a holdover tenant under the terms and
provisions of the USML Lease which would be applicable to a holdover tenant;
provided, that if USML's occupancy extends beyond March 31, 1999, USML shall pay
one hundred fifty percent (150%) of the monthly installment of Basic Rental
thereafter due under the USML Lease (and in each case together with all normal
charges payable by USML under the USML Lease), such payment to be in addition to
the payment required pursuant to Paragraph 1(d) hereof and to be paid to
Purchaser, if the sale of the Building to Purchaser has been closed, or, if not,
to be paid to 26500.
(c) On or before the Vacation Date, USML shall remove all of its
furniture, trade fixtures, business equipment and other personal property from
the Building and vacate all portions of the Building occupied by it (and not
subject to the Subleases) and surrender the same in the condition required under
the USML Lease.
(d) USML shall pay all rent and other charges due and payable under
the Lease through and including the Vacation Date and on April 1, 1999, the sum
of Forty-Seven Thousand Ninety-Two and 58/100 Dollars ($47,092.58),
notwithstanding the termination of the USML Lease upon the Termination Date.
Such amount shall be paid to Purchaser, if the sale of the Building to Purchaser
has been closed, or, if not, such amount shall be paid to 26500.
2. USML agrees that any obligations of USML relating to the Building
and/or the USML Lease that arose, accrued or relate to any facts or
circumstances existing or occurring prior to the Vacation Date shall survive the
termination of the USML Lease; provided, however,
<PAGE> 2
that USML shall not be required to perform any deferred maintenance, but shall
be required to pay for any and all work performed by or for it at the Building
and USML shall remain responsible for any and all damage caused to the Building
by it prior to the Vacation Date, including damages resulting from USML's
removal of its property from the Building.
3. In consideration for 26500's agreement to terminate the USML Lease,
USML agrees to the following:
(a) Simultaneously with the execution of this Agreement, USML shall
pay to 26500 the sum of Fifty Thousand Dollars ($50,000.00) and on or before
March 15, 1999, USML shall pay to 26500 the additional sum of One Hundred
Thousand Dollars ($100,000.00);
(b) Simultaneously with the execution of this Agreement, USML shall
assign to 26500 a total of One Hundred Fifty Thousand Dollars ($150,000.00) in
ITEX Corporation and Detroit Barter Dollars by instrument in form and substance
satisfactory to 26500 and World Wide Financial Services, Inc. ("World Wide").
USML consents to the assignment of the ITEX Corporation and Detroit Barter
Dollars to World Wide and USML shall obtain all necessary third party consents
for such assignments to 26500 and then to World Wide;
(c) Simultaneously with the execution of this Agreement, USML shall
issue to 26500 587,345 shares of its common stock, which shares of common stock
shall be validly issued, fully paid, and non-assessable and subject to no
restriction except for a restriction on transfer resulting from the fact that
the issuance of such shares has not been registered under the Securities Act of
1933 or any state securities act; together with an opinion of Dykema Gossett
PLLC, in form and substance reasonably satisfactory to 26500, as to the validity
of the stock; and
(d) Notwithstanding anything herein contained to the contrary, the
parties acknowledge that 26500 is acting as a mere conduit with respect to the
payments described in Paragraphs 3(a), (b) and (c) hereof, that such payments
are not payments of past due rents (the Lease being current) but are payments in
consideration of the termination of the Lease by Landlord, and that such
payments are being made for the benefit of Purchaser and its tenant, World Wide
and that 26500 will pay such amounts to Purchaser and/or World Wide in
accordance with their agreements.
4. Simultaneously herewith USML has entered into an agreement with
Purchaser and such tenant relating to the termination of the USML Lease.
5. (a) All notices required or desired to be given hereunder shall be
delivered to the parties at the respective addresses set forth in the Preamble
to this Agreement or such other address as either party shall notify the other
of in writing. Such notices shall be sent by certified mail, return receipt
requested, or a recognized overnight delivery service, and shall be effective
upon receipt or refusal to accept delivery.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective representatives, successors and assigns.
It is acknowledged and agreed that if the sale of the Building to Purchaser
shall be closed, Purchaser and World Wide are intended beneficiaries under this
Lease Termination Agreement.
(c) It is understood and agreed that this Agreement may be executed
in several counterparts, each of which, for all purposes, shall be deemed to
constitute an original and all of which counterparts, when taken together, shall
be deemed to constitute one and the same agreement, even though all of the
parties hereto may not have executed the same counterpart.
(d) The parties shall use their best efforts to cause the terms of
this Agreement or any information regarding the Building to be held in a
confidential manner except where disclosure is required by law or is necessary
to consummate the terms of this Agreement.
(e) This Agreement and the agreements referred to in Paragraph 4
hereof reflect the entire agreement and understandings of the parties and all
other prior agreements and understandings are merged into this Agreement and
such agreements.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Termination Agreement on the day and year first above written.
In the Presence of: 26500 DEVELOPMENT ASSOCIATES
LIMITED PARTNERSHIP
By: 26500 Investment Corporation
/s/ By: /s/ Mike Kojaian
- ------------------------------- ----------------------------
/s/ Its: President
- ------------------------------- ---------------------
UNIVERSAL STANDARD
HEALTH CARE, INC.
/s/ By: /s/ Alan S. Ker
- ------------------------------- ---------------------------------
/s/ Its: CFO
- ------------------------------- ---------------------------
3
<PAGE> 1
EXHIBIT 10.3
26500 DEVELOPMENT ASSOCIATES LIMITED PARTNERSHIP
1400 NORTH WOODWARD AVENUE, SUITE 250
BLOOMFIELD HILLS, MICHIGAN 48304
March 8, 1999
World Wide Financial Services, Inc.
555 South Woodward Avenue, Fifth Floor
Birmingham, Michigan 48009
26500 Northwestern Building LLC
555 South Woodward Avenue
Fifth Floor
Birmingham, Michigan 48009
RE: 26500 Northwestern Highway,
Southfield, Michigan (the "Building")
Gentlemen:
26500 Development Associates Limited Partnership ("Seller") and 26500
Northwestern Building LLC ("Purchaser") are the parties to that certain
Agreement for Purchase and Sale, dated October 23, 1998, as amended ("Purchase
Agreement") covering the captioned Building. World Wide Financial Services, Inc.
("World Wide") has or will enter into a Lease with Purchaser, as Landlord,
covering portions of the captioned Building.
In order to induce World Wide to enter into such a Lease so that Purchaser shall
proceed with the purchase of the Building, Seller shall pay to World Wide, at
the closing of the purchase and sale of the Building, the sum of Eight Hundred
Thousand Dollars ($800,000.00) by certified funds or by wire transfer for
leasehold and other improvements to be made in and to the Building by World Wide
and Seller shall assign to World Wide the One Hundred Fifty Thousand Dollars
($150,000.00) worth of Trade Dollars received by it from Universal Standard
Health Care, Inc. ("USML") under the terms of that certain Lease Termination
Agreement of even date. World Wide acknowledges that certain of the ITEX
Corporation Trade Dollars must be used as part of the purchase price for goods
and services in connection with United States currency and that the percentage
of ITEX Corporation Trade Dollars that can be used varies with the particular
goods or services being purchased.
The parties acknowledge that pursuant to such Lease Termination Agreement,
Seller is acting as a mere conduit with respect to the payment of One Hundred
Fifty Thousand Dollars ($150,000.00) in cash being received by it from USML and
the receipt of the Trade Dollars from USML, and that such payments are not
payments of past due rents (the Lease being current) but
<PAGE> 2
are payments in consideration for the termination of the Lease by Landlord, and
that such payments are being made for the benefit of Purchaser and World Wide
and are being paid to World Wide hereunder (collectively, "Payments") as herein
provided.
The obligation of Purchaser to close on the purchase of the Building is
conditional upon World Wide receiving the Payments as herein provided.
Purchaser and World Wide shall indemnify Seller and its beneficiaries, partners,
representatives, agents and employees and hold them harmless from and against
any and all claims, actions, damages, liabilities, costs and expenses, including
reasonable attorney's fees in any litigation relating to the Payments by USML to
Seller.
Please sign the enclosed copy of this letter in the space provided below in
order to evidence your acceptance and agreement to the foregoing.
Very truly yours,
26500 DEVELOPMENT ASSOCIATES
LIMITED PARTNERSHIP
By 26500 Investment Corporation,
A Michigan corporation, General Partner
By /s/ Mike Kojaian
------------------------------
Mike Kojaian, President
ACCEPTED AND AGREED TO:
WORLD WIDE FINANCIAL SERVICES, INC. 26500 NORTHWESTERN BUILDING LLC
By /s/ CEO By /s/ Alan S. Ker
---------------------------------- ----------------------------------
Its: CEO Its: CFO
<PAGE> 1
EXHIBIT 10.4
29200 NORTHWESTERN HIGHWAY
SOUTHFIELD, MICHIGAN
LEASE
THIS LEASE is made between the Landlord and Tenant hereinafter
identified in Sections 1(b) and 1(c) hereof, respectively, and constitutes a
Lease between the parties of the "Demised Premises" in the "Building," as
defined in Sections 2.2 and 2.1 hereof, respectively, on the terms and
conditions and with and subject to the covenants and agreements of the parties
hereinafter set forth.
W I T N E S S E T H
l. Basic Lease Provisions.
The following are certain basic lease provisions, which are part of, and in
certain instances referred to in subsequent provisions of, this Lease:
(a) Date of this Lease: March 8, 1999
(b) Landlord: 29200 NORTHWESTERN DEVELOPMENT ASSOCIATES
LIMITED PARTNERSHIP, a Michigan limited partnership
(c) Tenant: UNIVERSAL STANDARD HEALTHCARE OF DELAWARE, INC., a
Delaware corporation
(d) Demised Premises: approximately 15,964 rentable square feet,
Suite 300
(e) Anticipated Commencement Date: April 1, 1999
(f) Expiration Date: March 31, 2004
(g) Basic Rental:
Term Monthly Rental
---- --------------
April 1, 1999 - March 31, 2000 $30,265.08
April 1, 2000 - March 31, 2001 $30,930.25
April 1, 2001 - March 31, 2002 $31,595.42
April 1, 2002 - March 31, 2003 $32,260.58
April 1, 2003 - March 31, 2004 $32,925.75
(h) Tenant's Share: 14.34%
(i) Tenant's Use: General Office
(j) Deposit: -0-
(k) Tenant's Address for Notices: Until the Commencement Date:
26500 Northwestern Highway
Southfield, Michigan 48076
Thereafter the Demised Premises
<PAGE> 2
(l) Landlord's Address for Notices:
c/o Kojaian Management Corporation
26600 Telegraph, Suite 450
Southfield, Michigan 48034
With a copy to:
Grubb & Ellis Real Estate Management, Inc.
2000 Town Center, Suite 500
Southfield, Michigan 48075
(m) Guarantor: None
(n) Guarantor's Address for Notices: N/A
2. Building and Demised Premises.
2.1 Landlord is the owner of certain land and improvements, more
particularly described on Exhibit "A" hereto, consisting of a four (4) story
office building located at 29200 Northwestern Highway, Southfield, Michigan
(hereinafter referred to as the "Building"), together with certain interior and
exterior common and public areas and facilities including the surface parking
facilities (hereinafter referred to as the "Common Areas") as may be designated
by Landlord for the use in common by tenants of the Building. Landlord currently
leases from the Michigan Department of Transportation the parcel of land
adjacent to the Development more particularly shown on Exhibit "A-1" hereto
(hereinafter referred to as the "MDOT Parcel"). So long as such lease shall be
in effect, the MDOT Parcel shall be deemed a portion of the surface parking
facilities of the Development for all purposes of this Lease and any future
offsite parking servicing the Building shall likewise be deemed a portion of the
surface parking facilities of the Development for all purposes hereof (the MDOT
Parcel and such future offsite parking facilities are hereinafter referred to as
"Offsite Parking Areas"). The Building and appurtenant Common Areas are
hereinafter referred to as the "Development." Notwithstanding anything herein
contained to the contrary, this Lease does not grant Tenant any rights to
utilize certain designated parking areas.
2.2 Subject to the terms, covenants, agreements and conditions herein
set forth, Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, those certain premises in the Building (herein referred to as the
"Demised Premises") designated in Section l(d) hereof, as shown on the floor
plan(s) attached hereto as Exhibit "B," together with the nonexclusive right to
use the Common Areas. The square foot area of the Demised Premises, as well as
the Building, shall be computed based upon the BOMA-American National Standard
Z65.l-l980, and shall contain a proportionate share of the Common Areas of the
Building.
2.3 Landlord reserves (a) the right from time to time to make changes,
alterations, additions, improvements, repairs or replacements in or to the
Building (including the Demised Premises) and the fixtures and equipment
thereof, as well as in or to the street entrances, halls, passages, elevators,
escalators and stairways and other parts of the Building, and so long as the
same shall not unreasonably interfere with the Tenant's use of the Demised
Premises, to erect, maintain, and use pipes, ducts and conduits in and through
the Demised Premises, all as Landlord may reasonably deem necessary or
desirable, (b) the right to eliminate, substitute and/or rearrange the Common
Areas (which may theretofore have been so designated) as Landlord deems
appropriate in its discretion, and (c) the right from time to time to construct
additional stories onto the Building. Tenant's nonexclusive right to utilize the
Common Areas shall be in common with Landlord, other tenants and occupants of
the Building and others to whom Landlord grants such rights from time to time.
In no event shall Tenant, its employees, customers, invitees and/or guests
utilize in excess of Tenant's allocable portion of the parking spaces servicing
the Building.
<PAGE> 3
3. Term.
3.1 The Term shall commence on that date (hereinafter referred to as
the "Commencement Date") being the later to occur of the "Anticipated
Commencement Date" set forth in Section 1(e) hereof and the date Landlord has
substantially completed the improvements to be constructed or installed by
Landlord pursuant to the provisions of Exhibit "C" hereto, as provided in
Section 4 hereof, and, unless sooner terminated as hereinafter provided, shall
end on the "Expiration Date" set forth in Section 1(f) hereof; provided,
however, that if Tenant, with Landlord's prior written approval, shall take
occupancy of the Demised Premises for any purpose whatsoever prior to the
Commencement Date, as defined above, the Commencement Date shall be deemed to
have occurred on the earlier date Tenant takes such occupancy.
3.2 If Landlord, for any reason whatsoever, cannot deliver possession
of the Demised Premises to Tenant on the Anticipated Commencement Date, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, and the Expiration Date shall not be
affected. Notwithstanding the foregoing, if possession of the Demised Premises
has not been delivered to Tenant within one (1) year following the Anticipated
Commencement Date, either Landlord or Tenant, at its option, at any time within
thirty (30) days thereafter, but prior to the delivery of possession, may
terminate this Lease by and upon written notice to the other, and Landlord and
Tenant shall thereupon be released from all obligations under this Lease except
for any financial obligations of Tenant then due and payable, if any, pursuant
to Section 4 hereof or Exhibit "C" hereto.
4. Completion of Improvements. See Attached Rider.
(c) In the event Tenant desires to have improvements installed in the
Demised Premises in addition to or in lieu of the improvements provided for in
the attached rider, Tenant shall so advise Landlord and submit to Landlord at
least thirty (30) days prior to the Anticipated Commencement Date, complete
plans and specifications for such improvements. Tenant shall immediately cause
such plans and specifications to be revised in order to comply with Landlord's
comments to such plans and specifications. Upon approval of such plans and
specifications by Landlord, Landlord shall advise Tenant of the cost of
constructing and installing such improvements, and upon approval of such costs
Landlord will commence construction and installation of such improvements;
provided, however, that Tenant may revise such plans in order to reduce such
costs, subject to Landlord's approval. Tenant shall be responsible for all
costs
<PAGE> 4
resulting from such additional work, including architectural and engineering
charges. Notwithstanding anything contained to the contrary, if Tenant shall
request any changes or modification to the plans and specifications after the
approval thereof by Landlord, or if Tenant does not timely submit such plans and
specifications or revisions thereof, or if such plans and specifications require
materials which are not readily available or require long lead time, or if the
completion of such construction and installation is delayed for any other reason
attributable to Tenant including its failure to pay for the same as provided in
Paragraph 4(d) hereof, the Commencement Date shall not be delayed or postponed
as a result thereof and the Commencement Date shall be the date which Landlord
determines that the Demised Premises would have been ready but for such delays,
even if the Demised Premises is not completed on the Commencement Date.
(d) The cost of all improvements to the Demised Premises over
and above the Renovation Allowance shall be paid by Tenant as follows: (i)
one-half (1/2) of such amount within ten (10) days after the approval of
Tenant's plans and specifications by Landlord and the submission of the costs to
Tenant, and (iii) the balance of such amount prior to occupancy of the Demised
Premises by Tenant. In no event shall Landlord be required to commence or
continue such work if Tenant defaults in its obligation to make the payments
herein required.
(e) The Demised Premises shall be deemed completed and
possession delivered to Tenant when Landlord has substantially completed its
improvements subject only to the completion of details of construction,
decorations and mechanical adjustments which do not materially interfere with
Tenant's use of the Demised Premises, and Tenant shall accept the same upon
notice from Landlord that such improvements have been so completed in accordance
with the plans and specifications. If any dispute shall arise as to whether
Landlord has completed its improvements, a certificate furnished by Landlord's
architect certifying the date of such completion shall be conclusive and binding
of that fact and date upon Landlord and Tenant.
5. Rental.
5.1 Tenant shall pay to Landlord as rental for the Demised
Premises the Basic Rental set forth in Section 1(g) hereof, which shall be
payable in equal monthly installments in advance, together with the rentals
provided for in Section 5.3 hereof.
5.2 The following terms shall have the following meanings.
(a) The term "Expenses" shall mean the actual cost incurred by
Landlord with respect to the operation, maintenance, repair and replacement and
administration of the Development, including, without limitation or duplication,
(l) the costs incurred for air conditioning: mechanical ventilation; heating;
cleaning (including janitorial services); rubbish removal; snow removal; general
landscaping and maintenance; lease payments for any leases relating to OffSite
Parking Areas; window washing, elevators, escalators, porter and matron
services, electric current for the Common Areas; management fees; protection and
security services; repairs, replacement, and maintenance; fire, extended
coverage, boiler, sprinkler, apparatus, public liability and property damage
insurance (including loss of rental income insurance); supplies; wages,
salaries, disability benefits, pensions, hospitalization, retirement plans and
group insurance respecting service and maintenance employees and management
staff; accounting and administrative staff; uniforms and working clothes for
such employees and the cleaning thereof; expenses imposed pursuant to any
collective bargaining agreement with respect to such employees; payroll, social
security, unemployment and other similar taxes with respect to such employees
and staff; sales, use and other similar taxes; Landlord's Michigan Single
Business Tax, water rates and sewer charges and personal property taxes;
advertising, public relations and promotions; depreciation of movable equipment
and personal property, which is, or should be, capitalized on the books of
Landlord, and the cost of movable equipment and personal property, which need
not be so capitalized, as well as the cost of maintaining all such movable
equipment, and any other costs, charges and expenses which, under generally
accepted accounting principles and practices, would be regarded as maintenance
and operating expenses,
<PAGE> 5
and (2) the cost of any capital improvements made to the Development by Landlord
after the Commencement Date that are intended to reduce other Expenses, or made
to the Development by Landlord after the date of this Lease that are required
under any governmental law or regulation that was not applicable to the
Development at the time it was constructed, such cost to be amortized over such
reasonable period as Landlord shall determine, together with interest on the
unamortized balance at the rate of two percent (2%) in excess of the then
current "prime rate" of NBD Bank (as defined in Section 5.5 hereof) or such
higher rate as may have been paid by Landlord on funds borrowed for the purpose
of constructing such capital improvements. Expenses shall not include "Taxes,"
as defined in Section 5.2(d) hereof; depreciation on the Building other than
depreciation on standard exterior window coverings provided by Landlord and
carpeting in Common Areas and other than as set forth above; costs of services
or repairs, replacements and maintenance which are paid for by proceeds of
insurance, by other tenants (in a manner other than as provided in Section 5.3
hereof), or third parties; or tenant improvements, real estate brokers'
commissions, interest and capital items other than replacements and those
referred to in clause (2) above.
The Expenses shall be adjusted to equal Landlord's reasonable
estimate of Expenses had the total Building been occupied and had the total
Building been furnished all services.
(b) The term "Base Expenses" shall mean the Expenses for the
1999 calendar year.
(c) The term "Additional Expenses" shall mean the total dollar
increases, if any, over the Base Expenses paid or incurred by Landlord in the
respective calendar year.
(d) The term "Taxes" shall mean the amount incurred by
Landlord of all ad valorem real property taxes and assessments, special or
otherwise, levied upon or with respect to the Development, or the rent and
additional charges payable hereunder, imposed by any taxing authority having
jurisdiction. Taxes shall also include all taxes, levies and charges which may
be assessed, levied or imposed in replacement of, or in addition to, all or any
part of ad valorem real property taxes as revenue sources, and which in whole or
in part are measured or calculated by or based upon the Development, the
freehold and/or leasehold estate of Landlord or Tenant, or the rent and other
charges payable hereunder. Taxes shall include any expenses incurred by Landlord
in determining or attempting to obtain a reduction of Taxes.
(e) The term "Base Taxes" shall mean the 1999 real estate tax
rate applicable to the Development multiplied by the assessed valuation of the
Development determined by the City of Southfield as of December 31, 1999, or as
finally determined in the event Landlord appeals such assessment.
(f) The term "Additional Taxes" shall mean the total dollar
increase, if any, over the Base Taxes paid or incurred by Landlord in the
respective calendar year.
(g) The term "Tenant's Share" shall mean the percentage set
forth in Section 1(h) hereof. Tenant's Share has been computed on the basis of
the square foot area of the Demised Premises divided by the total leasable
square foot area of the Building (including the Demised Premises). In the event
the square foot area of the Demised Premises or the leasable square foot area of
the Building shall be determined to differ from that utilized in computing
Tenant's Share, Tenant's Share shall be adjusted accordingly.
5.3 (a) Tenant shall pay to Landlord as additional rental Tenant's
Share of Additional Expenses and Additional Taxes in the manner and at the times
herein provided.
(b) With respect to Additional Expenses and Additional Taxes,
prior to the Commencement Date and prior to the beginning of each calendar year
thereafter, or as soon thereafter as practicable, Landlord shall give Tenant
notice of Landlord's estimate of Tenant's Share of Additional Expenses and
Additional Taxes for the ensuing calendar year. On or before the first day of
each month during the ensuing calendar year, Tenant shall pay to Landlord
<PAGE> 6
one-twelfth (1/12th) of such estimated amounts, provided that until such notice
is given with respect to the ensuing calendar year, Tenant shall continue to pay
the amount currently payable pursuant hereto until after the month such notice
is given. If at any time or times (including, without limitation, upon Tenant
taking occupancy of the Demised Premises) it appears to Landlord that Tenant's
Share of Additional Expenses or Tenant's Share of Additional Taxes for the then
current calendar year will vary from Landlord's estimate by more than five
percent (5%), Landlord may, by notice to Tenant, revise its estimate for such
year and subsequent payments by Tenant for such year shall be based upon such
revised estimate.
Within ninety (90) days after the close of each calendar year,
or as soon after such ninety (90) day period as practicable, Landlord shall
deliver to Tenant a statement prepared by Landlord of Tenant's Share of
Additional Expenses and Additional Taxes, respectively, for such calendar year.
If on the basis of either of such statements, Tenant owes an amount that is less
than the estimated payments for such calendar year previously made by Tenant,
Landlord shall credit such excess amount against the next payment(s) due from
Tenant to Landlord of Additional Expenses or Additional Taxes, as the case may
be or promptly refund such excess to Tenant with respect to the last year of the
term. If on the basis of such statement, Tenant owes an amount that is more than
the estimated payments for such calendar year previously made by Tenant, Tenant
shall pay the deficiency to Landlord within seven (7) days after delivery of
such statement. See Attached Rider
(c) If this Lease shall commence on a day other than the first
day of a calendar year or terminate on a day other than the last day of a
calendar year, Tenant's Share of Additional Expenses and/or Additional Taxes
that is applicable to the calendar year in which such commencement or
termination shall occur shall be prorated on the basis of the number of calendar
days within such year as are within the Term.
5.4 The installment of the Basic Rental provided for in Section 5.1
hereof for the first full month of the Term shall be paid by Tenant to Landlord
upon execution of this Lease. Basic Rental shall be paid to Landlord on or
before the first day of each and every successive calendar month in advance
after the first month during the Term. In the event the Commencement Date is
other than the first day of a calendar month, or the Expiration Date is other
than the last day of the calendar month, then the monthly rental for the first
and last fractional months of the Term shall be appropriately prorated.
5.5 Tenant shall pay as additional rental any money and charges
required to be paid by Tenant pursuant to the terms of this Lease, whether or
not the same may be designated "additional rent."
5.6 Except as above provided, rental and additional rental shall be
paid to Landlord without notice or demand and without deduction or offset, in
lawful money of the United States of America at Landlord's address for notices
hereunder or to such other person or at such other place as Landlord may from
time to time designate in writing. All amounts payable by Tenant to Landlord
hereunder, if not paid when due, shall be subject to an administrative late
charge of five percent (5%) of the amount due and, in addition, shall bear
interest from the due date until paid at the rate equal to two percent (2%) in
excess of the then current "prime rate" of NBD Bank, but not in excess of the
legal rate. Such prime rate shall be the rate announced by such Bank as its
"prime rate"; if no such prime rate is announced, the prime rate shall be deemed
to be fifteen percent (15%).
6. Other Taxes Payable by Tenant.
In addition to the monthly rental and other charges to be paid by
Tenant hereunder, Tenant shall reimburse Landlord upon demand for any and all
taxes payable by Landlord (other than net income taxes and taxes included within
Taxes) whether or not now customary or within the contemplation of the parties
hereto: (a) upon, measured by or reasonably attributable to the cost or value of
Tenant's equipment, furniture, fixtures and other personal property located in
the Demised Premises or by the cost or value of any leasehold improvements made
in or to the Demised Premises by or for Tenant, other than building standard
tenant improvements made by
<PAGE> 7
Landlord, regardless of whether title to such improvements shall be in Tenant or
Landlord; (b) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Demised Premises or any portion thereof; and (c) upon this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Demised Premises. In the event that it shall not be lawful for
Tenant so to reimburse Landlord, the monthly rental payable to Landlord under
this Lease shall be revised to net to Landlord the same rental after imposition
of any such tax upon Landlord as would have been payable to Landlord prior to
the imposition of any such tax.
7. Tenant's Use.
7.1 The Premises shall be used only for the purposes of "Tenant's Use"
as set forth in Section 1(i) hereof, and for no other purpose or purposes
whatsoever.
7.2 Tenant shall not do or permit to be done in or about the Demised
Premises, nor bring or keep or permit to be brought or kept therein, anything
which is prohibited by or will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated, or which is prohibited by the standard form of fire
insurance policy, or will in any way increase the existing rate of or affect any
fire or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy covering the Building or any part thereof
or any of its contents, or adversely affect or interfere with any services
required to be furnished by Landlord to Tenant, or to any other tenants or
occupants of the Building, or with the proper and economical rendition of any
such service. Tenant shall not do or permit anything to be done in or about the
Demised Premises which will in any way obstruct or interfere with the rights of
other tenants of the Building, or injure or annoy them, or use or allow the
Demised Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Demised Premises or commit or suffer to be committed any waste in, on or
about the Demised Premises. If anything done, omitted to be done or suffered to
be done by Tenant, or kept or suffered by Tenant to be kept in, upon or about
the Demised Premises shall cause the rate of fire or other insurance on the
Building in companies acceptable to Landlord to be increased beyond the minimum
rate from time to time applicable to the Building, Tenant shall pay the amount
of any such increases. Tenant shall not cause or permit the use, generation,
storage or disposal in or about the Demised Premises or the Building of any
substances, materials or wastes subject to regulation under federal, state or
local laws from time to time in effect concerning hazardous, toxic or
radioactive materials, unless Tenant shall have received Landlord's prior
written consent, which Landlord may withhold or at any time revoke in its sole
discretion.
8. Services.
8.1 Landlord shall maintain the Common Areas including any lobbies,
stairs, elevators, corridors and restrooms, together with the windows and
exterior walls, roofs, foundations and structure itself of the Building and the
mechanical, plumbing and electrical equipment servicing the Building, in good
order and condition as reasonably determined by Landlord and the cost shall be
included in Expenses, except for the repairs due to fire and other casualties
(to the extent the cost of such repairs are covered by insurance proceeds) and
for the repair of damages occasioned by the acts or omissions of Tenant, which
Tenant shall pay to Landlord in full.
8.2 Landlord will arrange for the furnishing of electricity to the
Demised Premises, and Landlord shall elect either: (i) to charge Tenant for
electricity as determined by metering at the applicable secondary rates filed by
Landlord with the proper regulating authorities in effect from time to time
covering such services, but not more than the secondary rates which would be
charged to Tenant by the public utility company; or (ii) to charge Tenant for
electricity based upon engineering surveys of the Demised Premises and the use
by Tenant thereof, including, at the option of Landlord, periodic spot check
demand and/or consumption metering by Landlord. Such charge to Tenant for
electricity shall be payable in monthly installments together with Basic Rental
in the amount invoiced to Tenant. Engineering surveys shall be performed by
independent licensed professional electrical engineering consultants selected by
Landlord. From time to time during the Term, Landlord may inspect the Demised
Premises in order to evaluate Tenant's
<PAGE> 8
kilowatt hour electric consumption and demand, and if as a result of such
inspection, the amount charged to Tenant shall change because of changes in
demand and/or consumption, or in the cost of electricity to Landlord, Landlord
shall notify Tenant and commencing with the first day of the next calendar
month, Tenant shall pay such revised charge in monthly installments.
Notwithstanding anything herein contained to the contrary, Landlord reserves the
right to terminate the furnishing of electricity at any time upon sixty (60)
days' notice to Tenant, in which event Tenant shall make application directly to
the utility company servicing the Building for Tenant's separate supply of
electric current, and Landlord shall permit its wires and conduits to be used
for such purposes, to the extent available and capable of being used safely.
8.3 Landlord shall furnish the Demised Premises with (a) heat,
ventilation and air conditioning to the extent required for the occupancy of the
Demised Premises to standards of comfort and during such hours in each case as
provided to first class office buildings in Southfield, Michigan as reasonably
determined by Landlord for the Building (which hours, shall be from 8:00 a.m. to
6:00 p.m. on weekdays and from 8:00 am. to 12:00 pm. on Saturdays; in each case
except holidays), or as may be prescribed by any applicable policies or
regulations adopted by any utility or governmental agency, (b) elevator service,
and (c) janitorial service in accordance with Exhibit "D" hereto only to the
areas of the Demised Premises used for office purposes during the times and in
the manner that services are furnished in comparable first class office
buildings in the area, provided that Landlord shall not provide janitorial
services to any portion of the Demised Premises used for other than office
purposes such as preparing, dispensing or consumption of food or beverages or as
an exhibition area or for storage, shipping room, washroom or similar purposes,
or as private restrooms or a shop or for the operation of computer data
processing, reproduction, duplicating or similar equipment. In addition,
Landlord shall replace all burned out fluorescent (only) tubes, ballasts and
starters, and Tenant shall be billed therefor. Landlord shall not be in default
hereunder or be liable for any damages directly or indirectly resulting from,
nor shall the rental herein reserved be abated by reason of: (1) the
installation, use or interruption of use of any equipment in connection with the
furnishing of any of the foregoing services, (2) failure to furnish or delay in
furnishing any such services when such failure or delay is caused by accident or
any condition beyond the reasonable control of Landlord or by the making of
necessary repairs or improvements to the Demised Premises or to the Building, or
(3) any limitation, curtailment, rationing or restriction on use of water,
electricity, steam, gas or any other form of energy serving the Demised Premises
or the Building. Landlord shall use reasonable efforts diligently to remedy any
interruption in the furnishing of such services. Notwithstanding the provisions
of this Section 8.3, Landlord shall not be required to provide extraordinary
ventilation and air conditioning to the Demised Premises if Tenant shall utilize
in the Demised Premises heat generating equipment or lighting other than
building standard lights which affect the temperature otherwise maintained by
the air conditioning system or if the Demised Premises are occupied by a number
of persons in excess of the design criteria of the air conditioning system.
8.4 Tenant shall pay as additional rent the cost of providing all
heating, ventilating and air conditioning, including all costs associated with
the installation of meters for measuring the same, to the Demised Premises in
excess of that required for normal office use or during hours requested by
Tenant when heating, ventilating and air conditioning is not otherwise furnished
by Landlord. Tenant shall notify Landlord in writing at least twenty-four (24)
hours prior to the time it requires heating, ventilating and air conditioning
during periods the same are not otherwise furnished by Landlord. Notwithstanding
the foregoing, Landlord shall only be required to provide heating, ventilating
and air conditioning to the extent available utilizing the existing equipment
servicing the Building.
9. Alterations and Repairs.
9.1 Tenant shall not make or suffer to be made any alterations,
additions or improvements to or of the Demised Premises or any part thereof, or
attach any fixtures or equipment thereto, without first obtaining Landlord's
consent. All such alterations, additions and improvements shall be performed by
contractors and subject to conditions approved by Landlord. If any such
alterations, additions or improvements to the Demised Premises consented to by
Landlord shall be made by Landlord for Tenant's account, Tenant shall reimburse
Landlord for
<PAGE> 9
the cost thereof (including a reasonable charge for Landlord's overhead related
thereto) as the work proceeds within five (5) days after receipt of statements
therefor. All such alterations, additions and improvements shall become the
property of Landlord upon installation and/or completion and shall remain on the
Demised Premises upon the expiration or termination of this Lease without
compensation to Tenant unless Landlord elects by notice to Tenant to have Tenant
remove the same, in which event Tenant shall promptly restore the Demised
Premises to its condition prior to the installation of such alterations,
additions and improvements. See Attached Rider
9.2 Subject to the provisions of Section 8.1 hereof, Tenant shall keep
the Demised Premises and every part thereof in good condition and repair, Tenant
hereby waiving all rights to make repairs at the expense of Landlord or, in lieu
thereof, to vacate the Demised Premises as provided by any law, statute or
otherwise now or hereafter in effect. All repairs made by or on behalf of Tenant
shall be made and performed in such manner as Landlord may designate, by
contractors or mechanics approved by Landlord and in accordance with the rules
relating thereto annexed to this Lease as Exhibit "E" and all applicable laws
and regulations of governmental authorities having jurisdiction. Tenant shall,
subject to the provisions of Section 9.1 hereof, at the end of the term hereof,
surrender to Landlord the Demised Premises in the same condition as when
received, ordinary wear and tear and damage by fire, earthquake, act of God or
the elements excepted. Landlord has no obligation and has made no promise to
alter, remodel, improve, repair, decorate or paint the Demised Premises or any
part thereof and no representations respecting the condition of the Demised
Premises or the Building have been made by Landlord to Tenant except as
expressly set forth herein.
10. Liens.
Any mechanic's lien filed against the Demised Premises or the Building
for work claimed to have been done or materials claimed to have been furnished
to Tenant shall be discharged by Tenant within thirty (30) days thereafter. For
the purposes hereof, the bonding of such lien by a reputable casualty or
insurance company reasonably satisfactory to Landlord shall be deemed the
equivalent of a discharge of any such lien. Should any action, suit, or
proceeding be brought upon any such lien for the enforcement or foreclosure of
the same, Tenant shall defend Landlord therein, by counsel satisfactory to
Landlord, and pay any damages and satisfy and discharge any judgment entered
therein against Landlord.
11. Destruction or Damage.
11.1 In the event the Demised Premises or any portion of the Building
necessary for Tenant's occupancy are damaged by fire, earthquake, act of God,
the elements or other casualty in each case insured against by Landlord's fire
and extended coverage insurance policy covering the Building and, if Landlord's
reasonable estimate of the cost of making such repairs does not exceed the
proceeds of such insurance by more than One Hundred Thousand Dollars ($100,000),
Landlord shall forthwith repair the same if such repairs can, in Landlord's
opinion, be completed within ninety (90) days after commencement of such
repairs. This Lease shall remain in full force and effect except that an
abatement of Basic Rental shall be allowed Tenant for such part of the Demised
Premises as shall be rendered unusable by Tenant in the conduct of its business
during the time such part is so unusable to the extent Landlord is reimbursed
therefor by loss of rental income or other insurance. If such repairs cannot, in
Landlord's opinion, be made within ninety (90) days, or if such damage or
destruction is not insured against by Landlord's fire and extended coverage
insurance policy covering the Building, or if Landlord's reasonable estimate of
the cost of making such repairs exceeds the proceeds of such insurance by more
than One Hundred Thousand Dollars ($100,000), Landlord may elect, upon notice to
Tenant within thirty (30) days after the date of such fire or other casualty, to
repair or restore such damage, in which event this Lease shall continue in full
force and effect, but the Basic Rental shall be partially abated as provided in
this Section 11.1. If Landlord elects not to make such repairs, this Lease shall
terminate as of the date of such election by Landlord.
11.2 A total destruction of the Building shall automatically terminate
this Lease.
<PAGE> 10
11.3 If the Demised Premises are to be repaired under this Article 11,
Landlord shall repair at its cost any injury or damage to the Building itself
and building standard tenant improvements in the Demised Premises to be
constructed or installed by Landlord as set forth in Exhibit "C." Tenant shall
perform and pay the cost of repairing any other improvement in the Demised
Premises and shall be responsible for carrying such casualty insurance as it
deems appropriate with respect to such other tenant improvements.
12. Subrogation.
Landlord and Tenant shall each obtain from their respective insurers
under all policies of fire insurance maintained by either of them at any time
during the Term insuring or covering the Building or any portion thereof or
operations therein, a waiver of all rights of subrogation which the insurer of
one party might have against the other party, and Landlord and Tenant shall each
indemnify the other against any loss or expense, including reasonable attorneys'
fees, resulting from the failure to obtain such waiver and, so long as such
waiver is outstanding, each party waives, to the extent of the proceeds received
under such policy, any right of recovery against the other party for any loss
covered by the policy containing such waiver; provided, however, that if at any
time their respective insurers shall refuse to permit waivers of subrogation,
Landlord or Tenant, in each instance, may revoke said waiver of subrogation
effective thirty (30) days from the date of such notice, unless within such
thirty (30) day period, the other is able to secure and furnish (without
additional expense) equivalent insurance with such waivers with other companies
satisfactory to the other party.
13. Eminent Domain.
If all or any part of the Demised Premises shall be taken as a result
of the exercise of the power of eminent domain, this Lease shall terminate as to
the part so taken as of the date of taking, and, in the case of partial taking,
either Landlord or Tenant shall have the right to terminate this Lease as to the
balance of the Demised Premises by notice to the other within thirty (30) days
after such date; provided, however, that a condition to the exercise by Tenant
of such right to terminate shall be that the portion of the Demised Premises
taken shall be of such extent and nature as substantially to handicap, impede or
impair Tenant's use of the balance of the Demised Premises. In the event of any
taking, Landlord shall be entitled to any and all compensation, damages, income,
rent, awards, or any interest therein whatsoever which may be paid or made in
connection therewith, and Tenant shall have no claim against Landlord for the
value of any unexpired term of this Lease or otherwise. In the event of a
partial taking of the Demised Premises which does not result in a termination of
this Lease, the rental thereafter to be paid shall be reduced on a per square
foot basis.
14. Landlord's Insurance.
Landlord shall during the Term provide and keep in force or cause to be
provided or kept in force:
(a) Comprehensive general liability insurance with respect to
Landlord's operation of the Development for bodily injury or death and damage to
property of others;
(b) Fire insurance (including standard extended coverage endorsement
perils and leakage from fire protective devices) in respect of the Building,
excluding Tenant's trade fixtures, equipment and personal property; and
(c) Loss of rental income insurance;
together with such other insurance as Landlord, in its sole discretion, elects
to obtain. Insurance effected by Landlord shall be in amounts which Landlord
shall from time to time determine reasonable and sufficient, shall be subject to
such deductibles and exclusions which Landlord may deem reasonable and shall
otherwise be on such terms and conditions as Landlord shall from time to time
determine reasonable and sufficient. Tenant acknowledges that Landlord's loss of
rental income insurance may provide that (i) payments thereunder by the insurer
will be limited to a
<PAGE> 11
period of one year following the date of any destruction and damage, and (ii) no
insurance proceeds will be payable thereunder in the case of destruction or
damage caused by any occurrence other than fire and other risks included in the
standard extended coverage endorsement perils of a fire insurance policy.
15. Indemnification and Tenant's Insurance.
15.1 Tenant hereby waives all claims against Landlord for damage to any
property or injury or death of any person in, upon or about the Demised Premises
arising at any time and from any cause whatsoever, and Tenant shall hold
Landlord harmless from any damage to any property or injury to or death of any
person arising in, on or about the Demised Premises. The foregoing indemnity
obligation of Tenant shall include reasonable attorneys' fees, investigation
costs and all other reasonable costs and expenses incurred by Landlord from the
first notice that any claim or demand is to be made or may be made. The
provisions of this Section 15.1 shall survive the termination of this Lease with
respect to any damage, injury or death occurring prior to such termination.
15.2 Tenant shall procure and keep in effect comprehensive general
liability insurance, including contractual liability, with minimum limits of
liability of One Million Dollars ($1,000,000) per occurrence for bodily injury
or death, and Two Hundred Fifty Thousand Dollars ($250,000) per occurrence for
property damage. From time to time, Tenant shall increase the limits of such
policies to such higher limits as Landlord shall reasonably require. Such
insurance shall name Landlord and Landlord's property manager (currently Grubb &
Ellis Real Estate Management, Inc.) as additional named insureds, shall
specifically include the liability assumed hereunder by Tenant, and shall
provide that it is primary insurance and not excess over or contributory with
any other valid, existing and applicable insurance in force for or on behalf of
Landlord, and shall provide that Landlord shall receive thirty (30) days' notice
from the insurer prior to any cancellation or change of coverage.
15.3 Tenant shall procure and keep in effect fire insurance (including
standard extended coverage endorsement perils and leakage from fire protective
devices) for the full replacement cost of Tenant's trade fixtures, equipment,
personal property and leasehold improvements.
15.4 Tenant shall deliver policies of the insurance required pursuant
to Sections 15.2 and 15.3 hereof or certificates thereof to Landlord on or
before the Commencement Date, and thereafter before the expiration dates of
expiring policies.
16. Compliance with Legal Requirements.
Tenant shall promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, with the requirements of any board of fire underwriters
or other similar body now or hereafter constituted, with any occupancy
certificate or directive issued pursuant to any law by any public officer or
officers, as well as the provisions of all recorded documents affecting the
Demised Premises, insofar as any thereof relate to or affect the condition, use
or occupancy of the Demised Premises, excluding requirements of structural
changes not related to or affected by improvements made by or for Tenant or not
necessitated by Tenant's act.
17. Assignment and Subletting.
17.1 Except as expressly permitted pursuant to this Article 17, Tenant
shall not, without the prior written consent of Landlord, assign, encumber or
hypothecate this Lease or any interest herein or sublet the Demised Premises or
any part thereof, or permit the use of the Demised Premises by any party other
than Tenant. This Lease shall not, nor shall any interest herein, be assignable
as to the interest of Tenant by operation of law without the consent of
Landlord. Sales aggregating fifty percent (50%) or more of the capital or voting
stock of Tenant (if Tenant is a nonpublic corporation) or transfers aggregating
fifty percent (50%) or more of Tenant's partnership interest (if Tenant is a
partnership) shall be deemed to be an assignment of this Lease.
<PAGE> 12
17.2 If at any time or from time to time during the term of this Lease,
Tenant desires to sublet all or any part of the Demised Premises or to assign
this Lease, Tenant shall give notice to Landlord setting forth the proposed
subtenant or assignee, the terms of the proposed subletting and the space so
proposed to be sublet or the terms of the proposed assignment, as the case may
be. Landlord shall have the option, exercisable by notice given to Tenant within
twenty (20) days after Tenant's notice is given, (a) if Tenant's request relates
to a subletting, either to sublet from Tenant such space at the rental and other
terms set forth in Tenant's notice, or, if the proposed subletting is for the
entire Demised Premises for the balance of the Term, to terminate this Lease, or
(b) if Tenant's request relates to an assignment, either to have this Lease
assigned to Landlord or to terminate this Lease. If Landlord does not exercise
such option, Tenant shall be free for a period of one hundred eighty (180) days
thereafter to sublet such space or to assign this Lease to such third party if
Landlord shall consent thereto, provided that the sublease or assignment shall
be on the same terms set forth in the notice given to Landlord and that the
rental to such subtenant or assignee shall not be less than the then market rate
for such premises.
In the event Tenant shall so sublet a portion of the Demised Premises,
or assign this Lease, one-half (1/2) of the sums or other economic consideration
received by Tenant as a result of such subletting or assignment whether
denominated rentals or otherwise, under the sublease or assignment, which exceed
in the aggregate, the total sums which Tenant is obligated to pay Landlord under
this Lease (prorated to reflect obligations allocable to that portion of the
Demised Premises subject to such sublease) shall be payable to Landlord as
additional rental under this Lease without affecting or reducing any other
obligation of Tenant hereunder.
17.3 Notwithstanding the provisions of Sections 17.1 and 17.2 hereof,
Tenant may assign this Lease or sublet the Demised Premises or any portion
thereof, without Landlord's consent and without extending any option to
Landlord, to any corporation which controls, is controlled by or is under common
control with Tenant, or to any corporation resulting from the merger or
consolidation with Tenant, or to any person or entity which acquires all the
assets of Tenant as a going concern of the business that is being conducted on
the Demised Premises, provided that said assignee assumes, in full, the
obligations of Tenant under this Lease.
17.4 Regardless of Landlord's consent, no subletting or assignment
shall release Tenant of Tenant's obligation or alter the primary liability of
Tenant to pay the rental and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of rental by Landlord from any other person
shall not be deemed to be a waiver by Landlord or any provision hereof. Consent
to one assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such assignee or successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
17.5 In the event Tenant shall assign this Lease or sublet the Demised
Premises or request the consent of Landlord to any assignment or subletting or
if Tenant shall request the consent of Landlord for any act that Tenant proposes
to do, then Tenant shall pay Landlord's reasonable attorneys' fees and
processing fees incurred in connection therewith.
18. Rules.
Tenant shall faithfully observe and comply with the rules and
regulations annexed to this Lease as Exhibit "E" and, after notice thereof, all
reasonable modifications thereof and additions thereto from time to time
promulgated in writing by Landlord. Landlord shall not be responsible to Tenant
for the nonperformance by any other tenant or occupant of the Building of any of
such rules and regulations.
<PAGE> 13
19. Entry by Landlord.
19.1 Landlord and its designees may enter the Demised Premises at
reasonable hours and upon reasonable notice, except in emergencies and except
with respect to (d) below, to (a) inspect the same, (b) exhibit the same to
prospective purchasers, lenders or tenants, (c) determine whether Tenant is
complying with all of its obligations hereunder, (d) supply janitor service and
any other services to be provided by Landlord to Tenant hereunder, (e) post
notices of nonresponsibility, and (f) make repairs required of Landlord under
the terms hereof or repairs to any adjoining space or utility services or make
repairs, alterations or improvements to any other portion of the Building;
provided, however, that all such work shall be done as promptly as reasonably
possible. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Demised Premises or any other loss occasioned by such
entry.
19.2 Landlord shall at all times have and retain a key with which to
unlock all of the doors in, on or about the Demised Premises (excluding Tenant's
vaults, safes and similar areas designated in writing by Tenant in advance); and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in any emergency in order to obtain entry to the
Demised Premises, and any entry to the Demised Premises obtained by Landlord by
any of said means, or otherwise, shall not under any circumstances be construed
or deemed to be a forcible or unlawful entry into or a detainer of the Demised
Premises or an eviction, actual or constructive, of Tenant from the Demised
Premises, or any portion thereof.
20. Events of Default.
20.1 The occurrence of any one or more of the following events
(hereinafter referred to as "Events of Default") shall constitute a breach of
this Lease by Tenant: (a) if Tenant shall fail to pay the Basic Rental when and
as the same becomes due and payable; or (b) if Tenant shall fail to pay any
other sum when and as the same becomes due and payable and such failure shall
continue for more than ten (10) days; or (c) if Tenant shall fail to perform or
observe any other term hereof or of the rules and regulations referred to in
Article 18 hereof to be performed or observed by Tenant, such failure shall
continue for more than thirty (30) days after notice thereof from Landlord, and
Tenant shall not within such thirty (30) day period commence with due diligence
and dispatch the curing of such default, or, having so commenced, shall
thereafter fail or neglect to prosecute or complete with due diligence and
dispatch the curing of such default; or (d) if Tenant shall fail to perform or
observe any provision of Article 4 hereof or Exhibit "C" hereto either prior or
subsequent to the Commencement Date; or (e) if Tenant shall make a general
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts as they become due or shall file a petition in bankruptcy, or
shall be adjudicated as insolvent or shall file a petition in any proceeding
seeking any reorganization, arrangements, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting or fail timely to contest
or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant
or any material part of its properties; or (f) if within ninety (90) days after
the commencement of any proceeding against Tenant seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such proceeding
shall not have been dismissed, or, if within ninety (90) days after the
appointment without the consent of acquiescence of Tenant, of any trustee,
receiver or liquidator of Tenant or of any material part of its properties, such
appointment shall not have been vacated; or (g) if this Lease or any estate of
Tenant hereunder shall be levied upon under any attachment or execution and such
attachment or execution is not vacated within ten (10) days.
20.2 If, as a matter of law, Landlord has no right on the bankruptcy of
Tenant to terminate this Lease, then, if Tenant, as debtor, or its trustee
wishes to assume or assign this Lease, in addition to curing or adequately
assuring the cure of all defaults existing under this Lease on Tenant's part on
the date of filing of the proceeding (such assurances being defined below),
Tenant, as debtor, or the trustee or assignee must also furnish adequate
assurances of future performance under this Lease (as defined below). Adequate
assurance of curing defaults means the posting with Landlord of a sum in cash
sufficient to defray the cost of such a cure. Adequate assurance of future
performance under this Lease means posting a deposit equal to three
<PAGE> 14
(3) months rent, including all other charges payable by Tenant hereunder, such
as the amounts payable pursuant to Article 5 hereof, and, in the case of an
assignee, assuring Landlord that the assignee is financially capable of assuming
this Lease, and that its use of the Demised Premises will not be detrimental to
the other tenants in the Building or Landlord. In a reorganization under Chapter
11 of the Bankruptcy Code, the debtor or trustee must assume this Lease or
assign it within one hundred twenty (120) days from the filing of the
proceeding, or he shall be deemed to have rejected and terminated this Lease.
21. Remedies.
If any of the Events of Default shall occur, then Landlord shall have
the following remedies:
(a) Landlord at any time after the Event of Default, at
Landlord's option, may give to Tenant three (3) days' notice of
termination of this Lease and in the event such notice is given, this
Lease shall come to an end and expire (whether or not the Term shall
have commenced) upon the expiration of such three (3) days, but Tenant
shall remain liable for damages as provided in Article 22 hereof.
(b) Either with or without terminating this Lease, Landlord
may immediately or at any time after the Event of Default or after the
date upon which this Lease shall expire, reenter the Demised Premises
or any part thereof, without notice, either by summary proceedings or
by any other applicable action or proceeding, (without being liable to
indictment, prosecution or damages therefor), and may repossess the
Demised Premises and remove any and all of Tenant's property and
effects from the Demised Premises.
(c) Either with or without terminating this Lease, Landlord
may relet the whole or any part of the Demised Premises from time to
time, either in the name of Landlord or otherwise, to such tenant or
tenants, for such term or terms ending before, on or after the
Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as
Landlord, in its sole discretion, may determine. In the event of any
such reletting, Landlord shall not be liable for the failure to collect
any rental due upon any such reletting, and no such failure shall
operate to relieve Tenant of any liability under this Lease or
otherwise to affect any such liability; and Landlord may make such
repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Demised Premises
as Landlord, in its sole discretion, considers advisable or necessary
in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise
affecting such liability.
(d) Landlord shall have the right to recover the rental and
all other amounts payable by Tenant hereunder as they become due
(unless and until Landlord has terminated this Lease) and all other
damages incurred by Landlord as a result of an Event of Default.
(e) The remedies provided for in this Lease are in addition to
any other remedies available to Landlord at law or in equity by statute
or otherwise. See Attached Rider
22. Termination upon Default.
Upon termination of this Lease by Landlord pursuant to Article 21
hereof, Landlord shall be entitled to recover from Tenant the aggregate of: (a)
the worth at the time of award of the unpaid rental which had been earned at the
time of termination; (b) the worth at the time of award of the amount by which
the unpaid rental which would have been earned after termination until the time
of award exceeds the then reasonable rental value of the Demised Premises during
such period; (c) the worth at the time of the award of the amount by which the
unpaid rental for the balance of the term of this Lease after the time of award
exceeds the reasonable rental value of the Demised Premises for such period; and
(d) any other amount necessary to compensate
<PAGE> 15
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom. The "worth at the time of award" of the amounts
referred to in clauses (a) and (b) above is computed from the date such rent was
due or would have been due, as the case may be, by allowing interest at the rate
of two percent (2%) in excess of the prime rate of NBD Bank or, if a higher rate
is legally permissible, at the highest rate legally permitted. The "worth at the
time of award" of the amount referred to in clause (c) above is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
Chicago at the time of award, plus one percent (1%).
23. Landlord's Right to Cure Defaults.
All covenants, terms and conditions to be performed by Tenant under any
of the terms of this Lease shall be at its sole cost and expense and without any
abatement of rental. If Tenant shall fail to pay any sum of money, other than
Basic Rental, required to be paid by it hereunder or shall fail to perform any
other act on its part to be performed hereunder and such failure shall continue
for thirty (30) days after notice thereof by Landlord, Landlord may, but shall
not be obligated so to do, and without waiving or releasing Tenant from any
obligations of Tenant, make any such payment or perform any such other act on
Tenant's part to be made or performed as in this Lease provided. All sums so
paid by Landlord and all necessary incidental costs shall be deemed additional
rental hereunder and shall be payable to Landlord on demand, and Landlord shall
have (in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of the nonpayment thereof by Tenant as in the case of
default by Tenant in the payment thereof by Tenant as in the case of default by
Tenant in the payment of Basic Rental.
24. Attorneys' Fees.
If Landlord uses the services of an attorney in connection with (a) any
breach or default in the performance of any of the provisions of this Lease, in
order to secure compliance with such provisions or recover damages therefor or
to terminate this Lease or evict Tenant, or (b) any action brought by Tenant
against Landlord, or (c) any action brought against Tenant in which Landlord is
made a party, Tenant shall reimburse Landlord upon demand for any and all
attorneys' fees and expenses so incurred by Landlord.
25. Subordination.
25.1 This Lease is and shall be subject and subordinate, at all times,
to (a) the lien of any mortgage or mortgages which may now or hereafter affect
the Building, and to all advances made or hereafter to be made upon the security
thereof and to the interest thereon, and to any agreements at any time made
modifying, supplementing, extending or replacing any such mortgages, and (b) any
ground or underlying lease which may now or hereafter affect the Building,
including all amendments, renewals, modifications, consolidation, replacements
and extensions thereof. Tenant shall attorn to any such mortgagee and/or ground
or underlying lessor upon the date it acquires title to the Building. Tenant
shall not have the right or option to terminate this Lease in the event title to
the Building is acquired by such mortgagee or lessor. Any such mortgagee
acquiring title to the Building through foreclosure, exercise of a power of sale
or deed in lieu of foreclosure may, upon so acquiring title to the Building, at
its sole option, accept this Lease on all of its terms and conditions or
terminate this Lease and exercise the rights of foreclosure which are accorded
the purchaser or foreclosing mortgagee pursuant to Michigan law. Tenant shall,
upon such purchaser's or mortgagee's request, execute a new lease with such
purchaser or mortgagee upon materially identical terms as this Lease.
Notwithstanding the foregoing, at the request of the holder of any of the
aforesaid mortgage or mortgages or the lessor under the aforesaid ground or
underlying lease, this Lease may be made prior and superior to such mortgage or
mortgages and/or such ground or underlying lease.
25.2 At the request of Landlord, Tenant shall execute and deliver such
further instruments as may be reasonably required to implement the provisions of
this Article 25.
<PAGE> 16
25.3 If, as a condition of approving this Lease, Landlord's mortgagee
shall request reasonable modifications of this Lease, Tenant shall not
unreasonably withhold or delay its agreement to such modifications, provided
that such modifications do not increase the obligations or materially and
adversely affect the rights of Tenant under this Lease.
26. Merger.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation hereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
27. Nonliability of Landlord.
27.1 In the event the Landlord hereunder or any successor owner of the
Building shall sell or convey the Building, all liabilities and obligations on
the part of the original Landlord or such successor owner under this Lease
accruing thereafter shall terminate, and thereupon all such liabilities and
obligations shall be binding upon the new owner. Tenant shall attorn to such new
owner.
27.2 Landlord shall not be responsible or liable to Tenant for any loss
or damage that may be occasioned by or through the acts or omissions of persons
occupying adjoining areas or any part of the area adjacent to or connected with
the Demised Premises or any part of the Building or for any loss or damage
resulting to Tenant or his property from theft or a failure of the security
systems in the Building, or for any damage or loss of property within the
Demised Premises from any cause other than solely by reason of the gross
negligence or willful act of Landlord, and no such occurrence shall be deemed to
be an actual or constructive eviction from the Demised Premises or result in an
abatement of rental.
27.3 If Landlord shall fail to perform any covenant, term or condition
of this Lease upon Landlord's part to be performed and, if as a consequence of
such default, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only against the right, title and interest of
Landlord in the Building and out of rents or other income from the Building
receivable by Landlord, or out of the consideration received by Landlord from
the sale or other disposition of all or any part of Landlord's right, title and
interest in the Building, and neither Landlord nor any of the partners of
Landlord shall be liable for any deficiency.
28. Estoppel Certificate.
At any time and from time to time upon ten (10) days' prior request by
Landlord, Tenant will promptly execute, acknowledge and deliver to Landlord, a
certificate indicating (a) that this Lease 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, and stating the date and nature of each modification),
(b) the date, if any, to which rental and other sums payable hereunder have been
paid, (c) that no notice has been received by Tenant of any default which has
not been cured, except as to defaults specified in said certificate, and (d)
such other matters as may be reasonably requested by Landlord. Any such
certificate may be relied upon by any prospective purchaser, mortgagee or
beneficiary under any deed of trust of the Building or any part thereof.
29. No Light. Air or View Easement.
Any diminution or shutting off of light, air or view by any structure
which may be erected on lands adjacent to the Building shall in no way affect
this Lease or impose any liability on Landlord.
<PAGE> 17
30. Holding Over.
It is hereby agreed that in the event of Tenant holding over after the
termination of this Lease, thereafter the tenancy shall be from month to month
in the absence of a written agreement to the contrary, and Tenant shall pay to
Landlord a daily occupancy charge equal to five percent (5%) of the monthly
rental under Paragraph 5 hereof for the last lease year (plus all other charges
payable by Tenant under this Lease) for each day from the expiration or
termination of this Lease until the date the Demised Premises are delivered in
the condition required herein, and Landlord's right to damages for such illegal
occupancy shall survive.
31. Abandonment.
If Tenant shall abandon or surrender the Demised Premises, or be
dispossessed by process of law or otherwise, any personal property belonging to
Tenant and left on the Demised Premises shall be deemed to be abandoned, or, at
the option of Landlord, may be removed by Landlord at Tenant's expense.
32. Security Deposit.
33. Waiver.
33.1 The waiver by Landlord of any agreement, condition or provision
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other agreement, condition or provision herein contained, nor
shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be construed to waive or to lessen the right
of Landlord to insist upon the performance by Tenant of the terms hereof in
strict accordance with said terms. The subsequent acceptance of rental hereunder
by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any agreement, condition or provision of this Lease, other than the failure
of Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rental.
33.2 Landlord and Tenant hereby waive trial by jury in any action,
proceeding, or counterclaim brought by Landlord or Tenant against the other on
any matter whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord to Tenant, the use or occupancy of the Demised
Premises by Tenant or any person claiming through or under Tenant, any claim of
injury or damage, and any emergency or other statutory remedy; provided,
however, the foregoing waiver shall not apply to any action for personal injury
or property damage. If Landlord commences any summary or other proceeding for
nonpayment of rent or the recovery of possession of the Demised Premises, Tenant
shall not interpose any counterclaim of whatever nature or description in any
such proceeding, unless the failure to raise the same would constitute a waiver
thereof.
<PAGE> 18
34. Notices.
All notices, consents, requests, demands, designations or other
communications which may or are required to be given by either party to the
other hereunder shall be in writing and shall be deemed to have been duly given
when personally delivered or deposited in the United States mail, certified or
registered, postage prepaid, and addressed as follows: to Tenant at the address
set forth in Section 1(k) hereof, or to such other place as Tenant may from time
to time designate in a notice to Landlord; to Landlord at the address set forth
in Section 1(l) hereof, or to such other place as Landlord may from time to time
designate in a notice to Tenant; or, in the case of Tenant, delivered to Tenant
at the Demised Premises. In the event a Guarantor is listed in Section 1(m)
hereof and such Guarantor executes this Lease, Landlord shall forward copies of
all notices of default hereunder to the Guarantor at the address set forth in
Section 1(n) hereof. Tenant hereby appoints as its agent to receive the service
of all dispossessory or distraint proceedings and notices thereunder the person
in charge of or occupying the Demised Premises at the time, and, if no person
shall be in charge of or occupying the Demised Premises at the time, then such
service may be made by attaching the same on the main entrance of the Demised
Premises.
35. Guaranty.
<PAGE> 19
36. Complete Agreement.
There are no oral agreements between Landlord and Tenant affecting this
Lease, and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease or the Building. There are no representations between Landlord and
Tenant other than those contained in this Lease and all reliance with respect to
any representations is solely upon such representations.
37. Corporate Authority.
If Tenant signs as a corporation, each of the persons executing this
Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a
fully authorized and existing corporation, that Tenant has and is qualified to
do business in Michigan, that the corporation has full right and authority to
enter into this Lease, and that each and all of the persons signing on behalf of
the corporation are authorized to do so.
38. Inability to Perform.
If, by reason of the occurrence of unavoidable delays due to acts of
God, governmental restrictions, strikes, labor disturbances, shortages of
materials or supplies or for any other cause or event beyond Landlord's
reasonable control, Landlord is unable to furnish or is delayed in furnishing
any utility or service required to be furnished by Landlord under the provisions
of Article 8 hereof or any other provisions of this Lease or any collateral
instrument, or is unable to perform or make or is delayed in performing or
making any installations, decorations, repairs, alterations, additions, or
improvements, whether required to be performed or made under this Lease or under
any collateral instrument, or is unable to fulfill or is delayed in fulfilling
any of Landlord's other obligations under this Lease or any collateral
Instrument, no such inability or delay shall constitute an actual or
constructive eviction in whole or in part, or entitle Tenant to any abatement or
diminution of rental or other charges due hereunder or relieve Tenant from any
of its obligations under this Lease, or impose any liability upon Landlord or
its agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise.
39. Covenant of Quiet Enjoyment.
Upon Tenant paying the rental and other charges due hereunder and
performing all of Tenant's obligations under this Lease, Tenant may peacefully
and quietly enjoy the Demised Premises during the term of this Lease; subject,
however, to the provisions of this Lease and to any mortgages or ground or
underlying leases referred to in Article 25 hereof.
40. Miscellaneous.
40.1 The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several.
<PAGE> 20
40.2 Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for lease, and it is
not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
40.3 The agreements, conditions and provisions herein contained shall,
subject to the provisions as to assignment, set forth in Article 17 hereof,
apply to and bind the heirs, executors, administrators, successors and assigns
of the parties hereto.
40.4 Tenant shall not, without the consent of Landlord, use the name of
the Building for any purpose other than as the address of the business to be
conducted by Tenant in the Demised Premises. Landlord reserves the right to
select the name of the Building and to make such changes of name as it deems
appropriate from time to time.
40.5 If any provisions of this Lease shall be determined to be illegal
or unenforceable, such determination shall not affect any other provisions of
this Lease and all such other provisions shall remain in full force and effect.
40.6 This Lease shall be governed by and construed pursuant to the
laws of the State of Michigan.
40.7 Upon Landlord's written request but not more frequently than once
annually, Tenant shall promptly furnish
Landlord, from time to time, financial statements reflecting Tenant's current
financial condition. See attached Rider.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date set forth in Section 1(a).
29200 NORTHWESTERN DEVELOPMENT
ASSOCIATES LIMITED PARTNERSHIP,
a Michigan limited partnership
By: 29200 Northwestern Development, Inc.,
a Michigan corporation, its General Partner
By: /s/ Mike Kojaian
--------------------------------
Mike Kojaian, President
"Landlord"
UNIVERSAL STANDARD HEALTHCARE
OF DELAWARE,
By /s/ Alan S. Ker
---------------------------------
Its CFO
--------------------------------
"Tenant"
<PAGE> 21
1
RIDER TO LEASE by and between 29200 NORTHWESTERN DEVELOPMENT ASSOCIATES LIMITED
PARTNERSHIP, a Michigan limited partnership, as Landlord, and UNIVERSAL STANDARD
HEALTHCARE OF DELAWARE, INC., as a Tenant, for premises located at 29200
Northwestern Highway, Southfield, Michigan.
................................................................................
RIDER TO SECTION 3.1:
(a) Tenant shall be permitted to have access to the Demised Premises
five (5) days prior to the Commencement Date in order to install its furniture,
equipment and other personal property in the Demised Premises; provided,
however, that any furniture, equipment and other personal property installed by
Tenant in the Demised Premises during such period shall be at Tenant's sole risk
and Landlord shall not be liable or responsible to Tenant for any damage to such
furniture, equipment or other personal property from any cause whatsoever, and
Tenant shall not interfere with Landlord's completion of the Demised Premises.
By so entering the Demised Premises hereunder, Tenant shall not be deemed to
have taken occupancy of the Demised Premises pursuant to Section 3.1 hereof.
(b) Landlord may elect to terminate this Lease for any reason
whatsoever effective on the first anniversary of the Commencement Date and an
additional right on the third anniversary of the Commencement Date, upon not
less than six (6) months written notice to Tenant prior to such termination
date.
RIDER TO SECTION 4:
Tenant acknowledges that Landlord has earlier constructed the Demised
Premises substantially in accordance with Exhibit "C" attached hereto and that
Tenant is familiar with the physical condition of the Demised Premises and
hereby agrees to accept the Demised Premises in its existing "as-is" condition,
except as provided herein, without representation or warranty of any kind by
Landlord as to the present or future condition of the Demised Premises. Tenant's
taking of possession of the Demised Premises shall be deemed conclusive evidence
of Tenant's acceptance of the Demised Premises in good order and satisfactory
condition on or before March 31, 1999. Landlord shall provide or cause to be
provided, all materials and shall perform, or cause to be performed,
miscellaneous repairs and improvements as reasonably necessary, including the
installation of a new suite entry up to a total cost of $50,000.00 (hereinafter
referred to as the "Renovation Allowance"). Such work shall be substantially
completed on or before March 31, 1999. If such repairs and improvements shall
cost in excess of the Renovation Allowance, Tenant shall pay such excess in
accordance with Section 4(d) hereof. Landlord shall have no further obligations
to improve or to repair the Demised Premises except as expressly set forth in
this Lease.
RIDER TO SECTION 5.3:
For a period of two (2) years after the end of each respective calendar
year to which such records relate, Tenant shall have the right upon fifteen (15)
days prior written notice to Landlord to inspect Landlord's records relating to
Taxes and Expenses. Such inspection shall be conducted at Landlord's offices
during normal business hours at Tenant's expense and the person engaged to
conduct such audit shall not be engaged on a contingent fee basis.
RIDER TO SECTION 9.1:
(a) Landlord shall not unreasonably withhold its consent to interior
non-structured alterations, additions or improvements to the Demised Premises.
(b) Notwithstanding anything to the contrary in Section 9.1 hereof,
Tenant shall not be required to remove any such alterations, additions or
improvements installed in accordance with plans and specifications approved in
writing by Landlord.
RIDER TO SECTION 17.1:
Notwithstanding anything contained in Section 17.1 hereof to the
contrary, Landlord agrees that it will not unreasonably withhold its consent to
a proposed assignment of this Lease
1
<PAGE> 22
or subletting of the Demised Premises by Tenant; provided that Tenant shall not
sublet any portion of the Demised Premises or assign this Lease for any medical
or dental use, or to any governmental or quasi-governmental agency. In
determining reasonableness, Landlord may take into consideration all relevant
factors surrounding the proposed assignment or subletting, including, without
limitation: (i) the business reputation of the proposed assignee or subtenant
and its officers, directors and stockholders, (ii) the nature of the business of
the proposed assignee or subtenant and its affect on the other tenants of the
Building, (iii) the financial condition of the proposed assignee or subtenant;
and (iv) restrictions, if any, contained in leases or other agreements affecting
the Building.
RIDER TO SECTION 21:
Landlord shall use its reasonable efforts to mitigate its damages
resulting from Tenant's default hereunder; provided that Landlord may lease
other vacant premises in the Building prior to leasing the Demised Premises.
RIDER TO SECTION 25.1:
Prior to the Commencement Date, Landlord shall obtain a Subordination,
Attornment and Nondisturbance Agreement from the existing mortgage of the
Development for Tenant's benefit in a form reasonably acceptable to Tenant.
29200 NORTHWESTERN DEVELOPMENT
ASSOCIATES LIMITED PARTNERSHIP,
a Michigan limited partnership
By: 29200 Northwestern Development, Inc., a
Michigan corporation, its General Partner
By: /s/ Mike Kojaian
------------------------------------
Mike Kojaian
Its: President
"LANDLORD"
UNIVERSAL STANDARD HEALTHCARE OF
DELAWARE, INC., a Delaware corporation
By: /s/ Alan S. Ker
------------------------------------
Its: CFO
------------------------------------
"TENANT"
2
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<ARTICLE> 5
<CIK> 0000889187
<NAME> UNIVERSAL STANDARD HEALTHCARE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 674
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<RECEIVABLES> 807
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<CURRENT-ASSETS> 2,054
<PP&E> 4,509
<DEPRECIATION> 1,870
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<CURRENT-LIABILITIES> 27,031
<BONDS> 0
0
0
<COMMON> 34,247
<OTHER-SE> (57,751)
<TOTAL-LIABILITY-AND-EQUITY> 8,780
<SALES> 4,992
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<TOTAL-COSTS> 4,672
<OTHER-EXPENSES> 937
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