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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ___________ TO _______________
COMMISSION FILE NUMBER 0-22162
SIMIONE CENTRAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3209241
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6600 POWERS FERRY ROAD, ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 644-6700
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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Aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 18, 1998: $74,538,275.
There were 8,524,466 shares of Common Stock outstanding at March 18,
1998.
Documents incorporated by reference in this Form 10-K: Portions of the
definitive proxy statement relating to the 1998 Annual Meeting of Stockholders
in Part III, Items 10 (as related to Directors), 11, 12 and 13.
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TABLE OF CONTENTS
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PART I
Item 1. Business 1
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Executive Management of the Registrant 14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 15
Item 6. Selected Consolidated Financial Data 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedules
and Reports on Form 8-K 28
Index to Consolidated Financial Statements F-1
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PART I
ITEM 1. BUSINESS
Certain statements set forth in this Annual Report on Form 10-K
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are
subject to the safe harbor created by such sections. When used in this report,
the words "believe," "anticipate," "estimate," "expect," and similar expressions
are intended to identify forward-looking statements. Although Simione Central
Holdings, Inc. (the "Company") believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
When appropriate, certain factors that could cause results to differ materially
from those projected in the forward-looking statements are enumerated. This
Annual Report on Form 10-K should be read in conjunction with the Company's
consolidated financial statements and the notes thereto.
OVERVIEW
The Company is a leading provider of integrated systems and services
designed to enable home health care providers to more effectively operate their
businesses and compete in a managed care environment. The Company offers several
comprehensive and flexible software solutions, each of which provide a core
platform of software applications and which incorporate selected specialized
modules based on customer demand. These software solutions are designed to
enable customers to generate and utilize comprehensive financial, operational
and clinical information and are made available to customers in two
arrangements: a Shared Resource Solution and an In-House Solution. The Company's
Shared Resource Solution offers customers an outsourcing opportunity which
incorporates the Company's proprietary software. Under this arrangement, the
Company operates a data center which stores customer data and allows real-time,
secure access through a wide area communications network. The Company's In-House
Solution is licensed to customers for use on their own computer systems. In
addition to its software solutions and related software support services, the
Company's home health care consulting services assist providers in addressing
the challenges of reducing costs, maintaining quality, streamlining operations
and re-engineering organizational structures. The Company also provides
comprehensive agency support services which include administrative, billing and
collection, training, reimbursement and financial management services, among
others.
The Company has recently introduced the following three new products:
(i) SC Synergy, a comprehensive, fully-integrated home health care software
product which uses both client/server and IBM's AS400 technology to provide a
complete business solution; (ii) MAPP Plus, a fully-automated point-of-care
product which incorporates over 60 clinical pathways to collect outcomes data by
encounter and over an entire episode of care using a consistent methodology; and
(iii) Enterprize Management Solutions 7.0 ("Enterprize 7.0"), a Windows based
product for home medical equipment businesses.
During 1997, the Company had over 2,100 customers nationwide, including
hospital-based companies, free-standing home health care providers,
alternate-site care organizations, home medical equipment providers, integrated
delivery systems and government-managed organizations. The Company's customers
include Columbia/HCA Healthcare Corporation ("Columbia/HCA"), Tenet Healthcare
Corporation ("Tenet"), The Visiting Nurse Association of Texas ("VNA - Texas"),
Mercy Health Services, a Michigan not-for-profit corporation ("Mercy"), and
Advocate Health System ("Advocate").
Effective December 1, 1997, the Company purchased substantially all of
the assets of Dezine Healthcare Solutions, Inc. ("Dezine"), a provider of
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information solutions for home medical equipment ("HME") businesses. The Company
accounted for the acquisition using the purchase method (the "Dezine
Acquisition"). Accordingly, the $9.4 million purchase price was allocated to the
assets acquired and liabilities assumed based upon their estimated fair values,
with approximately $8.1 million allocated to purchased in-process research and
development, which was written off as of the date of the Dezine Acquisition. In
addition, approximately $1.3 million of the purchase price was allocated to
certain identifiable intangible assets and are being amortized over the related
assets' useful lives which range from 5 to 10 years.
For information regarding the Company's history, see Notes 1 and 2 to
Notes to Consolidated Financial Statements.
Unless the context otherwise requires, references to the Company herein
include Simione Central Holdings, Inc. and its subsidiaries. The Company's
executive offices are located at 6600 Powers Ferry Road, Atlanta, Georgia 30339
and its telephone number is 770-644-6700.
INDUSTRY OVERVIEW
Home health care is one of the fastest growing segments of the health
care industry, with total estimated expenditures having increased to
approximately $42 billion in 1997 from approximately $13 billion in 1990. The
increasing importance of home health care has principally been a result of
significant economic pressures within the health care industry. In recent years,
U.S. health care expenditures have increased rapidly and have been estimated to
have exceeded $1.1 trillion in 1997. In response to these escalating
expenditures, payors, such as Medicare and managed care organizations, have
applied increasing pressure on physicians, hospitals and other providers to
contain costs. This pressure has led to the growth of lower cost alternate-site
care, such as home health care, and to reduced hospital admissions and lengths
of stay. In addition, home health care has grown rapidly as a result of advances
in medical technology, which have facilitated the delivery of services in
alternate sites, demographic trends, such as an aging population, and
preferences among patients to receive health care in their homes.
Home health care consists of many elements, including skilled nursing,
durable medical equipment ("DME"), intravenous and infusion therapy ("IV
Therapy") and hospice. Historically, this industry has been highly fragmented
and characterized by small, local providers offering a limited range of
services. With the advent of managed care and integrated delivery systems, home
health care providers have had to expand their geographic scope and range of
product and service offerings. In addition, the overall growth in the home
health care industry has allowed providers to grow and realize increased
operating efficiencies. As a result of these developments, the home health care
industry has been in a period of rapid consolidation.
Medicare currently reimburses a majority of home health care services
at amounts that cannot exceed the costs of services provided, resulting in a
direct relationship between the number of home health care visits and
reimbursement. However, the Balanced Budget Act of 1997, enacted on August 5,
1997 (the "BBA"), contained provisions that significantly change the manner in
which home health agencies and home care services will be reimbursed in the
future by the Medicare and Medicaid programs. Additionally, in late 1997, the
Health Care Financing Administration ("HCFA"), the federal agency that
administers Medicare reimbursement for the home health care industry, imposed
further reimbursement limitations which created restrictions on the amount of
cost reimbursement per Medicare beneficiary. In January 1998, HCFA published a
notice revising the schedule of limits on home health agency costs for cost
reporting periods beginning on or after October 1, 1997, which reduced the cost
per visit limitations. At the same time, HCFA issued a rule setting forth the
surety bond and capitalization requirements for home health agencies. As
mandated by the BBA, HCFA has also announced the implementation, effective
October 1, 1999, of a Prospective Payment System ("PPS"), which would limit
reimbursement to a fixed amount for all services rendered per episode of
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care. In addition to the potential impact of PPS, the growth in the number of
Medicare members enrolling in managed care plans, which have also begun to take
measures to contain costs, will have a significant impact on how providers may
operate profitably.
As a result of consolidation and measures to address ongoing cost
pressures, home health care providers will increasingly require enhanced
management expertise, specialized industry knowledge and standardized financial,
operational and clinical information in order to compete. The Company believes
that many existing home health care information systems are inadequate to
address the changing needs of home health care providers. Generally, these
systems were designed to generate patient billing information and cost reports
for Medicare reimbursement and, as a result, may be unable to provide the
detailed information required for meaningful business analyses.
THE SIMIONE CENTRAL SOLUTIONS
The Company offers a comprehensive set of solutions to address the
changing needs of home health care providers. These solutions include
information systems and support, consulting services and agency support
services. The Company's systems and services are designed to enable home health
care providers to generate and utilize comprehensive financial, operational and
clinical information and address organizational issues in order to make informed
decisions, more effectively operate their businesses and compete in a managed
care and/or PPS environment. These solutions can be packaged and customized to
serve the individual needs of customers.
STRATEGY
The Company's objective is to enhance its position as a leading
provider of solutions to the home health care industry. Principal elements of
the Company's strategy include:
- Leverage Existing Customer Base. The Company currently has a
base of over 2,100 customers nationwide. The Company believes
that a significant opportunity exists to cross-sell its
existing systems and services as well as introduce new systems
and enhancements.
- Generate Recurring Revenue. The Company generates recurring
revenue through a combination of annually renewable
maintenance agreements and multi-year service contracts. These
sources of revenue collectively accounted for 60% of the
Company's net revenues in 1997. The Company attempts to
maximize recurring revenue opportunities through a combination
of periodic system enhancements and comprehensive customer
service.
- Capitalize on Changing Industry Dynamics. As the home health
care industry consolidates, the Company believes it is well
positioned to increase its market share by leveraging its
existing relationships with large providers such as
Columbia/HCA, Tenet, Advocate and Mercy. The Company also
believes its comprehensive solutions will become increasingly
important to home health care providers as they address the
challenges presented by health care reform and as integrated
delivery systems become more prevalent.
- Expand Through Acquisitions and Strategic Alliances. Through
selective strategic acquisitions such as the Dezine
Acquisition, the Company intends to continue to expand its
system and service offerings, expand its customer base and
increase its market share. The Company also intends to
selectively establish strategic alliances to expand its system
and service offerings and grow its distribution capabilities.
For example, the Company has a marketing agreement with
International Business Machines Corporation ("IBM") in order
to leverage IBM's presence in the hospital and integrated
delivery system marketplace.
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- Broaden System and Service Lines. The Company has recently
introduced three new products: SC Synergy, MAPP Plus and
Enterprize 7.0. The Company intends to continue to develop and
enhance its systems and services and is developing several new
products and enhancements.
SYSTEMS AND SERVICES
The Company provides a comprehensive set of solutions for home health
care providers through a broad range of systems and services, including: (i)
several comprehensive, flexible software solutions; (ii) software support
services; (iii) comprehensive agency support services; and (iv) consulting
services. These systems and services are designed to address the evolving
strategic, financial, operational and clinical needs of home health care
providers as illustrated below:
[Graphic illustration enumerating the various strategic, operational, financial
and clinical needs of home health care providers.]
INFORMATION SYSTEMS
The Company offers several comprehensive and flexible software
solutions to meet various customers' needs. Each of these solutions offers a
core platform of software applications which address the complete business
requirements of home health care providers. These applications are designed to
provide real-time reporting capabilities, speed information processing, reduce
redundant data entry, improve efficiencies and assist management with making
informed decisions. In addition to the core elements, the Company offers several
specialized modules that can be integrated with the Company's core applications
based on customer demand.
Core Software Solutions. The Company's core software solutions are as follows:
STAT2. A complete, flexible and fully-integrated home health care
management system. The STAT2 core platform of software applications
includes:
Client Intake Billing/Accounts Receivable
Treatment Plans General Ledger
Employee Tracking Accounts Payable
Scheduling Payroll
Electronic Transmission/
Remittance
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This core functionality can be enhanced with specialized modules
including hospice, IV Therapy, DME, imaging, telephony and cost
reporting. The STAT2 system allows a customer to exchange clinical and
financial information with external systems in either a real-time or
batch mode through interface engine technology or customized
interfaces.
NAHC IS. The Company's second complete, fully integrated home health
care management system. The NAHC IS core platform of software
applications contains similar functionality as the STAT2 system. In
addition, NAHC IS' core functionality includes the following
applications:
Human Resources Purchasing/Inventory Management
Fixed Asset Management Occurrence Tracking
Both the STAT2 and NAHC IS software systems are designed to increase
staff productivity by fully integrating the systems' clinical,
financial and operational applications and thereby eliminating
redundant data entry. These solutions emphasize their ability to
customize system features as well as their ability to expand with the
customer's business. A major feature of each system is its real-time
reporting capabilities.
DME IV. A PC-based software application for home medical equipment and
medical supply businesses. The DME IV core platform of software
applications includes:
Order Entry Billing
Inventory Management Accounts Receivable
General Ledger Purchase Orders
DME IV features the following add-on modules: Retail Sales, Bar Coding
and IV Therapy. Versions of this software are available for any size
operation. The software provides easy to use data import/export
capabilities.
Software Delivery Arrangements. The Company offers two different delivery
options for its software solutions: the Shared Resource Solution and
the In-House Solution.
Shared Resource Solution. The Company's Shared Resource Solution offers
an outsourcing opportunity which can incorporate any of the Company's
proprietary software. Under this arrangement, the Company operates a
data center which stores customer data and allows customers real-time,
secure access through a wide area communications network. The services
provided by the Company include processing access to computer and
communication hardware, disaster recovery services, new technology and
capacity upgrades and software support. The host systems, which are
maintained by Integrated Systems Solutions Corporation, a subsidiary of
IBM ("IBM Global Services"), can be accessed by customers using their
own workstations or LAN-based PCs over secure network connections,
which allow customers to input, modify, access and analyze data on a
real-time basis.
The Shared Resource Solution allows customers to reduce up-front
capital costs and minimize the need for in-house technical personnel.
Moreover, customers obtain immediate expansion capabilities and
automatic system upgrades and enhancements. The Company believes that
the Shared Resource Solution is well-suited for the needs of a
consolidating industry since it allows customers to avoid having to
deploy and maintain extensive networks. The Company prices its Shared
Resource Solution under two different pricing models which result in
recurring monthly user fees based on either the number of users
accessing the system or the number of billed home health care visits
for its certified home health care customers. Revenues derived from
contracts for
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these services typically range from several hundred thousand dollars to
several million dollars per year.
In-House Solution. For customers who have already made, or are planning
to make, an investment in a data center, information systems personnel
and either remote site connection equipment or a wide area
communications network, the Company offers its In-House Solution. Under
this arrangement, the selected software solution is licensed to
customers for use on their own computer system which allows them to
manage their financial, operational and clinical data. Customers obtain
non-exclusive licenses of the selected system software modules for a
license fee and contract for annual maintenance and support services.
The selected software system can be loaded on a customer's existing
customer hardware or on new hardware ordered by the Company on behalf
of the customer for installed delivery. License fees are determined by
the number of software modules licensed and by the number of users
accessing the system and can range from ten thousand dollars to a few
million dollars.
Specialized Software Solutions. The Company offers the following specialized
software solutions:
STAT2 Medical Records. STAT2 Medical Records is designed to help STAT2
customers improve patient care while reducing costs through improved
productivity. STAT2 Medical Records allows field staff, using handheld
point-of-care units, to enter, update and transmit patient information
from remote locations to the home office via modem connection, updating
the central STAT2 system on a real-time basis. Customers can use STAT2
Medical Records to measure outcomes, establish or import clinical
pathways and report on variances to a care plan. STAT2 Medical Records
is comprised of modules which are integrated with other clinical,
financial and operational STAT2 system software modules for
collaborative reporting and analysis.
SC STATScan. SC STATScan is a Windows-based imaging system which scans
and stores paper forms into a customer's system. Documents are scanned,
digitized, stored on optical disks, indexed according to user defined
fields and recalled for instant use. SC STATScan also provides an
automated workflow application which allows the user to define the flow
of image information to various groups within the organization.
Additionally, SC STATScan provides its customers with increased
security and control of information, faster information retrieval and
an enhanced ability to share information in a real-time environment.
SC TELTime. SC TELTime is an interactive voice response system which
records visit, mileage, payroll and billing data from field staff using
telephones in place of computers. This data can be automatically
exported into a customer's payroll and billing applications. SC TELTime
is designed to provide users with a more cost effective way to record
data and produce records and can accelerate a customer's billing
activities.
MAPPScan. The Company's initial version of its Managed Avenue of
Patient Progress ("MAPP") point-of-care products is MAPPScan. MAPPScan
uses scanning technology to input and analyze a wide array of clinical
data. MAPPScan paper documentation incorporates HCFA data elements and
utilizes pre-defined pathways which guide patient care delivery and
allows for the analysis of data associated with clinical care, outcomes
and patient satisfaction.
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New Products. The Company has recently introduced the following new products:
SC Synergy. A comprehensive, integrated home care information
management solution designed to allow home health care providers to
more effectively operate their businesses and compete in a managed care
environment. This system was developed to replace the Company's NAHC IS
software solution and was structured to take advantage of client
server/GUI technology as well as the reliability and processing power
of IBM's AS400 technology. The system's core applications include:
Client Intake Order Entry
Verification/Authorization Resource and Encounter Management
Admissions Revenue Management
Activity Entry Occurrence Tracking
Accounts Receivable/Collections
Additionally, the system has significant standard and ad hoc reporting
capabilities as well as enhanced data import/export features. This
system has been designed to automatically interface with the Company's
financial applications (General Ledger, Accounts Payable, Purchasing,
Inventory Management, Fixed Assets, Payroll and Human Resources). SC
Synergy began initial Beta testing in March 1998 and is expected to be
released in the second quarter of 1998.
MAPP Plus. The Company recently introduced its fully-automated version
of its MAPP point-of-care product, MAPP Plus. This product is
separately licensed and offers a means of documenting the provision of
home health care services and patient outcomes. MAPP collects outcomes
data by encounter and over an entire episode of care using a consistent
methodology for data collection. MAPP incorporates HCFA data elements
and utilizes pre-defined pathways, which may be expanded by the user
and guide patient care delivery. The Company has developed a functional
level of care model and over 60 clinical pathways related to specific
medical diagnoses. MAPP will also generate cost data associated with
clinical care, tracks outcomes variances and records patient
satisfaction. MAPP's clinical functionality is based on home health
care specific clinical knowledgeware developed through years of
practical application and clinical research.
MAPP Plus, utilizes fully-automated front-end data collection via a
mobile, pen-based computer and has significant data analysis
capabilities. The Company is currently developing modules to its STAT2
and SC Synergy software solutions which will provide users with a
seamless interface. MAPP Plus has been in Beta since the fourth quarter
of 1997 and is expected to be released in the second quarter of 1998.
Enterprize 7.0. Enterprize 7.0 is a new product for the home medical
equipment provider and has significant enhancements to the Company's
current DME IV product. This product features enhanced security,
increased reporting capabilities and improved productivity tools as
well as significant connectivity improvements. Enterprize 7.0 began
initial Beta testing in February 1998 and is expected to be released in
the second quarter of 1998.
SERVICE SOLUTIONS
Software Support Services. The Company believes that providing
comprehensive software support services to customers is critical to its success
in the home health care industry. The Company employs 112 professionals
dedicated to this effort who provide the following services:
Implementation: Implementation services include an assessment of
existing customer business processes, project
planning, system training, business process
re-engineering and data conversion assistance.
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Training: Training services are offered on a continuing basis
to existing customers either at the customer's site
or at a Company location.
Software Support: The Company offers on-call telephone software support
seven days a week and provides maintenance releases
on a periodic basis. Releases of software
enhancements are generally made available to
customers annually.
Technical Consulting: The Company provides software customization and
integration, technical audits of the customer's
information systems, integration and network planning
and strategic and tactical information systems
planning.
Under the In-House Solution, support services represent a source of
recurring revenue, as these services are provided through annual renewable
service contracts. Support services for the Shared Resource Solution, however,
are included as part of the service fee paid by the customer. Other services are
generally charged on a time and materials usage basis. The Company's technical
personnel also provide on-site and on-call hardware support.
Consulting Services. The Company's home health care consulting services
assist providers in addressing the challenges of both a managed care and a PPS
environment, such as reducing the cost of delivering care while maintaining or
improving quality of care, streamlining operational structures and
re-engineering organizational structures. The Company's consulting operations,
which were acquired in January 1996, have been providing consulting advice to
the home health care industry since 1963. The consulting staff is comprised of
40 professionals with home health care industry specific experience. Consulting
engagements generally focus on:
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Strategic Planning Marketing Studies Acquisition Due Diligence
Operational Reviews Business Valuations Quality Assurance Reviews
Reimbursement Consultation Organizational Reviews Operational Re-engineering
Medicare Compliance Medical Records Cost Report Preparation
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The Company provides consulting services on a time and materials usage
basis. The Company believes that its consulting services group effectively
complements its software and services, provides a valuable outlook on the
changing home health care industry and is a source of innovative ideas for the
Company's information systems enhancements. Furthermore, consulting services are
designed to build new customer relationships and provide opportunities for the
sale of additional information systems and services.
Agency Support Services. For home health care providers seeking to
address the challenges posed by changing industry dynamics, the Company provides
comprehensive agency support services to supplement their core competencies. The
Company's agency support services provide day-to-day personnel outsourcing for
certain critical customer operational functions. For new customers, the Company
will initially analyze and re-engineer, as appropriate, all aspects of a
customer's home health care operation. These services are provided by over 60
home health care specialists. This combination of services is designed to enable
customers to create an efficient organizational structure that seeks to provide
both cost-effective results and promotes the delivery of high quality patient
care. Components of these services include:
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Management Oversight Clinical Program Development Compliance & Ethics Audits
Training & Development Fiscal Intermediary Relations Community Awareness Programs
Human Resources Operations/Systems Management Accounting Support
Reimbursement Planning Billing/Collection Budget Preparation/Analysis
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The Company provides agency support services under multi-year
contracts. Fees for these services are billed monthly. The Company believes the
delivery of agency support services provides another valuable opportunity to
introduce its information systems and services to an additional customer base.
CUSTOMERS
During 1997, the Company had over 2,100 customers nationwide, including
hospital-based companies, free-standing home health care providers,
alternate-site care organizations, home medical equipment providers, integrated
delivery systems and government-managed organizations. The Company's customers
include Columbia/HCA, Tenet, VNA-Texas, Mercy and Advocate. The Company
presently anticipates that Columbia/HCA will account for a substantial portion
of the Company's consolidated net revenues for 1998. A significant number of the
Columbia/HCA contracts provide that the pricing terms may be renegotiated in the
event that HCFA replaces the current cost-based Medicare reimbursement system
for home health care with PPS, providing for fixed payments per episode of care.
In addition, the Columbia/HCA contracts provide for a reduction in the payments
to the Company in the event and to the extent that such payments are determined
not to be a reimbursable cost under Medicare. Although the Company believes that
such payments are reimbursable, certain components of such reimbursements have
been subject to increasing scrutiny and there can be no assurance that payments
under the Columbia/HCA contracts will not be subject to challenge. Except for
Columbia/HCA, no other customer is expected to account for 10% or more of the
Company's consolidated net revenues during the year ending December 31, 1998.
Some of the Company's representative customers include:
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HOSPITAL BASED ALTERNATE-SITE
Columbia/HCA Healthcare Corporation APRIA Health Care Group
Mercy Health Services Karmanos Cancer Institute
Mount Sinai Medical Center Massachusetts Easter Seal Society
Tenet Healthcare Corp. Valentine Services Company, Inc.
FREE STANDING FOR PROFIT/NOT-FOR-PROFIT INTEGRATED DELIVERY SYSTEMS
Associated Professional Home Health Care Advocate Health System
Lifetime Medical Home Care Health Group of Alabama
Nurses Unlimited Sisters of Providence in Oregon
VNA of Greater Philadelphia University of Penn Health Systems
VNA of Greater Woonsocket
VNA of Texas
HOME MEDICAL EQUIPMENT PROVIDERS GOVERNMENT-MANAGED
Walgreens Advance Care Community Home Health Agency,
The Mayo Store of Mayo Clinics Rochester, NY
Health and Home, a subsidiary of Orleans County Health Department,
American Stores/Home and Health Milwaukee, WI
Johns Hopkins Home Care Group Putnam County Health Department,
Brewster, NY
South Carolina Department of Health,
Columbia, SC
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SALES AND MARKETING
The Company markets its systems and services through a direct sales
force which consists of one executive vice president, three national sales
managers, and 24 sales and telemarketing representatives located throughout the
United States. The Company also employs a marketing and sales support staff of
14 people to assist its sales force. Recognizing the importance of maintaining
good communication and obtaining valuable input from its customers, the Company
sponsors national user group meetings. Regional user group meetings are also
held to discuss customer comments, suggestions, industry trends and related
system issues.
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Strategic Relationships. The Company has entered into a cooperative
marketing agreement with IBM, whereby IBM health care marketing representatives
will market and receive commissions related to the sales of the Company's
systems. The Company believes that this relationship should provide additional
opportunities focused primarily on the hospital and integrated delivery system
marketplace. In addition, NAHC Plus, Inc., a wholly-owned for-profit subsidiary
of the National Association for Home Care and Hospice ("NAHC"), has exclusively
licensed its name to the Company for use in connection with the Company's NAHC
IS system. The Company believes that this endorsement and the Company's
relationship with NAHC Plus, Inc. should be beneficial to the Company in its
marketing efforts as it provides a direct link to the home health care
industry's main trade association and its members. The Company is also exploring
other strategic alliances to broaden its sales and marketing activities.
BACKLOG
The Company had backlog associated with its In-House Solution of $7.1
million and $4.9 million on December 31, 1997 and 1996, respectively. Backlog
consists of the unrecognized portion of contractually committed software license
fees, hardware, estimated installation fees and professional services. The
length of time required to complete an implementation depends on many factors
outside the control of the Company, including the state of the customer's
existing information systems and the customer's ability to commit the personnel
and other resources necessary to complete the implementation process. As a
result, the Company may be unable to predict accurately the amount of revenue it
will recognize in any period and, therefore, can make no assurances that the
amounts in backlog will be recognized in the next twelve months.
The Company enters into multi-year contracts with its customers in
connection with its Shared Resource Solution. In general, these contracts
provide for the payment of monthly fees based on the number of users or billed
home care visits made by the customer. Accordingly, the Company does not
maintain a backlog with respect to its Shared Resources Solution.
TECHNOLOGY
The STAT2 system operates on multiple operating systems, including
Windows NT, and is designed for use on microcomputers, LAN-based PCs, IBM
RS/6000 and DEC Alpha hardware. The STAT2 system can be implemented on
client/server or host/dumb terminal architecture and offers SQL-compliant
databases in both configurations. The system allows any Windows SQL report
writer to access the STAT2 system database and to merge data with other customer
SQL-compliant databases. The STAT2 system allows a customer to exchange clinical
and financial information with external systems in either a real-time or batch
mode through interface engine technology or customized interfaces.
The NAHC IS host systems, built around IBM AS/400 RISC technology, are
located in a secure and commercially hardened IBM Global Services data center
site. Access to these host systems is provided via a secure, fully-managed,
multi-protocol wide area network, which is also maintained by IBM Global
Services. Customers can interface with the NAHC IS system through a wide range
of deployable site/desktop technologies. The NAHC IS system also incorporates
certain financial applications provided by Infinium Software, Inc. (formerly
known as Software 2000, Inc.).
The DME IV system operates on the MS-DOS and Windows NT operating
systems and is designed for use on microcomputers or LAN-based PCs.
The Company's systems are dependent upon many third-party software and
hardware products and related services, including Infinium Software, Inc. and
IBM Global Services. There can be no assurance that financial or other
difficulties experienced by such third-party vendors will not have an adverse
effect on the Company's abilities to provide its systems or that the Company
will be able to replace such third-party products and services if they become
unavailable.
10
<PAGE> 14
RESEARCH AND DEVELOPMENT
The Company maintains a staff of approximately 90 programmers, systems
analysts, quality assurance analysts and documentation specialists who monitor
developments in the computer software and health care industries and who
continuously work to enhance the Company's systems. The Company's research and
development expenses were approximately $6.7, $5.7 and $2.9 million for the
years ended December 31, 1997, 1996 and 1995, respectively. In addition, the
Company incurred approximately $8.1 million of purchased in-process research and
development expense in 1997 related to the Dezine Acquisition and $12.6 million
in 1996 related to the acquisition of InfoMed Holdings, Inc. ("IMHI").
STAT2 system research and development plans include upgrading key
modules to a graphical user interface. The Company's NAHC IS system is scheduled
for replacement by SC Synergy; therefore, no significant enhancements are
planned for this system. SC STATScan is being enhanced with data capture
capabilities which will allow a customer to eliminate duplicate entry of key
clinical data as well as increased inquiry capabilities.
The Company has additional research and development activities underway
to make certain product functionality web-enabled. Additionally, the Company
plans to develop or enhance interface capabilities between all of its software
products.
The Company recognizes the need to respond to the rapid technological
change that is occurring in the software and health care industries. There can
be no assurance, however, that the Company will be able to develop products on a
timely basis or that its future products will fully address the needs of its
current or prospective customers.
COMPETITION
Competition in the market for home health care information systems and
services is intense and is expected to increase. The Company believes that the
primary factors affecting competition are system performance and reliability,
customer support, service, system flexibility and ease of use, pricing,
potential for providing enhancements, reputation and financial stability. The
Company's competitors include other providers of home health care information
systems and services, management companies and home health care consulting
firms. Furthermore, other major health care information companies not presently
offering home health care information systems, or major information system
companies not currently in the health care industry, could develop the
technology and enter the Company's markets. The Company believes its most
significant competitors are Delta Health Systems (owned by Shared Medical
Systems Corp.), Springfield Products Group (formerly known as Management
Software, Inc. and owned by HBO & Company), Patient Care Technologies, Inc.
(partially owned by Meditec), Home Care Information Systems, Inc. (owned by
Medic Computer Systems, Inc.) and the home health care management division of
Olsten Corp. Increased competition could result in price reductions, reduced
gross margins and loss of market share, any of which could materially adversely
affect the Company's business, financial condition and results of operations. In
addition, many of the Company's competitors and potential competitors have
significantly greater financial, technical, product development, marketing and
other resources and market recognition than the Company. Many of the Company's
competitors also currently have, or may develop or acquire, substantial
installed customer bases in the home health care industry. As a result of these
factors, the Company's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their systems and services
than the Company. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition and results of operations.
11
<PAGE> 15
PROPRIETARY RIGHTS AND PRODUCT PROTECTION
The Company owns the copyrights on its STAT2 system. The Company also
has pending applications to register trademarks related to its MAPP products.
The Company depends upon a combination of trade secret, copyright and trademark
laws, license agreements, nondisclosure and other contractual provisions and
various security measures to protect its proprietary rights. There can be no
assurance that the legal protections afforded to the Company or the precautions
taken by the Company will be adequate to prevent misappropriation of the
Company's technology. In addition, these protections do not prevent independent
third-party development of functionally equivalent or superior technologies,
systems or services, or the obtaining of a patent with respect to the Company's
technology by third parties. Any infringement or misappropriation of the
Company's proprietary software could have a material adverse effect on the
Company. As the number of home health care software information systems
increases and the functionality of these systems further overlap, health care
information systems may increasingly become subject to infringement claims.
Although there has been no litigation with respect to such claims, there can be
no assurance that the Company will not be subject to litigation in the future or
additional infringement claims. The Company believes that its current systems
and products do not infringe on the patent or trademark rights of any third
parties. There has, however, been substantial litigation and uncertainty
regarding copyright, patent and other intellectual property rights involving
computer software companies and there can be no assurance that the Company will
prevail in any infringement litigation brought against it. Any claims or
litigation, with or without merit, could be costly and could result in a
diversion of management's attention which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Adverse determinations in such claims or litigation may require the Company to
cease selling certain systems or products, obtain a license and/or pay damages,
any of which could also have a material adverse effect on the Company's
business, financial condition and results of operations.
GOVERNMENT REGULATION AND HEALTH CARE REFORM
The health care industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operations
of home health care organizations. During the past several years, the United
States health care industry has been subject to an increase in governmental
regulation of, among other things, reimbursement rates and certain proposals to
reform various aspects of the United States health care system have periodically
been considered by Congress. These proposals may result in increased government
involvement in home health care and otherwise change the operating environment
for the Company's customers. Home health care organizations may react to these
proposals and the uncertainty surrounding such proposals by curtailing or
deferring investments in the Company's systems and services. The Company cannot
predict what impact, if any, such factors might have on its business, financial
condition and results of operations.
The confidentiality of patient records and the circumstances under
which such records may be released for inclusion in databases maintained on the
Company's systems are subject to substantial regulation by state governments and
certain federal legislation governing specialized medical information and
records. Although compliance with these laws and regulations is principally the
responsibility of the hospital, physician or other home health care provider
with access to the Company's information systems, regulations governing patient
confidentiality rights are evolving rapidly. For example, the Health Insurance
Portability and Accountability Act of 1996 includes provisions directing the
Secretary of the Department of Health and Human Services to adopt standards
governing the electronic transmission of data in connection with a number of
transactions involving health information, including submission of health
claims. These standards are to cover security measures and safeguards with
respect to health information, as well as standardization of data, assignment of
identifiers and authentication of electronic signatures. Additional legislation
governing the dissemination of medical record information has been proposed at
both the state and federal level. This legislation may require holders of such
information to implement additional security measures which may be difficult
12
<PAGE> 16
to implement and costly to the Company. There can be no assurance that changes
to state or federal laws and regulations will not materially restrict the
ability of home health care providers to submit information from patient records
to the Company's systems or impose requirements which are incompatible with the
Company's current systems.
The United States Food and Drug Administration (the "FDA") is
responsible for assuring the safety and effectiveness of medical devices under
the Federal Food, Drug and Cosmetic Act. Computer products are subject to
regulation when they are used or are intended to be used in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment or prevention
of disease, or are intended to affect the structure or function of the body.
Although the Company believes that its systems are not subject to FDA
regulation, the FDA could determine in the future that predictive applications
of the Company's systems could make them clinical decision tools subject to FDA
regulation. Compliance with FDA regulations could be burdensome, time consuming
and expensive. The Company also could become subject to future legislation and
regulations concerning the manufacture and marketing of medical devices and
health care information systems. These could increase the costs and time
necessary to market new systems and could affect the Company in other respects
not presently foreseeable. The Company cannot predict the effect of possible
future legislation and regulation.
EMPLOYEES
As of March 1, 1998, the Company employed approximately 415
individuals. The Company believes that its future success depends in large part
upon recruiting, motivating and retaining highly skilled and qualified employees
in all aspects of the Company's business. None of the Company's employees is
represented by a labor union. The Company believes that its employee relations
are good.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 6600 Powers
Ferry Road, Atlanta, Georgia 30339. The principal executive offices consist of
approximately 56,924 square feet, of which approximately 49,162 square feet are
leased directly from the owner of the office building in which the Company's
principal executive offices are located pursuant to a lease expiring on December
31, 2002 (the "Corporate Headquarters Office Building Lease"), and of which
approximately 7,762 square feet are subleased pursuant to a sublease expiring on
February 28, 2001 (the "Corporate Headquarters Sublease"). Upon the expiration
of the Corporate Headquarters Sublease, the space subleased thereunder will be
leased directly from the office building owner pursuant to the Corporate
Headquarters Building Lease.
The Company also leases approximately 20,291 square feet of office
space in Pompano Beach, Florida pursuant to a lease that expires on December 31,
2000, and approximately 6,500 square feet of office space in Hamden, Connecticut
pursuant to a lease that expires on December 31, 2002. The landlords of both of
these offices are companies comprised of certain directors and related parties
of the Company. See "Item 13. Certain Relationships and Related Transactions."
In addition, the Company leases approximately 8,540 square feet of office space
in East Brunswick, New Jersey, and approximately 7,900 square feet of office
space in Sugar Land, Texas pursuant to leases that both expire on September 30,
2000. Finally, the Company leases small offices in Westborough, Massachusetts,
San Diego, California, Irving, Texas and Jacksonville, Florida.
The Company believes that its present facilities are adequate to meet
the Company's current and foreseeable needs.
13
<PAGE> 17
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is currently a party to
any legal proceedings which would be material to the business or financial
condition of the Company on a consolidated basis. The Company was, however,
served on July 17, 1997 with an administrative subpoena issued by the United
States Department of Health and Human Services, Office of Inspector General. In
connection with that subpoena, the Department of Justice ("DOJ") has advised the
Company that certain aspects of the Company's past relationship with affiliates
of Columbia/HCA are within the scope of an ongoing grand jury investigation.
However, the DOJ has confirmed to the Company that neither the Company, nor any
of its officers, directors or employees, is a target in this investigation and,
based upon the information known to the DOJ at this time, neither the Company,
nor any of its officers, directors or employees, is likely to become one. The
Company is cooperating fully with the government and does not currently believe
that this inquiry will have any material effect on its overall business or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE MANAGEMENT OF THE REGISTRANT
<TABLE>
<S> <C> <C>
Gary M. Bremer .................. 58 Chairman of the Board
James R. Henderson .............. 52 President and Chief Executive
Officer
William J. Simione, Jr. ......... 56 Vice Chairman of the Board
and Executive Vice President
Gary W. Rasmussen ............... 43 Chief Operating Officer
Lori Nadler Siegel............... 34 Chief Financial Officer
and Treasurer
M. Henry Day, Jr. ............... 44 General Counsel and Secretary
</TABLE>
GARY M. BREMER has served as Chairman of the Board of the Company since
October 8, 1996, and from October 8, 1996 to April 10, 1997 also served as the
Company's Chief Executive Officer. From 1978 until October 1996, Mr. Bremer
served as President and Chief Executive Officer of Central Health Holding
Company, Inc. ("CHHC") and Central Health Services, Inc., a subsidiary of CHHC
("CHS"). Mr. Bremer has 23 years of experience in the home health care industry.
JAMES R. HENDERSON has served as President and as a director of the
Company since October 8, 1996, and since April 10, 1997 has also served as the
Company's Chief Executive Officer. From November 1995 to October 1996, Mr.
Henderson acted as a private consultant to various companies in the information
services industry, and from July 1992 to November 1995, Mr. Henderson served as
Executive Vice President for National Data Corporation, an information services
company. From February 1991 to June 1992, he served as Executive Vice President,
Worldwide Sales, Marketing and Operations, of QMS, Inc., a computer printer
company. From 1988 to January 1991, he served as Executive Vice President of Dun
and Bradstreet Software Services, Inc., a client server software solutions
company. Mr. Henderson has 31 years of experience in the information services
industry.
WILLIAM J. SIMIONE, JR. is a certified public accountant who has served
as Vice Chairman of the Board and Executive Vice President of the Company since
October 8, 1996. From January 1996 until October 1996, Mr. Simione served as the
President of Simione Central, Inc., a wholly-owned subsidiary of the Company.
From January 1975 until December 1995, Mr. Simione was Managing Partner of the
Home Health Care Consulting Division of Simione & Simione, CPA's ("Simione &
Simione"). Since September 1995, Mr. Simione has also served as a director and
an audit committee member of Personnel Group of America, Inc., a leading
provider of information technology services and commercial staffing solutions.
Mr. Simione has 32 years of experience in the home health care industry.
14
<PAGE> 18
GARY W. RASMUSSEN is a certified public accountant who has served as
Chief Operating Officer of the Company since October 8, 1996. From June 1996 to
October 1996, Mr. Rasmussen served as Chief Operating Officer of CHHC. He also
served as Chief Financial Officer of CHHC from January 1996 to May 1996, and as
Chief Financial Officer of CHS from October 1994 to December 1995. Mr. Rasmussen
served as Chief Financial Officer of Surgical Health Corporation, an outpatient
surgery center company, from May 1992 until September 1994, and was an Audit
Partner with Ernst & Young LLP from October 1987 to May 1992.
LORI NADLER SIEGEL is a certified public accountant who has served as
the Chief Financial Officer and Treasurer of the Company since October 8, 1996.
From June 1996 to October 1996, Ms. Siegel served as Chief Financial Officer of
CHHC. From January 1995 until May 1996, Ms. Siegel served as Assistant Vice
President of Finance for CHS after holding various accounting and finance
positions at CHS from July 1991 until December 1994.
M. HENRY DAY, JR. has served as General Counsel and Secretary of the
Company since January 2, 1998. From November 4, 1997 to December 31, 1997, Mr.
Day served as Vice President and Associate General Counsel of Paragon Health
Network, Inc., a leading provider of post-acute care services and the successor
corporation to the merger of GranCare, Inc. and Living Centers of America, Inc.
From September 1994 to November 4, 1997, Mr. Day served as Vice President,
Assistant General Counsel and Assistant Secretary of GranCare, Inc. From March
1993 to September 1994, Mr. Day served as General Counsel of Life Care Centers
of America, Inc., a privately-owned provider of post-acute care services.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of the Company, par value $.001 per share (the "Common
Stock") has been traded on the Nasdaq Stock Market under the symbol SCHI since
June 30, 1997. Prior to June 30, 1997, the Common Stock was traded on the OTC
Bulletin Board under the symbol SCHI from December 24, 1996 to June 29, 1997,
and under the symbol IMHI from December 21, 1995 to December 24, 1996. As of
March 18, 1998, the Common Stock was held by approximately 132 holders of
record. The table below sets forth the reported quarterly high and low bid
prices for the Common Stock on the OTC Bulletin Board for the period January 1,
1996 to June 29, 1997, and the reported quarterly high and low sales prices for
the Common Stock on the Nasdaq Stock Market for the period June 30, 1997 to
December 31, 1997. The information set forth below does not include retail
mark-ups, mark-downs or commissions. In addition, over-the-counter prices
reflect inter-dealer prices and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1997(1) 1996
---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $ 7 3/4 4 1/4 $1 3/4 3/4
Second Quarter 6 3/4 5 3 1/4 7/8
Third Quarter 14 3/4 9 l/2 5 3/8 1 7/8
Fourth Quarter 14 1/8 7 6 5/8 4
</TABLE>
(1)The quarterly high and low sales prices for the third and fourth
quarters of 1997 reflect the value of the Common Stock following a 1-for-2
reverse stock split effected by the Company on June 30, 1997.
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain future earnings, if any, for
future growth and does not anticipate paying any cash dividends in the
foreseeable future.
15
<PAGE> 19
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
the Company. The selected consolidated financial data in the table as of and for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 are derived from
the audited consolidated financial statements of the Company. The selected
consolidated financial data for the year ended December 31, 1996 includes the
operating results of Simione & Simione acquired effective January 1, 1996 and
IMHI for the period October 8, 1996 (the effective date of the acquisition of
IMHI (the "IMHI Acquisition")) to December 31, 1996. The selected consolidated
financial data as of and for the year ended December 31, 1997 includes the
operating results of Dezine for the period December 1, 1997 (the effective date
of the Dezine Acquisition) to December 31, 1997. As of and for the years ended
December 31, 1993, 1994 and 1995, the Company was a subsidiary of CHHC. See
Notes 1 and 2 to Notes to Consolidated Financial Statements for a description of
the Company's history. The data should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto of the
Company included herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 20
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996(2) 1995(2) 1994 1993
------- ------- ------- ------- ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Software and services $27,356 $15,308 $ 5,387 $ 4,875 $1,891
Agency support 14,680 7,324 7,835 7,235 3,317
Consulting services 4,909 3,363 -- -- --
------- ------- ------- ------- ------
Total net revenues 46,945 25,995 13,222 12,110 5,208
Costs and expenses:
Costs of revenues 22,715 14,698 8,154 7,694 4,328
Selling, general and administrative 12,508 7,037 3,095 2,959 810
Research and development 6,670 5,677 2,929 2,165 276
Amortization and depreciation 1,714 785 -- -- --
Purchased in-process research and
development 8,127 12,574 -- -- --
Severance and other
restructuring charges -- 1,215 -- -- --
------- ------- ------- ------- ------
Total costs and expenses 51,734 41,986 14,178 12,818 5,414
------- ------- ------- ------- ------
Loss from operations (4,789) (15,991) (956) (708) (206)
Other income (expense):
Interest expense (215) (115) -- -- --
Interest and other income 490 207 -- -- --
------- ------- ------- ------- ------
Net loss $(4,514) $(15,899) $ (956) $ (708) $ (206)
======= ======= ======= ======= ======
Net loss per share - basic
and diluted (1), (3) $ (0.63) $ (3.71) $ (0.32) $ (0.24) $(0.07)
======= ======= ======= ======= ======
Weighted average common shares
- basic and diluted (1), (3) 7,164 4,288 2,995 2,995 2,995
======= ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------
1997 1996 1995 1994 1993
------- ------- ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 8,267 $ 3,385 $ 323 $ 463 $2,620
Working capital (deficit) 9,019 (1,203) 189 (837) (130)
Total assets 28,919 18,776 1,828 1,340 2,907
Long-term obligations -- 2,986 -- -- --
Shareholders' equity (deficit) 19,489 4,680 650 (837) (130)
</TABLE>
(1) The number of shares used to compute the net loss per share reflects
the 2,994,856 shares issued in the reorganization of the Company on
January 17, 1996. See Notes 1 and 12 in the Notes to Consolidated
Financial Statements.
(2) Certain amounts in the 1996 and 1995 Statements of Operations have been
reclassified to conform with the 1997 presentation.
(3) All amounts have been restated in accordance with SFAS 128.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition
and results of operation of the Company for the three years ended December 31,
1997 and certain factors that will effect the Company's financial condition.
OVERVIEW
The Company is a leading provider of integrated systems and services
designed to enable home health care providers to more effectively operate their
businesses and compete in a managed care environment. The Company offers several
comprehensive and flexible software solutions, each of which provide a core
platform of software applications and which incorporate selected specialized
modules based on customer demand. These software solutions are designed to
enable customers to generate and utilize comprehensive financial, operational
and clinical information and are made available to customers in two
arrangements: a Shared Resource Solution or an In-House Solution.
17
<PAGE> 21
The Company's Shared Resource Solution offers customers an outsourcing
opportunity which incorporates the Company's proprietary software. Under this
arrangement, the Company operates a data center which stores customer data and
allows real-time, secure access through a wide area communications network. The
Company's In-House Solution is licensed to customers for use on their own
computer systems. In addition to its software solutions and related software
support services, the Company's home health care consulting services assist
providers in addressing the challenges of reducing costs, maintaining quality,
streamlining operations and re-engineering organizational structures. The
Company also provides comprehensive agency support services which include
administrative, billing and collection, training, reimbursement and financial
management services, among others. During 1997, the Company had over 2,100
customers nationwide.
The Company enters into multi-year contracts (generally 3 to 5 years)
with its customers in connection with its Shared Resource Solution and its
provision of agency support services. In general, these contracts provide for
the payment of monthly fees based on the number of billed home care visits made
by the customer or for its Shared Resource Solution customers on the number of
users of the system. Revenues derived under these contracts are recognized
monthly as the related services are rendered and typically range from several
hundred thousand dollars to several million dollars per year. As a result, the
loss of any of these contracts could have a material adverse impact on the
Company's business, financial condition and results of operations.
The Company sells its In-House Solution pursuant to non-exclusive
license agreements which provide for the payment of a one-time license fee. In
accordance with SOP 91-1, these revenues are recognized when products are
delivered and the collectibility of fees is probable, provided that no
significant obligations remain under the contract. Revenues derived from the
sale of software products requiring significant modification or customization
are recognized based upon the percentage of completion method. The price of the
Company's In-House Solution varies depending on the number of software modules
licensed and the number of users accessing the system and can range from ten
thousand dollars to a few million dollars. The Company generally requires
payment of a deposit upon the signing of a customer order as well as certain
additional payments prior to delivery. As a result, the Company's balance sheet
reflects significant customer deposits.
Third party software and computer hardware revenues are recognized when
the related products are shipped. Software support agreements are generally
renewable for one year periods, and revenue derived from such agreements is
recognized ratably over the period of the agreements. The Company has
historically maintained high renewal rates with respect to its software support
agreements. The Company charges for software implementation, training and
technical consulting services as well as management consulting services on an
hourly or daily basis. The price of such services varies depending on the level
and expertise of the related professionals. These revenues are recognized as
the related services are performed.
The Company typically experiences long sales cycles for information
systems and agency support services, which may extend up to one year. In
addition, the implementation period related to its information systems can range
from three months to one year.
The Company defines recurring revenues as revenues derived under
multi-year contracts in addition to annual software support agreements. These
revenues were approximately $28.2 million, or 60% of total net revenues for the
year ended December 31, 1997 and $7.4 million, or 29% of total net revenues, for
the year ended December 31, 1996. The Company anticipates that recurring
revenues should remain constant as a percentage of its total net revenues in the
foreseeable future.
For the ten months ended October 31, 1996, and for the year ended
December 31, 1995, 63% and 69%, respectively, of the Company's total net
revenues were derived from contracts with home health care agencies
wholly-owned by CHHC.
18
<PAGE> 22
These contracts were terminated October 31, 1996, in connection with the sale of
CHHC to Columbia/HCA. Revenues derived from these contracts were recorded in an
amount equal to the costs of the services provided, and, as a result, the
Company recognized no operating profit under these contracts. Subsequent to the
sale of CHHC to Columbia/HCA, affiliates of Columbia/HCA entered into multi-year
contracts with the Company to provide its Shared Resource Solution as well as
agency support services to certain of the home health care agencies formerly
owned by CHHC. The Company believes that its current contracts with the
Columbia/HCA affiliates were negotiated on an arms-length basis. The historical
results of operations attributable to the terminated CHHC contracts may not
therefore be indicative of future results of operations. For the year ended
December 31, 1997 and the three months ended December 31, 1996, the Company
derived 48% and 39%, respectively, of its total net revenues from contracts with
affiliates of Columbia/HCA. The loss of any of the Columbia/HCA contracts could
have a material adverse impact on the Company's business, financial condition
and results of operations.
The Company believes that continued development and enhancement of its
software systems is critical to its future success, and anticipates that the
total amount of research and development expense will continue to increase, but
should decrease as a percentage of total net revenues as the Company grows its
revenues. Costs incurred to establish the technological feasibility of computer
software products are expensed as incurred. The Company's policy is to
capitalize costs incurred between the point of establishing technological
feasibility and general release only when such costs are material. As of
December 31, 1997 and 1996, the Company capitalized $616,000 and $0,
respectively, of computer software development costs.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, certain items
from the consolidated statements of operations expressed as a percentage of
total net revenues. The Company's historical operating results are not
necessarily indicative of the results for any future period.
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19
<PAGE> 23
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Percentage of Net Revenues:
Net revenues:
Software and services 58.3 % 58.9 % 40.7 %
Agency support 31.3 28.2 59.3
Consulting services 10.4 12.9 --
----- ----- -----
Total net revenues 100.0 100.0 100.0
Costs and expenses:
Costs of revenues 48.4 56.5 61.7
Selling, general and administrative 26.6 27.1 23.4
Research and development 14.2 21.8 22.1
Amortization and depreciation 3.6 3.0 --
Purchased in-process research and
development 17.3 48.4 --
Severance and other restructuring
charges -- 4.7 --
----- ----- -----
Total costs and expenses 110.1 161.5 107.2
----- ----- -----
Loss from operations (10.1) (61.5) (7.2)
Other income (expense):
Interest expense (0.5) (0.5) --
Interest and other income 1.0 0.8 --
===== ===== =====
Net loss (9.6)% (61.2)% (7.2)%
===== ===== =====
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Revenues. Total net revenues increased $20.9 million, or 80.4%, to
$46.9 million in 1997 from $26.0 million in 1996. This increase in total net
revenues includes $11.7 million attributable to the business acquired in the
IMHI Acquisition which was completed in October 1996, $16.4 million in
additional revenues from contracts with affiliates of Columbia/HCA and a
decrease of $12.0 million resulting from the termination of contracts with home
health care agencies wholly-owned by CHHC. The remaining increase was
principally attributable to revenues from new customers.
Net revenues from Software and Services include revenues from the
Company's Shared Resource and In-House Solutions including software licenses,
service fees, computer hardware sales, software support, implementation,
training and technical consulting services. These revenues increased $12.1
million, or 79.1%, to $27.4 million in 1997 from $15.3 million in 1996. This
increase is primarily attributable to the business acquired in the IMHI
Acquisition.
Net revenues from Agency Support increased $7.4 million, or 101.4%, to
$14.7 million in 1997 from $7.3 million in 1996. This increase includes $10.0
million in additional revenues from contracts with affiliates of Columbia/HCA
and a decrease of $1.3 million resulting from the termination of contracts with
home health care agencies wholly-owned by CHHC.
20
<PAGE> 24
Net revenues from Consulting Services increased $1.5 million, or 44.1%,
to $4.9 million in 1997 from $3.4 million in 1996 and was attributable to
revenues from new customers.
Cost of Revenues. Cost of revenues increased $8.0 million, or 54.4%, to
$22.7 million in 1997 from $14.7 million in 1996. As a percentage of total net
revenues, cost of revenues decreased to 48.4% in 1997 from 56.5% in 1996. This
dollar increase includes $3.3 million in costs attributable to the business
acquired in the IMHI Acquisition and the remaining increase primarily results
from the increased cost of personnel and the cost of computer and communication
technology. The reduction as a percentage of total net revenues is principally
due to the higher margins related to the business acquired in the IMHI
Acquisition, and increased margins derived from new customers.
Selling, General and Administrative. Selling, general and
administrative expenses increased $5.5 million to $12.5 million in 1997 from
$7.0 million in 1996. As a percentage of total net revenues, selling, general
and administrative expenses were 26.6% in 1997 and 27.1% in 1996. This dollar
increase was attributable to approximately $3.8 million in costs related to the
business acquired in the IMHI Acquisition and the remainder principally relates
to increased administrative personnel to support growth.
Research and Development. Research and development expenses increased
$1 million to $6.7 million in 1997 from $5.7 million in 1996. As a percentage of
total net revenues, research and development expenses decreased to 14.2% in 1997
from 21.8% in 1996. This dollar increase was attributable principally to the
business acquired in the IMHI Acquisition. During 1997, the Company capitalized
approximately $600,000 of software development costs. The Company anticipates
that the total dollar amount of research and development expense will continue
to increase although such expenses should not increase as a percentage of total
net revenues assuming that the Company's revenues continue to increase in the
future.
Amortization and Depreciation. Amortization and depreciation increased
by approximately $900,000 to $1.7 million in 1997 from $800,000 in 1996. This
increase includes approximately $600,000 of amortization expenses attributable
to the IMHI Acquisition in October 1996 and approximately $300,000 associated
with the depreciation and amortization of purchased software, furniture, and
equipment acquired in 1997.
Purchased In-Process Research and Development. In connection with the
Dezine Acquisition in 1997, the purchase price of $9.4 million was allocated
based on relative fair value of the assets acquired and liabilities assumed.
Pursuant to a study conducted by an independent third party valuation firm, $8.1
million related to the Dezine Acquisition purchase price was allocated to
purchased in-process research and development and, in accordance with generally
accepted accounting principles, was charged to operations as it was not deemed
to have reached technological feasibility and had no alternative future use.
Additionally, the Company has a two year plan for the expansion of the DME
product line, to include a Windows based graphical user interface/open system.
It is anticipated that the Company will incur approximately $1.5 to $2.5 million
of direct research and development expenses in connection with the completion of
its DME development plans.
In connection with the IMHI Acquisition in 1996, the purchase price of
$16.8 million was allocated based on relative fair value of the assets acquired
and liabilities assumed. Pursuant to a study conducted by an independent third
party valuation firm, $12.6 million related to the IMHI Acquisition purchase
price was allocated to purchased in-process research and development and, in
accordance with generally accepted accounting principles, was charged to
operations as it was not deemed to have reached technological feasibility and
had no alternative future use. Subsequent to the IMHI Acquisition, the Company
completed the development of certain in-process versions of software products,
SC STATScan and SC TELTime, and has scheduled further enhancements to each of
these products.
21
<PAGE> 25
Severance and Other Restructuring Charges. As a result of the change in
focus of the Company's business from providing services to affiliates of CHHC,
the Company incurred severance and certain other restructuring costs totaling
$1.2 million in the fourth quarter of 1996. These expenses primarily relate to
the severance of several key employees and costs to buyout a lease of equipment
no longer useful to the Company.
Other Income (Expense). Interest expense relates to the borrowings
under the Company's line of credit agreements and capital lease obligations and
increased by $100,000 to $200,000 in 1997 from $100,000 in 1996. This increase
is principally attributable to the increased borrowings under the line of credit
agreements. Interest and other income consist principally of interest income
related to the Company's short term cash and restricted cash investments and
increased by $300,000 to $500,000 in 1997 from $200,000 in 1996. This increase
is principally attributable to the interest received on the $17.7 million in net
proceeds from the issuance and sale of 2,000,000 shares of Common Stock at
$10.00 per share in July 1997, pursuant to a Registration Statement on Form S-1
filed with the Securities and Exchange Commission.
Income Taxes. The Company has not incurred or paid any income taxes
since its inception. At December 31, 1997, the Company had net operating loss
("NOL") carryforwards for federal and state income tax purposes of $4.6 million,
such losses expire $1,824,000 in 2010 and $2,816,000 in 2011, if not utilized.
The Company also has research and development and alternative minimum tax
credits ("tax credits") of approximately $96,000 available to reduce future
income tax liabilities. The Tax Reform Act of 1986, as amended, contains
provisions that limit the NOL and tax credit carryforwards available to be used
in any given year when certain events occur, including additional sales of
equity securities and other changes in ownership. As a result, certain of the
NOL and tax credit carryforwards may be limited as to their utilization in any
year. The Company has concluded that it is more likely than not that these NOL
and tax credit carryforwards will not be realized based on a weighing of
available evidence at December 31, 1997, and as a result a 100% deferred tax
valuation allowance has been recorded against these assets. Of the $4.4 million
net deferred tax asset at December 31, 1997, approximately $500,000 relates to
the IMHI Acquisition and, if and when realized, will result in a credit to
intangible assets recorded in the acquisition.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Revenues. Total net revenues increased $12.8 million, or 97.0%, to
$26.0 million in 1996 from $13.2 million in 1995. This increase in total net
revenues includes $3.4 million attributable to the business acquired in the
Simione & Simione acquisition (the "Simione Acquisition") which was completed in
January 1996, $2.4 million attributable to the business acquired in the IMHI
Acquisition which was completed in October 1996, a net increase of $3.0 million
in revenues from contracts with affiliates of CHHC, and the remaining increase
principally attributable to revenues from new customers.
Net revenues from Software and Services include revenues from the
Company's Shared Resource and In-House Solutions including software licenses,
service fees, computer hardware sales, software support, implementation,
training and technical consulting services. These revenues increased $9.9
million, or 183.3%, to $15.3 million in 1996 from $5.4 million in 1995. This
increase includes $2.5 million attributable to the business acquired in the IMHI
Acquisition, $5.4 million from contracts with affiliates of CHHC, and the
remaining increase primarily attributable to revenues from new customers.
Net revenues from Agency Support decreased $500,000, or 6.4%, to $7.3
million in 1996 from $7.8 million in 1995. This decrease includes an increase of
$3.8 million in revenues from new and existing customers offset by decreases of
$2.4 million from agency support revenues from affiliates of CHHC, and $1.9
million in agency support revenues from Healthfield, Inc. See Note 15 to Notes
to Consolidated Financial Statements of the Company.
22
<PAGE> 26
Net revenues from Consulting Services were approximately $3.4 million
and were attributable entirely to the business acquired in the Simione
Acquisition.
Cost of Revenues. Cost of revenues increased $6.5 million, or 79.3%, to
$14.7 million in 1996 from $8.2 million in 1995. As a percentage of total net
revenues, total cost of revenues decreased to 56.5% in 1996 from 61.7% in 1995.
This dollar increase includes $2.4 million in costs attributable to the business
acquired in the Simione Acquisition, approximately $800,000 in costs
attributable to the business acquired in the IMHI Acquisition and the remaining
increase primarily resulting from the increased cost of computer and
communication technology.
Selling, General and Administrative. Selling, general and
administrative expenses increased $3.9 million to $7.0 million in 1996 from $3.1
million in 1995. As a percentage of total net revenues, selling, general and
administrative expenses were 27.1% in 1996 compared with 23.4% in 1995. These
increases were attributable principally to approximately $1.1 million in costs
related to the business acquired in the IMHI Acquisition and an increase of $1.2
million in sales and marketing costs primarily associated with the marketing
rollout of the Company's NAHC IS product which was released in late 1996. The
remaining increase relates to additional salary and benefit costs as well as
administrative infrastructure costs associated with establishing the Company as
a separate business entity from CHHC.
Research and Development. Research and development expenses increased
$2.8 million to $5.7 million in 1996 from $2.9 million in 1995. As a percentage
of total net revenues, research and development expenses remained relatively
constant at 21.8% in 1996 and 22.1% in 1995. The dollar increase was
attributable principally to $1.2 million in increased salary and benefit costs
associated with the Company's software enhancement efforts and approximately
$400,000 related to the business acquired in the IMHI Acquisition.
Amortization and Depreciation. Amortization and depreciation for 1996
includes approximately $200,000 attributable to the Simione Acquisition in
January 1996, approximately $200,000, representing three months' amortization,
attributable to the IMHI Acquisition in October 1996, and approximately $400,000
associated with the depreciation and amortization of purchased software,
furniture, and equipment acquired in 1996.
Purchased In-Process Research and Development. In connection with the
IMHI Acquisition, the purchase price of $16.8 million was allocated based on
relative fair value of the assets acquired and liabilities assumed. Pursuant to
a study conducted by an independent third party valuation firm, $12.6 million of
the purchase price was allocated to purchased in-process research and
development and, in accordance with generally accepted accounting principles,
was charged to operations as it was not deemed to have reached technological
feasibility and had no alternative future use.
Severance and Other Restructuring Charges. As a result of the change in
focus of the Company's business from providing services to affiliates of CHHC,
the Company incurred severance and certain other restructuring costs totaling
$1.2 million in the fourth quarter of 1996. These expenses primarily relate to
the severance of several key employees and costs to buyout a lease of equipment
no longer useful to the Company.
Other Income (Expense). Interest expense in 1996 of approximately
$100,000 resulted from borrowings under the Company's line of credit agreements
and capital lease obligations. Interest income of approximately $200,000 in 1996
resulted from interest earned on stock subscription receivables and cash
balances.
Income Taxes. At December 31, 1996, the Company had net operating loss
("NOL") carryforwards for federal and state income tax purposes of $6.0 million,
which will expire at various dates through 2011, if not utilized. The Company
also had research and development and alternative minimum tax credits ("tax
23
<PAGE> 27
credits") of approximately $96,000 available to reduce future income tax
liabilities. Certain of the NOL and tax credit carryforwards may be limited as
to their utilization in any year. The Company concluded that it is more likely
than not that these NOL and tax credit carryforwards would not be realized based
on a weighing of available evidence at December 31, 1996, and as a result a 100%
deferred tax valuation allowance was recorded against these assets.
SELECTED QUARTERLY FINANCIAL RESULTS
The Company's quarterly operating results have been and will likely
continue to be subject to significant fluctuations. The Company believes that
the timing of potential future acquisitions may cause fluctuations in its
quarterly operating results. Additionally, revenues can be expected to vary
significantly as a result of acceleration or delay of system implementations due
to customer requirements or other factors beyond the Company's control,
fluctuations in demand for existing systems and services and the Company's
ability to manage successfully any future growth. The sales cycles related to
its systems offerings and agency support contracts can be long and difficult to
predict, resulting in variability of revenues. The unpredictability of revenues
could in any quarter result in a shortfall relative to quarterly expectations.
Many other factors may contribute to fluctuations in the Company's operating
results. Accordingly, the Company believes that period-to-period comparisons of
results of operations are not necessarily meaningful and should not be relied
upon as any indication of future performance.
The following table sets forth certain unaudited consolidated quarterly
financial data for each of the eight quarters for the period ended December 31,
1997. This information is unaudited, but, in the opinion of the Company's
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of the information in accordance
with generally accepted accounting principles. These quarterly results of
operations are not necessarily indicative of future operating results.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE> 28
<TABLE>
<CAPTION>
FISCAL YEAR 1997(1) FISCAL YEAR 1996(1)
-------------------------------------------- --------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Software and services $ 5,682 $ 6,480 $ 7,467 $ 7,727 $ 3,362 $ 3,302 $ 3,680 $ 4,964
Agency Support 4,552 3,615 3,435 3,078 946 1,079 995 4,304
Consulting services 1,194 1,145 1,207 1,363 858 966 844 695
------- ------- ------- ------- ------- ------- ------- --------
Total net revenues 11,428 11,240 12,109 12,168 5,166 5,347 5,519 9,963
Costs and expenses:
Costs of revenues 5,473 5,142 5,516 6,584 3,219 3,213 3,254 5,012
Selling, general and
administrative 3,083 3,381 3,320 2,725 1,138 1,164 1,354 3,381
Research and development 1,756 1,686 1,731 1,496 1,114 1,234 1,333 1,996
Amortization and depreciation 424 403 411 476 104 128 130 423
Purchased in-process research
and development -- -- -- 8,127 -- -- -- 12,574
Severance and other
restructuring charges -- -- -- -- -- -- -- 1,215
------- ------- ------- ------- ------- ------- ------- --------
Total costs and expenses 10,736 10,612 10,978 19,408 5,575 5,739 6,071 24,601
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) from operations 692 628 1,131 (7,240) (409) (392) (552) (14,638)
Other income (expense):
Interest expense (77) (68) (41) (29) (4) (21) (27) (63)
Interest and other income 28 17 202 243 18 68 59 62
------- ------- ------- ------- ------- ------- ------- --------
Net income (loss) $ 643 $ 577 $ 1,292 $(7,026) $ (395) $ (345) $ (520) $(14,639)
======= ======= ======= ======= ======= ======= ======= ========
Net income (loss) per share
- basic (2) $ 0.11 $ 0.10 $ 0.16 $ (0.83) $ (0.12) $ (0.09) $ (0.13) $ (2.47)
======= ======= ======= ======= ======= ======= ======= ========
Weighted average common shares
- basic (2) 5,977 6,027 8,216 8,515 3,284 3,959 3,959 5,926
======= ======= ======= ======= ======= ======= ======= ========
Net income (loss) per share
- diluted (2) $ 0.09 $ 0.08 $ 0.14 $ (0.83) $ (0.12) $ (0.09) $ (0.13) $ (2.47)
======= ======= ======= ======= ======= ======= ======= ========
Weighted average common shares
and common equivalent shares
- diluted (2) 7,364 7,234 9,052 8,515 3,284 3,959 3,959 5,926
======= ======= ======= ======= ======= ======= ======= ========
</TABLE>
(1) Certain amounts in both 1996 and 1997 quarterly statements of
operations have been reclassified to conform with the presentation of
the 1997 audited consolidated financial statements.
(2) All amounts have been restated in accordance with FAS 128.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through its spinoff in January 1996, the Company
principally funded its operations through borrowings of $3.5 million from CHS.
In November 1995, CHHC made a capital contribution of $2.4 million to the
Company which was then used to repay indebtedness owed to CHS. During 1996, the
Company repaid the remaining $1.1 million of indebtedness owed to CHS.
In January 1996, CHHC made a cash capital contribution of $4.0 million
to the Company. Additionally, in March 1996, the Company issued common stock
that netted $3.1 million - $2.2 million of which was collected in 1996 and
$900,000 of which was collected in 1997.
In January 1996, the Company established lines of credit in the
aggregate amount of $2.5 million. These lines of credit had been fully drawn as
of December 31, 1996. During 1997, the Company repaid these lines of credit and
terminated them.
25
<PAGE> 29
In June 1997, the Company established a revolving credit facility
pursuant to which the maximum principal amount at any time outstanding could not
exceed the lesser of $5 million or the "Borrowing Base" (as defined in the
revolving credit facility agreement).
In July 1997, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission and sold 2,000,000 shares of its
Common Stock for $10.00 per share and received approximately $17.7 million in
net cash proceeds. The Company intends to use the net proceeds from this
offering for general corporate purposes and working capital, including potential
strategic acquisitions.
The cumulative proceeds from the Company's equity infusions and debt
financing have provided sufficient funds to support the Company's operating
activities. As of December 31, 1997, the Company had cash and cash equivalents
of $8.3 million.
The Company made capital expenditures (including capital leases)
totaling approximately $1.2 million, $1.3 million and $400,000 during 1997,
1996, and 1995, respectively. In January 1996, the Company completed the Simione
Acquisition for $2.0 million in cash. In October 1996, the Company completed the
IMHI Acquisition resulting in an increased cash balance of approximately
$700,000. In December 1997, the Company completed the Dezine Acquisition for a
purchase price of $9.4 million.
As of December 31, 1997, the Company had working capital of $9.0
million. The Company's current liabilities as of December 31, 1997 include
customer deposits of $1.5 million and unearned revenues of $1.5 million.
The Company believes that its available cash, cash equivalents and cash
to be generated from its future results of operations will be sufficient to meet
the Company's operating requirements, assuming no change in the operation of the
Company's business, for at least the next twelve months.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"), which changes the current method of computing earnings per share.
SFAS 128 requires presentation of basic earnings per share and diluted earnings
per share amounts, as defined. See Note 1 in the Notes to Consolidated Financial
Statements. SFAS 128 is effective for the Company's year ending December 31,
1997, and all prior-period earnings per share data presented have been restated
to conform with the provisions of the new pronouncement.
In June 1997 the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial position. SFAS 130 is effective for fiscal years beginning after
December 15, 1997.
In June 1997 the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 requires that a public business enterprise
report financial and descriptive information about its reportable operating
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 requires reporting segment profit or loss,
certain specific revenue and expense items, and segment assets. It requires
reconciliations of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to corresponding
amounts in the enterprise's general-purpose financial
26
<PAGE> 30
statements. It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and about major customers regardless of whether
that information is used in making operating decisions. SFAS 131 is effective
for financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated.
The Company intends to adopt the provisions of SFAS 130 and 131 in 1998
and does not expect their application to have a material impact on the financial
statements of the Company.
In October 1997 the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2"), which supersedes SOP 91-1 and is effective for transactions
entered into for fiscal years beginning after December 15, 1997. While some
principles remain the same, there are several key differences between the two
pronouncements, including accounting for multiple element arrangements. SOP 97-2
addresses revenue recognition from a conceptual level and does not specifically
provide implementation guidance. The Company is evaluating the impact of
adopting SOP 97-2; however, at this time, the Company believes that this
Statement will have no material impact on the financial statements of the
Company.
YEAR 2000 ISSUE
The Company is in the process of analyzing Year 2000 issues with
respect to the Company's products and software used internally. The Company has
developed and is implementing a plan to resolve Year 2000 compliance issues with
respect to its products. At this time, the Company does not believe that it will
need to modify or replace significant portions of its internally used software
so that its computer systems will function properly with respect to dates in the
Year 2000 and beyond. The Company has initiated discussions with its significant
vendors to ensure that they have appropriate plans to remediate potential Year
2000 issues.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective January 23, 1997, the Company appointed Ernst & Young LLP as
the Company's independent accountants for the fiscal year ended December 31,
1996 and replaced Arthur Andersen LLP. The decision to change accountants was
approved by the Audit Committee of the Board of Directors of the Company acting
pursuant to authority granted by the Board of Directors.
Arthur Andersen LLP's reports on IMHI's Financial Statements during the
three years ended June 30, 1996 contained no adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During the last three fiscal years ended June 30, 1996, there were no
disagreements between IMHI and Arthur Andersen LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen LLP, would have caused it to make a reference to the subject matter of
the disagreements in connection with its reports.
None of the "reportable events" described in Item 304(a)(1)(v) of
Regulation S-K occurred with respect to IMHI during the last three fiscal years
or in the subsequent interim period to the date hereof.
27
<PAGE> 31
During the last three fiscal years and subsequent interim period to the
date hereof, the Company did not consult with Ernst & Young LLP regarding any of
the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
PART III
With the exception of information relating to the executive officers of
the Company which is provided in Part I hereof, all information required by Part
III (Items 10, 11, 12 and 13) is incorporated by reference to the Company's
definitive proxy statement relating to the 1998 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. See Index to Consolidated
Financial Statements on Page F-1 hereof.
2. Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
Certain financial statement schedules have been
omitted because they are not applicable.
3. Exhibits Incorporated by Reference or Filed with this
Report.
The following exhibits are filed as part of this Report. Where such
filing is made by incorporation by reference to a previously filed statement or
report, such statement or report is identified in parentheses.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
2.1 -- Asset Purchase Agreement dated as of December 17, 1997 by and
among DHS Acquisition, L.L.C., the Company, Dezine Healthcare
Solutions, Inc. and Companion Technologies Corporation
(Incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K dated December 31, 1997 as filed
with the Securities and Exchange Commission).
3.1 -- Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-4 (Registration Number 33-57150) as filed
with the Securities and Exchange Commission).
3.2 -- Amendment to the Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-4 (Registration Number
33-57150) as filed with the Securities and Exchange
Commission).
3.3 -- Certificate of Amendment of the Certificate of Incorporation
of Simione Central Holdings, Inc., filed June 30, 1997 with
the Secretary of State of the State of Delaware (Incorporated
by reference to Exhibit 3.3 of the Company's Current Report on
Form 8-K dated July 9, 1997 as filed with the Securities and
Exchange Commission).
3.4 -- Amended and Restated Bylaws of the Company (Incorporated by
reference to Exhibit 3.3 of the Company's Registration
Statement on Form S-1 (Registration Number 333-25551) as filed
with the Securities and Exchange Commission).
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
3.5 -- Certificate of Ownership Merging Simione Central Holdings,
Inc. into InfoMed Holdings, Inc. (Incorporated by reference to
Exhibit 3.5 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
4.1 -- Specimen Stock Certificate of the Company (Incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-1 (Registration Number 333-25551) as filed
with the Securities and Exchange Commission).
4.2 -- See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of the
Company's Certificate of Incorporation and Bylaws governing
the rights of holders of securities of the Company.
4.3 -- Registration Rights Agreement dated October 7, 1996 by and
among InfoMed Holdings, Inc., those stockholders of Simione
Central Holding, Inc. appearing as signatories to the
Registration Rights Agreement, and those stockholders of
InfoMed Holdings, Inc. appearing as signatories to the
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K dated
October 8, 1996 as filed with the Securities and Exchange
Commission).
9.1 -- Form of Simione Central Holding, Inc. Shareholders Voting
Agreement and Irrevocable Proxy dated March 5, 1996 by and
among Howard B. Krone, William J. Simione, Jr., Gary
Rasmussen, G. Blake Bremer, Katherine L. Wetherbee, A. Curtis
Eade, James A. Tramonte, John Isett, Cindy Lumpkin, Douglas E.
Caddell, Robert J. Simione, Kenneth L. Wall, Allen K. Seibert,
III, Jerry Sevy, Larry Clark and Lori N. Siegel, Gary M.
Bremer, Richard A. Parlontieri, and James R. Henderson
(Incorporated by reference to Exhibit 9.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1996 as filed with the Securities and Exchange
Commission).
9.2 -- Agreement dated as of October 7, 1996 by and among InfoMed
Holdings, Inc., EGL Holdings, Inc., Mercury Asset Management
plc, O'Donnell Davis, Inc., Barrett O'Donnell and certain
other holders of the Class A Convertible Preferred Stock of
InfoMed Holdings, Inc. (Incorporated by reference to Exhibit
10.2 of the Company's Current Report on Form 8-K dated October
8, 1996 as filed with the Securities and Exchange Commission).
10.1 -- Amended and Restated Agreement and Plan of Merger dated as of
September 5, 1996 by and among InfoMed Holdings, Inc., Simione
Central Holding, Inc. and InfoSub, Inc. (Incorporated by
reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K dated September 5, 1996 as filed with the Securities
and Exchange Commission).
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.2 -- InfoMed Holdings, Inc. Amended and Restated Share Warrant for
the Purchase of Common Stock of InfoMed Holdings, Inc. dated
October 5, 1996 between InfoMed Holdings, Inc. and each of
O'Donnell Davis, Inc., Rowan Nominees Ltd., David O. Ellis,
Richard V. Lawry, Salvatore A. Massaro, Murali Anantharaman,
Kathleen E.J. Ellis, Jeremy Ellis, Karen Ellis, Gemma Ellis,
Thomas M. Rogers, Jr., and Arnold Schumacher (Incorporated by
reference to Exhibit 4.1 of the Company's Current Report on
Form 8-K dated October 8, 1996 as filed with the Securities
and Exchange Commission).
10.3 -- Warrant to Purchase 100,000 shares of Class A Common Stock of
Simione Central Holding, Inc., dated April 12, 1996 between
Simione Central Holding, Inc. and Home Health First, a Texas
not-for-profit corporation (Incorporated by reference to
Exhibit 10.3 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.4 -- Common Stock Warrant of InfoMed Holdings, Inc. dated October
8, 1996 between Jefferies & Company, Inc. and InfoMed
Holdings, Inc. (Incorporated by reference to Exhibit 10.4 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as filed with the Securities and
Exchange Commission).
10.5 -- Settlement Agreement, dated February 28, 1995, between
InfoMed Holdings, Inc. and Frederick Neufeld (Incorporated by
reference to Exhibit 5.5 of the Company's Current Report on
Form 8-K dated March 7, 1995 as filed with the Securities and
Exchange Commission).
10.6 -- Form of Simione Central Holding, Inc. 1996 Incentive Stock
Option Agreement dated September 4, 1996 by and between
Simione Central Holding, Inc. and each of James R. Henderson,
William J. Simione, Jr., Robert Simione, Katherine Wetherbee,
Sheldon Berman, Betty Gordon, William J. Simione, III, J.
Blake Bremer, Craig Luigart, Kenneth L. Wald, Marty Cavaiani,
Lori Ferrero, Douglas E. Caddell, Andy Anello and A. Curtis
Eade (Incorporated by reference to Exhibit 10.6 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 as filed with the Securities and Exchange
Commission).
10.7 -- Form of 1996 Non-Qualified Stock Option Agreement dated
September 4, 1996 between Simione Central Holding, Inc. and
each of Gary M. Bremer, James A. Tramonte, Gary W. Rasmussen,
Don VanderBeke and Lori N. Siegel (Incorporated by reference
to Exhibit 10.7 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.8 -- Form of Stock Option Agreement dated October 7, 1996 between
InfoMed Holdings, Inc., and Reid Horovitz, Zola Horovitz,
O'Donnell Davis, Inc., EGL Holdings, Inc., David O. Ellis,
Erin Dosdourian, Rodger Johnson, Richard V. Lawry, Salvatore
A. Massaro and Murali Anantharaman (Incorporated by reference
to Exhibit 10.8 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.9 -- 1994 Incentive Stock Option and Non-Qualified Stock Option
Plan (Incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1994 as filed
with the Securities and Exchange Commission).
10.10 -- Simione Central Holdings, Inc. Profit Sharing Plan dated
October 31, 1996, as amended (Incorporated by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.11 -- Simione Central Holdings, Inc. Section 125 Plan effective date
January 1, 1997 sponsored by the Company (Incorporated by
reference to Exhibit 10.11 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.12 -- Headquarters at Gateway Lake Lease Agreement dated January 1,
1996 by and between Gateway LLC and InfoMed Holdings, Inc.
(Incorporated by reference to Exhibit 10.54 of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 as filed with the Securities and Exchange Commission).
10.13 -- Sublease dated November 22, 1996 between Environmental Design
International, Ltd. and Simione Central, Inc. (Incorporated by
reference to Exhibit 10.13 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.14* -- Lease Amendment dated August 7, 1992 by and between Sugar Land
Plaza Building Corporation and Medical Solutions, Inc.
10.15* -- Lease dated August 13, 1992 between Unum Life Insurance
Company of America and Dezine Associates, Inc.
10.16* -- Indenture of Lease dated January 1, 1998 by and between S&S
Realty and Simione Central Consulting, Inc.
10.17* -- Lease dated December 18, 1996 by and between Resurgens Plaza
South Associates, L.P. and Simione Central, Inc.
10.18 -- Executive Employment Agreement dated December 10, 1996 between
InfoMed Holdings, Inc. and Gary M. Bremer (Incorporated by
reference to Exhibit 10.15 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.19 -- Executive Employment Agreement dated January 1, 1996 between
Simione Central, Inc. and William J. Simione, Jr.
(Incorporated by reference to Exhibit 10.16 of the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1996 as filed with the Securities and Exchange
Commission).
10.20 -- Agreement dated October 4, 1996 by and between InfoMed
Holdings, Inc. and EGL Holdings, Inc. (Incorporated by
reference to Exhibit 10.17 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.21 -- Information Systems Management Agreement dated January 4,
1996 between Integrated Systems Solutions Corporation and
Central Health Management Services, Inc. (Incorporated by
reference to Exhibit 10.18 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.22 -- Micronetics Design Corporation Value Added Reseller Agreement
Renewal dated July 10, 1996 between Micronetics Design
Corporation and InfoMed Holdings, Inc. (Incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.23 -- Master Software License Agreement Number 96-2283 dated October
31, 1996 by and between Software 2000, Inc. and Simione
Central Holding, Inc. (Incorporated by reference to Exhibit
10.20 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.24 -- Guaranty Agreement dated October 31, 1996 by Simione Central,
Inc. in favor of HCA, Inc. (Incorporated by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.25 -- Lease Agreement dated March 18, 1996 between National Leasing,
Inc. and Simione Central, Inc. (Incorporated by reference to
Exhibit 10.22 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.26 -- IBM Vendor Marketing Programs Cooperative Services Marketing
Agreement dated December 16, 1996 between IBM Corporation and
Simione Central Holding, Inc. (Incorporated by reference to
Exhibit 10.23 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.27 -- Loan and Security Agreement by and between National Bank of
Canada and the Company, dated as of June 6, 1997 (Incorporated
by reference to Exhibit 10.34 of the Company's Current Report
on Form 8-K dated June 27, 1997 as filed with the Securities
and Exchange Commission).
10.28 -- Amendment 2 to Agreement for Information Technology Services
between SC Holding, Inc. and Integrated Systems Solutions
Corporation dated July 31, 1997 (Incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
dated August 13, 1997 as filed with the Securities and
Exchange Commission).
10.29 -- Simione Central Holdings, Inc. Omnibus Equity-based Incentive
Plan (Incorporated by reference to Exhibit 10.17 of the
Company's Registration Statement on Form S-1 (Registration
Number 333-25551) as filed with the Securities and Exchange
Commission).
10.30 -- Simione Central Holdings, Inc. 1997 Non-Qualified Formula
Stock Option Plan (Incorporated by reference to Exhibit 10.18
of the Company's Registration Statement on Form S-1
(Registration Number 333-25551) as filed with the Securities
and Exchange Commission).
16.1 -- Letter re change in Certifying Accountant (Incorporated by
reference to Exhibit 4.1 of the Company's Current Report on
Form 8-K dated January 27, 1997 as filed with the Securities
and Exchange Commission).
21.1* -- Subsidiaries of the Company.
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
23.1* -- Consent of Ernst & Young LLP.
27.1* -- Financial Data Schedule (for SEC use only).
27.2* -- Restated Financial Data Schedule (for SEC use only).
27.3* -- Restated Financial Data Schedule (for SEC use only).
27.4* -- Restated Financial Data Schedule (for SEC use only).
- ----------
* Filed herewith
</TABLE>
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated December 31, 1997
announcing the acquisition of substantially all of the assets of Dezine
Healthcare Solutions, Inc., a South Carolina corporation, for $9,500,000 by the
Company's wholly-owned subsidiary, DHS Acquisition L.L.C., a Georgia limited
liability company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIMIONE CENTRAL HOLDINGS, INC.
By: /s/ James R. Henderson
James R. Henderson
President and Chief Executive Officer
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ James R. Henderson President, Chief Executive Officer March 26, 1998
- ------------------------------ and Director (Principal Executive
James R. Henderson Officer)
/s/ Lori Nadler Siegel Chief Financial Officer and Treasurer March 26, 1998
- ------------------------------ (Principal Financial and Accounting
Lori Nadler Siegel Officer)
/s/ Gary M. Bremer Chairman of the Board March 26, 1998
- ------------------------------
Gary M. Bremer
/s/ William J. Simione, Jr. Vice Chairman of the Board and March 26, 1998
- ------------------------------ Executive Vice President
William J. Simione, Jr.
/s/ Murali Anantharaman Director March 26, 1998
- ------------------------------
Murali Anantharaman
/s/ James A. Gilbert Director March 26, 1998
- ------------------------------
James A. Gilbert
/s/ Richard D. Jackson Director March 26, 1998
- ------------------------------
Richard D. Jackson
/s/ Barrett C. O'Donnell Director March 26, 1998
- ------------------------------
Barrett C. O'Donnell
</TABLE>
34
<PAGE> 38
SIMIONE CENTRAL HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors F-2
Consolidated Financial Statements
Consolidated Balance Sheets - December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for the three years ended
December 31, 1997 F-4
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1997 F-5
Consolidated Statements of Cash Flows for the three years ended
December 31, 1997 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 39
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Simione Central Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Simione
Central Holdings, Inc. as of December 31, 1997 and 1996 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. Our audits also
include the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Simione Central Holdings, Inc. as of December 31, 1997 and 1996 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia
February 23, 1998
F-2
<PAGE> 40
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,266,860 $ 3,384,728
Accounts receivable, net of allowance for doubtful
accounts of $1,915,000 and $1,063,000, respectively 9,025,666 5,651,415
Prepaid expenses and other current assets 1,157,168 870,729
------------ ------------
Total current assets 18,449,694 9,906,872
Purchased software, furniture and equipment, net 2,365,508 1,867,996
Intangible assets, net 7,448,911 5,922,755
Other assets including restricted cash at December 31, 1996 655,377 1,078,056
------------ ------------
Total assets $ 28,919,490 $ 18,775,679
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ 773,599 $ --
Accounts payable 1,876,688 3,199,353
Accrued compensation expense 560,334 666,650
Accrued liabilities 3,174,762 3,251,636
Customer deposits 1,460,653 1,679,565
Unearned revenues 1,527,173 2,006,044
Current portion of capital lease obligations 57,622 306,466
------------ ------------
Total current liabilities 9,430,831 11,109,714
Notes payable and capital lease obligations,
less current portion -- 2,986,267
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value; 10,000,000
shares authorized; none
issued or outstanding -- --
Common stock, $.001 par value; 20,000,000 shares
authorized; 8,522,978 and 5,952,166 shares issued and outstanding
at December 31, 1997 and 1996, respectively 8,523 5,952
Additional paid-in capital 41,686,109 23,216,050
Stock subscription receivable -- (850,000)
Accumulated deficit (22,205,973) (17,692,304)
------------ ------------
Total shareholders' equity 19,488,659 4,679,698
------------ ------------
Total liabilities and shareholders' equity $ 28,919,490 $ 18,775,679
============ ============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 41
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Net revenues:
Software and services $27,355,995 $ 15,307,906 $ 5,387,044
Agency support 14,680,310 7,323,540 7,834,999
Consulting services 4,908,965 3,363,195 --
----------- ------------ -----------
Total net revenues 46,945,270 25,994,641 13,222,043
Costs and expenses:
Cost of revenues 22,715,095 14,698,177 8,153,914
Selling, general and administrative 12,508,512 7,037,446 3,095,293
Research and development 6,669,500 5,676,898 2,928,961
Amortization and depreciation 1,714,207 784,502 --
Purchased in-process research and
development 8,126,947 12,573,931 --
Severance and other restructuring
charges -- 1,214,669 --
----------- ------------ -----------
Total costs and expenses 51,734,261 41,985,623 14,178,168
----------- ------------ -----------
Loss from operations (4,788,991) (15,990,982) (956,125)
Other income (expense):
Interest expense (214,508) (114,817) --
Interest and other income 489,830 206,902 --
----------- ------------ -----------
Net loss $(4,513,669) $(15,898,897) $ (956,125)
=========== ============ ===========
Net loss per share - basic and diluted $ (0.63) $ (3.71) $ (0.32)
=========== ============ ===========
Weighted average common shares - basic and diluted 7,164,398 4,287,956 2,994,856
=========== ============ ===========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 42
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL STOCK TOTAL
COMMON PAID-IN SUBSCRIPTION ACCUMULATED SHAREHOLDERS'
SHARES STOCK CAPITAL RECEIVABLE DEFICIT EQUITY
--------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 11 $ -- $ -- $ -- $ (837,282) $ (837,282)
Capital contribution from
former parent company -- 2,443,013 -- -- -- 2,443,013
Net Loss -- -- -- -- (956,125) (956,125)
--------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1995 11 2,443,013 -- -- (1,793,407) 649,606
Capital contribution from
former parent company -- 4,000,000 -- -- -- 4,000,000
Distribution of 2,994,856
shares of no par common
stock and cancellation of
11 shares of common stock
held by CHHC 2,994,845 -- -- -- -- --
Issuance of 964,418 shares
of no par Class A common stock 964,418 3,051,369 -- (850,000) -- 2,201,369
Purchase and cancellation of
918 shares of no par
Class A common stock not
exchanged in reverse
acquisition (918) (9,866) -- -- -- (9,866)
Exchange of 3,958,356 shares
of no par Class A and B
common stock for 3,958,356
shares of IMHI $.001 par
value common stock -- (9,480,558) 9,480,558 -- -- --
Issuance of 1,949,269 shares
of IMHI $.001 par value
common stock for purchase
of IMHI in reverse
acquisition 1,949,269 1,949 13,514,288 -- -- 13,516,237
Issuance of 44,541 shares of
$.001 par value common
stock as compensation and
from exercise of stock
options and warrants 44,541 45 221,204 -- -- 221,249
Net loss -- -- -- -- (15,898,897) (15,898,897)
--------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1996 5,952,166 5,952 23,216,050 (850,000) (17,692,304) 4,679,698
Issuance of 555,259 shares of
$.001 par value common
stock from exercise of stock
options and warrants 555,259 555 548,403 -- -- 548,958
Issuance of 15,553 shares
of $.001 par value
common stock in connection
with an acquisition 15,553 16 199,984 -- -- 200,000
Issuance of 2,000,000 shares of
$.001 par value common
stock, net of offering costs 2,000,000 2,000 17,721,672 -- -- 17,723,672
Payment of stock subscription -- -- -- 850,000 -- 850,000
Net loss -- -- -- -- (4,513,669) (4,513,669)
--------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1997 8,522,978 $ 8,523 $41,686,109 $ -- $(22,205,973) $ 19,488,659
========= =========== =========== ========= ============ ============
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 43
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995
------------- ------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,513,669) $ (15,898,897) $ (956,125)
Adjustments to reconcile net loss to net
cash used in operating activities:
Purchased in-process research and
development 8,126,947 12,573,931 --
Provision for doubtful accounts 1,329,563 395,046 --
Amortization and depreciation 1,714,207 784,502 --
Value assigned to stock purchase warrant -- 100,000 --
Stock compensation expense -- 58,500 --
Loss on sale of assets 25,887 3,636 --
Changes in assets and liabilities:
Accounts receivable (3,919,939) (3,305,003) 95,360
Prepaid expenses and other current assets (29,355) (553,630) (47,017)
Other assets (577,322) (26,925) --
Accounts payable (1,598,616) 2,264,539 (11,414)
Accrued compensation expense (106,316) 142,867 23,158
Accrued liabilities (525,519) 768,284 (7,771)
Customer deposits (218,912) 272,724 --
Unearned revenues (1,150,135) 616,518 --
------------- ------------- -----------
Net cash used in operating
activities (1,443,179) (1,803,908) (903,809)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of acquired companies, net of cash acquired (9,807,587) (1,249,798) --
Purchase of software, furniture and
equipment (915,581) (635,997) (424,000)
Decrease (increase) in restricted cash 1,000,000 (1,000,000) --
Increase in other intangible assets (585,000) (64,123) --
------------- ------------- -----------
Net cash used in investing activities (10,308,168) (2,949,918) (424,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from former
parent company -- 4,000,000 --
Proceeds from repayment of stock subscription 850,000 -- --
Proceeds from (payments on) notes payable (1,726,201) 2,499,800 --
Issuance of common stock, net of
cash expenses 17,723,672 2,191,503 --
Advances from (payments to) former
parent company -- (1,076,855) 1,440,309
Repayment (issuance) of note receivable
from officer -- 252,075 (252,075)
Payments on capital lease obligations (732,778) (45,741) --
Payments of related party notes (30,172) (68,000) --
Proceeds from exercise of stock options
and warrants 548,958 62,749 --
------------- ------------- -----------
Net cash provided by financing activities 16,633,479 7,815,531 1,188,234
------------- ------------- -----------
Net increase (decrease) in cash
and cash equivalents 4,882,132 3,061,705 (139,575)
Cash and cash equivalents, beginning of year 3,384,728 323,023 462,598
------------- ------------- -----------
Cash and cash equivalents, end of year $ 8,266,860 $ 3,384,728 $ 323,023
============= ============= ===========
Supplemental disclosure of non-cash
investing and financing activities:
Capital contribution from former
parent company $ -- $ -- $ 2,443,013
Software, furniture and equipment
obtained through capital lease $ -- $ 690,490 $ --
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 44
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Background: Incorporated in September 1991, as a wholly-owned
subsidiary of Central Health Holding Company, Inc. ("CHHC"), Central Health
Management Services, Inc. ("CHMS") provided information and management support
services to home health care providers. Central Health Services, Inc. ("CHS"),
also a wholly-owned subsidiary of CHHC, provided similar services to home health
care agencies owned by CHHC. On January 1, 1996, CHHC transferred at book value
the assets and employees related to CHS's information services and certain
clinical and financial support services to CHMS. Accordingly, the consolidated
financial statements for the year ended December 31, 1995 give effect to the
reorganization of these entities under common control and reflect the combined
operating results of CHMS and the transferred CHS operations. On January 17,
1996, CHHC completed a pro-rata distribution of the outstanding common stock of
CHMS to its shareholders.
On October 8, 1996, InfoMed Holdings, Inc. ("IMHI") and CHMS merged in
a transaction accounted for as a reverse acquisition for financial reporting
purposes. In connection with the merger, IMHI issued 3,958,356 shares of its
common stock in exchange for all the outstanding common stock of CHMS, and
thereby, the former shareholders of CHMS acquired control of IMHI. As a result,
CHMS is considered the acquiring company; hence, the historical financial
statements of CHMS became the historical financial statements of IMHI and
include the results of operations of IMHI only from the effective acquisition
date. On December 19, 1996, IMHI changed its name to Simione Central Holdings,
Inc. (the "Company").
Overview: The Company is a leading provider of integrated systems and
services designed to enable home health care providers to more effectively
operate their businesses and compete in a managed care environment. The Company
offers several comprehensive and flexible software solutions, each of which
provide a core platform of software applications and which incorporate selected
specialized modules based on customer demand. These software solutions are
designed to enable customers to generate and utilize comprehensive financial,
operational and clinical information and are made available to customers in two
arrangements: a Shared Resource Solution or an In-House Solution. The Company's
Shared Resource Solution offers customers an outsourcing opportunity which
incorporates the Company's proprietary software. Under this arrangement, the
Company operates a data center which stores customer data and allows them
real-time, secure access through a wide area communications network. The
Company's In-House Solution is licensed to customers for use on their own
computer systems. In addition to its software solutions and related software
support services, the Company's home health care consulting services assist
providers in addressing the challenges of reducing costs, maintaining quality,
streamlining operations and re-engineering organizational structures. The
Company also provides comprehensive agency support services which include
administrative, billing and collection, training, reimbursement and financial
management services, among others.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are derived from shared resource information management
services, agency support services, the licensing and sub-licensing of software,
the sale of computer hardware, professional and technical consulting services,
implementation and training services, software maintenance and support services,
as well as home health care management consulting services. Shared resource
information management and agency support services are provided under
contractual arrangements with terms typically ranging from three to five years.
F-7
<PAGE> 45
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION -
(CONTINUED)
To the extent that software and services revenues result from shared
resource information management, software support, implementation, training and
technical consulting services, such revenues are recognized monthly as the
related services are rendered or, for software support revenues, over the term
of the related agreement. To the extent that software and services revenues
result from software licenses, computer hardware and third-party software
revenues, such revenues are recognized when the related products are delivered
and collectibility of fees is determined to be probable, provided that no
significant obligation remains under the contract. Revenues derived from the
sale of software licenses requiring significant modification or customization
are recorded based upon percentage of completion using labor hours or contract
milestones. Agency support and consulting services revenues are recognized
monthly as the related services are performed.
CONCENTRATIONS AND MAJOR CUSTOMERS
The Company sells its systems and services to various companies in the
health care industry. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. Current operations are charged with an allowance for doubtful
accounts based upon experience and any unusual circumstances which affect the
collectibility of receivables. Amounts deemed uncollectible are charged against
this allowance.
During 1995 and through October 1996, the Company derived the majority
of its revenue from services provided to its former parent company, see Note 14.
In addition, the Company had other major customers which comprised the following
percentages of total net revenue:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Customer A -- -- 14%
Customer B 48% 22% --
</TABLE>
The Company is dependent upon certain third party software arrangements
as well as certain contractual arrangements for provision of certain of its
services, see Note 16.
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of
three months or less are considered to be cash equivalents.
RESTRICTED CASH
The Company's restricted cash at December 31, 1996 of $1,000,000 was
invested in a certificate of deposit and secured $1,000,000 of borrowings
outstanding under the Company's lines of credit agreements, see Note 6.
PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT
Purchased software, furniture and equipment is stated at cost.
Depreciation is calculated for financial reporting purposes using the
straight-line method over the estimated useful lives (ranging from 1 to 10
years) of the assets or lease term, whichever is shorter.
SOFTWARE DEVELOPMENT COSTS
Costs incurred to establish the technological feasibility of computer
software products are research and development expense and are charged to
expense as incurred. The Company capitalizes costs incurred between the point of
establishing technological feasibility and general release when such costs are
material. The Company capitalized $616,000 of software development costs during
1997. The Company had no capitalized computer software development costs as of
December 31, 1996.
F-8
<PAGE> 46
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INTANGIBLE ASSETS
Intangible assets, arising principally from the accounting for acquired
businesses, are amortized using the straight-line method over the estimated
useful lives of the related assets which range from 4 to 11 years. The Company
reviews its long-lived and intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. The measurement of possible impairment is based upon determining
whether projected undiscounted future cash flow from the use of the asset is
less than the carrying amount of the asset. As of December 31, 1997, in the
opinion of management, there has been no such impairment.
INCOME TAXES
The Company accounts for income taxes using the liability method which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial statement
carrying amount and the tax bases of assets and liabilities.
NET LOSS PER SHARE
Net loss per share is computed on the basis of the weighted average
number of common shares outstanding during the period. The 2,994,856 shares of
Class A common stock issued in the reorganization of the Company on January 17,
1996 (see Note 12) have been treated as outstanding since January 1, 1995. Due
to the net loss incurred by the Company in each year, basic and diluted loss per
share do not differ. Common stock equivalents relate to shares potentially
issuable under outstanding option and warrant agreements and are included in the
diluted loss per share calculation if dilutive.
STOCK BASED COMPENSATION
Stock options are accounted for under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. The Company has included in these consolidated financial
statements the pro forma disclosure information required by SFAS No. 123, see
Note 12.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents and restricted cash: The carrying amounts
reported in the balance sheet for cash and cash equivalents and restricted cash
approximate their fair value.
Notes payable: The carrying amounts of the Company's notes payable
approximate their fair value.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS No. 121 requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The adoption of SFAS No. 121 did not
have an impact on the Company's financial statements.
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." SFAS
No. 128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Per share amounts for all
periods have been presented in conformity with SFAS No. 128 requirements.
F-9
<PAGE> 47
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
In October 1997 the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2, "Software Revenue Recognition,"
("SOP 97-2"), which supersedes SOP 91-1 and is effective for transactions
entered into for fiscal years beginning after December 15, 1997. While some
principles remain the same, there are several key differences between the two
pronouncements, including accounting for multiple element arrangements. SOP 97-2
addresses revenue recognition from a conceptual level and does not specifically
provide implementation guidance. However the Company certainly believes, based
on its reading and interpretation of SOP 97-2, that future license and services
agreements that require modifications to the software will likely require
contract accounting for both the license fees and services and result in a
deferral of license revenue compared to revenue recognition under SOP 91-1 for
some agreements.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
1997 financial statement presentation.
2. ACQUISITIONS
Effective January 1, 1996, the Company purchased certain assets of
Simione & Simione, CPA's--Consulting Division (a division of Simione & Simione,
CPAs, a Partnership) ("Simione & Simione") for $2,000,000 in cash. Simione &
Simione provided a wide range of home health care consulting services. This
acquisition was accounted for using the purchase method. The entire purchase
price was allocated to goodwill and is being amortized over 10 years.
On October 8, 1996, IMHI merged with CHMS. IMHI provided a
comprehensive package of software applications for home health care providers
marketed under the name STAT 2. In connection with the acquisition, each issued
and outstanding share of CHMS common stock was converted into and exchanged for
the right to receive .22021 shares of IMHI common stock as of the effective
date. As a result, IMHI issued 3,958,356 shares of common stock to CHMS's
shareholders. In addition, each of the outstanding shares of IMHI Class A
Convertible Preferred Stock was converted into and exchanged for shares of IMHI
common stock and all outstanding options and warrants to purchase CHMS common
stock as of the effective date were converted into the right to purchase shares
of IMHI common stock, provided that the number of shares to be so purchased and
the respective exercise prices thereof have been adjusted by the exchange ratio.
The merger was accounted for as a reverse acquisition under the purchase method
of accounting. As a result, for accounting purposes CHMS was considered as
having acquired IMHI. The historical financial statements of CHMS became the
historical financial statements of IMHI and include the results of operations of
both companies from the effective date. All share amounts have been
retroactively restated giving effect to the .22021 exchange ratio of CHMS shares
for IMHI shares. CHMS had been on a December 31 fiscal year end, and, therefore,
the fiscal year end of IMHI was changed to December 31. Effective December 19,
1996, IMHI changed its name to Simione Central Holdings, Inc. (the "Company").
The purchase price of approximately $16,797,000 (including $760,000 of
acquisition costs and net liabilities assumed of $2,521,000) was allocated based
on the relative fair values of the assets acquired and liabilities assumed.
Approximately $12,574,000 of the purchase price was allocated to purchased
in-process research and development. This in-process research and development
had not reached technological feasibility and had no alternative future use, and
therefore, was charged to operations as of the acquisition date. In addition,
$4,223,000 of the purchase price was allocated to certain identifiable
intangible assets and is being amortized over the related assets estimated
useful lives, see Note 5. The purchase price was determined based on the
estimated value of the outstanding 1,949,269 shares of IMHI common stock and
options and warrants to purchase IMHI common stock outstanding at the merger
date.
Effective December 1, 1997, the Company purchased substantially all the
assets of Dezine Healthcare Solutions, Inc. ("Dezine"). Dezine provided a
comprehensive package of software applications for home medical equipment
providers. This acquisition was accounted for using the purchase method. The
purchase price of approximately $9,379,000 (including $200,000 of acquisition
costs and net liabilities assumed of $71,000) was allocated based on the
relative fair values of the assets acquired and liabilities assumed.
Approximately $8,127,000 of the purchase price was allocated to purchased
in-process research and development. This in-process research and development
had not reached technological feasibility and had no alternative future use, and
therefore, was charged to operations as of the acquisition date. In addition,
$1,323,000 of the purchase price was allocated to certain identifiable
intangible assets and will be amortized over the related assets estimated useful
lives, see Note 5. The Company's consolidated statement of operations for the
year ended December 31, 1997 includes the operating results of Dezine for the
period December 1, 1997 (the effective date of the Dezine acquisition) to
December 31, 1997.
F-10
<PAGE> 48
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2. ACQUISITIONS - (CONTINUED)
Pro forma information (unaudited) giving effect to the acquisitions as
if they took place on January 1, 1996, is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net revenues $53,397,919 $ 42,239,681
Net income (loss) 3,657,552 (23,829,188)
Net income (loss) per share - basic $ 0.51 $ (4.15)
Net income (loss) per share - diluted $ 0.44 $ (4.15)
</TABLE>
The 1996 pro forma net loss includes the $8,127,000 charged to
operations for the in-process research and development purchased in the Dezine
acquisition. This pro forma information does not purport to be indicative of the
results that actually would have occurred if the acquisitions had been effective
on January 1, 1996 or which may be obtained in the future.
3. LEASE RECEIVABLES
The Company provides lease financing to certain customers related to
sales of software licenses and computer hardware. Lease terms are generally five
years. Future minimum lease payments under these sales-type leases as of
December 31, 1997, of which the 1998 portion is classified in accounts
receivable, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1998 $143,608
1999 29,600
Thereafter 7,193
--------
Future minimum lease payments 180,401
Interest portion (10,094)
--------
Present value of future minimum lease payments $170,307
========
</TABLE>
4. PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT
Purchased software, furniture and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
----------- -----------
<S> <C> <C>
Equipment $ 1,736,907 $ 855,428
Purchased software 949,203 840,064
Furniture 664,901 491,666
Leasehold improvements 152,472 58,388
----------- -----------
3,503,483 2,245,546
Accumulated depreciation (1,137,975) (377,550)
----------- -----------
$ 2,365,508 $ 1,867,996
=========== ===========
</TABLE>
F-11
<PAGE> 49
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------ AMORTIZATION
1997 1996 PERIOD
----------- ----------- ------------
<S> <C> <C> <C>
Acquired technology $ 2,809,995 $ 2,054,000 4-5 years
Goodwill 3,204,179 2,000,000 9-10 years
Trade name 1,142,000 1,142,000 11 years
Other 1,695,021 1,128,025 6-10 years
----------- -----------
8,851,195 6,324,025
Accumulated amortization (1,402,284) (401,270)
----------- -----------
$ 7,448,911 $ 5,922,755
=========== ===========
</TABLE>
6. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
During 1996, a wholly-owned subsidiary of the Company entered into line
of credit agreements with a bank which provided for aggregate borrowing of
$2,500,000. Borrowings under these agreements aggregated $2,499,800 at December
31, 1996, and were secured by a certificate of deposit of $1,000,000, the
subsidiary's accounts receivable, and certain other assets. Additionally,
borrowings under these agreements aggregating $1,500,000 were personally
guaranteed by a major shareholder and executive officer of the Company. During
1997, the Company repaid amounts outstanding under these line of credit
agreements and terminated them accordingly.
On June 6, 1997, the Company entered into a Loan and Security Agreement
with a bank. Pursuant to the Agreement, the bank agreed to make available to the
Company a revolving credit facility, the maximum principal amount of which at
any time must be equal to the lesser of $5 million or the "borrowing base," as
defined in the revolving credit facility agreement. Interest accrues at a
variable rate per annum equal to the prime rate plus 0.25% (8.75% as of December
31, 1997). Under the terms of the Agreement, the Company granted to the bank a
security interest in all accounts, inventory, equipment, and general
intangibles. Additionally, borrowings under this agreement are secured by the
outstanding capital stock of the Company's subsidiaries. The Company's
subsidiaries have also guaranteed the Company's obligations to the bank under
the Agreement. As of December 31, 1997, $774,000 was outstanding and $4,226,000
was available under this agreement.
The Company has entered into lease agreements with a related party (see
Note 15) for certain office and computer equipment and furniture with
approximate aggregate cost and net book value of $690,000 and $624,000,
respectively, at December 31, 1996. In December 1997, the Company opted for
early termination of these leases and purchased the equipment from the lessor
for $579,000. Additionally, the Company has other equipment under capital leases
with third party lessors with approximate aggregate cost and net book value of
$139,000 and $52,000, respectively, at December 31, 1997. Amortization of
capital lease assets is included in the Company's depreciation expense and
amounted to approximately $283,000 and $84,000 for 1997 and 1996, respectively.
Aggregate annual rental commitments under these capital leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998 future minimum payments $ 61,964
Interest portion (4,342)
--------
Present value of future minimum
lease payments $ 57,622
========
</TABLE>
7. OPERATING LEASES
The Company leases its office facilities and certain furniture and
equipment under various operating lease agreements, some of which are with
related parties (see Note 15). These leases require the Company to pay taxes,
insurance and maintenance expenses, and provide for renewal options at the then
fair market rental value of the property. Amounts expensed under operating
leases were approximately $2,847,000, $3,699,000 and $1,554,000 for the years
ended December 31, 1997, 1996, and 1995, respectively.
F-12
<PAGE> 50
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. OPERATING LEASES - CONTINUED
Aggregate annual rental payments for operating leases with
noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1998 $2,484,487
1999 2,032,658
2000 1,813,660
2001 1,318,259
Thereafter 994,320
----------
Total $8,643,384
==========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
On November 1, 1996, Simione Central, Inc. ("SCI"), a wholly-owned
subsidiary of the Company, entered into a series of five year contracts to
provide shared resource information management and agency support services to
several affiliates of Columbia/HCA Health Care Corporation ("Columbia/HCA"). As
part of the negotiation of these contracts with SCI, Columbia/HCA required that
this subsidiary, formerly a subsidiary of CHHC, guarantee certain
indemnification obligations of the former shareholders of CHHC, as such
indemnification obligations relate to the administration and potential
liabilities to the Central Health Holding Company, Inc. Employee Stock Ownership
Plan ( the "Plan") or its participants. Columbia/HCA became indirectly
responsible for these Plan obligations as a result of its acquisition of the
CHHC stock. As a result of the fact that all former CHHC shareholders are also
shareholders of the Company by virtue of the January 1996 spin-off of the
Company, SCI agreed to undertake this contingent obligation. Under the terms of
this guaranty agreement (the "Guaranty"), SCI agreed to guarantee Columbia/HCA
against losses arising from the following: (i) liabilities relating to the Plan
for losses resulting from a fiduciary breach, prohibited transaction or other
violation of law relating to the Plan and (ii) liabilities relating to the Plan
which are not paid by the former stockholders of CHHC other than the Plan, but
only to the extent such losses are not recovered by Columbia/HCA through other
indemnity provisions of its agreement with the former shareholders of CHHC.
These indemnity provisions include any potential recovery from CHHC's insurance
policies as well as recoveries from escrow accounts established for the benefit
of Columbia/HCA by CHHC's former shareholders. This subsidiary's maximum
liability under the Guaranty is $17,500,000 for claims arising before November
1, 1998, and $15,000,000 for claims arising before November 1, 2000. There is no
liability for any claims arising after November 1, 2000. Further, the aggregate
maximum liability under the Guaranty is $20,000,000. Pursuant to the Guaranty,
the subsidiary agreed that on each date that a guaranteed obligation is required
to be paid to Columbia/HCA, the subsidiary shall grant to Columbia/HCA a
security interest equal to the amount of the guaranteed obligation in all the
subsidiary's accounts receivable. This subsidiary also granted to Columbia/HCA
the right to offset any liability arising under the Guaranty against any
obligation of Columbia/HCA or its affiliates to the subsidiary. At December 31,
1997, no claims had been made under the Guaranty and the Company does not
currently anticipate incurring any loss associated with the Guaranty.
Under the terms of an asset purchase agreement dated October 31, 1997,
the Company is obligated to pay additional purchase price if the earnings of the
acquired entity reach certain specified levels of earnings before income tax,
depreciation, and amortization.
The Company is engaged in various legal and regulatory proceedings
arising in the normal course of business which management believes will not have
a material adverse effect on its financial position or results of operations.
The Company was, however, served on July 17, 1997 with an administrative
subpoena issued by the United States Department of Health and Human Services,
Office of Inspector General. In connection with that subpoena, the Department of
Justice ("DOJ") has advised the Company that certain aspects of the Company's
past relationship with affiliates of Columbia/HCA are within the scope of an
ongoing grand jury investigation. However, the DOJ has confirmed to the Company
that neither the Company, nor any of its officers, directors or employees, is a
target in this investigation and, based upon the information known to the DOJ at
this time, neither the Company, nor any of its officers, directors or employees,
is likely to become one. The Company is cooperating fully and does not currently
believe that this inquiry will have any material effect on its overall business
or financial condition.
F-13
<PAGE> 51
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
9. SEVERANCE AND OTHER RESTRUCTURING CHARGES
As a result of the change in focus of the Company's business from
providing services to affiliates of CHHC, the Company incurred severance and
certain other restructuring costs totaling $1,215,000 in the fourth quarter of
1996. These costs primarily relate to severance of seven terminated key
employees and costs to buyout a lease of equipment no longer useful to the
Company. During 1997 and 1996, payments of $855,000 and $347,000, respectively
had been made against the accrued severance and other restructuring charges.
10. INCOME TAXES
The Company has not incurred or paid any income taxes since its
inception.
Deferred income taxes reflect the net effect of temporary differences
between the financial reporting carrying amounts of assets and liabilities and
income tax carrying amounts of assets and liabilities. The components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 1,763,040 $ 2,270,669
Accrued liabilities 316,956 547,259
Allowance for doubtful accounts 617,988 409,119
Unearned revenues 35,340 304,934
Purchased intangible assets 3,088,240 --
Tax credit carryforward 95,830 95,830
Other 72,484 62,356
----------- -----------
Total deferred tax assets 5,989,878 3,690,167
Deferred tax liabilities:
Purchased intangible assets (1,242,442) (1,532,009)
Capitalized software (234,096) --
Depreciation (149,316) (159,087)
----------- -----------
Total deferred tax liabilities (1,625,854) (1,691,096)
----------- -----------
Net deferred tax asset 4,364,024 1,999,071
Valuation allowance (4,364,024) (1,999,071)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The Company has approximately $4,640,000 of net operating losses for
income tax purposes available to offset future taxable income. Such losses
expire $1,824,000 in 2010 and $2,816,000 in 2011 and may be subject to certain
limitations for prior changes in ownership. Additionally, the Company has
research and development and alternative minimum tax credits of approximately
$96,000 which expire in years 2009 through 2011. A valuation allowance reducing
the net deferred tax asset to zero has been recorded based on management's
assessment that it is not "more likely than not" that this net asset is
realizable as of December 31, 1997.
Approximately $500,000 of the net deferred tax assets related to the
IMHI acquisition will result in a credit to intangible assets if and when
recognized.
Actual income tax expense differs from the "expected" amount (computed
by applying the U.S. Federal corporate income tax rate of 34% to the loss before
income taxes) as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Tax benefit computed at statutory rates $(1,534,648) $(5,405,624)
State income taxes, net of Federal effect (180,547) (635,956)
Non-deductible purchased in-process
research and development -- 4,778,094
Other, net (649,758) 14,264
Change in valuation allowance 2,364,953 1,249,222
----------- -----------
Income taxes $ -- $ --
=========== ===========
</TABLE>
F-14
<PAGE> 52
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
10. INCOME TAXES - CONTINUED
Prior to 1996, the Company's taxable loss was included in the
consolidated tax return of its former parent company. The former parent company
utilized net operating losses generated by the Company and did not allocate any
benefit from use of the net operating losses to the Company.
11. EMPLOYEE BENEFIT PLANS
CHHC sponsored the Central Health Holding Company, Inc. Employee Stock
Ownership Plan (the "Plan"), which covered substantially all full-time employees
of CHHC and its wholly-owned subsidiaries and was funded by cash contributions
from CHHC and its wholly-owned subsidiaries. The major asset of the Plan was
shares of CHHC common stock acquired by the Plan. In connection with the pro
rata distribution of the common stock of CHMS (see Note 1), the Plan received
shares of the Company's common stock. All of the Plan's assets are allocated to
each eligible employee's account and are held in trust until the employee's
termination, retirement, total disability or death. In connection with the sale
of CHHC to Columbia/HCA, the Plan was converted from an employee stock ownership
plan to the Simione Central Holdings, Inc. Profit Sharing Plan Trust, and the
sponsorship of the Plan was transferred from CHHC to the Company.
The consolidated financial statements include the Company's share of
employee benefit expense related to the Plan for the CHMS employees and also the
CHS employees (see Note 1). This expense was approximately $439,000 in 1995.
The Company has adopted 401(k) plans that cover substantially all
employees. The Company contributes to the plans based upon the dollar amount of
each participant's contribution. The Company made contributions to these plans
of approximately $94,000 and $54,000 in 1997 and 1996, respectively.
12. SHAREHOLDERS' EQUITY
In November 1995, CHHC forgave $2,443,013 of intercompany indebtedness
owed by the Company to CHS. The Company recorded the transaction as a capital
contribution by CHHC.
CHMS was a separate legal entity and a wholly-owned subsidiary of CHHC
as of December 31, 1995. On January 6, 1996, CHMS formed CHMS Transitory Corp.
("Transitory Corp."). Transitory Corp. issued 2,994,856 shares of Class A Common
Stock and one share of Class B Common Stock, all of which were held by CHMS. On
January 16, 1996, CHMS and Transitory Corp. merged with Transitory Corp. as the
survivor. The 11 shares of CHMS Common Stock held by CHHC were canceled and CHHC
received the Class A and Class B Common Stock of Transitory Corp. Immediately
subsequent to the merger, Transitory Corp. amended it articles of incorporation
and changed its name to Central Health Management Services, Inc. On January 17,
1996, CHHC completed a pro-rata distribution to its shareholders of all the
outstanding capital stock of CHMS. The distribution was accomplished through the
issuance of 3.411 Class A shares of CHMS common stock for each share of CHHC's
common stock held by the respective shareholder.
On January 17, 1996, CHHC made a $4,000,000 cash capital contribution
to CHMS. On March 5 and 22, 1996, employees of CHMS purchased 964,418 shares of
Class A Common Stock for aggregate consideration of $3,051,369. These shares
were purchased under the terms of a stock subscription agreement whereby 10% was
due at the date of purchase and the remainder was due on December 5, 1996. Stock
subscription receivable of $850,000 reported as a reduction to common stock
represents the amount not yet collected as of December 31, 1996. During 1997,
this amount was paid in full by the major shareholder and executive officer of
the Company when this individual was relieved from his personal guarantee of
$1,500,000 of the Company's indebtedness (see Note 6).
Holders of up to approximately 4.2 million shares of common stock and
warrants and options to purchase up to approximately 1.4 million shares of
common stock have certain demand or piggyback registration rights, subject to
certain conditions and limitations, which entitle the holders to require the
Company to register all or part of their shares for public resale.
On July 1, 1997, a Registration Statement, filed by the Company with
the Securities and Exchange Commission on Form S-1, became effective. In
conjunction with the effectiveness of the Registration Statement, the Company
effected a one-for-two reverse stock split of the Company's outstanding common
stock. The Company sold 2,000,000 (post-reverse split) shares of its common
stock for $10.00 per share and received approximately $17.7 million in net
proceeds. A shareholder also sold 1,220,000(post-reverse split) shares for
$10.00 per share. The Company did not receive any of the proceeds from the sale
of shares by the selling shareholder.
F-15
<PAGE> 53
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
12. SHAREHOLDERS' EQUITY - (CONTINUED)
All share and per share amounts included in these consolidated
financial statements have been restated to reflect the reverse stock split.
As of December 31, 1997, the Company has reserved 1,769,000 shares of
common stock for future issuance upon the exercise of warrants and options to
purchase common stock.
STOCK OPTIONS
The Company has established several stock option plans, under which the
Company is authorized to grant options to purchase an aggregate of 903,504
shares of common stock. Options granted under these plans must have an exercise
price not less than the fair market value at the date of grant. In addition to
options granted under these plans, the Company has granted non-plan options to
certain related parties. Such non-plan options were granted with exercise prices
equal to fair market value on the date of grant.
The Company had no stock option activity prior to 1996. A summary of
the Company's stock option activity for 1996 and 1997 follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Granted in 1996 751,260 $ 6.08
Assumed in IMHI purchase 722,174 $ 2.90
Exercised (26,748) $ 1.04
Forfeited (40,049) $ 5.00
---------
Outstanding at December 31, 1996 1,406,637 $ 4.58
Granted 339,300 $10.88
Exercised (179,266) $ 1.21
Forfeited (408) $ 2.20
---------
Outstanding at December 31, 1997 1,566,263 $ 6.36
=========
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE -----------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF CONTRACTUAL AVERAGE AVERAGE
EXERCISE NUMBER LIFE EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING IN YEARS PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.74 --$ 2.26 251,254 5.1 $ 1.65 251,254 $1.65
$ 3.00 --$ 5.26 558,211 8.1 $ 3.89 419,117 $3.52
$ 6.25 --$10.50 571,998 8.8 $ 9.14 266,667 $7.86
$11.13 --$14.00 184,800 9.6 $11.62 -- --
--------- ------- -----
1,566,263 8.0 $ 6.36 937,038 $4.25
========= =======
</TABLE>
Pro forma information regarding net loss and net loss per share is
required by SFAS No. 123 as if the Company had accounted for employee stock
option grants under the fair value method of SFAS No. 123. The fair value for
options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions for 1997:
risk-free interest rates of 6.232%; no dividends; a volatility factor of the
expected market price of the Company's common stock of 0.856; and a
weighted-average expected life of the options of 5 years; for 1996: risk-free
interest rates of 6%; no dividends; a volatility factor of the expected market
price of the Company's common stock of 0.6; and a weighted-average expected life
of the options of 3.5 years. In addition, options assumed in the purchase of
IMHI have been included in the fair value estimates as if the options assumed
were granted by the Company on the purchase date and using an assumed exercise
price of the value of IMHI shares issued in the acquisition. The weighted
average fair value of options granted during 1997 and 1996 was $7.74 and $1.80,
respectively.
F-16
<PAGE> 54
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
12. SHAREHOLDERS' EQUITY - (CONTINUED)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For the purposes of pro forma disclosures, the estimated fair value of
the stock options is amortized to expense over the options' vesting periods. The
Company's pro forma net loss and net loss per share (basic and diluted) are
$5,268,821 and $0.74 for 1997 and $17,492,350 and $4.08 for 1996.
STOCK PURCHASE WARRANTS
At December 31, 1997, the Company had outstanding warrants to purchase
shares of the Company's common stock as follows:
<TABLE>
<CAPTION>
COMMON EXERCISE EXPIRATION
SHARES PRICE DATE
------ -------- ----------
<S> <C> <C>
125,000 $ 1.00 February 24, 2005
51,679 $ 6.22 October 8, 1999
10,000 $11.26 May 27, 2000
-------
186,679
</TABLE>
All outstanding warrants are exercisable.
During 1996, the Company issued, and the holder exercised, a warrant
for the purchase of 11,010 shares of common stock at $3.16 per share. During
1997, warrants were exercised for 375,000 shares of common stock at $1.00 per
share.
13. EARNINGS PER SHARE
The following table set forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Numerator:
Net loss $(4,513,669) $(15,898,897) $ (956,125)
Denominator:
Denominator for basic and
diluted earnings per share --
weighted-average shares 7,164,398 4,287,956 2,994,856
Net loss per share - basic and diluted $ (0.63) $ (3.71) $ (0.32)
</TABLE>
14. TRANSACTIONS WITH FORMER PARENT COMPANY
The Company derived revenue from charges for the services provided to
the home health care agencies owned by CHHC. The charges were recorded, for
purposes of these consolidated financial statements, in an amount equal to the
cost of the services being provided and therefore generated no operating profit.
Revenues of $12,051,000 and $9,077,000 were recognized in 1996 and 1995,
respectively. In addition, CHHC charged the Company a management fee for
services provided to the Company. These services include facilities management,
legal, accounting, administrative, executive and office support during 1995.
During 1996, the services by CHHC provided were limited to legal and executive.
CHHC's charges included direct costs identified and allocations of shared costs
based on statistical and operational data such as square footage, hours, and
direct operating costs. In the opinion of management, the method of allocation
is reasonable. Management fees in the amount of $432,000 and $3,594,000 were
incurred in 1996 and 1995, respectively. These arrangements terminated
effective October 31, 1996.
F-17
<PAGE> 55
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
14. TRANSACTIONS WITH FORMER PARENT COMPANY - (CONTINUED)
In addition, prior to 1996, the Company was charged by CHHC for its share of
self-insured medical and dental claims. The Company's share of expenses for
this program was $146,000 in 1995.
Prior to the January 17, 1996 spin-off of the Company, CHHC funded all
operating expenses on behalf of the Company. The average balance of the
intercompany payable to CHHC was $1,825,000 in 1995. The intercompany balance
payable to CHHC was paid in cash during 1996.
15. RELATED PARTY TRANSACTIONS
Gateway LLC, a company owned in part by a director of the Company,
leases an office facility to the Company under the terms of an agreement, which
expires December 31, 2001. Rent expense and related operating expenses paid to
Gateway LLC by the Company were $356,000 and $82,000 in 1997 and 1996,
respectively. Future annual rental payments under this lease are $233,000 in
1998, $243,000 in 1999, $254,000 in 2000 and $264,000 in 2001.
A major shareholder and executive officer of the Company, along with
certain other shareholders, are shareholders of Healthfield, Inc.
("Healthfield"). The Company entered into a management services agreement with
Healthfield in February 1994. Healthfield paid the Company approximately
$1,913,000 in management fees during 1995 for certain administrative and
financial services rendered to Healthfield in accordance with the agreement. The
management services agreement with Healthfield was terminated in December 1995.
A major shareholder and executive officer along with certain other
executive officers of the Company are shareholders of National Leasing, Inc.
("National"). During 1997 and 1996, the Company entered into various three-year
capital leases with National. In December 1997, the Company opted for early
termination of all the outstanding capital leases with National and purchased
the equipment under lease for approximately $579,000. Payments, excluding the
purchase, to National under these lease agreements totaled $260,000 and $70,000
in 1997 and 1996, respectively.
A shareholder of the Company owns a Company which leased computer
equipment to the Company during 1996 under an operating lease which expired in
December 1996. Total payments in 1996 related to this lease were approximately
$497,000.
A shareholder and executive officer of the Company is a partner in an
entity that leases an office facility to the Company on a month-to-month basis
for $10,800 per month. Rent expense and related operating expenses paid to this
entity were $130,000 and $112,000 in 1997 and 1996, respectively.
The Company has consulting agreements with two entities in which
certain directors of the Company have ownership interests. Aggregate monthly
consulting fees paid to these two entities approximate $20,000 and totaled
$205,000 and $59,000 in 1997 and 1996, respectively.
16. LICENSE AGREEMENTS
Certain software applications of the Company's NAHC IS software
solution incorporates software licensed from a third party. Under this license
agreement, the Company is obligated to pay royalties based on the volume of
transactions processed by the Company. Royalty rates per transaction vary based
on the volume of transactions processed and totaled $255,000 and $117,000 in
1997 and 1996, respectively.
Another license agreement obligates the Company to pay royalties based
on a percentage of net collected revenues from sales of certain covered systems.
Royalty expense under this agreement totaled $161,000 and $500,000 in 1997 and
1996, respectively.
The Company obtains data processing and network communication services
under an agreement with IBM Global Services ("IBM"). The agreement with IBM
expires December 31, 2005, and requires the Company to pay fees based on the
volume of transactions processed. The agreement requires minimum annual payments
approximating $3.6 million through the year 2000, $3.4 million in 2001, and an
aggregate of $12.8 million thereafter. The agreement is cancelable by the
Company for a stated termination charge declining from $1.1 million to $100,000
over the term of the contract. The Company paid fees to IBM of $3.6 million and
$3.3 million in 1997 and 1996, respectively.
F-18
<PAGE> 56
SIMIONE CENTRAL HOLDINGS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Charged
Balance at to Additions Balance at
Beginning Costs and Due to End of
of Period Expenses Acquisitions Deductions(1) Period
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for Doubtful Accounts $1,063,014 $1,329,563 $ 253,593 $ 731,050 $1,915,120
=======================================================================
Year ended December 31, 1996
Allowance for Doubtful Accounts $ 13,600 $ 395,046 $ 780,701 $ 126,333 $1,063,014
=======================================================================
Year ended December 31, 1995
Allowance for Doubtful Accounts $ -- $ 13,600 $ -- $ -- $ 13,600
=======================================================================
(1) Write-offs of uncollectible accounts.
</TABLE>
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
2.1 -- Assset Purchase Agreement dated as of December 17, 1997 by
and among DHS Acquisition, L.L.C., the Company, Dezine
Healthcare Solutions, Inc. and Companion Technologies
Corporation (Incorporated by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K dated December 31, 1997
as filed with the Securities and Exchange Commission).
3.1 -- Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-4 (Registration Number 33-57150) as filed
with the Securities and Exchange Commission).
3.2 -- Amendment to the Certificate of Incorporation of the
Company (Incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-4 (Registration
Number 33-57150) as filed with the Securities and Exchange
Commission).
3.3 -- Certificate of Amendment of the Certificate of Incorporation
of Simione Central Holdings, Inc., filed June 30, 1997 with
the Secretary of State of the State of Delaware (Incorporated
by reference to Exhibit 3.3 of the Company's Current Report on
Form 8-K dated July 9, 1997 as filed with the Securities and
Exchange Commission).
3.4 -- Amended and Restated Bylaws of the Company (Incorporated by
reference to Exhibit 3.3 of the Company's Registration
Statement on Form S-1 (Registration Number 333-25551) as filed
with the Securities and Exchange Commission).
3.5 -- Certificate of Ownership Merging Simione Central Holdings,
Inc. into InfoMed Holdings, Inc. (Incorporated by reference to
Exhibit 3.5 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 as filed with the Securities
and Exchange Commission).
4.1 -- Specimen Stock Certificate of the Company (Incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-1 (Registration Number 333-25551) as filed
with the Securities and Exchange Commission).
4.2 -- See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of the
Company's Certificate of Incorporation and Bylaws governing
the rights of holders of securities of the Company.
4.3 -- Registration Rights Agreement dated October 7, 1996 by and
among InfoMed Holdings, Inc., those stockholders of Simione
Central Holding, Inc. appearing as signatories to the
Registration Rights Agreement, and those stockholders of
InfoMed Holdings, Inc. appearing as signatories to the
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K dated
October 8, 1996 as filed with the Securities and Exchange
Commission).
9.1 -- Form of Simione Central Holding, Inc. Shareholders Voting
Agreement and Irrevocable Proxy dated March 5, 1996 by and
among Howard B. Krone, William J. Simione, Jr., Gary
Rasmussen, G. Blake Bremer, Katherine L. Wetherbee, A. Curtis
Eade, James A. Tramonte, John Isett, Cindy Lumpkin, Douglas E.
Caddell, Robert J. Simione, Kenneth L. Wall, Allen K. Seibert,
III, Jerry Sevy, Larry Clark and Lori N. Siegel, Gary M.
Bremer, Richard A. Parlontieri, and James R. Henderson
(Incorporated by reference to Exhibit 9.1 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
as filed with the Securities and Exchange Commission).
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
9.2 -- Agreement dated as of October 7, 1996 by and among InfoMed
Holdings, Inc., EGL Holdings, Inc., Mercury Asset Management
plc, O'Donnell Davis, Inc., Barrett O'Donnell and certain
other holders of the Class A Convertible Preferred Stock of
InfoMed Holdings, Inc. (Incorporated by reference to Exhibit
10.2 of the Company's Current Report on Form 8-K dated October
8, 1996 as filed with the Securities and Exchange Commission).
10.1 -- Amended and Restated Agreement and Plan of Merger dated as of
September 5, 1996 by and among InfoMed Holdings, Inc., Simione
Central Holding, Inc. and InfoSub, Inc. (Incorporated by
reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K dated September 5, 1996 as filed with the Securities
and Exchange Commission).
10.2 -- InfoMed Holdings, Inc. Amended and Restated Share Warrant for
the Purchase of Common Stock of InfoMed Holdings, Inc. dated
October 5, 1996 between InfoMed Holdings, Inc. and each of
O'Donnell Davis, Inc., Rowan Nominees Ltd., David O. Ellis,
Richard V. Lawry, Salvatore A. Massaro, Murali Anantharaman,
Kathleen E.J. Ellis, Jeremy Ellis, Karen Ellis, Gemma Ellis,
Thomas M. Rogers, Jr., and Arnold Schumacher (Incorporated by
reference to Exhibit 4.1 of the Company's Current Report on
Form 8-K dated October 8, 1996 as filed with the Securities
and Exchange Commission).
10.3 -- Warrant to Purchase 100,000 shares of Class A Common Stock of
Simione Central Holding, Inc., dated April 12, 1996 between
Simione Central Holding, Inc. and Home Health First, a Texas
not-for-profit corporation (Incorporated by reference to
Exhibit 10.3 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.4 -- Common Stock Warrant of InfoMed Holdings, Inc. dated October
8, 1996 between Jefferies & Company, Inc. and InfoMed
Holdings, Inc. (Incorporated by reference to Exhibit 10.4 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as filed with the Securities and
Exchange Commission).
10.5 -- Settlement Agreement, dated February 28, 1995, between InfoMed
Holdings, Inc. and Frederick Neufeld (Incorporated by
reference to Exhibit 5.5 of the Company's Current Report on
Form 8-K dated March 7, 1995 as filed with the Securities and
Exchange Commission).
10.6 -- Form of Simione Central Holding, Inc. 1996 Incentive Stock
Option Agreement dated September 4, 1996 by and between
Simione Central Holding, Inc. and each of James R. Henderson,
William J. Simione, Jr., Robert Simione, Katherine Wetherbee,
Sheldon Berman, Betty Gordon, William J. Simione, III, J.
Blake Bremer, Craig Luigart, Kenneth L. Wald, Marty Cavaiani,
Lori Ferrero, Douglas E. Caddell, Andy Anello and A. Curtis
Eade (Incorporated by reference to Exhibit 10.6 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1996 as filed with the Securities and Exchange Commission).
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.7 -- Form of 1996 Non-Qualified Stock Option Agreement dated
September 4, 1996 between Simione Central Holding, Inc. and
each of Gary M. Bremer, James A. Tramonte, Gary W. Rasmussen,
Don VanderBeke and Lori N. Siegel (Incorporated by reference
to Exhibit 10.7 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.8 -- Form of Stock Option Agreement dated October 7, 1996 between
InfoMed Holdings, Inc., and Reid Horovitz, Zola Horovitz,
O'Donnell Davis, Inc., EGL Holdings, Inc., David O. Ellis,
Erin Dosdourian, Rodger Johnson, Richard V. Lawry, Salvatore
A. Massaro and Murali Anantharaman (Incorporated by reference
to Exhibit 10.8 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.9 -- 1994 Incentive Stock Option and Non-Qualified Stock Option
Plan (Incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1994 as filed
with the Securities and Exchange Commission).
10.10 -- Simione Central Holdings, Inc. Profit Sharing Plan dated
October 31, 1996, as amended (Incorporated by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.11 -- Simione Central Holdings, Inc. Section 125 Plan effective date
January 1, 1997 sponsored by the Company (Incorporated by
reference to Exhibit 10.11 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.12 -- Headquarters at Gateway Lake Lease Agreement dated January 1,
1996 by and between Gateway LLC and InfoMed Holdings, Inc.
(Incorporated by reference to Exhibit 10.54 of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 as filed with the Securities and Exchange Commission).
10.13 -- Sublease dated November 22, 1996 between Environmental Design
International, Ltd. and Simione Central, Inc. (Incorporated by
reference to Exhibit 10.13 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
10.14* -- Lease Amendment dated August 7, 1992 by and between Sugar Land
Plaza Building Corporation and Medical Solutions, Inc.
10.15* -- Lease dated August 13, 1992 between Unum Life Insurance
Company of America and Dezine Associates, Inc.
10.16* -- Indenture of Lease dated January 1, 1998 by and between S&S
Realty and Simione Central Consulting, Inc.
10.17* -- Lease dated December 18, 1996 by and between Resurgens Plaza
South Associates, L.P. and Simione Central, Inc.
10.18 -- Executive Employment Agreement dated December 10, 1996 between
InfoMed Holdings, Inc. and Gary M. Bremer (Incorporated by
reference to Exhibit 10.15 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 as filed
with the Securities and Exchange Commission).
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.19 -- Executive Employment Agreement dated January 1, 1996 between
Simione Central, Inc. and William J. Simione, Jr.
(Incorporated by reference to Exhibit 10.16 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1996 as filed with the Securities and Exchange Commission).
10.20 -- Agreement dated October 4, 1996 by and between InfoMed
Holdings, Inc. and EGL Holdings, Inc. (Incorporated by
reference to Exhibit 10.17 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 as
filed with the Securities and Exchange Commission).
10.21 -- Information Systems Management Agreement dated January 4, 1996
between Integrated Systems Solutions Corporation and Central
Health Management Services, Inc. (Incorporated by reference to
Exhibit 10.18 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.22 -- Micronetics Design Corporation Value Added Reseller Agreement
Renewal dated July 10, 1996 between Micronetics Design
Corporation and InfoMed Holdings, Inc. (Incorporated by
reference to Exhibit 10.19 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 as
filed with the Securities and Exchange Commission).
10.23 -- Master Software License Agreement Number 96-2283 dated October
31, 1996 by and between Software 2000, Inc. and Simione
Central Holding, Inc. (Incorporated by reference to Exhibit
10.20 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.24 -- Guaranty Agreement dated October 31, 1996 by Simione Central,
Inc. in favor of HCA, Inc. (Incorporated by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.25 -- Lease Agreement dated March 18, 1996 between National Leasing,
Inc. and Simione Central, Inc. (Incorporated by reference to
Exhibit 10.22 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.26 -- IBM Vendor Marketing Programs Cooperative Services Marketing
Agreement dated December 16, 1996 between IBM Corporation and
Simione Central Holding, Inc. (Incorporated by reference to
Exhibit 10.23 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 as filed with the
Securities and Exchange Commission).
10.27 -- Loan and Security Agreement by and between National Bank of
Canada and the Company, dated as of June 6, 1997 (Incorporated
by reference to Exhibit 10.34 of the Company's Current Report
on Form 8-K dated June 27, 1997 as filed with the Securities
and Exchange Commission).
10.28 -- Amendment 2 to Agreement for Information Technology Services
between SC Holding, Inc. and Integrated Systems Solutions
Corporation dated July 31, 1997 (Incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
dated August 13, 1997 as filed with the Securities and
Exchange Commission).
10.29 -- Simione Central Holdings, Inc. Omnibus Equity-based Incentive
Plan (Incorporated by reference to Exhibit 10.17 of the
Company's Registration Statement on Form S-1 (Registration
Number 333-25551) as filed with the Securities and Exchange
Commission).
10.30 -- Simione Central Holdings, Inc. 1997 Non-Qualified Formula
Stock Option Plan (Incorporated by reference to Exhibit 10.18
of the Company's Registration Statement on Form S-1
(Registration Number 333-25551) and filed with the Securities
and Exchange Commission).
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
16.1 -- Letter re change in Certifying Accountant (Incorporated by
reference to Exhibit 4.1 of the Company's Current Report on
Form 8-K dated January 27, 1997 as filed with the Securities
and Exchange Commission).
21.1* -- Subsidiaries of the Company.
23.1* -- Consent of Ernst & Young LLP.
27.1* -- Financial Data Schedule (for SEC use only).
27.2* -- Restated Financial Data Schedule (for SEC use only).
27.3* -- Restated Financial Data Schedule (for SEC use only).
27.4* -- Restated Financial Data Schedule (for SEC use only).
</TABLE>
- ----------------
* Filed herewith
<PAGE> 1
EXHIBIT 10.14
SUGAR CREEK NATIONAL BANK BUILDING
<TABLE>
<S> <C>
LEASE AGREEMENT
SUGAR CREEK NATIONAL BANK BUILDING
THE STATE OF TEXAS)
COUNTY OF FORT BEND)
This Lease, made and entered into on the 7th day of August, 1992, by and
between SUSAN LAND PLAZA BUILDING CORPORATION, a Texas Corporation, (the
"Landlord") and MEDICAL SOLUTIONS, INC., (the "Tenant");
WITNESSETH:
In consideration of the mutual covenants set forth herein, Landlord and
Tenant hereby agree as follows:
PREMISES 1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord for the rental and on the terms and conditions hereinafter set forth
7,929 square feet of Rentable Area (defined in Paragraph 7) in the SUGAR
CREEK NATIONAL BANK BUILDING which shall include all improvements (the
"Building") on land located in Sugar Land, Fort Bend County, Texas, (the
"Land") which land is more particularly described in Exhibit A hereto, which
space (the "Premises"), less the common areas described in Paragraph 7 below
included within the Rentable Area for the Premises) is designated by the area
outlined in red on Exhibit B hereto. The Premises includes space between the
top surface of the floor slab of the area outlined and finished surface of
the ceiling immediately above and all Tenant Improvements (defined in
Paragraph 10) constructed within this space.
AUTHORIZED 2. Tenant shall have the right to occupy and use the Premises for
USE general business office purposes, or any other related use which may be
deemed proper by the Landlord.
TERM 3. Subject to and upon the terms and conditions set forth in the
Lease, this Lease shall be in force for a term (the "Term") of three (3)
(1) Tenant shall be entitled years beginning on the 15th day of September, 1992 (the "Commencement Date")
to One (1) Renewal Option for and ending on the 30th day of September, 1995. (1)
Three (3) additional years at
Market Rates and the Right of
First Refusal to immediately
adjacent Space on the eighth
floor.
RENT 4. Tenant shall pay to Landlord as rent (the "Rent") for the initial
month beginning on the 1st DAY OF OCTOBER, 1992 and each month thereafter
during the Term the sum of EIGHT THOUSAND NINE HUNDRED TWENTY AND 12/100
($8,920.12) per month, subject to adjustment as hereinafter provided.
INITIAL
-------
-------
-------
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
ADJUSTMENT 5. In the event that the Operating Expenses (defined in Paragraph 8)
OF RENT during any Operating Period (an Operating Period being defined as each six
(6) calendar months beginning January I and ending June 30 and beginning July
1 and ending December 31 of each year during the Term, the first Operating
Period for purposes of this Lease beginning on the January 1 or July 1
(1) 1992 Base Year immediately preceding the Commencement Date) shall exceed, on an annualized
basis, $ (1) per year per square foot of Rentable Area of the Building,
Tenant shall pay to Landlord, as additional rent for the Operating Period or
Periods, the amount of such excess multiplied by the number of square feet of
Rentable Area of the Premises, as set forth in Paragraph 1. For all
calculations pursuant to the provisions of this Lease, the Rentable Area of
the Building shall be deemed to be 196,690 square feet. If the Term
commences or expires on other than the beginning date of any Operating
Period, the amount of additional rent shall be reduced in proportion to the
number of days of any such Operating Period not included within the Term.
Landlord shall have the right to collect monthly from Tenant the
escalations owed or to be owed by Tenant under this paragraph, said monthly
payments to be in such amounts as are estimated by Landlord in its sole
discretion. The monthly payment shall be due and payable at the same time as
the Rent provided for in Paragraph 4 is due and payable. Landlord shall,
within the period of one hundred twenty (120) days after the close of any
such Operating Period for which additional rent may be due under the
provisions of this paragraph, give written notice thereof to Tenant, which
notice shall also contain or be accompanied by a statement of the Operating
Expenses during such Operating Period, and by a computation of such
additional rent. Failure of Landlord to give Tenant said notice within said
time period shall not be a waiver of Landlord's right to collect said
additional rent. When the Landlord presents Tenant with a statement of
amounts due by Tenant for any escalation set out in this paragraph, Tenant
shall pay Landlord the difference between its proportionate share of said
escalation and the amount of monthly payments made by Tenant attributable to
said escalation, or Tenant shall receive a credit therefor if said escalation
is less than the amount of monthly payments collected by Landlord
attributable to said escalation, said credit to be applied to future monthly
payments attributable to future escalations.
PAYMENT 6. On or before the first day of each calendar month during the Term
OF RENT hereof, Tenant shall pay to Landlord for such month the Rent then in effect.
All such payments shall be paid to Landlord in lawful money of the United
States of America at the address of Landlord shown herein or to such other
party or to such other place as Landlord may designate from time to time in a
written notice to Tenant. If this Lease commences or terminates on any day
other than the first or last day of a .calendar month, the Rent due hereunder
shall be prorated except as otherwise provided in this Lease.
RENTABLE 7. The Rentable Area for a full floor of the Building shall be the
AREA area bounded by the exterior Building walls (measured to the interior surface
of the glass windows on such floors that do not have balconies, and on such
floors that have balconies, to the interior surface of the balcony wall),
including the area used for elevator lobbies, corridors, special stairways,
restrooms, atriums, mechanical rooms, telephone closets, and the structural
columns of the Building and all vertical penetrations for the special use of
Tenant but excluding the area used for Building stairs, vertical ducts,
elevator shafts, flues, vents, stacks, and pipe shafts; and with respect to
the second floor of the Building, one-half ( 1/2) of the Bank Atrium footage
(deemed to be 2,200 square feet). The Rentable Area for the
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Premises shall be the total Rentable Area calculated for the floor or floors
to be occupied by Tenant; or where only a portion of a floor is to be
occupied, the Rentable Area for the Premises shall be the area calculated
within the boundaries defined by any exterior Building walls bounding the
Premises (measured to the interior surface of the glass windows or the
interior surface of the balcony wall, as the case may be), the center line of
any common walls separating the Premises from area leased or to be leased to
other tenants and the exterior of any walls separating the Premises from any
public corridors or other public or common areas on such floors plus a pro
rata portion of the area used for elevator lobbies, corridors, rest rooms,
atriums, mechanical rooms and telephone closets.
OPERATING 8. "Operating Expenses," as used in this Lease, refers to the
EXPENSES aggregate of all expenses, costs and disbursements of every kind and nature
relating to or incurred or paid during any Operating Period in connection
with the ownership, operation and maintenance of the Building, Land,
equipment, fixtures, and facilities used in connection therewith, including,
but not limited to wages and salaries of all employees directly engaged in
the operation, maintenance or security of the Building and Land, including
taxes, insurance and benefits relating thereto; the cost of all labor,
supplies, materials and tools used in the operation and maintenance of the
Building and Land; management fees (not exceeding the industry standard of
similar buildings in Harris County, Texas); the cost of all accounting
expenses incurred in connection with the ownership and operation of the
Building and Land; the cost of all utilities for the Building and Land,
including, but not limited to, the cost of water and sewer services and power
for heating, lighting, air conditioning and ventilating; the cost of all
maintenance and service agreements for the Building, Land and equipment
therein or thereon, including, but not limited to, security service, window
cleaning, elevator maintenance and janitorial service; the cost of all
insurance relating to the Building and Land, including, but not limited to,
the cost of casualty, rental abatement and liability insurance applicable to
the Building, Land and Landlord's personal property used in connection
therewith; Taxes (defined in Paragraph 9); the cost of all license and permit
fees; the cost of repairs, refurbishing, restoration and general maintenance;
a reasonable amortization charge on account of any capital expenditure
incurred (i) to comply with any governmental rule, regulation, law or
otherwise, or (ii) to effect a reduction in the Operating Expenses of the
Building or Land; and, all other items constituting operating and maintenance
costs in connection with the Building and Land according to generally
accepted accounting principles. Except as specifically provided in the
immediately preceding sentence, Operating Expenses shall not include the
following: (i) depreciation, (ii) leasing commissions, (iii) repairs and
restorations paid for by the proceeds of any insurance policy or (iv)
construction of improvements of a capital nature, (v) ground rent, (vi)
income and franchise taxes other than that portion, if any, of income and
franchise taxes which may hereafter be assessed and paid in lieu of or as a
substitute in whole or in part for Taxes. If less than 95% of the Rentable
Area of the Building is actually occupied during any Operating Period,
Operating Expenses shall be the amount that such Operating Expenses would
have been for such Operating Period had 95% of the Rentable Area of the
Building been occupied during all such Operating Period, as determined by
Landlord. Tenant, at its cost, shall have the right to inspect, in
Landlord's offices, during Landlord's usual business hours, within the sixty
(60)-day period following delivery of the statement referred to in
Paragraph 5 herein, Landlord's records of the Operating Expenses referred to
in such statement. If within such sixty (60)-day period neither party hereto
delivers to the other party a notice referring in reasonable
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detail to one or more errors in such statement, it shall be deemed
conclusively that the information set forth in such statement is correct.
TAXES 9. Where used in this Lease, the term "Taxes" means all ad valorem
taxes, personal property taxes, and all other taxes, assessments, use and
occupancy taxes, transit taxes, water and sewer charges, excises, levies,
license and permit fees and all other similar charges, if any, which are
levied, assessed, or imposed upon or become due and payable in connection
with, or a lien upon, the Land, the Building or facilities used in connection
therewith, and all taxes of whatsoever nature that are imposed in
substitution for or in lieu of any of the taxes, assessments, or other
charges included in this definition of Taxes; provided, however, Taxes shall
not include the portion, if any, of ad valorem taxes against the Premises
that is paid by tenants as a separate charge pursuant to Paragraph 19 of this
Lease.
TENANT 10. The Premises shall be deemed ready for occupancy when offered by
IMPROVEMENTS Landlord to Tenant with doors, floor coverings, ceilings, walls, window
coverings, lighting, heating, cooling, ventilating, water, electrical and
other interior treatments, fittings, furnishings and fixtures ("Tenant
Improvements") substantially completed and accepted by Tenant; Landlord and
Tenant have agreed upon the various "Building Standard Improvements" (defined
in Exhibit C) and any other special additional improvements ("Special Tenant
Improvements"), which shall be required. All such Tenant Improvements shall
be fully described by approved plans and specifications prepared pursuant to
a separate written agreement ("Work Letter Agreement") signed by Landlord and
Tenant. Upon Tenant's taking possession, the Premises, including any Tenant
Improvements to be completed by Landlord, shall be deemed satisfactorily
completed unless otherwise expressly agreed in writing by both parties.
COMPLETION 11. If the Premises are not ready for occupancy by the Commencement
OF TENANT Date because Tenant Improvements have not been completed, the obligations of
IMPROVEMENTS Landlord and Tenant under this Lease shall nevertheless continue in full
AND force and effect and the Rent shall commence on the earlier of (i) the
COMMENCEMENT Commencement Date if occupancy is delayed due to Tenant's failure to furnish
OF RENT information or complete work which Tenant has agreed to provide within the
time agreed upon in the Work Letter Agreement and/or if delay of occupancy is
occasioned by special orders from Tenant, or (ii) the date the Premises are
ready for occupancy if the delay is due to Landlord's failure to complete
work which Landlord has agreed to provide under the terms of the Work Letter
Agreement and, in such event, abatement of Rent shall constitute full
settlement of all claims that Tenant might otherwise have against Landlord by
reason of the Premises not being ready for occupancy at the Commencement
Date.
MAINTENANCE 12. Landlord shall provide all normal maintenance and repair of the
AND REPAIR exterior and the structural portions of the Building and common areas, such
as lobbies, stairs, corridors, rest rooms, roof, elevators, escalators, and
shall provide painting of partitions and refinishing of doors in the Premises
included in the Building Standard Improvements at times when the Landlord, in
its discretion, deems it appropriate for the continued use and enjoyment of
the Premises. Landlord shall not have any obligation to maintain, repair, or
replace any Tenant Improvements, except the portions thereof included in
Building Standard Improvements. Except to the extent that Landlord is
obligated to furnish maintenance, repair and painting of portions of the
Premises pursuant to this Paragraph and to repair damage by fire or other
casualty pursuant to Paragraph 22,
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Tenant, at its sole cost, shall maintain and repair the Premises and
otherwise keep the Premises in good order and repair, but all workmen,
artisans and contractors employed for such purposes shall be obtained through
or specifically approved by Landlord prior to the commencement of any work on
the Premises.
LANDLORD'S 13. Landlord, at its cost, shall furnish the Premises with (i) cleaning
SERVICES and janitorial services (defined in Exhibit D), (ii) hot and cold domestic
water at those points of supply provided for general use of other tenants in
the building and electricity ( 110 volt current) for normal office uses,
(iii) elevator service at the times and frequency required, in Landlord's
judgment, for normal business use of the Premises by Tenant pursuant hereto,
(iv) lamp and ballast replacement for light fixtures included in Building
Standard Improvements, (v) heating, ventilating, and air conditioning service
between 7:00 o'clock a.m. and 7:00 o'clock p.m. on Monday through Friday, and
between 7:00 o'clock a.m. and 1:00 o'clock p.m. on Saturday, except on New
Year's Day, Memorial-Day, July 4, Labor Day, Thanksgiving Day, Christmas Day
and other holidays ("Holidays") observed from time to time by tenants
occupying a majority of the Rentable Area in the Building; however, in the
event applicable governmental laws, edicts, etc. cause normal hours to be
modified (e.g., Federal Energy Plan), then such heating, ventilating and air
conditioning service shall be changed to be in compliance with such
promulgations. Landlord shall furnish heating, ventilating and air
conditioning and cooling service on days and at times other than those
referred to in subsection (v) above provided Tenant requests such service a
reasonable time in advance and agrees in writing to bear all core to Landlord
thereof. Landlord shall not be liable for any damages, directly or
indirectly, resulting from, nor shall any Rent be abated by reason of, the
installation, use or interruption of use of any equipment in connection with
the furnishing of any of the foregoing services, or failure to furnish or
delay in furnishing any such service when such failure or delay is caused by
accident or any other occurrence or condition beyond the reasonable control
of Landlord or by the making of necessary repairs or improvements to the
Premises or to the Building. The failure to furnish any of such services
shall not be construed as an eviction of Tenant or relieve Tenant from the
duty of observing and performing any of its obligations under this Lease
unless such failure substantially handicaps, impedes or impairs the normal
use of the Premises by Tenant for the purposes authorized in this Lease and
unless within a reasonable time after delivery to Landlord by Tenant of a
written notice setting forth in reasonable detail a description of the
services not so furnished, Landlord fails to commence curing any such failure
or thereafter fails to continue the curing thereof with appropriate diligence
and speed under the circumstances until cured.
PROHIBITED 14. Tenant shall not use or permit any other party to use all or any
USE part of the premises for any purpose whatsoever not authorized in Paragraph 2
of this Lease. Tenant shall not do or permit anything to be done in or about
the Building nor bring or keep or permit anything to be brought to or kept
therein, which is prohibited by or which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated, or which is prohibited by any standard form
of fire insurance policy or which will in any way increase the existing rate
of or affect any fire or other insurance which Landlord carries 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.
Tenant shall not do or permit anything to be done in or about the 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 Premises to be
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used for any unlawful or objectionable purpose. Tenant shall not cause,
maintain or permit any nuisance in, on, or about the Premises or Building or
commit or suffer to be committed any waste to, in, on or about the Premises
or Building.
RULES AND 15. Tenant shall perform and comply with the Rules and Regulations of
REGULATIONS the Building set out in Exhibit E and, upon written notice thereof, all other
OF BUILDING rules and regulations with respect to safety care, cleanliness, and
preservation of good order in the Building that may be established from time
to time by Landlord for tenants of the Building. Landlord shall not have any
liability to Tenant for any failure of any other tenants of the Building to
comply with such Rules and Regulations.
COMPLIANCE 16. Tenant shall, at its sole cost and expense, promptly comply with
WITH LAWS all laws, statutes, ordinances and governmental rules, regulations or
AND OTHER requirements now in force or which may hereafter be in force, with the
REGULATIONS requirements of any board of fire underwriters or other similar body now or
hereafter constituted, and with any directive or occupancy certificate issued
pursuant to any law by any public officer or officers insofar as any thereof
relate to or affect the condition, use or occupancy of the Premises,
excluding requirements of structural changes not resulting from Special
Tenant Improvements or acts of Tenant.
ALTERATIONS 17. Tenant shall not make any alterations or additions to the Tenant
AND ADDITIONS Improvements, Premises or Building, except with the prior written consent of
the Landlord. All Tenant Improvements, alterations and additions to the
Tenant Improvements, to the Premises and to the Building shall be the
property of the Landlord and shall not be removed by Tenant either during or
after the end of the Term without the express written approval of Landlord.
Tenant shall not be entitled to any reimbursement or compensation resulting
from its payment of the cost of constructing all or any portion of the Tenant
Improvements or any alterations or additions thereto unless otherwise
expressly agreed by Landlord in writing. Tenant shall not permit any
mechanics', materialmen's or other liens to be fixed or placed against the
Premises or the Building or the Land and agrees immediately to discharge
(either by payment or by filing of the necessary bond, or otherwise) any
mechanics', materialmen's or other lien which is allegedly fixed or placed
against any of the foregoing.
TENANT'S 18. Except for desk or table mounted typewriters, adding machines,
EQUIPMENT office calculators, dictation equipment and other similar office equipment,
AND Tenant shall not install within the Premises any fixtures, equipment,
INSTALLATIONS facilities, or other improvements until the plans therefor have been approved
by Landlord and shall not, without the specific written consent of Landlord
and Tenant's written agreement to pay additional costs, install or maintain
any apparatus or devices within the Premises which will increase the usage of
electrical power, water or gas for the Premises to an amount greater than
would be normally required for general office use.
TAXES ON 19. Tenant shall pay all ad valorem and similar taxes or assessments
PERSONALTY levied upon or applicable to all equipment, fixtures, furniture, and other
AND TENANT property placed by Tenant in the Premises and all license and other fees or
IMPROVEMENTS charges imposed on the business conducted by Tenant on the Premises. If the
Tenant Improvements do not consist entirely of Building Standard Improvements
and Landlord shall be required to pay a higher ad valorem tax with respect to
the Building than would have been payable had the Tenant Improvements
consisted entirely of Building Standard Improvements, Tenant shall pay to
Landlord, within thirty (30) days after
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demand, the amount by which the ad valorem taxes payable by Landlord with
respect to the Building for the tax period exceed the amount of ad valorem
taxes that otherwise would have been payable by Landlord.
LANDLORD'S 20. Landlord shall have the right, at all reasonable times during the
ACCESS Term, to enter the Premises and to inspect the condition thereof, to show the
Premises to prospective new tenants, to determine if Tenant is performing its
obligations under this Lease, and to perform the services or to make the
repairs and restoration that Landlord is obligated or elects to perform or
furnish under this Lease, to make repairs to adjoining space, to cure any
defaults of Tenant hereunder that Landlord elects to cure, and to remove from
the Premises any improvements thereto or property placed herein in violation
of this Lease.
INSURANCE 21. Landlord shall maintain, during the Term of this Lease fire and
extended coverage insurance ("Insurance") insuring the Building and Premises,
but excluding Tenant's goods, furniture or property of Tenant's Improvements
not consisting wholly of Building Standard Improvements placed in the
Premises, against damage or loss from fire or other casualty normally insured
against under the terms of standard policies of fire and extended coverage
insurance. Tenant shall be responsible for providing, at Tenant's own
expense, all insurance coverage necessary for the protection against loss or
damage from fire or other casualty of Tenant's goods, furniture, Tenant's
Improvements not consisting wholly of Building Standard Improvements, or
other property placed in the Premises.
FIRE OR OTHER 22. If the Premises or the Building is damaged or destroyed, in whole
CASUALTY or in part, by fire or other casualty at any time during the Term, and if,
after such damage or destruction, Tenant is not able to use the portion of
the Premises not damaged or destroyed to substantially the same extent and
for substantially the same purpose as Tenant used the Premises prior thereto,
then unless such damage or destruction is the result of the negligence or
willful misconduct of Tenant, within thirty (30) days after delivery to
Landlord by Tenant of a written notice describing in reasonable detail such
damage or destruction, Landlord shall give Tenant a written notice setting
forth Landlord's election, either to (i) terminate this Lease, or (ii)
restore or replace the damaged or destroyed portion to substantially the same
condition that existed immediately prior to such damage or destruction. If
Landlord does not elect to proceed under the foregoing subsection (ii), it
shall be deemed that it has elected to terminate this Lease pursuant to the
foregoing subsection (i). If such damage or destruction occurs, then, unless
such damage or destruction is the result of the negligence or willful
misconduct of Tenant, the Rent shall be abated for the period and
proportionately to the extent that after such damage or destruction Tenant is
not able to use the portion of the Premises damaged or destroyed to
substantially the same extent and for substantially the same purposes as
Tenant used the Premises prior thereto. If Landlord elects to restore or
replace the damaged or destroyed portions of the Premises or Building, this
Lease shall continue in full force and effect in accordance with the terms.
hereof except for the rent abatement referred to above (if applicable) and
except that the Term shall be extended by a length of time equal to the
period beginning on the date of such damage or destruction and ending upon
completion of such restoration or replacement. If Landlord elects to restore
or replace the damaged or destroyed portions of the Premises or Building,
such restoration or replacement shall be made within a reasonable 90 days or
less time subject to delays arising from Acts of God, shortages of labor or
materials, war, or other similar or dissimilar conditions or events beyond
the reasonable control of Landlord. If
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Landlord elects to terminate this Lease, this Lease shall terminate on the
last day of the month next following the end of the thirty (30)-day period
referred to above.
WAIVER 23. Anything in this Lease to the contrary notwithstanding, each party
OF hereto releases and waives all claims, rights of recovery, and causes of
CLAIMS action that either such party or any party claiming by, through, or under
such party by subrogation or otherwise may now or hereafter have against the
other party or any of the other party's directors, officers, partners,
employees, or agents for any loss or damage that may occur to the Building,
Premises, Tenant Improvements, or any of the contents of any of the foregoing
by reason of fire, Act of God, the elements, or any other cause, excluding
gross negligence or willful misconduct but including negligence of the
parties hereto or their directors, officers, partners, employees, or agents
that could have been insured against under the terms of standard fire and
extended coverage insurance policies. Landlord shall not be liable to Tenant
for any inconvenience or loss to Tenant in connection with any of the repair,
maintenance, damages, destruction, restoration, or replacement referred to in
this Lease. Landlord shall not be obligated to insure any of the Tenant
Improvements not consisting wholly of Building Standard Improvements or any
of Tenant's goods, furniture, or other property placed in or incorporated in
the Building and, except with respect to the portion of the Tenant
Improvements that Landlord is expressly obligated to repair, maintain or
replace pursuant to the provisions of Paragraph 12 hereof, Landlord shall not
be obligated to repair, maintain, restore, or replace or otherwise be liable
for any damage to or destruction of any of the foregoing.
INDEMNITY 24. Except for the claims, rights of recovery and causes of action that
Landlord has released and waived pursuant to Paragraph 23 hereof, Tenant
shall indemnify and hold harmless Landlord and Landlord's agents, directors,
officers, partners, employees, invitees, and contractors, from all claims,
losses, costs damages, or expenses (including, but not limited to, attorneys'
fees) resulting or arising from any and all injuries to, including death of,
any person or damage to any property, caused by any act, omission, or neglect
of Tenant or Tenant's directors, officers, employees, agents, invitees, or
guests, or any parties contracting with Tenant relating to the Premises.
Landlord shall not be liable for any damage of any kind or for any damage to
property, death or injury to persons from any cause whatsoever by reason of
the use and occupancy of the Building by Tenant. Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord or
Landlord's directors, officers, partners, employees, or agents for any damage
or loss of any kind, for direct damages, consequential damages, loss of
profits, business interruption, and for any damage to property, death or
injury to persons from any cause whatsoever, including, but not limited to,
acts of other tenants, vandalism, loss of trade secrets or other confidential
information, any damage, loss or injury caused by a defect in the Premises or
the Building, pipes, air conditioning, heating, plumbing, or by water leakage
of any kind from the roof, walls, windows, or other portion of the Premises
or the Building, or caused by electricity, gas, oil, fire or any other cause
in, on, or about the Premises, Building, or Land or any part thereof, unless
caused solely by the willful misconduct or negligence of Landlord. During
the term of this Lease, Tenant, at its sole cost, shall obtain and maintain
with insurance companies approved by Landlord, comprehensive public liability
insurance including property damage insuring Tenant, Landlord and Landlord's
designees, if any, against liability for injury to persons or property
occurring in or about the Premises or arising out of the ownership,
maintenance, use or occupancy thereof The liability under such
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insurance shall not be less than $500,000.00 for any one person injured
and/or killed and not less 100,000.00 for any one accident and not less than
$100,000.00 for personal property damage per accident, all such amounts to be
increased if, in the reasonable judgment of Landlord, any such increase is
necessary for Landlord's protection. A certificate of such insurance shall be
furnished to Landlord, and such policy shall provide that it may not be
altered or cancelled without ten (10) days' notice being first given to
Landlord.
NON-WAIVER 25. No consent or waiver, express or implied, by Landlord to or of any
breach in the performance or observance by Tenant of any of its obligations
under this Lease shall be construed as or constitute a consent or waiver to
or of any other breach in the performance or observance by Tenant of such
obligation or any other obligations of Tenant. Neither the acceptance by
Landlord of any Rent or other payment hereunder, whether or not any default
hereunder by Tenant is then known to Landlord, nor any custom or practice
followed in connection with this Lease shall constitute a waiver of any of
Tenant's obligations under this Lease. Failure by Landlord to complain of
any action or non-action on the part of Tenant or to declare Tenant in
default, irrespective of how long such failure may continue, shall not be
deemed to be a waiver by Landlord of any of its rights hereunder. Time is of
the essence with respect to the performance of every obligation of Tenant
under this Lease in which time of performance is a factor. Except where
expressly provided herein to the contrary, all Rent and other amounts payable
by Tenant under this Lease shall be paid without abatement, offset,
counterclaim, or diminution to any extent whatsoever. Except for the
execution and delivery of a written agreement expressly accepting surrender
of the Premises, no act taken or failed to be taken by Landlord shall be
deemed an acceptance of surrender of the Premises.
QUIET 26. Provided Tenant has performed all its obligations under this Lease,
POSSESSION including, but not limited to, the payment of Rent and all other sums due
hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for
the Term, subject to the provisions and conditions set forth in this Lease.
NOTICES 27. Each Notice required or permitted to be given hereunder by one
party to the other shall be in writing, with a statement therein to the
effect that notice is given pursuant to this Lease, and the same shall be
given and shall be deemed to have been delivered, served and given if placed
in the United States mail, postage prepaid, by United States registered or
certified mail, return receipt requested, addressed to such party at the
address provided for such party herein. Any notices to the Landlord shall be
addressed and given to Landlord as follows:
SUGAR LAND PLAZA BUILDING CORPORATION
Sugar Creek Boulevard at Southwest Freeway
Sugar Land, Texas 77478
Prior to the Commencement Date, the address for notices to Tenant shall
be the address set forth for Tenant on the signature page of this Lease;
after the Commencement Date, the address for Tenant shall be the Premises.
The address stated above shall be effective for all notices to the respective
parties until written notice of a change in address is given pursuant to the
provisions hereof.
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LANDLORD'S 28. If Landlord fails to perform any of its obligations under this
FAILURE Lease, Landlord shall not be in default hereunder and Tenant shall not have
TO PERFORM any rights or remedies growing out of such failure, unless Tenant gives
Landlord written notice thereof setting forth in reasonable detail the nature
and extent of such failure and such failure by Landlord is not cured within
the thirty (30)-day period following delivery of such notice or such longer
period therefor provided elsewhere in this Lease. If such failure cannot
reasonably be cured within such thirty (30)-day period, the length of such
period shall be extended for the period reasonably required therefor if
Landlord commences curing such failure within such thirty (30)-day period and
continues the curing thereof with reasonable diligence and continuity.
TENANT'S 29. If Tenant fails to perform any one or more of its obligations
FAILURE hereunder, in addition to the other rights of Landlord hereunder, Landlord
TO PERFORM shall have the right, but not the obligation, to perform all or any part of
such obligations of Tenant. Upon receipt of a demand therefor from Landlord,
Tenant shall reimburse Landlord for (i) the cost to Landlord of performing
such obligations and a reasonable profit and overhead, plus (ii) interest
thereon at the then maximum legal rate from the date of demand. If the
obligation so performed by Landlord involves any repair or maintenance or the
removing by Landlord of any improvements to or use of the Premises not
authorized by this Lease, such reasonable profit and overhead shall be ten
percent (10%) of the cost to Landlord of performing such obligation.
ACT OF 30. The term "Act of Default" refers to the occurrence of any one or
DEFAULT more of the following: (i) failure of Tenant to pay when due any Rent or
other amount required to be paid under this Lease; or (ii) failure of Tenant
after thirty (30) days written notice from Landlord of Tenant's default in
the performance of any of Tenant's obligations, covenants or agreements under
this Lease, to do, observe, keep and perform with diligence and continuity
any of such obligations, covenants, or agreements; or (iii) the adjudication
of Tenant to be a bankrupt; or (iv) the filing by Tenant of a voluntary
petition in bankruptcy, receivership, or other related or similar
proceedings; or (v) the making by Tenant of a general assignment for the
benefit of its creditors; or (vi) the appointment of a receiver of Tenant's
interests in the Premises in any action, suit or proceeding by or against
Tenant's interest in the Premises or by or against Tenant; or (vii) any other
voluntary or involuntary proceedings instituted by or against Tenant under
any bankruptcy or similar laws, unless the occurrence of any such involuntary
receivership or proceeding is cured by the same being dismissed or stayed
within sixty (60) days thereafter; or (viii) the failure of Tenant to
discharge any judgment against Tenant within sixty (60) days after such
judgment becomes final; or (ix) the sale or attempted sale under execution or
other legal process of the interest of Tenant in the Premises, or (x)
abandonment of the Premises for any period of time consisting of thirty (30)
consecutive days.
RIGHTS UPON 31. If an Act of Default occurs, Landlord at any time thereafter prior
DEFAULT to the curing of such Act of Default and without waiving any other rights
herein available to Landlord at law or in equity, may either terminate this
Lease or terminate Tenant's right to possession without terminating the
Lease, whichever Landlord elects. In either event, Landlord may, without
additional notice and without court proceedings, reenter and repossess the
Premises, and remove all persons and property therefrom using such force as
may be necessary, and Tenant hereby waives any claim arising by reason
thereof or by reason of issuance of any
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distress warrant and agrees to hold Landlord harmless from any such claims.
If Landlord elects to terminate this Lease, it may treat the Act of Default
as an entire breach of this Lease and Tenant immediately shall become liable
to Landlord for damages for the entire breach in an amount equal to the
amount by which (i) the total Rent (being the Rent set forth in Paragraph 4
hereof as adjusted pursuant to Paragraph 5 hereof for any increase and
estimated increase in Operating Expenses which would be payable by Tenant
during the unexpired balance of the Term) and all other payments due for the
balance of the Term is in excess of (ii) the fair market rental value of the
Premises for the balance of the Term as of the time of default, both
discounted at the rate of 6% per annum to the then present value. If
Landlord elects to terminate Tenant's right to possession of the Premises
without terminating the Lease, Landlord may rent the Premises or any part
thereof for the account of Tenant to any person or persons for such rent and
for such terms and other conditions as Landlord deems practical, and Tenant
shall be liable to Landlord for the amount, if any, by which the total rent
and all other payments herein provided for the unexpired balance of the Term
exceed the net amount, if any, received by Landlord from such re-renting,
being the gross amount so received by Landlord less the cost of repossession,
re-renting, remodeling and other expenses. Such sum or sums shall be paid by
Tenant in monthly installments on the first day of each month of the Term.
In no case shall Landlord be liable for failure to re-rent the Premises or
collect the rental due under such re-renting. If Landlord elects to
terminate Tenant's right to possession without terminating the Lease,
Landlord shall have the right at any time thereafter to terminate this Lease,
whereupon the foregoing provisions with respect to termination will
thereafter apply. If an Act of Default occurs or in case of any holding over
or possession by Tenant of the Premises after the expiration or termination
of this Lease, Tenant shall reimburse Landlord on demand for all costs
incurred by Landlord in connection therewith including, but not limited to,
reasonable attorney's fees, court costs and related costs plus interest
thereon at the then maximum legal rate from the date such costs are paid by
Landlord. Actions by Landlord to collect amounts due from Tenant as provided
in this Paragraph 31 may be brought at any time, and from time to time, on
one or more occasions, without the necessity of Landlord's waiting until the
termination of this Lease.
SURRENDER 32. On the last day of the Term, or upon the earlier termination of
this Lease, Tenant shall peaceably and quietly surrender the Premises to
Landlord, broom clean, in good order, repair and condition at least equal to
the condition when delivered to Tenant, excepting only fair wear and tear
resulting from normal use and damage by fire or other casualty covered by the
Insurance carried by Landlord. Prior to the surrender of the Premises to
Landlord, Tenant, at its sole cost and expense, shall remove all liens and
other encumbrances which may have resulted from the acts or omissions of
Tenant. If Tenant fails to do any of the foregoing, Landlord, in addition to
other remedies available to it at law or in equity, may, without notice,
enter upon, reenter, possess and repossess itself thereof, by force, summary
proceedings, ejectment, or otherwise, and may dispossess and remove Tenant
and all persons and property from the Premises; and Tenant waives any and all
damages or claims for damages as a result thereof. Such dispossession and
removal of Tenant shall not constitute a waiver by Landlord of any claims by
Landlord against Tenant.
HOLDING 33. If Tenant does not surrender possession of the Premises at the end
OVER of the Term, or upon earlier termination of this Lease, at the election of
Landlord, Tenant shall be a tenant-at-sufferance of Landlord and the Rent and
other
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payments due during the period of such holdover shall be two times the amount
set forth above in effect immediately prior to the end of the Term or
termination of this Lease.
REMOVAL OF 34. Tenant shall retain the ownership of all movable equipment,
TENANT'S furniture, and supplies placed in or on the Premises by Tenant and shall have
PROPERTY the right to remove such movable equipment, furniture, and supplies prior to
termination of this Lease provided that no Act of Default has been committed
by Tenant which has not been fully cured in a manner acceptable to Landlord
and further provided that Tenant repairs any injury to the Premises or the
Building resulting from such removal. Unless Tenant has made prior
arrangements with Landlord and Landlord has agreed in writing to permit
Tenant to leave such equipment, furniture or supplies on the Premises for an
agreed period, if Tenant does not remove such movable equipment, furniture
and supplies prior to such termination, then, in addition to its other
remedies at law or in equity, Landlord shall have the right to have such
items removed and stored and all damage to the Premises or Building resulting
therefrom repaired at the cost of Tenant or elect that such movable
equipment, furniture and supplies automatically become the property of the
Landlord upon termination of this Lease, and, in the latter case, Tenant
shall not have any further right with respect thereto or for reimbursement
therefor.
LIENS 35. Tenant shall not permit any mechanics', materialmen's or other
liens to be fixed or placed against the Premises or the Building or the Land,
and agrees immediately to discharge (either by payment or by filing of the
necessary bond, or otherwise) any mechanics', materialmen's or other lien
which is allegedly fixed or placed against any of the foregoing. In addition
to and cumulative of Landlord's statutory lien.
INTEREST 36. All amounts of money payable by Tenant to Landlord under this
Lease, if not paid when due, shall bear interest from the date due until paid
at the then maximum legal rate.
ASSIGNMENT 37. Landlord shall have the right to transfer and assign in whole or in
AND SUBLETTING part, by operation of law or otherwise, its rights and obligations hereunder
whenever Landlord, in its sole judgment, deems it appropriate without any
liability to Tenant and Tenant shall attorn to any party to which Landlord
transfers the Building. Tenant shall not assign or otherwise transfer,
mortgage, pledge, hypothecate or otherwise encumber this Lease, or any
interest herein, and shall not sublet the Premises or any part thereof, or
any right or privilege appurtenant thereto, or permit any other party to
occupy or use the Premises, or any portion thereof, without the express
written consent of Landlord, which consent shall not be unreasonably
withheld. Any such consent by Landlord shall not release Tenant from any of
Tenant's obligations hereunder or be deemed to be a consent to any subsequent
assignment, subletting, occupation or use by another person. Subject to the
foregoing, the rights and obligations of the parties hereunder shall inure to
the benefit of and being binding on the parties hereto and their respective
successors, assigns, heirs, and legal representatives.
MERGER OF 38. The voluntary or other surrender of this Lease by Tenant, or a
ESTATES mutual cancellation thereof, 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 Tenant's
interest in any or all such subleases or subtenancies.
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LANDLORD'S 39. Any provisions of this Lease to the contrary notwithstanding, Tenant
LIABILITY hereby agrees that no personal or corporate liability of any kind or
character whatsoever now attaches or at any time hereafter under any
condition shall attach to Landlord for payment of any amounts payable under
this Lease or for the performance of any obligation under this Lease. The
exclusive remedies of Tenant for the failure of Landlord to perform any of
its obligations under this Lease shall be to proceed against the interest of
Landlord in and to the Building.
LIGHT 40. Neither diminution nor shutting off of light or air or both nor any
AND AIR other effect on the Premises by any structure erected or condition now or
hereafter existing on lands adjacent to the Building shall effect this Lease,
abate Rent, or otherwise impose any liability on Landlord.
CONDEMNATION 41. If all or more than twenty-five percent (25%) of the interest in
the 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. If more than 25% of the interest in the Premises or if a
substantial portion of the Building is so taken, either Landlord or Tenant
shall have the right to terminate this Lease as to the balance of the
Premises by written notice to the other within thirty (30) days after the
date of taking, provided, however, that a condition to the exercise by Tenant
of such right to terminate shall be that the portion of the Premises or
Building taken shall be of such extent and nature as to substantially
handicap, impede or impair Tenant's use of the Premises or the balance of the
Premises remaining. In the event of any taking, Landlord shall be entitled
to any and all compensation, damages, income, rent and awards with respect
thereto, except for an award, if any, specified by the condemning authority
for any property that Tenant has the right to remove upon termination of this
Lease. Tenant shall have no claim against Landlord for the value of any
unexpired Term. In the event of a partial taking of the Premises which does
not result in a termination of this Lease, the Rent thereafter to be paid
shall be equitably reduced by being proportionately reduced as to the square
footage so taken.
SUBORDINATION 42. The rights and interests of Tenant under this Lease and in and to
the Premises shall be subject and subordinate to first deeds of trust,
mortgages, and other security instruments and to all renewals, modifications,
consolidations, replacements and extensions thereof (the "Security
Documents") heretofore or hereafter executed by Landlord covering the
Premises, the Building and the Land, or any parts thereof, to the same extent
as if the Security Documents had been executed, delivered and recorded prior
to the execution of this Lease. After the delivery to Tenant of a notice
from Landlord that it has entered into one or more Security Documents, then,
during the term of such Security Documents, Tenant shall deliver to the
holder or holders of all Security Documents a copy of all notices to Landlord
and shall grant to such holder or holders the right to cure all defaults, if
any, of Landlord hereunder within the same time period provided in this Lease
for curing such defaults by Landlord and, except with the prior written
consent of the holder of the Security Documents, shall not (i) amend this
Lease, (ii) surrender or terminate this Lease, except pursuant to a right to
terminate expressly set forth in this Lease, or (iii) pay any Rent more than
one month in advance or pay any Rent or other amounts payable hereunder other
than in strict accordance with the terms hereof. The provisions of this
subsection shaft be self-operative and shall not require further agreement by
Tenant, however, at the request of Landlord, Tenant shall execute such
further documents as may be
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required to evidence and set forth for the benefit of the holder of any
Security Documents the obligations of Tenant hereunder. At any time and from
time to time upon not less than ten (10) days' prior notice by Landlord,
Tenant shall execute, acknowledge and deliver to the Landlord a statement of
the Tenant, in writing, certifying that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications, if any), and
stating whether or not to the best knowledge of Tenant the Landlord is in
default in the keeping, observance or performance of any covenant, agreement,
term, provision or condition contained in this Lease and, if so, specifying
each such default of which Tenant may have knowledge, it being intended that
any such statement may be relied upon by any prospective purchaser, tenant,
mortgagee or assignee of any mortgage of the Building or of the Landlord's
interest therein.
LEGAL 43. This Lease and the rights and obligations of the parties hereto
INTERPRETATION shall be interpreted, construed, and enforced in accordance with the laws of
the State of Texas. The determination that one or more provisions of this
Lease is invalid, void, illegal or unenforceable shall not affect or
invalidate the remainder. All obligations of either party requiring any
performance after the expiration of the Term shall survive the expiration of
the Term and shall be fully enforceable in accordance with those provisions
pertaining thereto. If the rights of the Tenant hereunder are owned by two
or more parties, or two or more parties are designated herein as Tenant, then
all such parties shall be jointly and severally liable for the obligations of
Tenant hereunder. Paragraph titles appearing in the margins are for
convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this Lease.
USE OF 44. Tenant shall not have the right to use the name SUGAR CREEK
NAMES NATIONAL BANK BUILDING except in connection with giving the address of
Tenant, and then such terms cannot be emphasized or displayed with more
prominence than the rest of such address. Landlord shall have the right to
change the name of the Building whenever Landlord in its sole judgment deems
appropriate without any consent of or liability to Tenant.
WHOLE 45. No oral statements or prior written material not specifically
AGREEMENT incorporated herein shall be of any force or effect. Tenant agrees that in
entering into and taking this Lease, it relies solely upon the
representations and agreements contained in this Lease and no others. This
Lease, including the Exhibits which are attached hereto and a part hereof for
all purposes, constitutes the whole agreement of the parties and shall in no
way be conditioned, modified or supplemented, except by a written agreement
executed by and delivered to both parties.
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THENCE South 72 degrees 26'06" West, 31.26 feet
to a 3/4 inch iron rod in a curve concave to the
West, a radial to said 4 inch iron rod bears
North 85 degrees 13'09" East, 1,271.99 feet;
THENCE Northerly 9.70 feet along said 1,271.99
foot curve through a central angle of 00 degrees
26'13" to a 3/4 inch iron rod at a point of
tangency;
THENCE North 5 degrees 13'03" West, 195.00 feet
to a 3/4 inch iron rod set for corner, said
corner being at the beginning of a curve concave
to the West, a radial line to said corner bears
North 84 degrees 46'56" East, 495.00 feet;
THENCE Northerly 20.43 feet along said 495.00
foot radius curve through a central angle of 02
degrees 21'54" to a 3/4 inch iron rod set for
corner,
THENCE North 23 degrees 55'00" East, 18.66 feet
to a 3/4 inch iron rod set for corner, said
corner being a point in a curve concave South, a
radial fine to said corner bears North 32
degrees 19'08" West, 334.94 feet;
THENCE Easterly, 165.38 feet along said 334.94
foot radius curve through a central angle of 28
degrees 17'25" to a 3/4 inch iron rod set for
corner;
THENCE South 53 degrees 58'08" East, 15.89 feet
to a 3/4 inch iron rod set for corner in the
West right-of-way line of said Sugar Creek
Boulevard, said corner being in a curve concave
East, a radial line to said corner bears South
74 degrees 44'13" West, 1,221.28 feet;
THENCE Southerly, 570.42 feet coincident with
Southwest right-of-way line of Sugar Creek
Boulevard along said 1,221.28 foot radius curve,
through a central angle of 26 degrees 45'40" to
a 5/8 inch iron rod found for corner;
THENCE South 03 degrees 27'55" West, 56.45 feet
coincident with a West line of said Parcel 128
to the PLACE OF BEGINNING, containing 4.4677
acres of land.
SAVE AND EXCEPT THE FOLLOWING DESCRIBED 0.8951
ACRE TRACT:
ALL that certain tract of land being 0.8951
acres, in that certain 110.95 acres tract
described in deed to Jake Kamin, et al., dated
the 18th day of January, 1971 and recorded in
Volume 539 at Page 488, et seq., (Clerk's File
Code 190280) of the Deed Records Fort Bend
County, Texas, being also in that certain 21
acres tract described in deed to Sugar Creek
Corporation dated the 31st day of August, 1976
and recorded in Volume 698 at Page 385, et seq.,
(Clerk's File Code 299678), Deed Records Fort
Bend County, Texas, all of said 0.8951 acres
tract being in the Brown and Belknap Survey,
Abstract 15, Fort Bend County, Texas, being more
particularly described as follows (all bearings
are referenced to the Texas State Coordinate
System, South Central Zone and a grid bearing of
South 44 degrees 25'33" East from National
Geodetic Survey Triangulation Station Stafford
to Stafford Water Tank, all distances are
horizontal surface distances);
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COMMENCING at the intersection of the center
line of Sugar Creek Boulevard, (a 150 feet wide
connecting road between the Southwest Freeway
and U.S. 90-A), and the Northwest right-of-way
line of the Southwest Freeway, both roads being
described as Parcel 128 in that certain deed to
the State of Texas dated the 27th day of
December, 1967 and recorded in Volume 497 at
Page 26, et seq., (Clerk's File Code 167860 of
the Deed Records of Fort Bend County, Texas
(FDCDR). a radial line to said commencing point
bears North 41 degrees 31'35" West, 3613.89
feet;
THENCE Southwesterly 115.92 feet, more or less,
along said 3613.89 foot radius curve to a 3/4
inch iron rod set at a concrete monument a
radial fine to said 3/4 inch iron rod bears
North 43 degrees 21'51" West, 3613.89 feet;
THENCE North 3 degrees 27'55" East, 56.45 feet
coincident with a Northwest line of said Parcel
128 to a 5/8 inch iron rod found at the
beginning of a curve concave to the East, a
radial line to said 5/8 inch iron rod bears
South 47 degrees 58'33" West, 1221.28 feet;
THENCE Northerly 394.87 feet coincident with the
West right-of-way line of Sugar Creek
Boulevard, along said 1221.28 feet radius curve,
through a central angle of 18 degrees 3131" to a
3/4 inch iron rod set for corner to which a
radial line bears South 66 degrees 30'04" West,
1221.28 feet, said corner being the PLACE OF
BEGINNING of this description;
THENCE South 72'26'06' West, 228.35 feet to a
3/4 inch iron rod set for corner;
THENCE North 5 degrees 13'03" West, 155.95 feet
parallel with and 50.00 feet east of a west fine
of said 21 acres tract to a 3/4 inch iron rod
set at the beginning of a curve concave to the
west, a radial line to said 3/4 inch iron rod
bears North 84 degrees 46'56" East, 495.00 feet;
THENCE Northerly 20.43 feet along said 495.00
foot radius curve, through a central angle of 2
degrees 21'54" to a 3/4 inch iron rod set for
corner;
THENCE North 23 degrees 55'00" East, 18.66 feet
to a 3/4 inch iron rod set for corner, said
corner being a point in a curve concave South, a
radial line to said corner bears North 32
degrees 19'08" West, 334.94 feet;
THENCE Easterly 165.38 feet along said 334.94
foot radius curve, through a central angle of 28
degrees 17'25" to a 3/4 inch iron rod set for
corner;
THENCE South 53 degrees 58'08" East, 15.89 feet
to a 3/4 inch iron rod set for corner in the
West right-of-way line of said Sugar Creek
Boulevard being in a curve concave to the East,
a radial line to said corner bears South 74
degrees 44'13" West, 1,221.28 feet;
THENCE Southerly 175.55 feet coincident with the
west right-of-way line of said Sugar Creek
Boulevard, along said 1,221.28 foot radius
curve, through a central angle of 8 degrees
14'09" to the PLACE OF BEGINNING, containing
0.8951 acres of land.
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EXHIBIT B
DIAGRAM OF "TYPICAL FLOOR PLAN 3-9"
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1. Office Space
2. Freight Elevator
3. Electrical
4. Mechanical
5. Telephone
6. Janitor
7. Men
8. Women
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EXHIBIT C
BUILDING STANDARD IMPROVEMENTS
As used in this Lease, Building Standard Improvements shall refer to the following:
1. 660 linear feet of partitioning, painted and in place. The partitions will be 3
--- 3/4" nominal thickness, consisting of two (2) 5/8" thick, full-height gypsum
boards, attached to each side of 2 1/2" metal studs. Demising partitions
will include batt-type insulation for sound insulation purposes. One (1)
linear foot per twelve (12) square feet of Rentable Area.
2. 26 doors: Doors are to be full height solid core with non-glare laminate-clad
-- exterior finish. One (1) entry door included with additional corridor doors
as required by the Fire Code section of the applicable Building Code.
Interior doors equipped with passage sets. Corridor doors furnished with
heavy duty lockset and closers. Door stops provided for all doors. One (1)
door per three hundred (300) square feet of Rentable Area.
3. 99 light fixtures: Light Fixtures are recessed 2' x 4' ceiling mounted
-- parabolic fluorescent fixtures. One (1) fixture per eighty (80) square feet
of Rentable Area.
4. 66
-- electrical outlets: Each convenience outlet to be wall-mounted at standard
height. One (1) duplex outlet per one hundred twenty (120) square feet of
Rentable Area.
5. 38 telephone outlets: Provisions for installation of telephone outlets to be
-- wall-mounted at standard height. One (1) outlet per two hundred ten (210)
square feet of Rentable Area.
6. Ceiling Acoustical tile ceiling hung throughout Premises.
7. Carpet Building Standard carpet provided throughout office areas.
8. Window Covering Building Standard window coverings on all exterior window openings.
9. Heating, Furnish and install Landlord's Building Standard air-conditioning system
Ventilating throughout the leased premises and Air Conditioning.
and Air
Conditioning
10 Automatic Fire Furnish and install Building Standard automatic fire sprinkler system
Sprinkler System through out the leased premises, not to exceed one sprinkler head per one
hundred forty-five (145) square feet of Rentable Area.
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EXHIBIT D
CLEANING AND JANITORIAL SERVICES
NIGHTLY 1. Empty, clean and damp dust all waste receptacles, wash as necessary.
CLEANING 2. Empty and clean all ash trays.
3. Vacuum all rugs and carpeted areas.
4. Dust furniture, files, fixtures, etc.
5. Damp wipe and polish all glass furniture tops.
6. Remove finger marks and smudges from vertical surfaces.
7. Clean all water coolers.
8. Sweep all private stairways nightly, vacuum if carpeted.
9. Damp mop spillage in office and public areas as required.
10 .Damp dust all telephones as necessary.
WASH ROOMS 1. Damp mop, rinse and dry floors nightly.
(NIGHTLY) 2. Scrub floors as necessary.
3. Clean all mirrors, bright work and enameled surfaces nightly.
4. Wash and disinfect all fixtures.
5. Damp wipe and disinfect all partitions, tile walls, etc.
6. Empty and sanitize all receptacles.
7. Fill toilet tissue, soap, towel, and sanitary napkin dispensers.
8. Clean flushometers and other metal work.
9. Wash and polish all wall partitions, tile walls and enamel surfaces from
trim to floor monthly.
10. Vacuum all louvers, ventilating grilles and dust light fixtures monthly.
FLOORS 1. Ceramic tile, marble and terrazzo floors to be swept and buffed nightly and washed
or scrubbed as necessary.
2. Vinyl asbestos floors and bases to be swept nightly.
3. Tile floors to be waxed and buffed monthly.
4. All carpeted areas and rugs to be vacuum cleaned nightly.
5. Carpet shampooing will be performed at Tenant's request and billed to Tenant.
GLASS 1. Clean all perimeter windows quarterly, inside and outside.
2. Clean glass entrance doors and adjacent glass panels nightly.
3. Clean partition glass and interior glass doors quarterly.
HAND DUSTING 1. Dust and wipe clean all closet shelving when empty.
(QUARTERLY) 2. Dust all picture frames, charts, graphs, etc.
3. Dust clean all vertical surfaces.
4. Damp dust all ceiling air conditioning diffusers.
5. Dust the exterior surfaces of lighting fixtures.
DAY SERVICE 1. Check men's washrooms for toilet tissue replacement.
2. Check ladies' washrooms for toilet tissue and sanitary napkin replacements.
3. Supply toilet tissue, soap and towels in men's and ladies' washrooms.
Anything hereinabove to the contrary notwithstanding, it is understood that no services of the character provided for in this
Exhibit shall be per- formed on Saturdays, Sundays or Holidays defined in this Lease.
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EXHIBIT E
RULES AND REGULATIONS OF BUILDING
RULES AND 1. Landlord will provide and maintain a directory for all tenants of the
REGULATIONS Building. No signs, advertisements or notices visible to the general
public shall be permitted within the Building unless first approved in
writing by Landlord.
2. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by tenants or used by any tenant for any purpose
other than ingress and egress to and from the leased premises and for
going from one to another part of the Building.
3. Corridor doors, when not in use, shall be kept closed.
4. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. Damage resulting to any such
fixtures or appliances from misuse by a tenant shall be paid by tenant.
5. Landlord shall provide all locks for doors into each tenant's leased
area, and no tenant shall place any additional lock or locks on any door
in its leased area without Landlord's prior written consent. Two keys
for each lock on the doors in each tenant's leased area shall be finished
by Landlord. Additional keys shall be made available to tenants at
tenant's cost. Tenants shall not have any duplicate keys made except by
Landlord.
6. Electric current shall not be used for cooking, or heating without
Landlord's prior written permission.
7. All tenants will refer all contractors, contractors' representatives and
installation technicians who are to perform any work within the Building
to Landlord for Landlord's supervision, approval and control before the
performance of any such work. This provision shall apply to all work
performed in the Building including, but not limited to installation of
telephones, medical type equipment, telegraph equipment, electrical
devices and attachments, and any and all installations of every nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment and
any other physical portion of the Building.
8. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by tenants of any heavy equipment, bulky material or
merchandise shall be performed only in such manner, during such hours and
using such elevators and passageways as the Building Manager may
designate and approve in advance and, if reasonable, necessary or
appropriate in view of all the circumstances, then only upon having been
scheduled in advance with the Building Manager.
9. The location, weight and supporting devices for any medical type equipment,
safes and other heavy equipment shall in all cases be approved by
Landlord prior to initial installation or relocation.
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10. No portion of any tenant's leased area shall at any time be used for
cooking, sleeping or lodging quarters. No birds, animals or pets of
any type, with the exception of guide dogs accompanying visually
handicapped persons, shall be brought into or kept in, on or about
Tenant's leased area.
11. Tenants shall not make or permit any loud or improper noises in the
Building or otherwise interfere in any way with other tenants or
persons having business with them.
12. Each tenant shall endeavor to keep its leased area neat and clean.
Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways, nor shall tenants place any trash receptacles
in these areas.
13. Tenants shall not employ any person for the purpose of cleaning
other than the authorized cleaning and maintenance personnel for the
Building unless otherwise approved in writing by Landlord.
14. To insure orderly operation of the Building, Landlord reserves the
right to approve all concessionaires, vending machine operators or
other distributors of cold drinks, coffee, food or other
concessions, water, towels or newspapers.
15. Landlord shall not be responsible to the tenants, their agents,
patients, employees or invitees for any loss of money, jewelry or
other personal property from the leased premises or public areas or
for any damages to any property therein from any cause whatsoever
whether such loss or damage occurs when an area is locked against
entry or not.
16. Tenants shall exercise reasonable precautions in protection of their
personal property from loss or damage by keeping doors to unattended
areas locked. Tenants shall also report any thefts or losses to the
Building Manager and security personnel as soon as reasonably
possible after discovery and shall also notify the Building Manager
and security personnel of the presence of any persons whose conduct
is suspicious or causes a disturbance.
17. Tenants, their employees, patients, guests and invitees may be
Called upon to show suitable identification and sign a building
register when entering or leaving the Building at times other than
normal Building operating hours, and all tenants shall cooperate
fully with Building personnel in complying with such requirements.
18. Tenants shall not solicit from or circulate advertising material
among other tenants of the Building except through the regular use
of the U.S. Postal Service. Tenants shall notify the Building
Manager or the Building personnel promptly if it comes to their
attention that any unauthorized persons are soliciting from or
causing annoyance to tenants, their employees, guests or invitees.
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C>
19. Landlord reserves the right to deny entrance to the Building or
remove any person or persons from the Building in any case where the
conduct of such person or persons involves a hazard or nuisance to
any tenant of the Building or to the public or in the event or other
emergency, riot, civil commotion or similar disturbance involving
risk to the Building, tenants or the general public.
20. Tenant shall not tamper with or attempt to adjust temperature
control thermostats in the Building. Landlord shall adjust
thermostats as required to maintain the Building at standard
temperature.
21. All requests for overtime air conditioning or heating must be
submitted in writing to the Building management office by 2:00 p.m.
on the day desired for weekday requests, by 2:00 p.m. Friday for
weekend requests, and by 2:00 p.m. on the preceding-business day for
holiday requests.
22. No flammable or explosive fluids or materials shall be kept or used
within the Budding except in areas approved by Landlord, and Tenant
shall comply with all applicable building and fire codes relating
thereto.
23. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations
as in its judgment shall from time to time be needful for the
safety, protection, care and cleanliness of the Building, the
operation thereof, the preservation of good order therein and the
protection and comfort of the tenants and their agents, employees
and invitees, which rules and regulations, when made and written
notice thereof is given to a tenant, shall be binding upon it in
like manner as if originally herein prescribed.
</TABLE>
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SERVICES PROVIDED BY LANDLORD
Janitorial service five days per week,
including vacuuming and spot cleaning of
floors, dusting, trash collecting and general
cleaning to maintain a first-class standard.
All utilities, excluding that for computer
equipment and other machines of high
electrical consumption characteristics.
Taxes and insurance.
Light tube replacement and ballast
replacement and fixture cleaning for Building
Standard fixtures.
All Building Standard air-conditioning and
heating equipment maintenance.
All Building Standard electrical, mechanical
or plumbing maintenance.
Rest room supplies including paper towels and
soap.
Window cleaning.
Landscape and parking area cleaning and
maintenance.
On-site maintenance man.
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<PAGE> 24
RENTABLE AREA
The Rentable Area for a full floor of the
Building shall be the area bounded by the
exterior Budding walls (measured to the
interior surface of the glass windows on such
floors that do not have balconies, and on
such floors that have balconies, to the
interior surface of the balcony wall)
including the area used for elevator lobbies,
corridors, special stairways, rest rooms,
atriums, mechanical rooms, telephone closets,
and the structural columns of the Building
and all vertical penetrations for the special
use of Tenant but excluding the area used for
Building stairs, vertical ducts, elevator
shafts, flues, vents, stacks and pipe shafts
and with respect to the second floor of the
Building, one-half (1 1/2) of the Bank Atrium
footage (deemed to be 2,200 square feet).
The Rentable Area for the Premises shall be
the total Rentable Area calculated for the
floor or floors to be occupied by Tenant or
where only a portion of a floor is to be
occupied, the Rentable Area. for the Premises
shall be the area calculated within the
boundaries defined by any exterior Building
walls bounding the Premises (measured to the
interior surface of the glass windows or the
interior surface of the balcony wall, as the
case may be), the center line of any common
walls separating the Premises from area
leased or to be leased to other tenants and
the exterior of any walls separating the
Premises from any public corridors or other
public or common areas on such floors plus a
pro rata portion of the area used for
elevator lobbies, corridors, rest rooms,
atriums, mechanical rooms and telephone
closets.
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<PAGE> 25
WORK LETTER AGREEMENT
MEDICAL SOLUTIONS, INC.
10039 BISSONNET, SUITE 230
HOUSTON, TEXAS 77036-7838
Re: Lease Agreement ("Lease") dated
August ___, 1992, relating to 7,929 square
feet of Rentable Area on the eighth floor of
the SUGAR CREEK NATIONAL BANK BUILDING.**
Gentlemen:
You (hereinafter referred to as the
"Tenant") and the undersigned (hereinafter
referred to as the "Landlord") are executing,
simultaneously with this letter agreement, a
written lease covering the space referred to
above, as more particularly described in said
Lease (therein and hereinafter called the
"Premises").
To induce Landlord and Tenant to enter
into said Lease (which is hereby incorporated
by reference to the extent that the
provisions of this letter agreement may apply
thereto) and in consideration of the mutual
covenants hereinafter contained, Landlord and
Tenant mutually agree as follows:
1. Landlord agrees to provide, by Landlord's
designated Architect and/or Engineer, and
at Landlord's sole cost and expense, the
following Building Standard architectural
and mechanical drawings and
specifications (hereinafter referred to
as the "Initial Plans"), to be drawn for
the Premises on Tenant's behalf:
(a) Completed, finished and detailed
architectural drawings for Tenant's
partition layout, reflected ceiling,
telephone and electrical outlets,
and for the work to be done by
Landlord under Paragraph 2 hereof,
(b) Completed Building Standard plans
where necessary for installation of
air- conditioning, outlets and
registers, heating and electrical
facilities for the work to be done
by Landlord under Paragraph 2
hereof.
Any redrawing occasioned by Tenant after
his prior approval of the Initial Plans
and any changes in the Initial Plans
requested thereafter shall be at Tenant's
sole cost and expense. M such plans are
expressly subject to Landlord's prior
written approval, which Landlord
covenants it will not unreasonably
withhold or delay.
Tenant covenants and agrees to furnish to
Landlord all information necessary for
the preparation of the Initial Plans on
or before July 30, 1992, who will, within
thirty (30) days therefrom, complete said
plans and submit to Tenant for approval
or disapproval. Tenant will inform
- -------------------
*Landlord agrees to provide turnkey construction and or modification of Suite
850 per plan prepared by Charles morgan, dated June 19, 1992, as initialed and
approved by Tenant and Landlord.
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<PAGE> 26
Landlord of this approval or any
corrections of said plans within ten (10)
days after receipt thereof by Tenant.
Landlord, at its sole cost and expense,
will cause said plans to be filed with
the appropriate government agencies in
such form (building notice, alteration or
other form) as may be required. If
Tenant shall desire any additional or
non-standard work, over and above that
specified below in Paragraph 2, to be
perform d in the Premises by Landlord or
by Tenant, Tenant shall cause similar
plans and specifications for such work to
be drawn at Tenant's sole expense, either
by arranging therefor with Landlord's
Architect and/or Engineer, or by
consultants of its own selection. All
such plans and specifications for
additional or nonstandard work shall be
submitted to Landlord with Tenant's
approved and/or corrected Initial Plans
(hereinafter referred to as the "Final
Plan") for Landlord's review and
approval. Landlord reserves the right to
give directives to Tenant's Architect or
Engineer, at Tenant's expense, for the
purpose of insuring that such additional
or non-standard work conforms to the
Building Standards. Landlord covenants
it will not unreasonably withhold or
delay such review.
2. Landlord agrees to perform, at its sole
cost and expense, the following work in
the Premises, said work to be commenced
after Tenant has approved the Initial
Plans:
(a) PARTITIONING
Furnish and install Landlord's
Building Standard partitioning in
place in a ratio of one (1) linear
foot per each twelve (12) square
feet of Rentable Area.
(b) PAINTING
Paint the non-glazed portion of the
exterior walls and all Building
Standard demising and interior
partitions in Landlord's Building
Standard grade of enamel latex paint
with one (1) primer and one (1)
finish coat.
(c) DOORS, FRAMES AND HARDWARE
Furnish and install Landlord's
Building Standard full-height solid
core doors and door frames in a
ratio of one (1) door per each three
hundred (300) square feet of
Rentable Area, including corridor
doors required by the applicable
Building or Fire Codes. Interior
doors to have Building Standard
passage set hardware and corridor
doors to have Building Standard lock
sets.
(d) ELECTRICAL OUTLETS
Furnish and install Landlord's
Building Standard wall-mounted
duplex 110 volt receptacles in the
ratio of one (1) per each one
hundred twenty (120) square feet of
Rentable Area.
(e) TELEPHONE OUTLETS
Provide for the installation of
building Standard wall-mounted
telephone outlets in the ratio of
one (1) per each two hundred ten
(210) square feet of Rentable Area.
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<PAGE> 27
(f) LIGHT FIXTURES
Furnish and install Landlord's Building
Standard 2' x 4' recessed parabolic
fluorescent fixtures in the ratio of
one (1) per each eighty (80) square
feet of Rentable Area.
(g) LIGHT SWITCHES
Furnish and install Landlord's Building
Standard wall switches in the ratio
of one (1) switch per each corridor
door.
(h) AUTOMATIC FIRE SPRINKLER SYSTEM
Furnish and install Building Standard
automatic fire sprinkler system
throughout the leased premises, not
to exceed one (1) sprinkler head per
one hundred forty-five (145) square
feet of Rentable Area.
(i) CEILING
Furnish and install Landlord's Building
Standard acoustical hung ceiling
throughout.
(j) CARPET AND COVE BASE
Furnish and install Landlord's Building
Standard carpeting throughout office
areas.
(k) WINDOW COVERING
Furnish and install Landlord's Building
Standard window coverings on all
exterior windows.
(1) HEATING, VENTILATING AND AIR
CONDITIONING
Furnish and install Landlord's Building
Standard air-conditioning system
throughout the leased Premises.
(m) GRAPHICS
Furnish and install Landlord's Building
Standard entry door graphics and
directory board strips.
3. If Landlord agrees to perform at Tenant's
request, and upon submission by Tenant of
necessary plans and specifications, any
additional or non-standard work over and
above that specified in Paragraph 2
hereof and associated architectural and
engineering fees, if any, such work shall
be performed by Landlord, at Tenant's
sole expense, as a Tenant extra. Prior
to commencing any such work requested by
Tenant, Landlord will submit to Tenant
written estimates of the cost of any such
work as indicated on the Final Plan. If
Tenant shall fail to approve or
disapprove any such estimate within one
(1) week from the date of submission
thereof by Landlord, then Landlord shall
be authorized to proceed thereon. Tenant
agrees to pay Landlord, promptly upon
being billed therefor, the cost of all
such work, together with twenty percent
(20%) of the cost for Landlord's
overhead; Tenant agrees that in the event
of default of payment thereof, Landlord
shall (in addition to all other remedies)
have the same rights as in the event of
default of payment of rent under said
Lease.
4. It is agreed that, notwithstanding the
date provided in said Lease for the
commencement thereof, Tenant's obligation
for the payment of rental thereunder
shall not commence until Landlord has
substantially completed
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<PAGE> 28
all work to be performed by Landlord as
hereinabove set forth in Paragraph 2;
provided, however, that if Landlord shall
be delayed in substantially completing
said work as a result of:
(a) Tenant's failure to timely furnish
Landlord with the information
required to prepare the Initial
Plans, or the failure of Tenant to
timely approve the Initial Plans, or
Final Plans; or
(b) Tenant's request for materials,
finishes or installations other than
Landlord's Building Standard; or
(c) Tenant's changes in the Initial
Plans, or Final Plans; or
(d) The performance and/or completion of
said work by a person, firm or
corporation employed by Tenant; then
the commencement of the term of said
Lease and the payment of rent
thereunder shall be accelerated by
the number of days of such delay.
In addition, if Tenant fails to supply to
Landlord any of the above specified
information within twenty (20) days after
the dates so specified, Landlord may, at
its option, declare a default under said
Lease and exercise any of Landlord's
remedies for default thereunder,
including terminating said Lease. If
Landlord so terminates said Lease, Tenant
shall pay Landlord for all expenses
incurred by Landlord in preparing the
Initial Plans, and/or Final Plan, or in
preparing the premises for occupancy by
Tenant.
5. Landlord will permit Tenant and its
agents reasonable access to the Premises
during normal working hours prior to the
date specified for the commencement of
Tenant's occupancy under said Lease, in
order that Tenant may perform through its
own contractors such work and decorations
as Tenant may desire at the time that
Landlord's contractors are working in the
Premises. The foregoing license to enter
prior to the commencement of the Lease
term, however, is conditioned upon
Tenant's workmen and mechanics working in
harmony and not interfering with the
labor employed by Landlord, Landlord's
mechanics or contractors or by any ocher
Tenant or their contractor. Such license
is further conditioned upon Workmen's
Compensation and public liability
insurance and property damage insurance,
all in amounts and with companies and on
forms satisfactory to Landlord, being
provided and at all times maintained by
Tenant's contractors, engaged in the
performance of the work, and certificates
of such insurance being furnished to
Landlord prior to proceeding with the
work. If at any time such entry shall
cause disharmony or interference with
Landlord's mechanics or contractors, this
license may be withdrawn by Landlord upon
forty-eight (48) hours written notice to
Tenant. Such entry shall be deemed to be
subject to all of the terms, covenants,
provisions and conditions of said Lease
except as to the covenant to pay Rent.
Landlord shall not be liable in any way
for any injury, loss or damage which may
occur to Tenant, its employees,
contractors, agents, workmen and
mechanics, or any one-or more of them, or
to any of Tenant's decorations or
installations so made prior to
commencement of the term of the Lease,
the same being solely at Tenant's risk
and Tenant hereby agrees to indemnify and
hold Landlord harmless from any and all
claims therefor or arising therefrom.
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<PAGE> 29
6. Landlord shall cause the repair or
replacement of any defects in material or
workmanship in the Landlord Improvements
and Tenant Improvements, if any,
installed by Landlord if Landlord
receives written notification of such
defect from Tenant within the period of
one (1) year after the date of
substantial completion of the Building.
Tenant's sole and exclusive remedy
against Landlord shall be for the repair
and replacement of defects of material
and workmanship as provided herein, and
Landlord shall not be responsible for any
defect of any nature in the Landlord or
Tenant Improvements installed by Landlord
of which Landlord is not so notified
within such one (1) year period.
LANDLORD MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, IN
CONNECTION WITH LANDLORD IMPROVEMENTS OR
TENANT IMPROVEMENTS EXCEPT THE WARRANTIES
EXPRESSLY SET FORTH IN TIES SECTION 6.
TENANT'S SOLE REMEDY FOR THE BREACH OF
ANY APPLICABLE WARRANTY SHALL BE THE
REMEDY SET FORTH IN THIS SECTION 6.
Tenant agrees that no other remedy,
including without limitation incidental
or consequential damages for lost
profits, injury to person or property, or
any other incidental or consequent loss
shall be available to Tenant.
If the foregoing correctly sets forth
our understanding, kindly acknowledge
your approval in the space provided
below for that purpose.
Yours very truly,
SUGAR LAND PLAZA
BUILDING CORPORATION
By: /S/
-----------------------------------
"LANDLORD"
AGREED to and ACCEPTED
this 7th day of August, 1992.
By: /S/
-----------------------------------
"TENANT"
MEDICAL SOLUTIONS, INC.
By: Richard M. Dortch, President
(Name and Title of person
executing for Tenant)
INITIAL
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<PAGE> 30
Diagram of "Sugar Creek National Bank Bldg" floor plan by Medical Solutions,
Inc.
P-64
INITIAL
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<PAGE> 31
EXHIBIT A
DESCRIPTION OF THE LAND
All that certain tract of land being 4.4677 acres,
in that certain 110.95 acres tract described in
deed to Jake Kamin, et al., dated the 18th day of
January, 1971, and recorded in Volume 539 at Page
488, et seq. (Clerk's File Code 190280) of the
Deed Records of Fort Bend County, Texas, being
also in that certain 21 acres tract described in
deed to Sugar Creek Corporation dated the 31st day
of August, 1976, and recorded in Volume 698 at
Page 385, et seq. (Clerk's File Code 299678), Deed
Records Fort Bend County, Texas, all of said
4.4677 acres tract being in the Brown and Belknap
Survey, Abstract 15, Fort Bend County, Texas,
being more particularly described as follows: (all
bearings are referenced to the Texas State
Coordinate System, South Central Zone and a grid
bearing of South 44 degrees 25'33" East from
National Geodetic Survey Triangulation Station
Stafford to Stafford Water Tank, all distances are
horizontal surface distances);
COMMENCING at the intersection of centerline of
Sugar Creek Boulevard, (a 150 feet wide connecting
road between the Southwest Freeway and U.S. 90-A),
and the Northwest right-of- way line of the
Southwest Freeway, both roads being described as
Parcel 128 in that certain deed to the State of
Texas dated the 27th day of December, 1967, and
recorded in Volume 497 at Page 26, et seq.,
(Clerk's File Code 167860 of the Deed Records of
Fort Bend County, Texas, FBCDR), said commencing
point being in a curve concave Southeast to which
a radial line to said point bears North 41 degrees
'31'35" West, 3,613.89 feet;
THENCE Southwesterly 115.92 feet, more or less,
along said curve through a central angle of 01
degrees 50'16" to a 3/4 inch iron rod set at a
concrete monument found being the PLACE OF
BEGINNING of this description, a radial line to
said 3/4 inch iron rod bears North 43 degrees
21'51" West, 3,613.89 feet.
THENCE Southwesterly 264.52 feet coincident with
Northwest right-of-way line of Southwest Freeway,
along said curve through a central angle of 04
degrees 11'38" to a 5/8 inch iron rod found for
corner;
THENCE South 85 degrees 35'10" West, 29.14 feet to
a 5/8 inch iron rod found for corner, said corner
being a point in a curve concave Southwest, a
radial line to said corner bears North 40 degrees
13'00" East, 1,555.00 feet;
THENCE Northwesterly, 268.99 feet along said
curve through a central angle of 09 degrees 54'40"
to a 3/4 inch iron rod set for corner, said corner
being a point in a curve concave West, a radial
line to said corner bears South 80 degrees 59'34"
East, 1,271.99 feet;
THENCE Northerly, 109.50 feet along said 1,271.99
foot curve through a central angle of 4 degrees
55'57" to a 3/4 inch iron rod set for corner;
THENCE North 42 degrees 26'06" East, 103.21 feet
to an "X" set in concrete for corner;
THENCE North 17 degrees 33'54" West, 136.00 feet
to an "X" set in concrete for corner;
INITIAL
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<PAGE> 32
SUGAR CREEK NATIONAL BANK BUILDING
LETTER AGREEMENT FOR LEASE PARKING
MEDICAL SOLUTIONS, INC.
THIS AGREEMENT is made and entered into effective as of October 1, 1992, by and
between MEDICAL SOLUTIONS, INC. (the "Tenant") and SUGAR LAND PLAZA BUILDING
CORPORATION (the "Landlord"), a Texas corporation.
Landlord agrees to initially furnish Tenant with Sixteen (16) parking spaces at
no charge, except State Sales Tax of $40.60 per month on implied value of
parking ($560.00) per month, for a period of time concurrent with the term of
the above-captioned Lease Agreement effective date October 1, 1992. The spaces
will be as follows:
________ Reserved covered parking space(s) at the prevailing rate,
which is $70.00 per space per month, plus State Sales Tax.
16 Covered parking space(s) at the prevailing rate, which is
$35.00 per space per month, plus State Sales Tax.
________ Uncovered parking space(s) at the prevailing rate, which is
currently $20.00 per space per month, plus State Sales Tax.
Landlord and Tenant agree to execute additional Agreements, from time to time,
during the term of this Lease Agreement, if additional parking spaces are
needed.
SUGAR LAND PLAZA BUILDING MEDICAL SOLUTIONS, INC.
CORPORATION
By: /S/ By: /S/
----------------------------------- ------------------------
Don L. Russell, President Rick Dortch
ONE SUGAR CREEK CENTER BOULEVARD, SUITE 820 SUGAR LAND, TX 77478 713/242-3700
<PAGE> 33
SUGAR CREEK NATIONAL BANK BUILDING
FIRST AMENDMENT TO THE
LETTER AGREEMENT FOR LEASE PARKING
MEDICAL SOLUTIONS, INC.
THIS AGREEMENT is made and entered into effective as of February 4, 1993, by
and between MEDICAL SOLUTIONS, INC. (the "Tenant") and SUGAR LAND PLAZA
BUILDING CORPORATION (the "Landlord"), a Texas corporation.
Landlord agrees to furnish Tenant with one (1) additional covered parking
space, at the rate indicated below, for a period of time concurrent with the
term of the above captioned Lease Agreement effective date August 7, 1992. The
space will be as follows:
________ Reserved covered parking space(s) at the prevailing rate,
which is $70.00 per space per month, plus State Sales Tax.
1 Covered parking space(s) at the prevailing rate, which is
$35.00 per space per month, plus State Sales Tax.
________ Uncovered parking space(s) at the prevailing rate, which is
currently $20.00 per space per month, plus State Sales Tax.
Landlord and Tenant agree to execute additional Agreements, from time to time,
during the term of this Lease Agreement, if additional parking spaces are
needed.
SUGAR LAND PLAZA BUILDING MEDICAL SOLUTIONS, INC.
CORPORATION
By: /S/ By: /S/
----------------------------------- ----------------------
Don L. Russell, President Rick Dortch
ONE SUGAR CREEK CENTER BOULEVARD, SUITE 820 SUGAR LAND, TX 77478 713/242-3700
<PAGE> 34
SUGAR CREEK NATIONAL BANK BUILDING
SECOND AMENDMENT TO THE
LETTER AGREEMENT FOR LEASE PARKING
MEDICAL SOLUTIONS, INC.
THIS AGREEMENT is made and entered -into effective as of February 15, 1993, by
and between MEDICAL SOLUTIONS, INC. (the "Tenant") and SUGAR LAND PLAZA
BUILDING CORPORATION (the "Landlord"), a Texas corporation.
Landlord agrees to furnish Tenant with one (1) additional covered parking
space, at the rate indicated below, for a period of time concurrent with the
term of the above captioned Lease Agreement effective date August 7, 1992. The
space will be as follows:
________ Reserved covered parking space(s) at the prevailing rate,
which is $70.00 per space per month, plus State Sales Tax.
1 Covered parking space(s) at the prevailing rate, which is
$35.00 per space per month, plus State Sales Tax.
________ Uncovered parking space(s) at the prevailing rate, which is
currently $20.00 per space per month, plus State Sales Tax.
Landlord and Tenant agree to execute additional Agreements, from time to time,
during the term of this Lease Agreement, if additional parking spaces are
needed.
SUGAR LAND PLAZA BUILDING MEDICAL SOLUTIONS, INC.
CORPORATION
By: /S/ By: /S/
----------------------------------- --------------------
Don L. Russell, President Rick Dortch
ONE SUGAR CREEK CENTER BOULEVARD, SUITE 820 SUGAR LAND, TX 77478 713/242-3700
<PAGE> 35
SUGAR CREEK NATIONAL BANK BUILDING
THIRD AMENDMENT TO THE
LETTER AGREEMENT FOR LEASE PARKING
MEDICAL SOLUTIONS, INC.
THIS AGREEMENT is made and entered into effective as of May 3, 1993, by and
between MEDICAL SOLUTIONS, INC. (tire "Tenant") and SUGAR LAND PLAZA BUILDING
CORPORATION (the "Landlord"), a Texas corporation.
Landlord agrees to furnish Tenant with two (2) additional covered parking space
(s) , at the rate indicated below, f or a period of time concurrent with the
term of the above captioned Lease Agreement effective date August 7, 1992. The
space(s) will be as follows:
________ Reserved covered parking space(s) at the prevailing rate,
which is $70.00 per space per month, plus State Sales Tax.
2 Covered parking space(s) at the prevailing rate, which is
$35.00 per space per month, plus State Sales Tax.
________ Uncovered parking space(s) at the prevailing rate, which is
currently $20.00 per space per month, plus State Sales Tax.
Landlord and Tenant agree to execute additional Agreements, from time to time,
during the term of this Lease Agreement, if additional parking spaces are
needed.
SUGAR LAND PLAZA BUILDING MEDICAL SOLUTIONS, INC.
CORPORATION
By: /S/ By: /S/
----------------------------------- --------------------
Don L. Russell, President Rick Dortch
ONE SUGAR CREEK CENTER BOULEVARD, SUITE 820 SUGAR LAND, TX 77478 713/242-3700
<PAGE> 36
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "Amendment") is executed
as of September 29, 1995, by and between BROOKDALE INVESTORS, L.P., a Delaware
limited partnership (the "Landlord"), and DEZINE HEALTHCARE SOLUTIONS, INC., a
South Carolina corporation (the "Tenant").
RECITALS
WHEREAS, Medical Solutions, Inc. (the "Prior Tenant") and Sugar Land
Plaza Building Corporation (the "Prior Landlord") entered into that certain
Lease Agreement dated as of August 7, 1992, and that certain Letter Agreement
for Lease Parking dated as of October 1, 1992, as amended by First Amendment to
Letter Agreement for Lease Parking, Second Amendment to the Letter Agreement
for Lease Parking and the Third Amendment to Letter Agreement for Lease Parking
dated as of February 4, 1993, February 15, 1993 and May 3, 1993, respectively,
and the Work Letter Agreement dated as of August 7, 1992 (the Lease Agreement,
the Letter Agreement for Parking as so amended, and the Work Letter Agreement
are collectively referred to herein as "Lease");
WHEREAS, Landlord has succeeded to the Prior Landlord's rights, title
and interest as the "Landlord" under the Lease and Tenant has succeeded to the
Prior Tenant's right, title and interest as the "Tenant" under the Lease;
WHEREAS, Landlord and Tenant desire to amend the Lease as herein
provided;
WITNESSETH:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:
1. Defined Terms. All terms used in this Amendment, but not
defined herein, shall have the meaning given such terms in the Lease. From and
after October 1, 1995 (the "Effective Date"), the term "Base Operating
Expenses" means Operating Expenses for calendar year 1995 (the "Base Year").
From and after the Effective Date, the term "Operating Period" means each
twelve (12) calendar month period beginning on January I and ending on December
31 of such year occurring during the Term, beginning with calendar year 1996,
which will be the first Operating Period. From and after the Effective Date,
the term "Tenant's Pro Rata Share" means the percentage calculated by dividing
the Rentable Area of the Premises (numerator) by the Rentable Area of the
Building (denominator), and expressing the fraction as a percentage. The
Rentable Area of the Building is hereby modified and restated as approximately
197,048 square feet.
2. Term; Renewal Option. Subject to and upon the conditions set
forth in the Lease, as amended by this Amendment, the Term shall be extended
from the Effective Date to end on September 30, 2000. Tenant shall not have
the Renewal Option for three (3) years as set
<PAGE> 37
forth in the Lease, which is hereby deleted in its entirety. However. as long
as Tenant is not in default under the Lease, Tenant is granted the option to
renew the Term as to the entire Premises for one successive period (the
"Renewal Term") of sixty (60) months to commence as of October 1, 2000. Tenant
shall exercise its option to renew by delivering written notice thereof to
Landlord on or before March 31, 2000. Tenant's failure to exercise timely the
renewal option for any reason whatsoever shall conclusively be deemed a waiver
of such renewal option. Any such renewal of the Lease shall be upon the same
terms and conditions of the Lease, except (a) the Rent during the Renewal Term
shall be based on the Fair Market Rental Rate (as hereinafter defined) for the
Premises as of the commencement of the Renewal Term, (b) Tenant shall have no
option to renew this Lease beyond the expiration of the Renewal Term, and (c)
the leasehold improvements in the Premises will be provided to Tenant in their
then existing "AS-IS, WHERE-IS" and "WITH ALL FAULTS" condition at the time the
Renewal Term commences, excepting only latent defects. In addition, Tenant's
renewal option set forth in this paragraph shall be subject and subordinate to
the preexisting renewal, expansion, right of refusal and similar options with
respect to the Premises held by Comerica Bank.
As used herein, the term "Fair Market Rental Rate" shall mean the annual rental
rates then being charged for comparable space within comparable buildings
located in the far southwest Houston/Sugar Land area, taking into consideration
use, location and/or floor level; size of the space in question; whether the
rate is "gross" or net" of operating expenses; leasehold improvements (existing
or to be provided) and/or allowances therefor provided; quality, age and
location of the space and building; any other rental concessions such as
abatements or lease assumptions; the time the particular rate under
consideration became effective; and the time the rate to be determined will
become effective. It is agreed that bona fide written offers to lease the
relevant space made to Landlord by third parties (at arm's-length) may be used
by Landlord as an indication of Fair Market Rental Rate.
3. Rent. From and after the Effective Date, Tenant shall pay the Rent
based upon the following chart:
<TABLE>
<CAPTION>
Rent Per Square Monthly Annual
Time Period Foot Per Annum Rent Payment Rent Payment
- ----------- -------------- ------------ ------------
<S> <C> <C> <C>
October 1, 1995 - September 30, 2000 $14.25 $9,415.69 $112,988.25
</TABLE>
The Rent shall be made in equal monthly installments on the first day of each
month as provided in the Lease.
4. Additional Rent. If the Operating Expenses for any Operating
Period exceed the Base Operating Expenses (any such excess being known
collectively as the "Expense Increase"), then Tenant agrees to pay Landlord as
additional rent (the "Additional Rent") Tenant's Pro Rata Share of the Expense
Increase, provided, however, that for Operating Expenses other than for Taxes,
insurance. utilities and the minimum wage component of janitorial expenses,
Tenant shall not be obligated to pay for the portion of an Expense Increase
which in the aggregate with any previous Expense Increase exceeds a seven (7%)
percent per annum cumulative increase over the Base Year. For purposes of
calculating the Operating Expenses hereunder, the Operating Expenses and the
Base Operating Expenses shall be grossed
-2-
<PAGE> 38
up to a ninety-five (95%) percent occupancy level as the Operating Expenses are
grossed up to a ninety-five (95%) percent occupancy level in Section 8 of the
Lease.
5. Operating Expenses. In addition to the exclusions listed in
Paragraph 8 of the Lease, the term "Operating Expenses" shall not include the
following: (vii) expenses incurred in leasing to or procuring of tenants;
(viii) advertising expenses; (ix) expenses for the renovation of space for new
tenants; (x) interest or principal payment on any mortgage or other
indebtedness of Landlord; (xi) compensation paid to any employee of Landlord
above the grade of senior property or project manager and any depreciation
allowance or expenses; and (xii) repairs, restoration, or other work occasioned
by fire, wind, the elements, or other casualty to the extent of any amounts
recovered under any insurance policy maintained by Landlord with respect
thereto.
6. Leasehold Improvements. Tenant acknowledges and agrees that
Landlord has performed all leasehold improvement work that Landlord previously
agreed to perform under the Lease. Tenant acknowledges and agrees that Tenant
has accepted the Premises and the Building in their "AS IS, WHERE IS," and
"WITH ALL FAULTS" condition, excepting only latent defects. From and after the
Effective Date, Landlord will provide a renovation allowance (the "First
Allowance") for Tenant equal to $2.00 per square foot of Rentable Area in the
Premises (estimated to equal $15,858), which shall be used by Tenant for
renovations to the Premises. Additionally, in the event Tenant does not
exercise the Termination Option (as defined below), Landlord shall provide to
Tenant at Tenant's request at any time after the Termination Date (as
hereinafter defined) a renovation allowance (the "Second Allowance") for Tenant
equal to $1.00 per square foot of Rentable Area in the Premises (estimated to
equal $7,929), which allowance shall be used by Tenant for renovations to the
Premises. Tenant can only receive the First Allowance prior to December 3 1,
1995; however, any unused portion of the First Allowance can be at Tenant's
request deferred and added to the Second Allowance. Tenant shall not be
entitled to use any portion of the Second Allowance or any remaining portion of
the First Allowance after December 31, 1998. Subject to the time limitations
listed in this Section, Landlord will pay such sums to Tenant for renovations
performed to the Premises within twenty (20) days of written request therefor
provided by Tenant, together with the invoices for the renovation work
performed.
7. Termination Option. Tenant is hereby granted the option (the
"Termination Option") to terminate this Lease effective as of September 30,
1998 (the "Termination Date"), by delivering written notice exercising such
option to Landlord on or before March 31, 1998 (the "Termination Notice Date"),
and by paying to Landlord, on or before the Termination Notice Date, a
termination payment (the "Termination Payment") equal to $5.86 per square foot
of Rentable Area in the Premises (estimated to equal $46,464). In the event
Tenant exercises the Termination Option and makes the Termination Payment to
Landlord as provided above, this Lease shall each terminate as of the
Termination Date and no further obligations shall thereafter accrue to the
benefit of either party under this Lease, except as expressly provided to the
contrary under the Lease. Notwithstanding anything to the contrary set forth
in this Section, Tenant shall not be permitted to exercise the Termination
Option if, at the time of such exercise, there exists and is continuing a
default by Tenant under the Lease.
-3-
<PAGE> 39
8. Right of Refusal. The right of refusal granted to Tenant in
Paragraph 3 of the Lease is hereby deleted in its entirety. In lieu thereof,
Landlord hereby grants to Tenant a right of refusal to include under this Lease
all or any portion of the space adjoining the Leased Premises on the 8th Floor
of the Building and known as Suite 815 (the "ROR Space") upon the terms and
conditions set forth in this Section. Tenant's right of refusal shall be
continuous and shall be superior to the renewal option of the current tenants
of the ROR Space, Reed and Terry, but shall be subject and subordinate to the
renewal options, expansion options, rights of refusal or similar rights now
held by Comerica Bank (the "Superior Tenant").
Whenever Landlord shall notify any Superior Tenant that any portion of
the ROR Space is available for lease by it under such Superior Tenant's option
or rights, Landlord shall send a copy of said notice to Tenant and from and
after the date any such tenants involved give written notice to Landlord that
they elect not to lease any relevant space out of the ROR Space, or if no such
rights then exist in favor of any Superior Tenant, then from and after the date
on which the tenant occupying all or any portions of any ROR Space gives
written notice to Landlord that it is vacating said floor or portion or fails
to exercise any right of renewal, and if this Lease is then in full force and
effect and Tenant is not then in default of any of its covenants contained in
this Lease, Landlord shall offer to Tenant in writing (the "ROR Notice") the
right to include said space under this Lease upon the same terms and conditions
set forth herein, except that: (a) the Base Rental for any such space shall be
the Fair Market Rental Rate at the time said portion is to be made a part of
the Premises; (b) Tenant may not assign this right of refusal except to a
permitted assignee of all of Tenant's rights under this Lease; (c) the
leasehold improvements will be provided in their then existing "as is"
condition at the time said space is made available to Tenant; (d) any leasehold
improvement allowance agreed to by Tenant and Landlord as part of the Fair
Market Rental Rate shall be provided by Landlord to Tenant to cover costs
incurred by Tenant in connection with leasehold improvements made by Tenant to
the ROR Space, as such costs are incurred; and (e) notwithstanding anything
herein to the contrary, the term for any ROR Space added to this Lease pursuant
to this right of refusal shall terminate when the Term of this Lease for the
Premises terminates or expires. Accordingly, Tenant shall renew the Term of
this Lease as to each ROR Space whenever Tenant renews the Term of this Lease
as to the remainder of the Premises, upon the same terms and conditions set
forth in the Lease with respect to such renewal option. Notwithstanding any
provisions hereof to the contrary, in no event shall this Lease continue in
force and effect as to any ROR Space beyond the termination or expiration of
this Lease as to the remainder of the Premises.
Tenant shall exercise its right of refusal, if at all, within fifteen
(15) days after the Notice is received by Tenant; provided, however, Tenant
agrees to use reasonable efforts to respond in as short a time period as the
circumstances dictate (e.g., if a tenant abandons its premises without notice
to Landlord). Tenant's obligation to pay Rent for such space shall commence on
the earlier to occur of (A) the date that Tenant takes occupancy of the ROR
Space for purposes of conducting its business therein or (B) forty-five (45)
days following the later to occur of (i) the date the prior, tenant vacates
such space and said space is made available to Tenant in the condition
described in (c) above or (ii) the date when Tenant exercises its right of
refusal.
9. Parking. From and after the Effective Date to the end of the
initial Term, Landlord agrees to furnish Tenant without charge twenty-seven
(27) unreserved parking spaces in the garage on the Land on an unassigned,
first-come first-serve basis with the other tenants of
-4-
<PAGE> 40
the Building (the "Parking"). During the Renewal Term, Landlord agrees to
furnish Tenant with the Parking and Tenant agrees to pay Landlord for such
parking the market rate per space then being charged therefor by Landlord as of
the commencement of the Renewal Term. Landlord's previous obligation under the
Lease to provide parking spaces to Tenant shall terminate as of the Effective
Date. Tenant agrees to use all such parking privileges in accordance with any
and all rules and regulations established by Landlord or the operator of the
garage for the operation and use of such garage.
10. Landlord's Services. Paragraph 13 of the Lease is hereby
amended as follows:
- Landlordto provide non-exclusive operatorless passenger
elevator service seven (7) days per week and 24 hours per
day and non-exclusive operatorless freight elevator
service during normal business hours; provided, that
Landlord may reasonably limit the number of elevators in
operation on weekdays after normal business hours, and on
Saturdays, Sundays and Holidays.
- Should the interruption of use of any equipment or
services as described in Paragraph 13 of the Lease (as
modified hereby) continue for more than three (3)
consecutive business days after Landlord's receipt of
Tenant's notice of such interruption, Tenant shall have
the right to abate Rent payments as of the commencement
of the next day following the expiration of such three
(3) consecutive business day period, but only to the
extent (and during the period) that the Premises are
untenantable for Tenant's customary usage of the same and
are not actually used by Tenant for such purpose. Should
such interruption of services continue for sixty (60)
consecutive days (or for such longer period of time as
long as Landlord is diligently and continuously pursuing
the restoration of such services, but in no event for
more than one hundred twenty (120) consecutive days from
the interruption of such services), Tenant shall have the
right to terminate the Lease. Notwithstanding the
foregoing. such abatement and termination rights shall
only apply to an interruption of services that is not the
result of a casualty; any such cessation or interruption
as a result of a casualty shall be governed by the
provisions of the Lease relating to such casualty.
11. Landlord's Access. Paragraph 20 of the Lease is hereby
amended to provide that Landlord's right to enter the Premises to show the
Premises to prospective new tenants shall be permitted only during the six (6)
months prior to lease expiration.
12. Landlord's Insurance. The insurance to be maintained by
Landlord pursuant to the first sentence of Paragraph 21 of the Lease is hereby
modified to provide that such insurance shall represent one hundred percent
(100%) of the replacement value of the Building and Building Standard
Improvements.
13. Fire and Other Casualty. The following statement beginning on
the 23rd line of Paragraph 22 of the Lease is hereby deleted: " . . . and
except that the term shall be extended by
-5-
<PAGE> 41
a length of time equal to the period beginning on the date of such damage or
destruction and ending upon completion of such restorations or replacements."
14. Indemnity. The following shall be added at the end of
Paragraph 24 of the Lease: Except for the claims, rights of recovery and causes
of action that Tenant has released and waived pursuant to Paragraph 23 hereof,
and except as such obligations and liabilities of Landlord and rights of Tenant
are otherwise limited or modified herein, Landlord hereby indemnities and holds
Tenant harmless from and against any and all claims arising (a) from Landlord's
negligence in the operation of the Building and (b) from and against a breach
by Landlord (after notice and opportunity to cure as set forth in Paragraph 28
of the Lease) of any obligation on Landlord's part to be performed under the
terms of this Lease, and from and against all damages, losses, costs,
attorney's fees, expenses and liabilities incurred in or related to any such
claim or any action or proceeding brought thereon. Notwithstanding the
foregoing, Tenant waives any right it may have to indirect, circumstantial,
consequential, exemplary or punitive damages against Landlord for any breach of
the Lease by Landlord or relating to any claim that Tenant may have against
Landlord relating to or arising out of the Lease or Tenant's occupancy of the
Building.
15. Notice. For all purposes under the Lease, as amended by this
Amendment, notices for Landlord shall be delivered to Landlord at the following
address:
Brookdale Investors, L.P.
3343 Peachtree Road NE, Suite 510
Atlanta, Georgia 30326.
Notice for Tenant shall be delivered to Tenant at the following
address:
Dezine Healthcare Solutions, Inc.
758 State Highway 18, Suite 110
East Brunswick, New Jersey 08810
Attention: David Pfiel
with a copy (which shall not constitute as notice) to:
Blue Cross Blue Shield
1-20 at Alpine Road
Columbia, South Carolina 29219-0001
Attention: General Counsel
16. Act of Default. Clause (i) of Paragraph 30 of the Lease is
hereby modified to provide: "(i) failure of Tenant to pay when due any Rent or
other amount required to be paid under this Lease; provided, that the first two
(2) such failures to pay on such due date shall not constitute an Act of
Default as long as such failure to pay does not continue for five (5) days
following the date such payments are due under the Lease, but after such two
(2) grace periods have been used by Tenant, all future payments must be
received on the due date therefor or such failure shall constitute an Act of
Default." Clause (viii) of Paragraph 30 of the Lease is hereby deleted in its
entirety.
-6-
<PAGE> 42
17. Holding Over. The words " . . . two times . . . " on Line 4
of Paragraph 33 of the Lease are hereby deleted and replaced with ". . . one
and one-half times (150%) the amount set forth above in effect immediately
prior to the end of the Tern or termination of this Lease for the first thirty
(30) days following such end or termination, and thereafter one and
three-fourths times (175%) . . . "
18. Interest. Paragraph 36 of the Lease is hereby deleted and
replaced with the following: "All Rent and other sums of money due and payable
by Tenant to Landlord shall be paid at the times and in the manner provided in
this Lease without demand, deduction, abatement, setoff, counterclaim or prior
notice. All Rent under this Lease shall bear interest from the date due until
paid at the lesser of eighteen percent (18%) or the maximum nonusurious rate of
interest then permitted by the applicable laws of the State of Texas or the
United States of America, whichever shall permit the higher nonusurious rate,
and to the extent that the maximum nonusurious rate is determined by reference
to the laws of the State of Texas, such rate shall be the indicated rate
ceiling (as defined and described in Texas Revised Civil Statutes, Art.
5069-1.04 as amended) at the applicable time and effect until paid, such
interest being in addition to any other rights and remedies which Landlord may
have with regard to the failure of Tenant to make any such payments under this
Lease."
19. Legal Description. Tenant and Landlord acknowledge and agree
that the parties erroneously attached the wrong legal description for the Land
as Exhibit A to the Lease. Exhibit A to the Lease is deleted in its entirety
and replaced with Exhibit A to this Amendment.
20. Rules and Regulations (Exhibit E). The use of microwave ovens
are hereby excepted from Paragraphs 6 and 10 of Exhibit E to the Lease.
21. Independent Covenants. The obligation of Tenant to pay Rent
and other monetary obligations provided to be paid by Tenant under the Lease
and the obligation of Tenant to perform Tenant's other covenants and duties
under the Lease constitute independent, unconditional obligations of Tenant to
be performed at all times provided for under the Lease, save and except only
when an abatement thereof or reduction therein is expressly provided for in the
Lease and not otherwise. Notwithstanding any of the other terms or provisions
of the Lease and notwithstanding any other circumstances whatsoever, it is the
intent and agreement of Landlord and Tenant that so long as Tenant has not been
wrongfully evicted from the Premises, the doctrine of independent covenants
shall apply in all matters relating to the Lease including, without limitation,
the obligation of Landlord to perform Landlord's covenants under the Lease, as
well as the obligation of Tenant to pay Rent and all other monetary obligations
of Tenant and perform Tenant's other covenants, duties and obligations under
the Lease.
22. No Default. To the best of Tenant's knowledge, no default
exists under the Lease and Tenant has no current claims or rights of offset
against Landlord under the Lease.
23. Full Force. Except as expressly provided in this Amendment,
the terms and provisions in the Lease (including without limitation the
obligation of Tenant to pay Rent and additional rent under the Lease prior to
the Effective Date provided in this Amendment) remains in full force and
effect. This Amendment sets forth the entire agreement between the parties
-7-
<PAGE> 43
with respect to the matter set forth herein; no additional oral or written
representations or agreements have been made.
This Amendment has been executed as of the date set forth above.
TENANT:
DEZINE HEALTHCARE SOLUTIONS, INC.,
a South Carolina corporation
By: /S/
-------------------------
Name: John P. Sessions
----------------
Title: Vice President
-----------------
LANDLORD:
BROOKDALE INVESTORS, L.P.,
a Delaware limited partnership
By:BROOKDALE PARTNERS, LLC,
a Georgia limited liability
company, its sole General Partners
By: /S/
-------------------------
Fred H. Henritze, its Manager
-8-
<PAGE> 44
EXHIBIT "A"
TO
FIRST AMENDMENT TO LEASE AGREEMENT
(LEGAL DESCRIPTION OF LAND)
ALL that certain 4.4677 acres tract of land out of Commercial Reserve "G" out
of SUGAR CREEK CENTER, a plat of subdivision recorded on Slides 595-B, 596-A,
and 596-B of the Plat Records of Fort Bend County, Texas, all being in the
Brown & Belknap League, Abstract 15, Fort Bend County, Texas, said 4.4677 acres
tract being more particularly described as follows (all bearings are referenced
to the Texas State Coordinate System, South Central Zone, and a grid bearing of
South 44o25'33" East from the National Geodetic Survey triangulation station
"Stafford" to the Stafford water tower, all distances are horizontal surface
distances):
BEGINNING at a 5/8-inch iron rod found at the most southwesterly cutback corner
at the intersection of the West right- of-way line of Sugar Creek Boulevard
(also known as Spur 41, a 150-foot wide right-of-way) and the Northwest
right-of- way line of the Southwest Freeway (also known as U.S. Highway 59, a
right-of-way of varying width), to which a radial line to said 5/8-inch iron
rod bears North 43o21'5 1 " West, 3,613.89 feet;
THENCE southwesterly, 264.52 feet coincident with the Northwest right-of-way
line of said Southwest Freeway and said 3,613.89-foot radius curve, through a
central angle of 04o11'38", to a 5/8-inch iron rod found for corner at the most
southeasterly cutback corner at the intersection of the Northwest right-of-way
line of said Southwest Freeway and the Northeast right-of-way line of Sugar
Creek Center Boulevard, a 150-foot wide right-of-way;
THENCE North 85o35'10" West, 29.14 feet coincident with said cutback line to a
5/8-inch iron rod found for corner in the Northeast right-of-way line of said
Sugar Creek Center Boulevard, said 5/8-inch iron rod being in a curve concave
Southwest to which a radial line bears North 40o1 3'00" East, 1,555.00 feet;
THENCE northwesterly, 268.99 feet coincident with the Northeast right-of-way
line of said Sugar Creek Center Boulevard and said 1,555.00-foot radius curve,
through a central angle of 09o54'40", to an "X" found in concrete for corner,
said "X" being in a curve concave West to which a radial line bears South
80o59'34" East, 1,271.99 feet, said "X" also being the most westerly corner of
said Commercial Reserve "G" of said SUGAR CREEK CENTER;
THENCE northerly, 109.50 feet coincident with the most westerly line of said
Commercial Reserve "G" and said 1,271.99- foot radius curve, through a central
angle of 04 degrees 55'57", to a railroad spike found in asphalt for corner;
THENCE North 42 degrees 26'06" East, 103.21 feet to a 5/8-inch iron rod set for
corner;
THENCE North 17 degrees 33'54" West, 136.00 feet to a 5/8-inch iron rod set for
corner;
<PAGE> 45
THENCE South 72 degrees 26'06" West, 31.26 feet to a 5/8-inch iron rod found
for corner in the most westerly line of said Commercial Reserve "G" of said
SUGAR CREEK CENTER, said 5/8-inch iron rod being in a curve concave West, to
which a radial line to said 5/8-inch iron rod bears North 85' 13'09" East,
1,271.99 feet;
THENCE northerly, 9.70 feet coincident with said westerly line of said
Commercial Reserve "G" and said 1,271.99-foot radius curve, through a central
angle of 00 degrees 26'13", to a 5/8-inch iron rod set at the point of tangency;
THENCE North 05 degrees 13'03" West, 195.00 feet coincident with said westerly
line of said Commercial Reserve "G" to a 5/8-inch iron rod set for corner at the
beginning of a 495.00-foot radius curve concave West;
THENCE northerly, 20.43 feet along said 495.00-foot radius curve through a
central angle of 02o21'54" to a 5/8-inch iron rod set for corner;
THENCE North 23 degrees 55'00" East, 18.66 feet to a 5/8-inch iron rod set for
corner in a curve concave South, to which a radial line bears North 32o19'08"
West, 334.94 feet, said curve being 20.00 feet South of and concentric with the
South right-of-way line of Parklane Boulevard, an 80-foot wide right-of-way;
THENCE easterly, 165.38 feet along said 334.94-foot radius curve, through a
central angle of 28 degrees 17'25" to a 3/4-inch iron rod found for corner;
THENCE South 53 degrees 58'08" East, 15.89 feet to a 5/8-inch iron rod set for
corner in said West right-of-way line of said Sugar Creek Boulevard, a curve
concave East, to which a radial line to said 5/8-inch iron rod bears South
74o44'1 3 West, 1,221.28 feet;
THENCE southerly, 570.42 feet coincident with the West right-of-way line of said
Sugar Creek Boulevard and said 1,221.28-foot radius curve, through a central
angle of 26 degrees 45'40" to a 5/8-inch iron rod found for corner;
THENCE South 03 degrees 27'55" West, 56.45 feet to the POINT OF BEGINNING,
containing 4.4677 acres of land, more or less.
-2-
<PAGE> 46
<TABLE>
<S> <C> <C>
---------------------------------------------------
"Landlord"
DON L. RUSSELL
-------------------------------------------
PRESIDENT
---------------------------------------------------
Title
ATTEST: (FOR TENANT
IF APPLICABLE) MEDICAL SOLUTIONS, INC.
----------------------------------
(Name of Tenant)
By
---------------------------------- -------------------------------------------------
"Tenant"
RICHARD M. DORTCH, PRESIDENT
----------------------------------
(Name & Title of person executing for Tenant)
CORPORATE SEAL 10039 Bissonnett, Suite 230
(IF APPLICABLE) Houston, Texas 77036-7838
---------------------------------------------------
(Tenant's address prior to
occupancy)
Signature page to Lease dated August, 1992 covering 7,929 square feet of Rentable Area on the
Eighth floor of SUGAR CREEK NATIONAL BUILDING, Sugar Land, Fort Bend County, Texas.
</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.15
===============================================================================
===============================================================================
LEASE
BETWEEN
UNUM LIFE INSURANCE COMPANY OF AMERICA
LANDLORD
-AND-
DEZINE ASSOCIATES, INC.
TENANT
HERON MANAGEMENT LTD.
850 Third Avenue
New York, N. Y. 10022
212-753-3210
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE NO. DESCRIPTION PAGE NO.
<S> <C> <C>
I Demise 2
II Term 2
III Rent 3
IV Use and Occupancy 4
V Alterations or Improvements by Tenant 4
VI Maintenance 5
VII Compliance with Laws, Indemnity and Insurance 6
VIII Hazardous Materials 6
IX Subordination and Estoppel 7
X Destruction - Fire or Other Casualty 7
XI Mutual Waiver of Subrogation 8
XII Condemnation and Other Proceedings 9
XIII Assignment and Subletting 9
XIV Surrender 10
XV Holding Over 10
XVI Landlord's Right of Entry 11
XVII Default 11
XVIII Landlord's Rights Upon Tenant's Default 12
XIX Landlord's Remedies Cumulative: Expenses 13
XX No Waiver 14
XXI Landlord's Reserved Rights 14
XXII Landlord's Liability 15
XXIII Tenant's Liability 15
XXIV Tenant's Insurance 15
XXV Mechanic's Liens 16
XXVI Quiet Enjoyment 16
XXVII Air and Light 16
XXVIII Landlord's Services 17
XXIX Personal Property Taxes 18
XXX Security Deposit 18
XXXI Use of Security Deposit 18
XXXII Definition of Landlord 19
XXXIII Notices 19
XXXIV Signs 19
XXXV Notice of Defects and Accidents 20
XXXVI Rules and Regulations 20
XXXVII Directory 20
XXXVIII Americans With Disability Act 20
XXXIX Miscellaneous 21
XXXX Definitions 25
Corporate Tenant Acknowledgement 26
Partnership Tenant Acknowledgement 26
Exhibit A -- Floor Plan 2
Exhibit B -- Cleaning
Schedule 3
</TABLE>
2
<PAGE> 3
LEASE, dated as of the 13th day of August, 1992 between UNUM LIFE INSURANCE
COMPANY OF AMERICA having its principal office at 2211 Congress Street,
Portland, ME 04121 (hereinafter referred to as "Landlord") and DEZINE
ASSOCIATES, INC. having their principal offices at 74 BRUNSWICK WOODS DRIVE,
EAST BRUNSWICK, N.J. 08816
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE I
Demise
1.1 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord approximately Seven Thousand One Hundred (7,100 Sq. Ft.) substantially
as shown on the floor plan which has been initialed by the parties and annexed
hereto and made a part hereof and marked Exhibit A, in the building known as THE
WOODS OF EAST BRUNSWICK, 758 ROUTE 18, EAST BRUNSWICK, NEW JERSEY at the annual
rental rate set forth in Article III and upon and subject to all of the terms,
covenants and conditions contained in this Lease. The premises shall be deemed
to and hereby are agreed to have a Rentable Area as above of approximately 7,100
sq. ft. of floor area constituting a portion of the ground floor of the building
subject however to and reserving unto Landlord, its successors and assigns, its
agents, employees and invitees, the use in common with Tenant of common areas
and facilities located upon said first floor which common areas and facilities
include but are not limited to corridors and rest rooms. The premises leased to
Tenant, together with all appurtenances, fixtures, improvements, additions and
other property attached thereto or installed therein at the commencement of, or
at any time during, the term of this Lease, other than Tenant's personal
property are referred to collectively as the "Premises."
ARTICLE II
Term
2.1 The Premises are leased for a term to commence at 12:01 A.M. on
September 1, 1992 and to end at 11:59 P.M. on September 30, 1997 unless the term
shall sooner terminate pursuant to any of the terms, covenants or conditions of
this Lease or pursuant to law, or unless the term shall be extended pursuant to
the terms of this lease.
2.2 When Tenant takes possession of the Premises, Tenant shall be deemed
to have accepted the Premises as being in satisfactory condition as of the date
of such possession.
Notwithstanding anything contained herein to the contrary, Tenant
shall have access to the demised premises during the month of August for the
purposes of completing Tenant's work. However, in no event shall Tenant's work
interfere with Landlord's work and/or
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schedule and Tenant shall be required to give Landlord at least 48 hours notice
of its intent to have contractors working in the space. Tenant's contractors
shall supply Landlord with appropriate Certificate of Insurance and shall comply
in all respects with Article 5, sections 5.1 and 5.2 of this lease.
2.3 Notwithstanding anything contained herein to the contrary, Tenant
acknowledges that the demised premises will be constructed pursuant to the plans
annexed hereto. Landlord shall in no way be responsible for any delay in
possession due to the construction to Tenant's space. However if Landlord cannot
deliver possession to Tenant by September 1, 1992, then the commencement date of
this lease shall be postponed until five days after substantial completion of
Landlord's work to the demised premises. Substantial completion shall be defined
as the issuance of a Certificate of Occupancy for the demised premises by the
appropriate authority. Landlord shall be responsible for obtaining the
Certificate of Occupancy.
ARTICLE III
Rent
3.1 The Tenant covenants and agrees to pay to the Landlord as rent for
and during the term hereof the sums pursuant to the following schedule:
<TABLE>
<CAPTION>
LEASE YEAR ANNUAL RENT
---------- -----------
<S> <C>
September 1, 1992 through September 30, 1993 $76,916.67* (SEE 3.5)
October 1, 1993 through September 30, 1994 $71,000.00
October 1, 1994 through September 30, 1995 $71,000.00
October 1, 1995 through September 30, 1996 $71,000.00
October 1, 1996 through September 30, 1997 $71,000.00
</TABLE>
*13 Months
3.2 The Basic Rent and Additional Rent payable pursuant to the provisions
of this Lease shall be payable by Tenant to Landlord at its office (or at such
other place as Landlord may designate in a notice to Tenant) in lawful money of
the United States without prior demand thereof and without any offset or
deduction whatsoever except as otherwise specifically provided in this Lease for
the convenience of the Landlord. The Basic Rent shall be payable in equal
monthly installments pursuant to the following schedule, in advance, on the
first (1st) day of each month during the term. Notwithstanding anything
contained herein to the contrary, the term "Base Rent" shall include real
property taxes, cleaning tenants space, recycle bins, water and sewer charges,
Landlord's Insurance, garbage collection (unless Tenant shall require additional
services due to its business or the use of the premises, i.e. dumpster),
maintenance of common areas (including hallways and common area lavatories, and
the exterior of the premises, including the parking lot).
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<PAGE> 5
<TABLE>
<CAPTION>
LEASE YEAR MONTHLY RENT
---------- ------------
<S> <C>
September 1, 1992 through September 30, 1993 $5,916.67
October 1, 1993 through September 30, 1994 $5,916.67
October 1, 1994 through September 30, 1995 $5,916.67
October 1, 1995 through September 30, 1996 $5,916.67
October 1, 1996 through September 30, 1997 $5,916.67
</TABLE>
3.3 Tenant covenants to pay the Basic Rent and any Additional Rent
payable pursuant to the provisions of this Lease and to observe and perform and
to permit no violation of the terms, covenants and conditions of this Lease on
Tenant's part.
3.4 Notwithstanding anything contained herein to the contrary,
simultaneous with the execution of this lease, Tenant shall pay to Landlord the
first months rent due hereunder.
3.5 Notwithstanding anything contained herein to the contrary, Tenant
shall pay no base rent for the months of September, October, November and
December 1992 and January, February and March 1993, said rent being abated.
ARTICLE IV
Use and Occupancy
4.1 Tenant shall use or occupy the Premises only for the following
purpose: Corporate Offices and Storage of Computer Hardware and Supplies.
4.2 Tenant shall not use or occupy, or permit the use or occupancy of the
Premises or any part thereof for any purpose other than the purpose specifically
set forth herein. Any violations of this Article shall be deemed a material
breach of this Agreement.
4.3 Provided Tenant shall not then be in default under any of the terms
or conditions of this lease, Landlord shall not Lease space in the building
known as 758 Route 18, East Brunswick, N.J. to any Tenant for the purpose of
manufacturing goods.
ARTICLE V
Alterations or Improvements by Tenant
5.1 Tenant shall make no changes in or to the Premises of any nature
without Landlord's prior written consent. Subject to the prior written consent
of Landlord, Tenant, at Tenant's sole expense, may hire contractors approved by
Landlord to make alterations, installations, additions or improvements in or to
the Premises (collectively "Alterations") which are non-structural and which do
not affect utility services, plumbing or electrical lines in or to the Premises
or the Building. All alterations shall, upon installation, become the property
of Landlord and shall remain upon and be surrendered with the Premises unless
Tenant by notice to Landlord no later than thirty (30) days prior to the
Termination Date requests Landlord so
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consents the same shall be removed from the Premises by Tenant prior to the
Termination Date at Tenant's sole expense. Nothing in this Article V shall be
construed to give Landlord title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment but upon removal of any such
item from the Premises or upon removal of any other installation as may be
permitted by Landlord, Tenant shall immediately and at its expense, repair and
restore the Premises to the condition existing prior to such Alteration. Tenant
shall repair any damage to the Premises, the building, or the real property on
which the building is located (hereinafter referred to as the "Real Property")
incurred during such removal. All property permitted or required to be removed
by Tenant at the end of the Term remaining on the Premises after the Termination
Date shall be deemed abandoned and may, at the election of Landlord, either be
retained as Landlord's property or may be removed from the Premises by Landlord
at Tenant's expense.
5.2 Prior to the commencement of any Alteration, Tenant shall at its sole
expense, obtain all required permits, approvals and certificates required by all
Governmental Authorities as determined by Landlord and upon completion of the
Alteration certificates of final approval thereof, Tenant shall deliver to
Landlord promptly upon its receipt, duplicates of same. Tenant shall carry and
will cause Tenant's contractors and subcontractors to carry such worker's
compensation, general liability, personal and property damage insurance as
required by law and in amounts no less than the amounts set forth in Article
XXIII hereof.
ARTICLE VI
Maintenance
6.1 Tenant shall take good care of the Premises throughout the Term and
preserve same in the condition delivered to Tenant on the Commencement Date,
normal wear and tear excepted. Tenant further agrees not to injure, overload,
deface or commit waste of the Premises. Tenant shall be responsible for all
injury or damage of any kind or character to the Real Property, including the
windows, floors, walls, ceilings, lights, electrical equipment and HVAC
equipment, caused by Tenant or by anyone using or occupying the Premises by,
through or under the Tenant. Landlord shall repair the same and Tenant shall pay
the costs incurred thereof to Landlord immediately upon demand. This shall be
deemed to be additional rent.
6.2 Landlord shall be responsible for all Structural Repairs and shall
maintain, and replace all plumbing, heating, air conditioning, roof, electrical
and mechanical fixtures supplied by Landlord (exclusive of (a) starters,
ballasts, incandescent and fluorescent lamps and (b) electrical and mechanical
fixtures installed by Tenant) which shall be standard for the Building, when
required, and maintain and make repairs to the parking area and the exterior of
the building, except those repairs or replacements arising from the negligence
of Tenant, its agents, servants, employees licensees, or invitees, which shall
be the sole responsibility of Tenant.
6.3 Notwithstanding anything contained herein to the contrary, and
provided Tenant is not in default under any of the terms and conditions of this
lease, Landlord and Tenant agree that should the roof leak into the demised
premises, Tenant shall notify Landlord of such
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<PAGE> 7
condition. If landlord shall fail to commence curing the problem within a
reasonable period of time, and Tenants furniture and fixtures are damaged,
Landlord agrees to repair and/or replace same as soon as reasonable, in an
amount not to exceed $10,000.00 per incident.
ARTICLE VII
Compliance with Laws, Indemnity and Insurance
7.1 Tenant shall not do, or permit anything to be done in or to the
Premises, or bring or keep anything therein which will, in any way, increase the
cost of fire or public liability insurance on the Real Property, or invalidate
or conflict with the fire insurance or public liability insurance policies
covering the Real Property, any Building, fixtures or any personal property kept
therein, obstruct or interfere with the rights of Landlord or other tenants, or
in any other way injure or annoy Landlord or other tenants, or subject Landlord
to any liability for injury to persons or damage to property, or interfere with
the good order of the Building, or conflict with the present or future laws,
rules or regulations of any Governmental Authority. Tenant hereby indemnities
and shall hold Landlord harmless of and from all liability for injury to persons
or damage occurring on the Premises or in the Building whether occasioned by any
act or omission of Tenant, or Tenant's agents, servants, employees, invitees, or
licensees. Tenant agrees that any increase in fire and casualty insurance
premiums on the Building or contents caused by the occupancy of Tenant and any
expense or cost incurred in consequence of negligence, carelessness or willful
action of Tenant, Tenant's agents, servants, employees, invitees or licensees,
shall be reimbursed to Landlord within ten (10) days of demand thereof and shall
be considered additional rental.
ARTICLE VIII
Hazardous Materials
8.1 Tenant shall not, without Landlord's prior written consent, use,
generate, release, spill, store, deposit, transport or dispose of (collectively
"Release") any hazardous substances, sewage, petroleum products, hazardous
materials, toxic substances or any pollutants, contaminants or substances,
defined as hazardous or toxic under and applicable federal, state, and local
laws and regulations ("Hazardous Substances") in, on or about the Premises. In
the event, and only in the event, Landlord approves such Release of Hazardous
Substances on the Premises, Tenant agrees that such Release shall occur safely
and in compliance with all applicable federal, state and local laws and
regulations. Tenant shall indemnify, hold harmless and defend Landlord, its
officers, directors, employees and agents from any and all claims, liabilities,
losses, damages, cleanup costs and expenses (including reasonable attorney's
fees) arising directly or indirectly out of or attributable to failure of
Tenant, its agents, servants, employees or invitees to comply with this Article.
The provisions of this Article shall survive the expiration or termination of
the Lease for any reason.
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<PAGE> 8
ARTICLE IX
Subordination and Estoppel
9.1 Tenant agrees that this Lease is subject and subordinate to all
ground or underlying leases and to the lien of any mortgages or deeds of trust
now on or which at any time in the future that may be made a lien upon the Real
Property, and to all advances made or hereafter to be made upon the security
thereof. This subordination provision shall be self-operative and no further
instrument of subordination shall be required. Tenant agrees to execute and
deliver within two (2) business days, upon request, such further instrument or
instruments confirming this subordination as shall be desired by Landlord or by
any mortgagee or proposed mortgagee of the Real Property; and Tenant hereby
constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any
such instrument or instruments. Tenant further agrees that at the option of the
holder of any mortgage or of the trustee under any deed of trust securing the
Real Property, this Lease may be made superior to said mortgage or deed of trust
by the insertion therein of a declaration that this Lease is superior.
9.2 Tenant agrees at any time and from time to time upon not less than
five (5) days' prior written request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the same are in full force and effect as modified) and stating the
modifications, that there are no offsets, defenses, defaults or counterclaims
under this Lease or against the Landlord, the dates to which the Basic Rent and
Additional Rent have been paid in advance, if any, it being intended that any
such statement delivered pursuant to this paragraph 8.2 may be relied upon by a
prospective purchaser of Landlord's interest or mortgagee of Landlord's interest
or assignee of any mortgage upon Landlord's interest in the Real Property.
ARTICLE X
Destruction - Fire or Other Casualty
10.1 (a) If Landlord's building is totally damaged or is rendered
wholly untenantable by fire or other cause, and cannot reasonably be repaired by
Landlord within one hundred twenty (120) days, or if the Building shall be so
damage that Landlord cannot reasonably restore the same but must demolish it or
rebuild it, which Landlord may in its sole discretion determine, then either
party may, within sixty (60) days after such casualty, give to the other party a
notice in writing of intention to terminate this Lease, and thereupon the term
of this Lease shall expire by lapse of time upon the thirtieth (30th) day, after
such notice is given, and Tenant shall vacate the demised Premises and surrender
the same to Landlord. Upon termination of this Lease under this Paragraph IX(a),
Tenant's liability for rent shall cease as of the day following the casualty or
when tenant ceases to do business in the demised Premises, whichever date is
later. In the event this Lease is not terminated under the provisions of this
Paragraph IX(a), Landlord shall repair and rebuild the Demised Premises with
reasonable diligence.
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<PAGE> 9
(b) If the Demised Premises shall be totally or partially
damaged by fire or other casualty, the damages to the Landlord's Building and to
the Demised Premises shall, to the extent that they were originally constructed
and furnished by the Landlord, be promptly repaired by and at Landlord's expense
and the damage to all of tenant's fixtures and other improvements installed by
Tenant shall be promptly repaired by and at the expense of Tenant and the rent
until such repair shall be made shall be apportioned according to the part of
the Demised Premises which is tenantable by Tenant until the Landlord has made
the repairs required of Landlord.
(c) Landlord shall provide and maintain, at its expense, during
the term hereof, fire insurance. Anything contained in this Lease to the
contrary notwithstanding, in the event the Landlord's Building shall be totally
or partially damaged by fire or other casualty, the Landlord shall not be
obligated to expend for such repair or restoration an amount in excess of the
net proceeds of insurance recovered as a result of such damage to expend any
sums for Tenants own. Notwithstanding anything to the contrary, this lease
becomes immediately null and void if the tenant cannot reasonably occupy the
premises as a result of fire or other causes, provided not caused by negligence
of Tenant.
ARTICLE XI
Mutual Waiver of Subrogation
11.1 Landlord hereby waives any and all rights of recovery against Tenant
for or arising out of damage to or destruction of the Premises, Building, or the
Real Property and any other property of Landlord from causes then insured under
standard fire and extended coverage insurance policies or endorsements to the
extent that its insurance policies then in effect permit such waiver, and Tenant
hereby waives any and all rights of recovery against Landlord for or arising out
of damage to or destruction of the Premises or the Real Property and any
property of Tenant from causes then insured under standard fire and extended
coverage insurance policies to the extent that its insurance policies then in
effect permit such waiver. If at any time during the Term any insurance carrier
which shall have issued a policy to either of the parties covering the Real
Property, the Premises or any of the property of Tenant, shall refuse to consent
to the waiver of the right of recovery with respect to any loss payable under
such policy, or if such carrier shall consent to such waiver only upon the
payment of an additional premium (unless such additional premium is voluntarily
paid by one of the parties hereto) or shall cancel a consent previously given,
or shall cancel or threaten to cancel any policy previously issued and then in
full force and effect, then in any such sent, the waiver of this paragraph 10.1
shall thereupon be of no further force and effect as to the loss, damage or
destruction covered by such policy except as hereinafter provided. If however,
at any time thereafter such consent shall be obtained thereof from any existing
or any substitute insurance carrier, the waiver hereinabove provided for shall
again become effective.
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<PAGE> 10
ARTICLE XII
Condemnation and Other Proceedings
12.1 In the event the whole of the Demised Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, then
and in that event, the term of this Lease shall cease and terminate from the
date of title vesting in such proceeding or the termination of her right to
possession, whichever is earlier. In the event any substantial part thereof or
of Landlord's Building or of the structure of which Landlord's Building is a
part is so acquired or condemned as to render the Demised Premises untenantable
or in the event that a part of Landlord's Building, other than the Demised
Premises, shall be so condemned or taken and if in the opinion of the Landlord,
the Building should be restored in such ways to alter the Demised Premises
materially, the Landlord may terminate this Lease and the term and the estate
hereby granted by notifying the tenant in writing of such termination and this
Lease and the term and estate hereby granted shall expire on the date specified
in the notice of termination, not less than thirty (30) days after the giving of
such notice, as fully and completely as if such date were the date hereinbefore
set forth for the expiration of the term of this Lease, and the rent hereunder
shall be apportioned as of said date. Tenant shall have no claim against
Landlord for the value of any unexpired term of said Lease, nor a claim to any
part of an award in such proceeding and rent shall be adjusted and paid to the
date of such termination. Nothing herein contained shall be deemed to affect or
be in derogation of any right or rights of Tenant against the condemning
authority to claim and recover damages, if any, to or for the taking of its
movable fixtures and equipment or expenses or removal or relocation resulting
from any such condemnation or acquisition.
ARTICLE XIII
Assignment and Subletting
13.1 Tenant, by itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not, during the Original Term or during the renewal
Term, assign, mortgage or encumber this Lease, nor sublet, or suffer or permit
the Demised Premises or any part thereof to be used by others, without the prior
written consent of the Landlord in each instance, which consent shall not be
unreasonably withheld. Except as herein provided, if this Lease be assigned, or
if the Demised Premises or any part thereof be sublet or occupied by any party
other than Tenant, Landlord may, at its option, terminate this Lease, or may, at
its option after default by Tenant, collect rent from the assignee, subtenant or
occupants of Tenant, and apply the net amount collected to the rent herein
reserved, but no such assignment, subletting, occupancy or collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee, subtenant
or occupant's tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. In the event Tenant
shall at any time desire to have Landlord sublet the Premises for Tenant's
account, Landlord or Landlord's agents are authorized to receive keys for such
purposes without releasing Tenant from any of the obligations under this Lease
The consent by Landlord to an assignment or subletting shall not in any way be
construed to relieve Tenant from obtaining the express consent in writing of
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<PAGE> 11
Landlord to any further assignment or subletting. Each permitted assignee or
transferee shall assume and be deemed to have assumed this Lease and shall be
liable for the payment of the rent and additional rent and for the due
performance of all of the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the term of this Lease. No
assignment shall be binding on Landlord unless such assignee or tenant shall
deliver to Landlord a duplicate original of the instrument of assignment, in
form reasonable satisfactory to Landlord, containing a covenant of assumption by
he assignee of all of the obligations aforesaid and shall obtain from Landlord
the aforesaid written consent, prior thereto.
Notwithstanding anything contained herein to the contrary, Tenant shall
continue to remain primarily liable to Landlord under all of the terms and
conditions of this Lease, even upon assignment of this lease, and assumption by
a third party.
ARTICLE XIV
Surrender
14.1 Upon the termination of the Term or prior expiration of this Lease,
Tenant shall peaceably and quietly quit and surrender to the Landlord the
Premises, broom clean, in as good condition as they were on the Commencement
Date ordinary wear and tear, repairs and replacements by Landlord, loss by fire,
casualty and other causes beyond Tenant's control and alterations, additions and
improvements permitted hereunder, excepted. Tenant's obligation to observe or
perform this covenant shall survive the Termination Date or prior expiration of
the Term. If the Termination Date falls on a Sunday or a legal holiday, this
Lease shall expire at 12:00 noon on the business day first preceding said date.
ARTICLE XV
Holding Over
15.1 If Tenant holds possession of the Premises beyond the Termination
Date or prior expiration of the Term, Tenant shall become a tenant from
month-to-month at DOUBLE the Basic Rent and Additional Rent payable hereunder
and upon all other terms and conditions of this Lease, and shall continue to be
such month-to-month tenant until such tenancy shall be terminated by Landlord
and such possession shall cease. Nothing contained in this Lease shall be
construed as a consent by Landlord to the occupancy or possession by Tenant of
the Premises beyond the Termination Date or prior expiration of the Term, and
Landlord, upon said Termination Date or prior expiration of the Term shall be
entitled to the benefit of all legal remedies that now may be in fore or may be
hereafter enacted relating to the speedy repossession of the Premises and to all
damages to which Landlord is entitled.
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ARTICLE XVI
Landlord's Right of Entry
16.1 Landlord and Landlord's agents and representatives shall have the
right to enter into or upon the Premises, or any part thereof, at all reasonable
hours upon one day's oral notice for the following purposes:
(1) examining the Premises;
(2) making such repairs or alterations therein as may be
necessary in Landlord's sole judgment for the safety
and preservation thereof;
(3) erecting, maintaining, repairing or replacing wires,
cables, conduits, vents or plumbing equipment running
in to or through the Premises; or
(4) showing the Premises to prospective new tenants
during the last year of the Term.
16.2 Landlord may enter upon the Premises at any time in case of emergency
without prior notice to Tenant.
16.3 Landlord, in exercising any of its rights under this Article XVI
shall not be deemed guilty of an eviction, partial eviction or disturbance of
Tenant's use or possession of the Premises and shall not be liable to Tenant for
same.
ARTICLE XVII
Default
17.1 Each of the following, whether occurring before or after the
Commencement Date, shall be deemed a substantial and material Default by Tenant
and a breach of this Lease;
(a) the filing of a petition by or against Tenant for
adjudication as a bankrupt, or for reorganization, or for arrangement under any
bankruptcy act or any state or federal insolvency law; if proceeding is not
withdrawn or discharged within 60 days.
(b) the commencement of any action or proceeding for
the dissolution or liquidation of Tenant, whether instituted by or against
Tenant, or for the appointment of a receiver or trustee of the property of
Tenant under any state or federal statute for relief of debtors; if proceeding
is not withdrawn or discharged within 60 days.
(c) the making by Tenant of an assignment for the
benefit of creditors; if proceeding is not withdrawn or discharged within 60
days.
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(d) the suspension of business by Tenant other than in
the ordinary course of business or any act by Tenant amounting to a business
failure;
(e) the filing of a tax lien or a mechanics, lien
against any property of Tenant;
(f) Tenant's causing or permitting the Premises to be
vacant, or abandonment of the Premises by Tenant for a period in excess of ten
(10) days;
(g) failure by Tenant to pay Landlord when due the
Basic Rent, the Additional Rent herein reserved, or any other sum by the time
require by the terms of this Lease;
(h) a failure by Tenant in the performance of any other
material term, covenant, agreement or condition of this lease on the part of
Tenant to be performed;
(i) a material default by Tenant under any other lease
or sublease with Landlord, or other written agreement.
ARTICLE XVIII
Landlord's Rights Upon Tenant's Default
18.1 (a) Upon a Default by Tenant or any subtenant or
assignee, Landlord, upon failure of Tenant to cure a default in the payment of
Basic Rent, Additional Rent or any other sum of money due to Landlord hereunder
within ten (10) days after same was due, without notice thereof from Landlord,
or to cure or diligently commence to cure any other Default within thirty (30)
days after notice thereof from Landlord, (provide same is cured within a
reasonable time thereafter and without any delay) may immediately or at any time
thereafter, without further notice to Tenant (i) enter upon the Premises as
agent for Tenant, by legal entry, without terminating this Lease and do any and
all acts as Landlord may deem necessary, proper or convenient to curing such
Default, for the account of and at the expense of Tenant, and Tenant agrees to
pay Landlord, upon demand, all damages and/or expenses incurred by Landlord in
so doing, or (ii) terminate this Lease and Tenant's right to possession of the
Premises and take possession of the Premises and remove Tenant, and occupant and
any property therefrom, without being guilty of trespass and without
relinquishing any rights of Landlord against Tenant.
(b) Landlord shall be entitled to recover reasonable
damages from Tenant in an amount equal to the amount herein covenanted to be
paid as Basic Rent and Additional Rent, together with: (i) all expenses of any
proceedings (including but not limited to, legal expenses and attorney's fees)
which may be necessary in order for Landlord to recover possession of the
Premises; and (ii) the expenses of re-renting the Premises, including, but not
limited to, any commissions paid to any real estate brokers, advertising
expenses and the costs of such alterations, repairs, replacements and decoration
or re-decoration as Landlord in its sole judgment considers advisable and
necessary for the purpose of re-renting the Premises.
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Landlord shall in no event be liable in any way whatsoever for failure to
collect rent thereof under such re-renting. Landlord shall be under the
obligation to make a reasonable effort to re-rent the Premises which will reduce
the tenants obligation under the lease.
18.2 No act or thing done by Landlord shall be deemed to be an acceptance
of Tenant's surrender of the Premises, unless Landlord should execute a written
agreement of surrender with Tenant. Tenant's liability hereunder shall not be
terminated by the execution of a new lease of the Premises by Landlord. Tenant
agrees to pay to Landlord, upon demand, the amount of damages herein provided
after the amount of such damages for any month shall have been ascertained;
provided, however, that any expenses incurred by Landlord shall be deemed to be
a part of the damages for the month in which they were incurred. Separate
actions maybe maintained each month by Landlord against Tenant to recover the
damages then due, without waiting until the end of the Term to determine the
aggregate amount of such damages or Landlord, at its option, if the Premises
have been re-let for a term extending at least as long as the remainder of the
Term thereof, may hold the Tenant responsible in advance for the entire
deficiency to be realized during the term of the re-letting. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of the eviction of Tenant or tenant being
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Premises by reason of the violation by Tenant of any of the covenants or
conditions of this Lease.
18.3 Landlord shall have the right, as agent for Tenant, to take
possession and dispose of any furniture or fixtures of Tenant found upon the
Premises and dispose after taking possession of same pursuant to this Article
XVIII. Tenant waives any notice of execution or levy in connection therewith.
ARTICLE XIX
Landlord's Remedies Cumulative: Expenses
19.1 All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other right or remedy allowed by law. For
the purposes of any suit brought or based hereon, this Lease shall be construed
to be a divisible contract, to the end that successive actions may be maintained
on this Lease as successive periodic sums mature hereunder.
19.2 Tenant shall pay, upon demand, all of the Landlord's reasonable
costs, charges and expenses, including the fees of counsel, agents and others
retained by Landlord, incurred in enforcing Tenant's obligations hereunder.
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ARTICLE XX
No Waiver
20.1 No waiver by Landlord of any breach by Tenant of any of the terms,
covenants, agreements, or conditions of this Lease shall be deemed to constitute
a waiver of any succeeding breach thereof, or waiver of any of the terms,
covenants, agreements and conditions herein contained.
20.2 No employee of Landlord or of Landlord's agents shall have any
authority to accept the keys of the Premises prior to the Termination date and
the delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as an acceptance of a termination of this lease or an acceptance of a
surrender of the Premises except in accordance with any procedures stated in
Article XVII.
20.3 The receipt by Landlord of the Basic Rent and Additional Rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Basic Rent or a lesser amount of the Additional Rent
then due shall be deemed to be other than on account of the earliest stipulated
amount then due, nor shall any endorsement or statement on any check or any
letter or other instrument accompanying any check or payment as Basic Rent or
Additional Rent or pursue any other ready provided in this Lease.
20.4 The failure of Landlord to enforce any of the Rules or Regulations as
may be set by Landlord from time to time against Tenant or against any other
tenant in the Building shall not be deemed a waiver of any such rule or
regulation.
ARTICLE XXI
Landlord's Reserved Rights
21.1 (a) Landlord reserves the following rights: (i) If
during or prior to the last ninety (90) days of the Term Tenant vacates the
Premises, Landlord shall be permitted to decorate, remodel, repair, alter or
otherwise prepare the Premises for occupancy and, (ii) to have pass keys to the
Premises.
(b) Landlord may enter upon the Premises and may
exercise either of the preceding rights hereby reserved without being deemed to
have caused an eviction or disturbance of Tenant's use and possession of the
Premises and without being liable in any manner to Tenant.
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ARTICLE XXII
Landlord's Liability
22.1 Landlord or its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, rain, snow or leaks from any part of the building or
from the pipes, appliances, plumbing, or the roof, street, subsurface or from
any other place or by dampness or by any other cause of whatsoever nature;
nothing contained herein shall apply to Landlord's wilful misconduct or gross
negligence.
ARTICLE XXIII
Tenant's Liability
23.1 Tenant shall reimburse Landlord for all reasonable expenses, damages
or fines, incurred or suffered by Landlord by reason of any breach, violation or
non-performance by Tenant, its agents, servants, employees, invitees or
licensees of any covenant or provision of this Lease, or by reason of damage to
persons or property caused by moving property of or for Tenant in or out of the
Building, or by the installation or removal of furniture or other property of or
for Tenant by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants, employees, invitees and
licensees in the use or occupancy of the Premises. Any such expense shall be
deemed Additional Rent, due in the next calendar monthly after it is incurred.
ARTICLE XXIV
Tenant's Insurance
24.1 Notwithstanding the agreement in Article 22.1, Tenant covenants to
provide on or before the Commencement Date for the benefit of Landlord and
Tenant a comprehensive policy of liability insurance protecting Landlord and
Tenant against any liability whatsoever occasioned by accident on or about the
Premises or any appurtenances thereto. Such policy is to be written by insurance
companies qualified to do business in the State of New Jersey which shall be
rated grade A or better and with a rating therein of 12 or better and the limits
of liability thereunder shall not be less than the amount of one million
($1,000,000.00) in respect of any one person, in respect of any one accident and
in respect of property damage.
24.2 Prior to the time such insurance is first required by this Article
XXIII to be carried by Tenant, and thereafter, at least thirty (30) days prior
to the expiration of any such policy, Tenant agrees to deliver to Landlord
either a duplicate original of the aforesaid policy or a certificate evidencing
such insurance, provided said certificate contains an endorsement that such
insurance may not be canceled except upon thirty (30) days' notice to Landlord,
together with evidence of payment for the policy.
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24.3 Upon failure at any time on the part of Tenant to procure deliver to
Landlord the policy or certificate of insurance, as hereinabove provided,
stamped "Premium Paid" by the issuing company at least thirty (30) days before
the expiration of the prior insurance policy or certificate, if any, or to pay
the premiums thereof, after 15 days written notice to Tenant demanding same
Landlord shall be at liberty, from time to time, as often as such failure shall
occur, to procure such insurance and to pay the premium thereof, and any sums
paid for insurance by Landlord shall be and become, and are hereby declared, to
be Additional Rent hereunder due immediately for the collection of which
Landlord shall have all the remedies provide for in this Lease or by law for the
collection of rent. Payment by Landlord of such premium or the carrying by
Landlord of any such policy shall not be deemed to waive or release the default
of Tenant with respect thereto. Tenant's failure to provide and keep in force
the aforementioned insurance shall be regarded as a Default hereunder entitling
Landlord to exercise any or all of the remedies as provided in this Lease in the
event of Default.
ARTICLE XXV
Mechanic's Liens
25.1 Any mechanic's liens filed against the Real Property for work claimed
to have been done for, or materials claimed to have been furnished to Tenant,
shall be considered a substantial and material breach of this lease unless
removed or bonded at Tenant's expense within five (5) days after notice of
filing.
ARTICLE XXVI
Quiet Enjoyment
26.1 Landlord covenants and agrees that, upon the performance by Tenant of
all of the covenants, agreements and provisions hereof on Tenant's part to be
kept and performed, Tenant shall have, hold and enjoy the premises, subject and
subordinate to the rights set forth in Article VIII, free from any interference
whatsoever by, from or through the Landlord, provided, however, that no
diminution or abatement of the Basic Rent, Additional Rent or other payment to
Landlord shall be claimed by or allowed to Tenant for inconvenience or
discomfort arising from the making of any repairs or improvements to the
Premises or the Real Property, or for any space taken to comply with any law,
ordinance or order of any Governmental Authority, except as provided for herein.
ARTICLE XXVII
Air and Light
27.1 This lease does not grant any rights or easements to air and light to
tenant.
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ARTICLE XXVIII
Landlord's Services
28.1 Landlord shall furnish to Tenant the electrical services set forth
herein at a cost of .13 per sq. ft. per month, subject to any additional costs
referred to below.
28.2 (a) Electricity for 24 hours per day and air heating, and air
cooling shall be furnished only between the hours of 8:00 a.m. and 9:00 p.m.,
Mondays through Fridays, from 8:00 a.m. to 6:00 p.m. on Saturdays and Sundays,
Building Holidays excluded, and then only when weather conditions in the
opinion of Landlord, require. Landlord shall use its best efforts to maintain
the temperature between 68 degrees and 72 degrees Fahrenheit during normal
business hours.
(b) If Tenant shall request the use of air cooling (during
the periods when such is available), ventilating, heat and/or electricity at
any times other than the hours in this Lease provided for such service,
Landlord shall furnish such to Tenant provided (i) that Tenant pays to
Landlord, as additional rent, a special overtime charge of $25.00 per hour;
(ii) that Tenant's request shall be received by Landlord by 12 noon of the day
on which after-hours service is required (and by 12 noon of the day preceding
any requested before hours service).
28.3 (a) Throughout the Term, Landlord agrees to distribute
electrical energy to the Premises (not exceeding the present electrical
capacity at the Premises and the Buildings upon the following terms and
conditions: (i) Landlord shall not be liable in any way to Tenant for any loss,
damage or defect or change in the quantity or charger of electricity furnished
to the Premises or due to any cessation, diminution or interruption of the
supply thereof; (ii) Tenant shall be responsible for replacing all light bulbs,
fluorescent lamps, non-Building standard lamps and bulbs, and all ballasts used
by Tenant in the Premises, except that the Landlord shall supply the above at
the beginning of this lease.
(b) Tenant covenants that its use of electricity in the
Premises shall be limited to and for the operation of (1) the building standard
lighting, and (2) electric typewriters, calculators, copying machines and other
small office machines, AV equipment, computers, and small kitchen items.
(c) Tenant shall make no alteration to the existing
electrical equipment or connect any fixtures, appliances or equipment in
addition to the equipment permitted in Article 27.3 (b) above without the prior
written consent of Landlord in each instance. Should Landlord grant such
consent, all additional risers or other equipment required thereof shall be
provided by Landlord and the cost hereof shall be paid by Tenant upon Landlord's
demand. As a condition to granting such consent, Landlord shall require an
increase in the Additional Rent by an amount which will reflect the cost of the
additional equipment and service to be furnished by Landlord. If Landlord and
Tenant agree to such increase the Additional Rent increase shall be determined
by an independent electrical engineer, to be selected by Landlord
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and whose services shall be paid for by Tenant. All consents and permits are a
condition of this lease.
(d) Landlord shall not be liable in the event of any
interruption in the supply of electricity, and Tenant agrees that such supply
may be interrupted for inspection, repairs, replacement and in emergencies.
28.4 The failure of Landlord to furnish any service hereunder shall not be
construed as a constructive eviction of Tenant and shall not excuse Tenant from
failing to perform any of its obligations hereunder and shall not give Tenant
any claim against Landlord for damages for failure to furnish such service.
ARTICLE XXIX
Personal Property Taxes
29.1 Tenant agrees to pay all taxes imposed on the personal property of
Tenant, the conduct of its business and its use and occupancy of the Premises.
ARTICLE XXX
Security Deposit
30.1 Simultaneously with the execution hereof, Tenant has deposited with
Landlord the sum of $3,944.44. On the later of September 1, 1992 or Landlord's
obtaining the Certificate of Occupancy for the demised premises, Tenant shall
deposit an additional $3,944.44 with the Landlord. Thirty days after the later
of September 1, 1992 or Landlord's obtaining the Certificate of Occupancy,
Tenant shall deposit the sum of $3,944.44, thereby bringing Tenant's security
deposit to $11,833.33.
ARTICLE XXXI
Use of Security Deposit
31.1 In the event of a Default by Tenant in respect of any of the terms,
covenants or conditions of this Lease Landlord may use, apply or retain the
whole or any part of the Security Deposit to the extent required for the payment
of any Basic Rent, Additional Rent or any other sum as to which Tenant is in
Default or for any sum which Landlord may expend or may be required to expend by
reason of Tenant's Default in respect of any of the terms, covenants or
conditions of this Lease, including but not limited to, any damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. In the event that Tenants shall fully and faithfully comply with all
of the terms, covenants and conditions of this Lease, the Security Deposit shall
be returned to Tenant after the Termination Date and after delivery of
possession of the entire Premises to Landlord.
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31.2 In the event of a sale of the Real Property or a leasing thereof,
Landlord shall have the right to transfer the Security Deposit to the vendee or
Lessee, as the case 'may be, and Landlord shall thereupon be released by Tenant
from all liability for the return of such Security Deposit; and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the Security Deposit to a new landlord. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the Security Deposit and
that neither the Landlord nor its successors or assigns shall be bound by any
such assignment, encumbrance, attempted assignment or attempted encumbrance.
ARTICLE XXXII
Definition of Landlord
32.1 The term "Landlord" as used in this Lease means only the owner for
the time being of the Real Property and/or Building or the owner of a lease of
the Real Property. In the event of any transfer of title to or lease of the Real
Property, the Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder and this Lease shall be deemed
and construed as a covenant running with the land without further agreement
between the parties or their successors in interest.
32.2 Landlord shall be under no personal liability with respect to any of
the provisions of this Lease, and if Landlord is in breach of default with
respect to its obligations or otherwise, Tenant shall look solely to the equity
of Landlord in the Real Property for the satisfaction of Tenant's remedies. It
is expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, and obligations of this Lease shall in no event exceed
the loss of its equity in the Real Property.
ARTICLE XXXIII
Notices
33.1 Notices by either party to the other shall be in writing, postage
paid, deposited in a U.S. mail box in the Continental United States and
addressed to Landlord or Tenant at their respective addresses hereinabove set
forth, or to such other address as either party shall hereafter designate by
notice as aforesaid. All notices shall be by certified mail, return receipt
requested.
ARTICLE XXXIV
Signs
34.1 No sign, advertisement or notice shall be affixed to or placed upon
any part of the Premises by the Tenant, except in such manner and of such size,
design and color as shall be approved in advance in writing by Landlord.
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ARTICLE XXXV
Notice of Defects and Accidents
35.1 Tenant shall give Landlord immediate notice in case of accident on
the Premises or involving Tenant, its servants, agents, employees, invitees or
licensees in the Building or of any defects in the Building.
ARTICLE XXXVI
Rules and Regulations
36.1 Tenant, on behalf of itself and its employees, agents, servants,
invitees and licensees, agrees to comply with the Rules and Regulations with
respect to the Real Property. Landlord shall have the right to make reasonable
amendments thereto from time to time for the safety, care and cleanliness of the
Real Property and Building, the preservation of good order therein an the
general convenience of all the tenants and Tenant agrees to comply with such
amended Rules and Regulations, after twenty (20) days' written notice thereof
from Landlord. All such amendments shall apply to all tenants in the building,
and will not materially interfere with the use and enjoyment of the Premises or
the parking lot by Tenant.
ARTICLE XXXVII
Directory
37.1 Landlord shall furnish and service in the lobby of the Building a
directory. Tenant shall be entitled to one listing on such directory. Tenant, at
its expense, may request from Landlord and pay for such reasonable number of
names that Tenant may from time to time request to be listed in such directory,
provided, in Landlord's sole discretion, there is sufficient space on such
directory to accommodate additional listings.
ARTICLE XXXVIII
Americans With Disability Act
38.1 Americans With Disability Act. Notwithstanding anything contained in
this Lease to the contrary, Landlord represents that it is currently making good
faith efforts to bring the common areas of the building in which the demised
premises is located into compliance with the requirements of Title III of the
ADA. Tenant represents and covenants that it shall conduct its occupancy and use
of the Premises in accordance with ADA (including but not limited to, modifying
its policies, practices, and procedures, and providing auxiliary aids and
services to disables persons). If the Lease provides that the Tenant is to
complete certain alterations and improvements to the Premises in conjunction
with Tenant taking occupancy of the Premises, Tenant agrees that all such work
shall comply with the ADA. Furthermore, Tenant covenants and agrees that any and
all future alterations or improvements made by Tenant to the Premises shall
comply with the ADA.
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ARTICLE XXXIX
Miscellaneous
39.1 Entire Agreement. This Lease contains the entire agreement between
the parties, and any attempt hereafter made to change, modify, discharge or
effect an abandonment of it in whole or in part shall be void and ineffective
unless in writing and signed by the party against whom enforcement of the
change, modification, discharge or abandonment is sought.
39.2 Jury Trial Waiver. Landlord and Tenant do hereby waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matter whatsoever arising out of or in
connection with this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the premises, and/or any claim, injury or damage, or any
emergency or statutory remedy.
39.3 Force Majeure. If, by reason of strike, labor troubles or other
causes beyond Landlord's control, including, but not limited to, governmental
preemption in connection with a national emergency or any rule, order or
regulation of any Governmental Authority, or conditions of supply and demand
which are affected by war or other emergency, Landlord shall be unable to
fulfill its obligations under this Lease or shall be unable to supply any
service which Landlord is obligated to supply, this Lease and Tenant's
obligation to pay Basic Rent and Additional Rent hereunder shall in no way be
affected, impaired or excused.
39.4 Broker. Tenant represent that it has not dealt with any real estate
broker in connection with this Lease other than Eric Bramm & Co. and Heron
Properties Realty, Ltd. Tenant indemnifies and holds Landlord harmless from any
and all claims, liabilities, costs or damages either may incur as a result of a
breach of this representation.
39.5 Separability. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and all other
terms and provisions of this Lease shall be valid and enforced to the fullest
extent permitted by law.
39.6 (a) Interpretation. Whenever in this Lease any words of
obligation or duty are used, such words or expressions shall have the same
force and effect as though made in the form of covenants.
(b) Words of any gender used in this Lease shall be held to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
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(c) All pronouns and any variations thereof shall be deemed
to refer to the neuter, masculine, feminine, singular number shall be held to
include the plural as the identity of the parties requires.
(d) This Lease shall be strictly construed neither against
Landlord nor Tenant. No remedy or election given by any provision in this Lease
shall be deemed exclusive unless so indicated, but each shall, wherever
possible, be cumulative with all other remedies in law or equity as otherwise
specifically provided. Each provision hereof shall be deemed both a covenant
and a condition and shall run with the land.
(e) If, and to the extent that, any of the provisions
of any rider to this Lease conflict or are otherwise consistent with any of the
preceding provisions of this Lease, or of the Rules and Regulations appended to
this Lease, whether or not such inconsistency is expressly noted in the rider,
the provisions of the rider shall prevail, and in case of inconsistency with
said Rules and Regulations, shall be deemed a waiver of such Rules and
Regulations with respect to Tenant to the extent of such inconsistency.
(f) Tenant agrees that all of Tenant's covenants and
agreements herein contained providing for the payment of money and Tenant's
covenant to remove mechanics' liens shall be deemed conditions as well as
covenants, and that if default be made in any such covenants, Landlord shall
have all of the rights provided for herein.
(g) The parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience of reference only, and are
not to be deemed part of or to be used in construing this Lease.
(h) The covenants and agreements herein contained shall be
subject to the provisions of this Lease, bind and inure to the benefit of
Landlord, its successors and assigns, the Tenant, its successors and assigns
except as otherwise provided herein.
(i) This Lease has been executed and delivered in the State
of New Jersey and shall be construed in accordance with the laws of the State
of New Jersey and Landlord and Tenant acknowledge that all of the applicable
statutes of the State of New Jersey are superimposed on the rights, duties and
obligations of Landlord and Tenant hereunder and this Lease shall not otherwise
provide that which said statutes prohibit.
(j) Landlord has made no representations or promises with
respect to the Premises or the Real Property, except as expressly contained
herein. Tenant has inspected the Premises and agrees to take the same in an "as
is" condition, except as otherwise expressly set forth. Landlord shall have no
obligation, except as herein set forth, to do any work in and to the Premises
to render them ready for occupancy and use by Tenant.
(k) Time is of the essence with respect to all dates, notices
and time periods, unless otherwise stated.
39.7 No Recordation. Tenant shall not record this Lease or a memorandum
hereof.
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39.8 Late Charges. If Tenant shall fail to pay with in ten (10) days of
any due date any rent or additional rent payments due hereunder, such unpaid
amounts shall bear interest from the due date thereof to the date of payment at
the rate of 5% per month.
39.9 Approval of Lender. The Tenant agrees to sign a recordable assignment
of this Lease to any future mortgagee of Landlord. The Tenant agrees, upon
request, to furnish said mortgagee with five (5) days written evidence provided
same is established that:
a. The Lease is in full force and effect.
b. The possession of premises is accepted by Tenant.
c. Confirm the commencement of the lease term.
d. It is in occupancy and paying rent on a
current basis, with no rental offsets or claims.
39.10 Parking. The Landlord covenants and agrees with Tenant that it shall
have the right to use 35 parking spaces and the access driveways in common with
other tenants of the Property for use by Tenant and Tenant's employees, servants
or invitees.
39.11 Preparation of Office: Tenant agrees to take space in its "as is"
condition except that the Landlord agrees to do the following work prior to the
Tenant's occupancy at Landlord's cost and expense:
1. Demolish walls in Units A, B, and C as indicated on the
annexed floor plan (Exhibit B). Walls to be demolished are indicated in red on
Exhibit B. Relocate or remove corridor as required.
2. Provide and erect the necessary Linear feet of ceiling
height partition as indicated on plans.
3. Provide and/or relocate (as required) doors and one vinyl
accordion door as indicated on plans.
4. Ceiling tiles to be patched to match as required.
5. Provide and install one dedicated circuit and six power
poles in locations as delineated by Tenant.
6. Paint Tenant's premises (consisting of Units A, B, and C)
in building standard color and paint quality.
7. Install building standard carpeting in Tenant's premises
(consisting of Units A, B, and C). Tenant shall have the decision of color
selections according to building standard color choices.
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8. Install vinyl cove base molding between carpet and walls
along the floor. Install trim molding between walls and ceiling to match walls.
9. Install Mini-blinds on windows throughout the demised
premises.
10. Remediate water leaks in several areas in ceiling/roof.
39.12 Tenant's proportionate share. Tenant's proportionate share is 25%.
39.13 Renewal Option. Provided that Tenant is not in default under any of
the terms hereunder, Tenant shall have the option to renew this lease for one
additional period of five (5) years. All terms and conditions shall remain the
same. However, the base rental shall be 95% of fair market value during the last
six (6) months of the lease term. However in no event shall the rent be less
than the base rent payable during the last year of the original term. Tenant
shall notify Landlord in writing no less than 180 days prior to the expiration
of the term of its intention to exercise said option.
39.14 Right of First Refusal. (a) Provided Tenant shall not be in default
under any of the terms and/or conditions of this Lease, Tenant shall have the
right of first refusal for an additional approximately 3,500 square feet of
office space located directly across the hall from the demised premises as
indicated on the floorplan marked Exhibit "B" (annexed hereto) and hereinafter
called the "Expansion Space". Upon Landlord receiving a written offer to lease
all or any part of the Expansion Space, Landlord shall notify Tenant in writing
of such offer and Tenant shall have five (5) days from the date of such
notification in which to notify Landlord of its decision to lease said Expansion
Space. If Tenant elects to lease the Expansion Space and notifies the Landlord
within the required time period, Tenant shall execute a Lease within fifteen
(15) days of receipt of said lease, upon substantially the same terms and
conditions as in the lease for the Demised Premises except that the base rent
and any additional rent payable shall be equal to the amount offered by the
prospective new tenant, but in no event less than the rent being paid by the
Tenant at the time. If Tenant shall fail to execute the proposed lease within
such fifteen (15) day period or if Tenant shall elect not to exercise its right
of first refusal, or Tenant does not respond to Landlord's notice, then and in
that event it shall be deemed that Tenant waived its right of first refusal and
Landlord shall be free to offer the space.
(b) Notwithstanding anything contained hereabove to the contrary, Tenant
shall have the right at any time during the term hereof to lease said Expansion
Space upon the same terms and conditions as contained in this lease for the
demised premises upon giving landlord written notice at least sixty days in
advance. Should Tenant elect to lease said expansion space, Landlord agrees to
paint and carpet said space with building standard materials and colors. This
right to lease the expansions space shall expire once Landlord has notified
Tenant pursuant to paragraph (a) of Article 39.14 above.
39.15 Full Execution. This Lease shall not be binding upon either party
unless and until fully executed by both Landlord and Tenant.
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ARTICLE XXXX
Definitions
40.1 Building Holidays. Building Holidays shall mean all holidays
including, but not limited to: Washington's Birthday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and the day after, Christmas Day and New Year's
Day, as each of said holidays are celebrated in the State of New Jersey.
40.2 Excusable Delay. Excusable delay shall mean a delay caused by strike,
lockout, act of God, inability to obtain labor or materials, governmental
restrictions, enemy actions, civil commotion, fire, unawardable casualty or any
other cause similar or dissimilar beyond the reasonable control of either
Landlord or Tenant or due to the passing of time while waiting for an adjustment
of insurance proceeds.
40.3 Rental Area of the Premises. Rental area of the Premises shall mean
the sum of (i) the total number of square feet contained in the area shown on
Exhibit 1 computed by measuring from the outside finish of the exterior of the
Building wall(s) to the offside of the corridor walls or permanent partitions in
the Premises from adjoining areas in the Building; and, (ii) Tenant's
proportionate share of the area of the Building used for public corridors,
public toilets, air conditioning rooms, fan rooms, janitor's closets, electrical
closets, telephone closets and overhead shafts.
40.4 Structural repairs. Structural repairs shall mean repairs to the
roof, foundation and permanent exterior walls and support columns of the
building.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the 13th day of
August, 1992.
WITNESS: LANDLORD: UNUM LIFE INSURANCE COMPANY OF AMERICA
By: /s/ James D. Means
----------------------------------------
James D. Means
WITNESS: TENANT: DEZINE ASSOCIATES, INC.
By: /s/ David R. Pfeil
----------------------------------------
David R. Pfeil, President
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CORPORATE TENANT ACKNOWLEDGEMENT
STATE OF NEW JERSEY :
: SS.
COUNTY OF MIDDLESEX :
On this 24th day of July, 1992, before me personally came David R.
Pfeil, to me known, who, being by me duly sworn, did depose and say that he
resides in________________________, City of East Brunswick, State of New Jersey,
that he is the President of____________________________, the corporation
described in and which executed the foregoing lease, as Tenant; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.
Notary Public
PARTNERSHIP TENANT ACKNOWLEDGEMENT
STATE OF :
: SS.
COUNTY OF :
On this ____________ day of ___________________, 19___, before me
personally came ____________________________, to me known and in and who
executed this foregoing Lease, as Tenant, and to me acknowledged that each is a
partner in the firm of ____________________________________ and that they each
executed the same individually and as co-partners in said firm.
Notary Public
STATE OF :
: SS.
COUNTY OF :
On this________________day of ___________________, 19___, before me
personally came _____________________, to me known, and known to me to be the
individual described in and who executed the foregoing Lease, as Tenant, and he
duly acknowledged to me that he executed the same.
Notary Public
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EXHIBIT A
FLOOR PLAN
<PAGE> 29
EXHIBIT B
CLEANING SCHEDULE
I. GENERAL CLEANING
Nightly:
1. All the nightly cleaning services as listed herein are to be
performed (5) nights each week, Monday through Friday, except
on legal holidays.
2. Cartons of refuse in excess of that which can be placed in
wastebaskets will not be removed. Tenants are required to make
arrangements with the building manager for the disposal of
such unusual refuse, for which tenant may incur additional
charges.
3. Sweep and dust mop all uncarpeted floors. Vacuum all rugs
and carpeted areas.
4. Damp clean all glass desk tops.
5. Hand dust all office furniture, paneling and window sills.
6. Empty and wash clean all ashtrays and receptacles.
7. Wash clean all water fountains and coolers, emptying all
wastes.
8. Keep cigarette urns clean.
9. Dust and wipe clean all sand urns.
10. Hand dust al moldings, chair rails, baseboards and trim as
necessary.
11. Spot clean all partitions and doors.
12. Damp dust all telephone equipment whenever necessary.
13. Remove all hand marks from around light switches.
14. On completion of work all slop sinks, locker areas, etc.
15. All lights shall be extinguished, all windows closed, and
all doors shall be locked after cleaning is completed.
<PAGE> 30
II. MAIN LOBBY, ELEVATORS AND CORRIDORS
1. Vacuum entrance and corridors nightly; spot for stains as
necessary.
2. Vacuum elevator floor nightly.
3. Elevator cab to be wiped clean daily and polished as
necessary.
III. CORE LAVATORIES
Nightly:
1. Mop, rinse and dry floors, polish mirrors, wash shelves, clean
enameled surfaces, wash basins, urinals, and bowls, using
scouring powder to remove stains, making certain to clean
under sides of rim on urinals and bowls.
2. Wash both sides of all toilet seats with soap and water.
3. Damp rinse and wash with disinfectant tile walls near urinals.
4. Fill toilet tissue dispensers in appropriate washrooms. Tissue
to be furnished by owner.
5. Wastepaper cans and receptacles are to be emptied and
thoroughly cleaned.
6. Install paper hand towels and liquid hand soap in core
lavatories. Hand towels and liquid soap to be supplied by
owner.
IV. DAY CUSTODIAN WILL (when applicable):
1. Clean and sanitize lavatories as necessary.
2. Empty and clean paper towel and sanitary disposal receptacles,
refill same as necessary.
3. Keep public areas in neat and orderly condition at all times.
4. Custodian will be available for special tasks and will fix
minor problems that arise in the building, such as cleaning up
spillage, changing light tubes, etc.
5. Wash lobby entrance door windows in and out.
6. Keep parking lot area free of papers and general debris.
<PAGE> 31
V. CORE LAVATORIES
Monthly:
1. Wash all partitions, tile walls, and enamel surfaces.
2. Wash down walls in washrooms and stalls from trim to floor.
3. Dust all lighting fixtures.
VI. GLASS CLEANING
1. All windows in premises shall be cleaned inside and out two
(2) times per year.
VII. QUARTERLY SERVICES
1. Dust all pictures, frames, charts, graphs and similar wall
hangings.
2. Dust exterior of light fixture diffuses.
All cleaning to be performed by a company covered by a Janitorial Service Bond.
<PAGE> 32
AMENDMENT TO LEASE
DATED AUGUST 13, 1992
BETWEEN
UNUM LIFE INSURANCE COMPANY OF AMERICA
AS LANDLORD
AND
DEZINE ASSOCIATES, INC.
AS TENANT
WHEREAS, Tenant currently leases 7,100 square feet of office space at
758 Route 18, East Brunswick, New Jersey pursuant to the terms and conditions of
the above mentioned lease, a copy of which is annexed hereto, and,
WHEREAS, Tenant wishes to expand its premises by leasing an additional
894 square feet adjacent to its current offices pursuant to Paragraph 39.14(b)
of its lease, said premises formerly occupied by Quality Technologies;
It is hereby agreed by and between the parties as follows:
1. Landlord hereby leases to Tenant the 894 square feet referenced
above and marked as "Expansion Space" on Exhibit A annexed hereto, at an annual
rental of Eight Thousand Nine Hundred and Forty Dollars ($8,940.00) payable in
equal monthly installments of Seven Hundred and Forty Five Dollars ($745.00).
2. Tenant shall take possession of the premises on February 1,
1994 and rental payments shall commence on February 1, 1994.
3. Tenant has examined the "Expansion Space" and agrees to lease
the premises in its "as is" condition except that the Landlord agrees to perform
the following work prior to the Tenant's occupancy:
a. Landlord shall provide premises as delineated on
attached sketch. (See area marked as "A" on the annexed Exhibit A).
b. Premises to be painted in building standard color and
paint quality.
c. Building standard carpet shall be installed in Tenant's
premises.
4. Landlord hereby grants Tenant permission to make the following
alterations to the Expansion Space, provided Tenant complies with all of the
terms and conditions relating to Tenant alterations in the current leases:
<PAGE> 33
Page 2
Amendment to Lease
a. Tenant may install a small bathroom, subject to the
approval of plans and specifications by Landlord, in the premises at any time
after the commencement of lease. (See area marked as "B" on the annexed Exhibit
A).
5. The term of lease for the Expansion Space shall be continuous
with the original premises.
6. Tenant shall, simultaneously herewith, deposit as additional
security with the Landlord, the sum of One Thousand Four Hundred and Ninety
($1,490.00) Dollars thereby bringing Tenant's total security deposit for all of
its leased premises to Thirteen Thousand Three Hundred and Twenty Three Dollars
and Thirty Four Cents ($13,323.34).
7. All other terms and conditions of the original lease shall
remain in full force and effect and shall apply to the Expansion Space as if
such space was part of the original leased premises.
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ James D. Means
------------------------------------
James D. Means
Director of Property Management
DEZINE ASSOCIATES, INC.
By: /s/ David R. Pfeil
------------------------------------
David R. Pfeil
<PAGE> 34
EXHIBIT A
FLOOR PLAN
Description of First Floor Plan
<PAGE> 35
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT ("Second Amendment"), dated
January 31, 1997, is between EAST BRUNSWICK WOODS ASSOCIATES, LIMITED
PARTNERSHIP ("Landlord"), Successor Landlord to Unum Life Insurance Company, and
DEZINE HEALTHCARE SOLUTIONS, INC. ("Tenant"), Successor in interest to Dezine
Associates, Inc.
RECITALS
A. Landlord's predecessor in interest and Tenant have entered into
a certain Lease Agreement, dated August 13, 1992, as amended by a First
Amendment to Lease Agreement, effective February 1, 1994 (the "Lease"), for
approximately 7,994 rentable square feet of space (the "Premises"), located in a
certain building known as The Woods of East Brunswick (the "Building") and
located at 758 Route 18, East Brunswick, New Jersey.
B. Landlord and Tenant wish to amend the Lease to extend the lease
term through September 30, 2000.
C. Landlord and Tenant wish to amend the Lease to include an
expansion into Suite 107 consisting of 546 rentable square feet, ("First
Expansion").
D. Landlord and Tenant also wish to amend the Lease to give Tenant
the right of first offer to lease certain additional suites under terms
hereinafter defined, and to amend other provisions in the Lease as set forth
below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, Landlord and Tenant, intending to be legally bound,
agree as follows:
1. Effective upon the execution hereof, section 2.1 of the Lease shall
be amended to reflect an extended term commencing October 1, 1997 and expiring
on September 30, 2000.
2. Article 3.1 of the Lease shall be amended to reflect the addition of
the following rental schedules which shall apply to the extended term of the
Lease and to the First Expansion consisting of 546 rentable square feet,
respectively:
<TABLE>
<CAPTION>
EXISTING PREMISES LEASE PERIOD ANNUAL RENT MONTHLY RENT
- ------------------------------ ----------- ------------
<S> <C> <C>
October 1, 1997 through September 30, 1998 $113,115.10 $ 9,426.26
October 1, 1998 through September 30, 1999 $117,112.10 $ 9,759.34
October 1, 1999 through September 30, 2000 $121,109.10 $10,092.43
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
FIRST EXPANSION LEASE PERIOD ANNUAL RENT MONTHLY RENT
- ---------------------------- ----------- ------------
<S> <C> <C>
February 1, 1997 through September 30, 1997 $7,644.00 $637.00
October 1, 1997 through September 30, 1998 $7,725.90 $643.83
October 1, 1998 through September 30, 1999 $7,998.90 $666.58
October 1, 1999 through September 30, 2000 $8,271.90 $689.33
</TABLE>
3. Upon execution hereof, Tenant shall be entitled to an allowance of
fifteen thousand dollars ($15,000) to be used exclusively in connection with the
installation of new carpet in the Premises and the modification of the existing
tenant signage at the Building. Any unused portion of this allowance may be
added to a future tenant improvement allowance, as hereinafter described, to be
used in conjunction with the future expansion of Tenant in the Building.
Additionally, Landlord will provide Tenant with a tenant improvement allowance
of $5,460.00 to be used exclusively in connection with the first Expansion
space.
4. Tenant shall be granted the right of first offer for the following
suites in the Building, subject to the expiration of the respective leases as
noted, and with respect to Suite 103, subject to the existing tenant's renewal
option.
- - Suite 109 consisting of 1,685 rentable square feet. Current tenant
lease expires February 28, 1998.
- - Suite 103 consisting of 3,271 rentable square feet. Current tenant
lease expires June 30, 1998.
5. In order for the Tenant to effectively exercise the right of first
offer on either of these suites, Tenant must notify Landlord in writing of its
intent to enter into a lease for the suite four months prior to the expiration
of the applicable lease. It is expressly acknowledged that time is of the
essence with regard to this notification, and should no notice be received by
Landlord in accordance with the Lease, Tenant's right of first offer shall be
null and void as it applies to the relevant suite. Should the Tenant exercise
its right of first offer on any one of the suites listed above, Tenant and
Landlord will amend the Lease to reflect the addition of the suite ("Expansion
Space") to the Premises. Should an existing tenant fail to surrender the
Expansion Space in a timely manner, rent for that suite will be abated
equitably. Landlord will use its best efforts to insure that any holdover
tenants are removed from the Expansion Space as quickly as possible. Rent for
any Expansion Space will be payable in accordance with the following schedule.
Rents are expressed as dollars per square foot per annum and will be payable in
accordance with the provisions of the Lease.
- - Suite 109:
March 1, 1998 through February 28, 1999 = $14.15
March 1, 1999 through February 29, 2000 = $14.65
March 1, 2000 through February 28, 2001 = $15.15
<PAGE> 37
- - Suite 103:
July 1, 1998 through June 30, 1999 = $14.15
July 1, 1999 through June 30, 2000 = $14.65
July 1, 2000 through June 30, 2001 = $15.15
6. Should Tenant exercise any expansion within the building, the term
for all existing space then leased shall be extended automatically to terminate
three years after the effective date of the expansion. Rental rate for the
existing space will continue at $15.15 per rentable square foot after the
previously effective termination date until the revised termination of the
Lease. Landlord will provide Tenant with a tenant improvement allowance of
$10.00 per rentable square foot for the Expansion Space upon the effective date
of the expansion.
7. Landlord will perform the roof repairs as outlined in the attached
exhibit A no later than March 1, 1997, weather conditions permitting. Landlord
will repair in a good and workmanlike fashion the sections of sidewalk
identified in the attached Exhibit B, no later than April 30, 1997, weather
conditions permitting. Landlord will repair or replace the ventilation system in
the women's restroom so that it functions adequately and properly, no later than
thirty days after the execution of this lease.
8. In the event water leaks through the rook into Tenant's space,
adversely effecting Tenant's ability to conduct business, Landlord agrees to
repair and correct these leaks within two business days after notice from
Tenant, weather conditions permitting. In the event Landlord fails to correct
these leaks within two business days after notice from Tenant, weather
conditions permitting, Tenant shall be entitled to a reasonable rental abatement
on the space rendered unusable on a per diem basis, until such time as the leaks
are corrected. Furthermore, should Landlord fail to correct the leaks in
accordance with the above parameters, Tenant may contract directly with a
roofing contractor of Tenant's choice and bill Landlord for reasonable expenses
associated with repairing the leak. Should the leak occur during an evening,
weekend or holiday period, and Landlord can not be notified after a reasonable
attempt, Tenant may contract directly with Landlord's roofing contractor to
repair the leak. Tenant may bill Landlord for reasonable costs associated with
such repairs.
9. Landlord's notice address is hereby amended to read:
East Brunswick Woods Associates, L.P.
BGK Properties, Inc.
330 Garfield Street, #200
Santa Fe, New Mexico 87501
10. All other terms and conditions of the Lease not expressly modified
by this amendment shall remain in full force and effect.
<PAGE> 38
IN WITNESS WHEREOF, the parties to this Second Amendment have executed the same
on the day and year first written above.
LANDLORD:
WITNESSES: EAST BRUNSWICK WOODS
ASSOCIATES, LIMITED PARTNERSHIP
By: Empire National Corporation,
- -------------------- General Partner
By: /s/ Cherly S. Willoughby
- -------------------- ----------------------------------
Cheryl S. Willoughby
Senior Vice President
TENANT:
WITNESSES: DEZINE HEALTHCARE SOLUTIONS,
INC.
- --------------------
By: /s/ David R. Pfeil
- -------------------- ----------------------------------
Print Name: David R. Pfeil
Its: C.O.D.
STATE OF NEW MEXICO )
)SS:
COUNTY OF SANTA FE )
The foregoing instrument was acknowledged before me this 31st day of
January, 1997, by Cheryl S. Willoughby of Empire National Corporation, General
Partner, on behalf of East Brunswick Woods Associates, Limited Partnership.
- ------------------------------
Notary Public
My commission expires 7/14/99.
STATE OF NEW JERSEY )
)SS:
COUNTY OF MIDDLESEX )
The foregoing instrument was acknowledged before me this 30th day of
January, 1997, by David Pfeil on behalf of the corporation.
- -------------------------
Notary Public
My commission expires
------------
<PAGE> 1
EXHIBIT 10.16
INDENTURE OF LEASE
THIS INDENTURE OF LEASE, made this 1st day of January, 1998,
by and between
S&S REALTY, a Connecticut general partnership with offices located at
4130 Whitney Avenue, Hamden, Connecticut (hereinafter "Landlord"); and
SIMIONE CENTRAL CONSULTING, INC. a Georgia corporation with offices
located at 6600 Powers Ferry Road, Atlanta, Georgia 30339 (hereinafter
"Tenant").
ARTICLE I
DEFINITIONS
1.1 Building shall mean all of the real property, together with all of
the improvements, structures, and the buildings thereon, now or hereafter during
the Term of this Lease, known as 4130 Whitney Avenue, Hamden, Connecticut 06518
and as more particularly described in Schedule 1.1 attached hereto and made a
part hereof.
1.2 Common Areas shall mean all areas and improvements in and around
the Building which Landlord shall make available, for the general use, in
common, by Tenant and other tenants and occupants of the Building, and shall
include but not be limited to the following: hallways, yards, entrances, exits,
stairwells, lavatories, service closets, entrance lobbies, storage areas,
loading docks, and any fixtures or personal property of Landlord in any part
thereof.
1.3 Leased Premises shall mean that portion of the Building identified
in Schedule 1.3, attached hereto and made a part hereof.
1.4 Lease Year shall mean a twelve (12) month period commencing on
January 1, 1998, and terminating on December 31, 1998, and each succeeding a
twelve (12) month period during the Term of this Lease.
1.5 Mortgage shall mean any mortgage, deed to secure debt, trust
indenture, or deed of trust which may now or later encumber or be a lien upon
Landlord's interest in the Leased Premises, or the Building; and any spreading
agreements, renewals, modifications, consolidations, replacements, and
extensions of any instrument heretofore referred.
1.6 Mortgagee shall mean the holder of any Mortgage.
1.7 Operating Expenses shall mean all amounts expended in connection
with the Leased Premises by Landlord or on Landlord's behalf for (i) the
operation, repair, or maintenance of any portion or all of the Leased Premises
or the Common Areas; (ii) cleaning, lighting, striping, and snow removal of any
parking spaces or lots comprising the Common
<PAGE> 2
Area; (iii) premium costs of public liability insurance covering the Building
and the Common Areas; (iv) premium costs for the Broad Form All Risk Insurance
(or its equivalent) cover the Building or the Common Areas (v) actual labor
costs for services required in connection with the operation, maintenance,
repair, or replacement of the Leased Premises or the Common Areas.
1.8 Pro Rata Share shall mean Tenant's proportionate percentage of the
leased space in the Building, which such percentage is equal to Tenant's Total
Rented Square Footage (agreed to be 6,500 square feet) divided by Total Rentable
Square Footage of the Building (agreed to be 9,000 square feet).
1.9 Real Estate Taxes shall mean all current real property taxes
imposed with respect to the Leased Premises by any governmental authority having
jurisdiction thereof, and all impositions and assessments for public
improvements, such as sanitary sewer or public water supply (excluding any
assessment so imposed in connection with the initial construction of the Leased
Premises); provided, however, that if at any time during the Term of this Lease,
the present method of taxation or assessment of real property shall be altered,
changed or modified, in whole or in part, and in addition to or in lieu of such
real property taxes, there shall be imposed upon Landlord or the Leased Premises
by way of assessment or levy or otherwise upon the rents derived from the Leased
Premises, each and every such assessment, levy or change shall be deemed a Real
Estate Tax. Federal income taxes, state income taxes, estate taxes, inheritance
taxes imposed upon Landlord shall not be considered Real Estate Taxes unless
such other taxes are imposed or increased by reason of alteration, change or
modification of the method of taxation or assessment of real property.
1.10 Repair shall have its ordinary meaning, but shall include
replacement whenever reasonably necessary, as determined by Landlord.
1.11 Term of this Lease shall mean a period commencing on January 1,
1998 and terminating on December 31, 2002.
1.12 Utilities shall mean charges for telephones, hot water,
electricity, air conditioning, and heating fuel used or consumed by the Tenant.
1.13 Permitted Uses shall mean an office engaged in General Business
Use and related services. The parties expressly agree that Landlord makes no
representation or warranty that such uses are or will be permitted by the
appropriate zoning regulations of the City of Hamden, either presently or
hereafter. In no event shall this Lease become ineffective or void as a result
of the Tenant's inability to conduct its business as contemplated by the
enforcement of the zoning regulations of the City of Hamden.
1.14 Tenant's Total Rented Square Feet shall mean not less than 6,500
square feet, which number is mutually agreed upon by the parties hereto.
1.15 Minimum Rent shall mean the rent as set forth in Section 2.1
hereof.
-2-
<PAGE> 3
1.16 Additional Rent shall mean all other rent payable as provided
herein.
ARTICLE II
RENT, UTILITIES AND SECURITY DEPOSIT
2.1 During the Term of this Lease, Tenant shall pay Minimum Rent to
Landlord without notice or demand and without setoff or counterclaim the
following sums:
(a) The fixed minimum annual rent during the first year of this
Lease shall be ONE HUNDRED THIRTY THOUSAND AND NO/100
($130,000.00) DOLLARS payable in advance in equal monthly
installments of TEN THOUSAND EIGHT HUNDRED THIRTY THREE AND
33/100 ($10,833.33) DOLLARS on the first day of each month.
(b) The minimum annual rent during years two, three, four and five
of this agreement and each year of any extended term shall be
equal to the minimum rent of the year immediately preceding as
adjusted pursuant to Section 2.2 below.
2.2 The minimum annual rent for years two, three, four, and five of the
initial term and each year of any extended period may, upon thirty (30) days
written notice from Landlord to Tenant, be increased by ninety cents ($.90)
multiplied by the Tenant's Total Rented Square Feet.
2.3 Tenant shall pay monthly throughout the Term of this Lease any and
all charges for all utilities used on consumed in the Leased Premises. In the
event that the charges for any of such utilities are commingled with charges for
utilities servicing other Tenants of the building, or the Common Areas, Landlord
may irrebuttably presume that Tenant's share of such utilities is equal to its
Pro Rata Share. Any such charges for utilities paid by Landlord shall be repaid
by Tenant to Landlord, as Additional Rent, within fifteen (15) days after demand
therefor. Notwithstanding the foregoing, Landlord agrees that it shall pay for
all cold water used or consumed in the Leased Premises.
2.4 In the event that Landlord does not receive any payment or Minimum
Rent or Additional Rent within ten (10) days after the same is due, Tenant shall
pay to Landlord a Late Charge equal to five (5%) percent of each such amount
past due.
ARTICLE III
DEMISE AND QUIET ENJOYMENT
3.1 In consideration of all of the obligations imposed upon Tenant by
the Lease, Landlord demises and leases to Tenant the Leased Premises for the
Term of this Lease.
3.2 Upon payment by Tenant of the rents herein provided, and upon the
observance and performance by Tenant of all of the covenants, terms and
conditions of this Lease, Tenant shall peaceably and quietly hold and enjoy the
Leased Premises for the term hereby demised,
-3-
<PAGE> 4
without hindrance or interruption by Landlord, subject, however, to the terms,
conditions and covenants hereof, and restrictions, easements and other matters
as of the record may appear.
ARTICLE IV
USE AND OPERATIONS OF THE PREMISES
4.1 Tenant shall use the Leased Premise for the sole and exclusive
purpose of the Permitted Uses set forth in Section 1.13 hereof, and for no other
purpose, whatsoever, without the Consent of Landlord.
4.2 Tenant shall not engage in any activity, nor shall keep any article
on the Leased Premises, which may be prohibited by the standard form of fire,
casualty, and public liability insurance, or which may increase the costs
incurred by the Landlord for such policies, if Landlord chooses to acquire such
policies. Any increases above the normal rates for such policies as may be
acquired by Landlord, if any, which result from the activities of Tenant, shall
be paid to Landlord, as Additional Rent, by Tenant, within ten (10) days written
demand by Landlord therefor. Proof of amount of increase and reason of increase
must be provided in writing upon notification of increase.
4.3 Tenant shall not use the Leased Premises for any illegal trade,
manufacture, or other business, or for any illegal purposes whatsoever.
4.4 Tenant shall not use the plumbing facilities of the Leased Premises
or elsewhere in the Building, for any purposes other than those for which they
were constructed. Tenant shall not dispose of any substances in such facilities
which may clog, erode, or damage them.
4.5 Tenant recognizes that the effective and harmonious operation of
the Building shall require the cooperation among all of the Building's
occupants, and as such, Tenant hereby commits itself, its agents, employees,
guests, and invitees to such actions as may be necessary to insure that there
will be no interference with the peace and quiet necessary for other occupants
of the Building, and the faithful observance of such rules and regulations that
Landlord may promulgate pursuant to Article XIV hereof.
4.6 Tenant shall not use the roof or the exterior walls of the Leased
Premises or the Building for any purpose, whatsoever, except for professional
signs, which signs must be approved by the Landlord. Landlord agrees that
approval shall not be unreasonably withheld. All sighs must be in conformance
with the ordinances and regulations of the local authorities. Upon the
termination of the lease, Tenant agrees to remove the signs and restore the
exterior to its prior condition.
4.7 Landlord agrees to provide Tenant with parking spaces to be used in
common with other tenants.
-4-
<PAGE> 5
ARTICLE V
MAINTENANCE AND REPORT OF THE LEASED PREMISES; SURRENDER
5.1 Tenant has examined the Leased Premises and the Common Areas, and
is satisfied with the condition thereof. Tenant acknowledges that Landlord has
made no representations or warranties whatsoever with the condition or fitness
for Tenant's particular purposes of the Leased Premises, the Common Areas, or
the Building except as otherwise set forth herein.
5.2 Landlord may enter the Leased Premises at reasonable times, and
from time to time, to make such inspections, repairs, alterations, or
improvements as Landlord may deem necessary, with the consent of Tenant, without
any liability to Tenant for the interruption of Tenant's business, and without
any obligation for Landlord to make such inspections, repairs, alterations, or
improvements.
5.3 Tenant shall have the right to alter or improve the Leased Premises
or any part of the Building only with the Consent of Landlord.
5.4 In the event that Tenant, its agents, employees, guests, or
invitees cause any damage to the Lease Premises or the Building, whether by
willful act, neglect, or omission, Tenant shall have no right to repair such
damage except with the Consent of Landlord; but Landlord may repair such damage
at Tenant's sole cost and expense. Such repairs as may be made by Landlord shall
be performed without liability to Tenant for any loss or damage that may be
sustained by Tenant's trade fixtures or other property, or any interference or
interruption of Tenant's business by reason thereof. Tenant shall pay to
Landlord all costs incurred by Landlord, as Additional Rent, not later than ten
(10) days after Landlord send to Tenant a bill for such repairs. Any sum for
such repairs not paid by Tenant within such ten (10) day period shall bear
interest at the rate of fifteen (15%) percent per annum.
5.5 At the expiration of the Term of this Lease, Tenant shall surrender
the Leased Premises in the same condition as the Leased Premises were in upon
the commencement hereof broom clean and in good repair, reasonable wear and tear
excepted, and shall surrender all keys for the Leased Premises to the Landlord
at the place then fixed for the payment of rent. Tenant shall have the right to
remove all of its trade fixtures, if any, before surrendering the Leased
Premises, as aforesaid, provided that Tenant shall reimburse Landlord for any
repair or damage occasioned thereby. Tenant's obligation to observe all of its
obligations under this Section shall survive the expiration of the Term of this
Lease. Trade fixtures not removed by Tenant upon the expiration of this Lease
will become the property of the Landlord.
ARTICLE VI
DESTRUCTION OF LEASED PREMISES
6.1 If during the Term of this Lease, the Leased Premises are destroyed
by fire, explosion, the elements, or other casualty, or if the Leased Premises
are partially destroyed so as to render the Leased Premises wholly untenantable
or unfit for occupancy, or should the Leased Premises be so badly injured that
they cannot be repaired within one hundred eighty (180) days
-5-
<PAGE> 6
from the date they sustained such injury, then either party may elect by sending
a written notice to the other to cancel and nullify the term hereby created from
the date of such damage or destruction. Upon such notice, Tenant shall
immediately surrender the Leased Premises and all of the Tenant's interest
therein to the Landlord, and shall pay rent only to the time of such surrender,
upon which event the Landlord may re-enter and repossess the Premises and may
remove all persons and property therefrom. Should the Leased Premises be
rendered untenantable or unfit for occupancy, but yet be repairable within one
hundred eighty (180) days from the occurrence of such injury, the Landlord may
enter and repair the same with reasonable speed, and the rent shall not accrue
after said injury or while the repairs are being made, but shall recommence
after said repairs shall be completed. In the event, however, that the Leased
Premises shall be so slightly injured as not to be rendered untenantable or
unfit for occupancy, then the Landlord agrees to repair the same with reasonable
promptness and in that case the rent accrued and accruing shall not cease or
discontinue at any time. The Tenant shall immediately notify the Landlord in
case of fire or other casualty to the Leased Premises.
6.2 Landlord and Tenant hereby release each other and each other's
partners, officers, directors, employees and agents, from liability or
responsibility for any loss or damage to property covered by valid and
collectible fire insurance with standard extended coverage endorsement. This
release shall apply not only to liability and responsibility of the parties to
each other, but shall also extend to liability and responsibility for anyone
claiming through or under the parties by way of subrogation or otherwise. This
release shall apply even if the fire or other casualty shall have been caused by
the fault or negligence of a party or anyone for whom a party may be
responsible; provided, however, that this release shall apply only with respect
to loss or damage actually recovered from an insurance company. This release
shall not apply to loss or damage of property of a party unless the loss or
damage occurs during the times the fire or extended coverage insurance policies
of a party contain a clause or endorsement to the effect that any release shall
not adversely affect or impair the policies or prejudice the right of the party
to recover thereunder. Landlord and Tenant each agree that any fire and extended
coverage insurance policies covering the Demised Premises or their contents
shall include this clause or endorsement at Tenant's sole cost and expense.
ARTICLE VII
CONDEMNATION
7.1 If the Building, or any significant part thereof affecting Tenant's
use, is taken public or quasi-public authority under any power of eminent domain
or condemnation, this Lease, at the option of the Landlord, shall forthwith
terminate, on the date that title vests in the condemning authority, and all
rents and other costs payable by Tenant to Landlord with respect to the Leased
Premises shall be paid to that date. The election by Landlord to exercise the
option under this Section shall be made, not later than thirty (30) days after
Title vests in the condemning authority, by written notice to Tenant. In the
event that Landlord does not elect to exercise such option, all of the
provisions, terms, conditions, and covenants of this Lease shall remain in full
force and effect.
-6-
<PAGE> 7
7.2 In the event of any condemnation, all proceeds of any award,
judgment, or settlement payable by or to the condemning authority shall be and
remain the sole and exclusive property of Landlord, and Tenant waives any right
to make any claim to such award, judgment or settlement received by Landlord.
Tenant may pursue its own claim against the condemning authority for personal
property, moving expenses and other items permitted by statute to be paid by
Tenant; provided that such pursuit by Tenant does not diminish or reduce any
award, judgment, or settlement payable by Landlord.
ARTICLE VIII
ASSIGNMENT AND SUBLETTING
8.1 Tenant will not assign this Lease in whole or in part, nor sublet
all of any part of the Leased Premises, without the consent of the Landlord in
each instance. The consent by Landlord to any assignment or subletting shall not
constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. This prohibition against assigning any assignment or
subletting shall be construed to include a prohibition against any assignment or
subletting by operation of law. If this Lease is assigned, or if the Leased
Premises or any part thereof by underlet or occupied by any person other than
the Tenant for any amount of rent greater than the amount of rent reserved in
this Lease, Landlord shall be entitled to fifty (50%) percent of such greater
rent as if it were the amount reserved in this Lease. Landlord may collect rent
from the assignee, undertenant or occupant, and apply the net amount collected
to the rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained, without the consent of the Landlord. Any attempted assignment,
subletting, or other transfer by Tenant without the consent of Landlord shall be
void.
8.2 In the event that Landlord consents to any assignment or
subletting, such consent shall not be effective unless and until such assignee
or sublessee delivers to Landlord a written agreement in form and substances
satisfactory to Landlord pursuant to which, such assignee or sublessee assumes
all of the obligations or liabilities of this Lease. Notwithstanding any
assignment or sublease to which Landlord has given its consent, Tenant shall
remain primarily liable on this Lease, and shall not be released from performing
any of the terms, covenants and conditions of this Lease, but Tenant and such
assignee or sublessee shall thereafter be jointly and severally liable for the
full and faithful performance of the obligations of Tenant under this Lease, and
the aforesaid written agreement.
ARTICLE IX
ESTOPPEL CERTIFICATE, SUBORDINATION,
ATTORNMENT AND MORTGAGEE'S RIGHTS
9.1 Tenant agrees that from time to time, and at any time within ten
(10) days after each request by Landlord therefor, it will deliver an Estoppel
Certificate to Landlord, or to Landlord's designees. Estoppel Certificates shall
be in writing, acknowledged, and in proper
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<PAGE> 8
form for recordation. Estoppel Certificates shall be executed by Tenant if
Tenant is an individual proprietorship, by a General Partner of Tenant if Tenant
is a partnership, or by the President or Vice President, duly authorized, if
Tenant is a corporation. Each Estoppel Certificate shall be certified to
Landlord, any Mortgagee, and assignee of any Mortgagee, or any other person
designated by Landlord, and shall contain the following information certified by
the person executing it on behalf of Tenant:
(a) Whether or not Tenant is in possession of the Leased Premises;
(b) Whether or not this Lease is in full force and effect, and the
nature of any modifications, if any, of this Lease;
(c) Whether or not Tenant contends that Landlord is in default
under any provision of this Lease;
(d) The nature of any existing setoffs or defenses against the
enforcement of any right or remedy of Landlord, or any duty or
obligation of Tenant; and
(e) The dates, if any, to which any and all rents or charges
payable by Tenant have been paid in advance.
9.2 This Lease and all of Tenant's rights hereunder are subject to and
subordinate to any and all liens of any present or future Mortgage irrespective
of the time of execution on recordation of such Mortgage. This Section is
self-executing, and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute and deliver
any instrument in recordable form, that Landlord or the holder of any Mortgage
may request, and Tenant hereby constitutes and appoints Landlord as
attorney-in-fact for Tenant to execute any such instrument for or in Tenant's
behalf. Notwithstanding anything else to the contrary in this Section, the
holder of any Mortgage may elect to make this Lease superior to the lien of such
Mortgage or any attempt by the holder of any Mortgage to dispossess the Tenant
must be preceded by written notice to the Tenant of intention to dispossess one
hundred eighty (180) days in advance of the intended date of such dispossession.
9.3 In the event that any Mortgage is foreclosed, or if the Leased
Premises or Building is sold pursuant to a foreclosure, or by reason of any
default under any Mortgage, Tenant shall not disaffirm its obligations under
this Lease, and upon the request of the Mortgagee or purchaser at the
foreclosure, sale, or other conveyance, attorn to the Mortgagee or purchaser,
and execute a new lease setting forth terms and conditions identical to this
Lease, except that the Term of the new lease shall be for the balance of the
Term of this Lease.
9.4 Upon the written notice to Tenant from Landlord or any Mortgagee,
no notice intended for Landlord shall be deemed to have been properly given
unless a copy of such notice is sent simultaneously to such Mortgagee by
certified or registered mail, return receipt requested. If any Mortgagee shall
perform any obligation imposed upon Landlord by this Lease, the performance by
such Mortgagee shall be deemed to have discharged Landlord's obligation to make
such performance for the purposes of this Lease. Notwithstanding the foregoing,
no
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<PAGE> 9
Mortgagee shall have any obligation to Tenant to perform any of Landlord's
obligations hereunder.
ARTICLE X
DEFAULT OF TENANT
10.1 Tenant shall be deemed to have defaulted under this lease upon any
of the following events:
(a) The failure to pay any installment of Minimum Rent,
Additional Rent, or any other sum required to be paid
by Tenant under this Lease for a period of ten (10)
days after such sum is due;
(b) The failure by Tenant to perform, observe, and
discharge any of its other obligations under this
Lease for a period of ten (10) days after written
notice of such failure is made by Landlord to Tenant;
(c) The expiration, lapse, or non-effect for any reason
whatsoever of any insurance policy required of Tenant
under this Lease;
(d) In the event that Tenant becomes bankrupt, insolvent,
files any debtor proceedings, or takes or has taken
against it in any court pursuant to any statute
either of the United States or of any state a
petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver
or trustee of all or a portion of Tenant's property,
and if such proceeding is not terminated within
thirty (30) days after the date of its commencement;
(e) If Tenant makes an assignment for the benefit of
creditors;
(f) If Tenant shall abandon the Leased Premises;
(g) If Tenant's rights under this Lease are assigned by
operation of law; or
(h) If Tenant shall lose its license or other privilege
to conduct its business.
10.2 In the event of any of the defaults specified in Section 10.1,
Landlord may give to Tenant a notice of intention to cancel this Lease at the
expiration of five (5) days from the date of service of such Notice, and upon
the expiration of such five (5) day period, the Term of this Lease shall expire,
and all of the right, title and interest of Tenant under this Lease shall
terminate. Thereafter, Tenant shall quit and surrender the Leased Premises to
Landlord; provided, however, that Tenant's liability under all of the provisions
of this Lease, including Tenant's obligation to pay Minimum Rent, Additional
Rent, and such other sums as may be due and payable hereunder, shall continue
notwithstanding any expiration and surrender, and notwithstanding any re-entry,
repossession, or dispossession by Landlord under Section 10.3, hereinafter.
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<PAGE> 10
10.3 Upon the expiration of the Term of this Lease, or the termination
of this Lease by Landlord pursuant to Section 10.2, hereinbefore, Landlord, its
agents and employees, may immediately or at any time thereafter re-enter the
Leased Premises and remove Tenant, its agents, subtenants, licensees,
concessionaires, and invitees, and any of its or their property from the Leased
Premises. Re-entry and removal may be effectuated by any suitable action or
proceeding at law or equity, by force, or otherwise. Landlord shall not be
liable in any way for any action it may take pursuant to this Section. Tenant's
liability to Landlord under the Terms of this Lease shall survive Landlord's
re-entry, the institution of summary process proceedings, or the issuance of any
warrants or executions with respect thereto.
10.4 If this Lease shall be terminated by Landlord pursuant to Section
10.2, hereinbefore, Tenant shall remain liable (in addition to accrued
liabilities) to the extent legally permissible for the Minimum Rent, Additional
Rent, and all other charges Tenant would otherwise have been required to pay to
Landlord until the expiration of the Term of this Lease if such earlier
termination had not occurred. All such amounts shall be deemed liquidated
damages. Minimum Rent, Additional Rent, and other charges Tenant would have been
required to pay to Landlord (hereinafter "Rents") shall be computed as follows:
(a) The Rents shall be added to such expenses as Landlord may
have incurred in re-entering and/or repossessing the Leased Premises during any
default by Tenant, painting, altering or dividing the Leased Premises for
prospective tenants, combining the Leased Premises with any adjacent space for
any new or prospective tenant, putting the Leased Premises in proper repair, the
expenses of reletting the Leased Premises, including attorney's fees, brokerage
fees, disbursements to marshals, etc., and any other expenses which Landlord may
incur during the occupance of any new Tenant. From all of the foregoing sums
shall be subtracted any and all proceeds Landlord may collect, if any, in
reletting the Leased Premises. At the end of each month, Tenant shall pay the
Rents set forth for that month at the address the rent was otherwise payable.
Any suit brought by Landlord to enforce collection of this provision for any one
month shall not prejudice Landlord's right to enforce collection for any
subsequent month.
10.5 Landlord may relet all or any part of the Leased premises for all
or any part of the unexpired portion of the Term of this Lease or for any longer
period. Landlord may accept any rental then obtainable; grant any concessions of
rent; and agree to paint or make any special repairs, alterations, or
decorations for any new tenant as Landlord may deem advisable in the exercise of
its sole and absolute discretion; provided, however, that Landlord shall be
under no obligation to relet or attempt to relet the Leased Premises. Tenant
hereby waives for itself and all persons claiming by, through, or under it, any
right or redemption or restoration of the operation of this Lease under any
present or future law in the event that Tenant shall be dispossessed for any
cause, or Landlord shall obtain possession of the Leased Premises pursuant to
this Article.
10.6 In the event that Landlord shall retain an attorney to enforce the
provisions of this Lease, or if suit shall be brought for recovery of possession
of the Leased Premises, for the recovery of Rent, or any other amount due under
the provisions of this Lease, or because of the breach of any other covenant or
obligation imposed upon Tenant by this Lease, Tenant shall pay
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<PAGE> 11
to Landlord all expenses incurred thereof, including a reasonable attorney's
fee, providing Landlord prevails in such action.
10.7 The rights and remedies of Landlord set forth in this Article
shall be in addition to any other right or remedy Landlord may have, now or
hereafter. All rights and remedies of Landlord shall be cumulative and not
exclusive. Landlord may exercise its rights and remedies at any time, from time
to time, in any order, to any extent, and as often as Landlord deems advisable.
A single or partial exercise of a right or remedy by Landlord shall not preclude
a further exercise thereof, or the exercise of another right or remedy from time
to time. No delay or omission by Landlord in exercising any right or remedy
shall exhaust or impair the same or constitute a waiver or acquiescence by
Landlord of a Default of Tenant. No waiver of a default shall extend to or
affect any other default or impair any right or remedy with respect thereto. No
action or inaction by Landlord shall constitute a waiver of a default by Tenant.
No waiver of a default by Landlord shall be effective unless Landlord provides
Tenant with a Notice of the same.
10.8 Tenant shall pay to Landlord for each day Tenant retains
possession of the Leased Premises, or any part thereof, after the expiration of
the Term of this Lease, Two Hundred (200%) percent of the Rent for the last day
immediately preceding the expiration of the Term of this Lease, together with
any and all damages sustained by Landlord by reason of Tenant's retention and,
if Landlord provides a Notice of Tenant of Landlord's election thereof, such
holding over by Tenant shall constitute an extension of this Lease for a period
from month to month, upon all of the terms and conditions of this Lease. This
provision shall not be deemed to waive Landlord's right of re-entry or any other
right hereunder or at law.
ARTICLE XI
LIMITATIONS OF LIABILITY OF LANDLORD
11.1 Tenant hereby indemnifies and agrees to save harmless Landlord and
any Mortgagee from and against all "claims", (except with respect to Landlord
and those that arise from its willful misconduct) which (i) arise from or are in
connection with the possession, use, occupation, management, repair, maintenance
or control of the Leased Premises or any portion thereof; (ii) arise from or are
in connection with any act or omission of Tenant, its agents, employees, guests,
or invitees; (iii) result from any default, breach, violation or nonperformance
of this Lease or any provision hereof by Tenant; or (iv) result in any injury to
any person or property or loss of life sustained in, on, or about the Leased
Premises. Tenant shall defend any and all claims against Landlord or any
Mortgagee with respect to the foregoing, or in which they may be impleaded, and
shall also pay with respect to the same, and any and all claims, suits,
proceedings, actions, causes of actions, determinations of responsibility,
liability, demands, judgment and executions.
11.2 Upon any transfer of Landlord's interest in the Leased Premises,
the then transferor Landlord shall be relieved of any and all liability to
Tenant under this Lease.
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<PAGE> 12
11.3 In the event that Landlord shall be delayed or hindered or
prevented from the performance of any act required under this Lease to be
performed by Landlord, by reason of strikes, lock-outs, labor troubles,
inability to procure materials, failure of power, restrictive governmental laws
or regulations, riots, insurrection, war or other reason of a like nature not
the fault of the Landlord, then performance of such act shall be excused for the
period of the delay.
ARTICLE XII
INSURANCE
12.1 Tenant will provide and maintain throughout the Term of this Lease
comprehensive public liability insurance covering the Leased Premises, and
protecting Landlord, any Mortgagee, and any other of Landlord's designees. The
insurance required of Tenant pursuant to this Section shall protect Landlord,
the Mortgagee, Landlord's designees, and Tenant against any liability which may
arise from any occurrence on or about the Leased Premises or any appurtenance of
the Leased Premises, or which may arise from any of the claims set forth in
Section 11.1, hereinbefore. The coverage limits of such policy shall be at least
One Million ($1,000,000.00) Dollars with respect to any one person, at least One
Million ($1,000,000.00) Dollars with respect to any one accident, and at least
Five Hundred Thousand ($500,000.00) Dollars with respect to property damage.
Limits may be increased at the reasonable request of Landlord or Mortgagee at
the commencement of the Second Lease Year, and each Lease Year thereafter.
12.2 Tenant will provide and maintain fire insurance with such extended
coverage endorsements as Landlord may from time to time require covering the
contents of the Leased Premises and any alterations, additions and leasehold
provisions made by or for Tenant to the extent of the full replacement costs.
12.3 Tenant will also provide Workers Compensation insurance with
statutory limits covering all of Tenant's employees, and plate glass insurance
covering exterior plate glass in the Leased Premises.
12.4 All policies required of Tenant under this Article shall provide
(and any certificate evidencing the existence of any insurance policies shall
certify) that: unless Landlord shall be given ten (1) days written notice of any
cancellation or failure to renew, or material change to the policies, as the
case may be, the insurance shall not be canceled and shall continue in full
force and effect; and the insurance carrier shall not fail to renew the policies
for any reason; and no material change may be made in any of such policies.
12.5 Tenant shall deliver to Landlord prior to the commencement of the
First Lease Year certificates of insurance policies. In the event that any
policy required of Tenant shall be canceled or if Landlord shall reasonably
believe that such insurance is not in full force and effect, Landlord may, at
Landlord's election, purchase such insurance on Tenant's behalf, and in such
event, Tenant shall pay to Landlord the cost thereof as Additional Rent. Tenant
hereby waives and releases Landlord from any cause of action or right of
recovery which Tenant may have for any loss, injury, claim, or damage, whenever
Tenant has an insurance policy which will
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<PAGE> 13
compensate for the same. Tenant irrevocably waives on behalf of Tenant and on
behalf of Tenant's insurers the right of such insurers to exercise their right
of subrogation whenever such right may be exercised against Landlord.
ARTICLE XIII
LANDLORD'S RIGHT OF ACCESS
13.1 During any reasonable time before or after the Commencement Date
of the Lease, Landlord may enter upon the Leased Premises, any portion thereof,
and any appurtenance thereto, for any of the following purposes: (i) to make
inspections; (ii) to make any repairs, replacements, or alterations which
Landlord may be required to perform under this Lease or which may be required to
perform under this Lease or which may be required to perform under this Lease or
which Landlord may deem desirable; and (iii) to show the Leased Premises to
prospective purchasers or lessees.
13.2 Tenant shall deliver to Landlord on the Commencement Date of this
Lease, keys to the Leased Premises to provide to Landlord access as permitted in
Section 13.1, hereinbefore.
13.3 Tenant shall permit Landlord to erect, use, maintain and repair
pipes, cables, conduits, plumbing, vents and wire, in, to and through the Leased
Premises, as often and to the extent that Landlord may now or hereafter deem to
be appropriate for the operation and maintenance of the Leased Premises and the
Building.
ARTICLE XIV
MISCELLANEOUS
14.1 No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this Lease provided.
14.2 This Lease and any Schedules attached hereto and forming a part
hereof, set forth all of the covenants, promises, agreements, conditions and
understandings between Landlord and Tenant concerning the Leased Premises and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between them other than are herein set forth. No
subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by them.
14.3 Landlord does not, in any way or for any purpose, become a partner
of Tenant in the conduct of its business.
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<PAGE> 14
14.4 If any term, covenant or condition of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable or decreed against public policy, the remainder of this
Lease, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
14.5 The use of the neuter singular pronoun to refer to Landlord or
Tenant shall be deemed a proper reference even though Landlord or Tenant may be
an individual, partnership, a corporation or a group of two or more individuals
or corporations. The necessary grammatical changes required to make the
provisions of this Lease apply in the plural sense where there is more than one
Landlord or Tenant to either corporations, associations, partnerships, or
individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
14.6 The captions, Section numbers and Article numbers appearing in
this Lease are inserted only as a matter of convenience and in no way define,
limit, construe, or describe the scope or intent of such Sections or Articles of
this Lease nor in any way affect this Lease.
14.7 This Lease shall be construed and enforced in accordance with the
laws of the State of Connecticut for agreements wholly made and to be wholly
performed in such state.
14.8 This Lease may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all of the parties have not signed the same counterpart.
14.9 Each of the parties shall execute, acknowledge and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purpose of this Lease.
14.10 All notices, approvals, consents, or other communications
hereunder shall be made in writing and signed by the party giving the same and
shall be deemed to have been given when the same are either deposited in the
United States mail and sent by certified or registered mail, postage prepaid, or
delivered in each case to the parties at the address as such parties may
designate by Notice given in the manner set forth herein. To the Landlord, such
Notices shall have a copy sent to:
CARL M. PORTO, ESQUIRE
PARRETT, PORTO, PARESE & COLWELL, P.C.
357 WHITNEY AVENUE
NEW HAVEN, CONNECTICUT 06511
If to Tenant, such Notice shall be sent to the Leased Premises.
14.11 In the event that the Leased Premises are sold or otherwise
conveyed by Landlord, the selling Landlord shall be entirely relieved of all
obligations and liability under this Lease.
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<PAGE> 15
14.12 Subject to the foregoing, all provisions of this Lease shall bind
and inure to the benefit of and be enforceable by and against, each of the
parties' respective successors and assigns.
ARTICLE XV
RULES AND REGULATIONS
15.1 See Exhibit A
ARTICLE XVI
RECORDATION
16.1 The Landlord and Tenant hereto agree that this Lease will not be
recorded. In the event that Landlord wishes to record a Notice of Lease or
Memorandum of Lease, Landlord will prepare such document for recordation and
Tenant shall execute said document. In no event will the business terms of said
Lease be enumerated in said Notice or Memorandum.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals on the day and date first above written.
LANDLORD
S & S REALTY
By:
- --------------------------- ---------------------------
Richard C. Simione
A General Partner
Duly Authorized
/s/ Laura Ventura
- ---------------------------
Laura Venture
TENANT
SIMIONE CENTRAL CONSULTING,
INC.
By: /s/ Lori N. Siegel
- --------------------------- ---------------------------
Lori N. Siegel
As its Treasurer
Duly Authorized
/s/ Gary Rasmussen
- ---------------------------
Gary Rasmussen
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<PAGE> 16
STATE OF CONNECTICUT )
) ss: New Haven
COUNTY OF NEW HAVEN )
Personally appeared, Richard C. Simione, who acknowledged himself to be
a General Partner of S & S Realty, and that he, as such Partner, being
authorized so to do, executed the foregoing for the purposes therein contained.
------------------------------------------
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<PAGE> 17
STATE OF GEORGIA )
) ss: Atlanta
COUNTY OF FULTON )
Personally appeared, Lori N. Siegel, who acknowledged herself to be
treasurer of Simione Central Consulting, Inc., and that she, as such treasurer,
being authorized so to do, executed the foregoing for the purposed therein
contained.
/s/
--------------------------------------
My Commission Expires February 5, 2001
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<PAGE> 18
EXHIBIT A
RULES AND REGULATIONS
1. Doors to be locked. Before leaving the Premises unattended, Tenant
shall close and securely lock all doors and transoms and shut off all utilities
in the Premises. Any damage resulting from failure to do so shall be paid by
Tenant.
2. Sound Devices. Tenant shall not place any radio or television
antenna on the roof or on or in any part of the inside or outside of the
Building other than the inside of the Premises, or operate or permit to be
operated any musical or sound producing instrument or device inside or outside
the Premises which may be heard outside the Premises, or operate any electrical
device from which may emanate electrical waves which may interfere with or
impair radio or television broadcasting or reception from or in the Building or
elsewhere.
3. Nuisances. Tenant shall not bring or permit to be in the Building
any bicycle or other vehicle, or animal, make or permit any noise, vibration or
odor to emanate from the Premises; or do anything therein tending to create or
maintain a nuisance; or disturb, solicit or canvass any occupant of the
Building, or do any act tending to injure the reputation of the Building.
4. Cleanliness and Obstruction of Public Areas. Tenant shall not place
anything or allow anything to be placed near the glass of any door, partition,
or window which may be unsightly from outside the Premises; or take or permit to
be taken in or out of other entrances of the Building, any item normally taken
in or out through the trucking concourse or service doors; or, whether
temporarily, accidentally, or otherwise, allow anything to remain, in, place or
store anything in, or obstruct in any way, any passageway, exit, stairway,
shipping platform, or truck concourse, if any. Tenant shall lend its full
cooperation to keep such areas free from all obstruction and in clean and
sightly condition.
5. Overload Any Floor. Tenant shall not overload any floors.
6. Defacing Premises. Tenant shall not do any painting or decorating in
the Premises, or mark, paint, cut or drill into, drive nails or screws into, or
in any way deface any part of the Premises or the Building, outside or inside,
without the prior written consent of Landlord. (If Tenant desires signal,
communication, alarm or other utility or service connections installed or
changed, the same shall be made by and at the Expense of Tenant, with the
approval of and under direction of Landlord).
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<PAGE> 1
EXHIBIT 10.17
RESURGENS PLAZA SOUTH ASSOCIATES, L.P.
AND
SIMIONE CENTRAL, INC.
LEASE AT
POWERS FERRY LANDING WEST
Table of Contents
<TABLE>
<S> <C> <C>
1. PREMISES...........................................................................................1
2. TERM...............................................................................................1
3. RENTAL.............................................................................................1
4. USE................................................................................................3
5. INSURANCE..........................................................................................3
6. TENANT'S ACCEPTANCE................................................................................6
7. REPAIRS............................................................................................6
8. NOTICE OF DAMAGE...................................................................................6
9. INSPECTIONS........................................................................................7
10. COMMON AREAS.......................................................................................7
11. DEFAULT............................................................................................7
12. REMEDIES...........................................................................................8
13. LIABILITY.........................................................................................10
14. NO ESTATE.........................................................................................10
15. SERVICES..........................................................................................10
16. ASSIGNMENT AND SUBLETTING.........................................................................12
17. CONDEMNATION AND EMINENT DOMAIN...................................................................12
18. ALTERATIONS AND IMPROVEMENTS......................................................................13
19. ATTORNEY'S FEES...................................................................................14
20. ENTIRE AGREEMENT..................................................................................14
21. TIME OF ESSENCE...................................................................................14
22. RULES AND REGULATIONS.............................................................................14
23. SURRENDER OF PREMISES.............................................................................15
24. NOTICES...........................................................................................15
25. BROKER............................................................................................16
26. AFFIRMATIVE WAIVERS...............................................................................16
27. TERMS.............................................................................................17
28. CONTROLLING LAW AND SEVERABILITY..................................................................17
29. SUBMISSION OF LEASE...............................................................................17
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
30. SPECIAL STIPULATIONS..............................................................................17
31. SUBORDINATION AND ATTORNMENT......................................................................18
32. ESTOPPEL CERTIFICATE AND FINANCIAL INFORMATION....................................................18
33. PARKING...........................................................................................19
</TABLE>
EXHIBIT A - FLOOR PLANS
EXHIBIT B - RULES AND REGULATIONS
EXHIBIT C - SPECIAL STIPULATIONS
EXHIBIT D - JANITORIAL SPECIFICATIONS
EXHIBIT E - NON-DISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT F - CERTIFICATE OF ESTOPPEL
ii
<PAGE> 3
POWERS FERRY LANDING WEST
LEASE
THIS OFFICE LEASE (this "Lease"), made this 18th day of December, 1996,
by and between, RESURGENS PLAZA SOUTH ASSOCIATES, L.P., a Georgia limited
partnership ("Landlord") and SIMIONE CENTRAL, INC., a Georgia corporation, whose
principal place of business is 6600 Powers Ferry Road, Suite 300, Atlanta,
Georgia 30339, ("Tenant").
1. PREMISES: Landlord, for and in consideration of the rents,
covenants, agreements and stipulations herein contained to be paid, kept and
performed by Tenant, has leased and rented, and by these presents does lease and
rent, unto Tenant and Tenant hereby leases, upon the terms and conditions set
forth herein, the Premises (also termed the "Leased Premises") located on the
first, second and third floors of that certain office building ("the Building")
situated on that certain tract of land ("the Land") located at 6600 Powers Ferry
Road, Atlanta, Georgia 30339. The Premises are more particularly shown on the
building floor plans annexed hereto as Exhibit "A" by this reference made a part
hereof. The total net rentable area of the Premises is deemed to be 55,553 net
rentable square feet (49,162 usable square feet). Effective March 1, 2001, the
area of the Premises shall become and be a total of 64,324 net rentable square
feet (56,924 usable square feet).
2. TERM: The term of this lease (the "Term" or "Lease Term") shall be
for a period of sixty (60) months beginning on January 1, 1998 (the
"Commencement Date") and shall end on December 31, 2002 (the "Expiration Date")
unless sooner terminated as hereinafter set forth.
3. RENTAL:
(a) Tenant shall and hereby agrees to pay to Landlord in
advance, without demand, deduction or set-off, annual rental of Eight Hundred
Forty-Nine Thousand Nine Hundred Sixty and 90/100 Dollars ($849,960.90) ("Base
Rental") in
<PAGE> 4
equal monthly installments of Seventy Thousand Eight Hundred Thirty and 00/100
Dollars ($70,830.00) on the first day of each month commencing with the month of
the Commencement Date. Base Rental and "Additional Rental" (as hereinafter
defined), are hereinafter together collectively called "Rental."
(b) Base Rental and "Additional Rental" (as hereinafter
defined) for any other fractional month shall be prorated in the same manner.
Base Rental and Additional Rental are herein collectively called "Rental."
(c) At each anniversary of the Commencement Date, during the
Term of this Lease, the then current Base Rental shall be increased by four
percent (4%). Adjustments in the Base Rental shall be made as of each and every
anniversary of the Commencement Date. Landlord shall, on or before the date when
the increase in Base Rental is due, furnish Tenant a statement reflecting the
adjustment of the Base Rental, which shall then remain in effect until the next
adjustment is made. Within ten (10) days following receipt of Landlord's
statement for each such adjustment, Tenant shall pay such increase in the Base
Rental as has accrued from the anniversary of the Commencement Date during the
period of the preparation of the statement.
(d) Tenant shall pay promptly when due all license, franchise,
and other fees or charges imposed on the business conducted by Tenant at the
Premises and shall pay all taxes levied or assessed upon Tenant's personal
property located at the Premises or upon improvements (whether classified as
personalty or realty) to the Premises made by Tenant or by Landlord at Tenant's
request. (Excluding improvements contemplated in this Lease). If some of the
improvements that Tenant is to pay taxes on are jointly assessed or taxed with
Landlord's improvements on the Building, Landlord shall determine that portion
of the taxes attributable to the improvements for which Tenant is responsible.
Following Landlord's determination, Landlord shall notify Tenant in writing and
Tenant shall pay Tenant shall pay Tenant's portion to Landlord on or before the
date specified in Landlord's notice. Within five (5) days of Landlord's request,
Tenant agrees to deliver to Landlord receipted tax bills showing payment of all
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<PAGE> 5
taxes required to be paid by Tenant hereunder. If Tenant fails to pay, either
thirty (30) days prior to delinquency, or, if applicable, when specified in
Landlord's notice, any taxes described above that are or may become a lien
against the Premises, Landlord shall have the right, but not the obligation, to
pay such taxes, together with associated fines, penalties and interest. Tenant
agrees to immediately reimburse to Landlord, as "Additional Rental", the amount
paid by Landlord, with interest from the date of Landlord's payment of same at a
rate of 18% per annum.
(e) Tenant recognizes that late payment of any Rental will
result in administrative expense to Landlord, the extent of which additional
expense is extremely difficult to ascertain. Tenant therefore agrees that if
Rental or any other sum due hereunder from Tenant to Landlord remains unpaid ten
(10) days after said amount is due, as set forth in Sections 3(c) and Section
3(d) hereof, the amount of such unpaid Rental or other sum shall be increased by
a late charge to be paid Landlord by Tenant in an amount equal to five percent
(5%) of the amount of Base Rental and/or Additional Rental or other sum then due
which shall be added to the Base Rental and/or Additional Rental or other sum
them due and shall be immediately due and payable.
4. USE: The Premises shall be used as general office space in
connection with the operation of the Tenant's business and for no other purpose
whatsoever. Tenant shall, at its own cost and expense, procure and maintain each
and every permit, license, certificate or other authorization required in
connection with the lawful and proper use of the Premises by Tenant.
5. INSURANCE: Tenant covenants and agrees that from and after the date
of delivery of the Premises from Landlord to Tenant, and during the Term of this
Lease or any renewal thereof, Tenant will carry and maintain, at its sole cost
and expense, the following types of insurance, in the amounts specified and in
the form hereinafter provided for:
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<PAGE> 6
(a) Tenant shall keep in full force and effect Comprehensive
General Liability Insurance including Blanket Contractual, Personal Injury,
Broad Form Property Damage, Products Liability, Completed Operations, Fire,
Legal Liability, and Owned, Non-owned and Hired automobile coverages, naming
Landlord and Tenant, and any designee of Landlord, as co-insureds or additional
insureds as the case may be, with minimum limits of $1,000,000 combined single
limit for property damage and bodily injury per occurrence for any and all
claims for injury or damage to persons or property or for the loss of life or of
property occurring upon, in or about the Premises and the public portions of the
Building used by Tenant, its employees, agents, contractors, customers,
customers, and invitees. Tenant shall deposit a policy or policies of such
insurance, or an approved certificate thereof issued by duly authorized agents
of the carriers in question, with Landlord, at least ten (10) days before the
Commencement Date and each renewal of same and at least thirty (30) days prior
to the expiration of any existing policies. All such policies must provide that
Landlord and any additional insureds be provided with thirty (30) days prior
written notice of cancellation, reduction, or material change by the insurer.
(b) Tenant shall keep in full force and effect All Risk
insurance including sprinkler leakage and flood and earthquake (if flood and
earthquake exposure exists) and vandalism and malicious mischief on a 100%
replacement cost basis covering all contents, fixtures and improvements and such
other portions of the Premises which Landlord is not responsible for restoring.
Tenant shall deposit a policy or policies of such insurance, or an approved
certificate thereof with Landlord, providing Landlord with thirty (30) days
notice of cancellation, reduction, or material change by the insurer.
(c) Tenant shall keep in full force and effect Workers'
Compensation insurance as required by law and Employer's Liability coverage for
a minimum of $100,000 per occurrence.
(d) Tenant covenants to comply with any and all rules and
regulations applicable to the Premises issued by the Board of Fire Underwriters,
or by any other body
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<PAGE> 7
hereinafter constituted exercising similar functions, and of insurance companies
writing policies covering the Premises. Tenant shall pay all costs, expenses,
claims, fines, penalties and damages imposed because of failure of Tenant to
comply with this Paragraph 5(d) and agrees to indemnify Landlord from all
liability with reference thereto. Tenant shall, at its own cost and expense,
procure and maintain each and every permit, license, certificate or other
authorization and any renewals, extensions or continuances of the same required
in connection with lawful and proper use of the Premises for Tenant's business.
Tenant agrees to pay any increase in the amount of insurance premiums over and
above the rate now in force that may be caused by Tenant's use or occupancy of
the Premises. This payment shall be in addition to any amounts due Landlord
pursuant to other provisions in this Lease.
(e) Carrying the prescribed insurance will in no way be
construed as either a limitation or satisfaction of any hold harmless or
indemnity agreements contained in this Lease.
(f) Landlord and Tenant shall each have included in all
policies of insurance respectively obtained by them with respect to the Building
and/or the Premises a waiver by the insurer of all right of subrogation against
the other in connection with any loss or damage thereby insured against. So long
as both Landlord's and Tenant's policies then in force include such mutual
waiver of subrogation, Landlord and Tenant, to the fullest extent permitted by
law, each release the other from liability for loss or damage to the extent such
loss or damage is covered by valid and collectible insurance in effect at the
time of such loss or damage. If such waiver of subrogation shall not be
obtainable or shall be obtainable only at a premium over that chargeable without
such waiver, the party seeking such waiver shall notify the other thereof in
writing, and the latter shall have ten (10) days in which either (i) to procure
on behalf of the notifying party insurance with such waiver from a company or
companies reasonably satisfactory to the notifying party or (ii) to agree to pay
such additional premium (in Tenant's case, in the proportion which the rentable
area of the Premises bears to the area covered by the insurance policy of
Landlord in question).
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<PAGE> 8
6. TENANT'S ACCEPTANCE: By taking possession thereof, Tenant shall be
conclusively deemed to have accepted the Premises in their "as is" condition as
of the Commencement Date and as suited for the use intended by Tenant as set
forth in Paragraph 4 hereof.
7. REPAIRS: Tenant, at its expense, shall promptly make such repairs as
shall be required by reason of (a) the installation, use, misuse or operation of
Tenant's property in the Premises, (b) the moving of Tenant's property in or out
of the Building, and (c) the misuse or neglect of Tenant or any of its
subtenants or its or their employees, agents, licensees or contractors. Tenant,
at its expense, shall replace all scratched, damaged or broken doors and glass
in and about the Premises, if such scratching, damage or breakage occurs due to
the willful act or gross negligence of Tenant or its licensee or invitee. Tenant
shall also be responsible for all repairs, maintenance and replacement of all
wall and floor coverings in the Premises, ordinary wear and tear excepted.
Tenant shall also be responsible for repair or replacement of any sanitary or
electrical fixtures and equipment damaged by willful act or gross negligence of
Tenant, its licensee or invitee. Notwithstanding the foregoing, Landlord shall
be responsible for any repairs which are required by reason of the willful or
negligent acts of Landlord, its employees, agents, licensees or contractors. At
the termination, for any reason, of this Lease and in addition to the
obligations imposed by Paragraph 22 hereof, Tenant will surrender the Premises
broom clean, in good condition and repair, ordinary wear and tear excepted, with
all personal property belonging to Tenant removed. See Special Stipulation No.
1.
8. NOTICE OF DAMAGE: Tenant shall give prompt notice to Landlord of (a)
any fire or other casualty in the Premises, (b) any damage to or defect in the
Premises, including the fixtures, equipment and appurtenances thereof, for the
repair of which Landlord might be responsible, or (c) any damage to or defect in
any part of air conditioning, elevator or other systems located in or passing
through the Premises or any part thereof. Landlord shall have no repair
obligations whatsoever absent such notice.
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<PAGE> 9
9. INSPECTIONS: Landlord may enter the Premises at reasonable hours to
exhibit same to prospective purchases or tenants, to inspect the Premises to see
that Tenant is complying with all obligations of Tenant hereunder, and to make
repairs required of Landlord under the terms hereof or repairs or modifications
to any adjoining space. Tenant shall not change the locks on any entrance to the
Premises without Landlord's prior written consent.
10. COMMON AREAS: So long as Tenant is not in default hereunder, Tenant
shall have the nonexclusive right to the use of the Common Areas (as hereinafter
defined) of the Building upon such conditions, rules and regulations as Landlord
shall from time to time to make. As used in this Lease, the term "Common Areas"
shall refer to all of the Building's core corridors, passageways, entrances,
elevators and any space adjacent to the Premises used for shafts, pipes,
conduits, electric or other utilities, the grounds, the parking deck, drive-ways
and loading dock facilities.
11. DEFAULT: The occurrence of any of the following shall constitute an
event of default ("Event of Default"):
(a) Any part or portion of Rental is not received by Landlord
within ten (10) days of the date same is due hereunder;
(b) An attempt by Tenant to assign this Lease or sublet the
Premises in contravention of the provisions hereof;
(c) The Premises are abandoned or vacated (unless as a result
of fire or other casualty) even though Lessee continues to pay Rental;
(d) Tenant, or any guarantor of Tenant's obligations under
this Lease, makes an assignment for the benefit of creditors, or files a
voluntary petition under any bankruptcy or insolvency law;
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<PAGE> 10
(e) An involuntary petition is filed against Tenant or such
guarantor under any bankruptcy or insolvency law, and such petition is not
dismissed within ninety (90) days after the date of such filing;
(f) Failure of Tenant, whether by action or inaction, to
perform any of its obligations under any other Lease from Landlord or any
affiliate thereof with respect to any other space; or
(g) Failure of Tenant, whether by action or inaction, to
perform any of its obligations hereunder (other than as set forth in items (a) -
(f) above) and such failure is not remedied within fifteen (15) days of written
notice from Landlord specifying the nature of such failure.
12. REMEDIES: Upon the occurrence of an Event of Default, Landlord may
invoke any of the following remedies, in addition to, or in lieu of, any and all
remedies available to Landlord under the laws of the State of Georgia;
(a) Landlord may terminate this Lease. Upon termination,
Tenant shall immediately surrender the Premises to Landlord. If tenant fails to
do so, Landlord may, without prejudice to any other remedy Landlord may have
either by law or under this Lease, enter upon the Premises and remove or expel
Tenant and Tenant's personal property with or without force and without being
liable to Tenant in any manner whatsoever for damages therefor. Upon
termination, Tenant shall pay to Landlord (but not on lieu of any other damages
to which Landlord may be entitled), the unamortized cost of all work performed
on the Premises by Landlord in preparing the Premises for occupancy by Tenant.
(b) Landlord may enter the Premises and remove Tenant and its
personal property, by force if necessary, without being liable to Tenant in any
manner whatsoever for such acts, and may relet the Premises as agent of Tenant
and receive such rent therefor. In no event however, shall Landlord be liable in
any way whatsoever for its
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<PAGE> 11
failure or refusal to relet the Premises or any part thereof. Tenant shall
remain liable to Landlord for any deficiency which may arise by reason of such
reletting but shall not be entitled to any surplus so arising, except for any
surplus remaining at the end of the stated Term hereof.
If this Lease is terminated by Landlord, Tenant shall pay to Landlord
as additional damages (and not in lieu of any other damages to which Landlord
may be entitled), the unamortized cost of all work performed on the Premises by
Landlord in preparing the Premises for occupancy by Tenant and at the election
of Landlord:
(i) a sum which represents the then excess, if any, of (A)
the aggregate amount of the Rental due and reserved hereunder from the date of
Tenant's default to the Expiration Date of the fully stated Term hereof over (B)
the aggregate rental value of the Premises for the same period as reduced by the
estimated cost of reletting the Premises, including attorney's fees,
commissions, alterations and repair costs; or
(ii) sums equal to the Rental which would have been payable by
Tenant had this Lease not been so terminated, or had Landlord not so re-entered
the Premises; payable upon the due dates therefor specified herein, provided,
however, that if Landlord shall relet the Premises during said period, Landlord
shall credit Tenant with the net rents received by Landlord from such reletting,
such net rents to be determined by first deducting from the gross rents as and
when received by Landlord from such reletting, the expenses incurred or paid by
Landlord in terminating this Lease and/or in re-entering the Premises and in
securing possession thereof, as well as the expenses of reletting, including,
without limitation, altering and preparing the Premises for new tenants,
brokers' commissions, legal fees, and all other expenses chargeable against the
Premises and the rental therefrom, it being understood that any such reletting
may be for a period shorter or longer than the remaining Term of this Lease; but
in no event shall Tenant be entitled to a credit for any net rents from a
reletting, except to the extent set forth hereinabove.
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<PAGE> 12
If Landlord shall not be permitted to terminate this Lease as
hereinabove provided because of the provisions of Title 11 of the United States
Code relating to Bankruptcy as amended (the "Bankruptcy Code"), then Tenant or
any trustee for Tenant agrees promptly, within no more than fifteen (15) days
upon request by Landlord to the Bankruptcy Court, to assume or reject this
Lease. In such event, Tenant or any trustee of Tenant may assume this Lease only
if it (i) cures or provides adequate assurance that the trustee will promptly
cure any default hereunder, and (ii) compensates or provides adequate assurance
that Tenant will promptly compensate Landlord for any actual pecuniary loss to
Landlord resulting from Tenant's default. See Special Stipulation No. 2.
13. LIABILITY: Neither Landlord nor any of its partners or affiliates,
individual, corporate or other, shall have any personal liability with respect
to its obligations under this Lease. Tenant agrees to look solely to Landlord's
interest in the Building and Land for satisfaction of Tenant's remedies.
14. NO ESTATE: This Lease shall create the relationship of landlord and
tenant between the parties. No estate shall pass out of Landlord, and Tenant
shall have only a usufruct which is not subject to levy and sale.
15. SERVICES: So long as Tenant is not in default hereunder, Landlord
shall provide the following services to the Premises:
(a) Landlord shall provide routine janitorial services to the
Premises;
(b) Landlord shall furnish electrical service for the lighting
of the Premises to building standard light level produced by building standard
fluorescent lighting fixtures and lamps provided by Landlord and for usual and
normal small office machines and equipment utilizing 110 volt current; and
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(c) Landlord shall furnish seasonable air conditioning and
heating from 8:00 a.m. to 6:00 p.m. Monday through Friday and 9:00 a.m. to 1:00
p.m. on Saturdays, national holidays excepted.
Landlord reserves the right to prohibit the installation of additional
lighting fixtures, heat generating equipment, data processing machines, etc.,
unless and until arrangements acceptable to Landlord are made by Tenant to
install supplementary air conditioning equipment on the Premises at Tenant's
cost and expense. The costs of maintaining and repairing such additional
lighting, equipment, machines and supplementary air conditioning equipment shall
be paid by Tenant directly to the applicable servicing company and the costs of
operating such equipment shall be paid as Additional Rental by Tenant with the
monthly installations of Base Rental due hereunder at such reasonable rates as
are established by Landlord.
Should Tenant desire either heating air conditioning at times when such
services are not furnished by Landlord under the terms of this Lease, Landlord
may, but shall not be required to, furnish such services as requested by Tenant,
at Tenant's expense and at such hourly charge as is from time to time determined
by Landlord. Landlord shall not be liable for any damages directly or indirectly
resulting from the interruption or curtailment of services referred to in this
Paragraph 15 nor for the interruption in use of any equipment in connection with
the furnishing of such services. Landlord reserves the right, in addition to
Landlord's other rights and remedies hereunder and at law or in equity, to
discontinue furnishing said services upon five (5) days written notice so long
as Tenant shall be and remain in default hereunder.
16. ASSIGNMENT AND SUBLETTING:
(a) Tenant shall not sublet the Premises or any part thereof
nor assign, mortgage, pledge or encumber this Lease or any interest
therein, without the prior written consent of Landlord, which consent
Landlord may refuse, withhold, delay and/or condition in its sole and
absolute discretion.
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(b) Any transfer of effective control of Tenant or any other
transfer of this Lease from Tenant by merger, consolidation,
liquidation by operation of law or otherwise without the prior written
consent of Landlord shall be deemed a violation of this Paragraph 16.
Tenant shall not permit any business to be operated in or from the
Premises by any concessionaire or licensee without the prior written
consent of Landlord.
(c) Any consent by Landlord to any assignment or subletting,
or to the operation by a concessionaire or licensee, shall not
constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting, or operation by a concessionaire of licensee.
See Special Stipulation No. 4.
17. CONDEMNATION AND EMINENT DOMAIN: In the event the whole or any part
of the Premises shall be taken or condemned by any competent authority for any
public or quasi-public use or purpose, or acquired by private purchase in lieu
of condemnation, this Lease shall terminate from the date when the possession of
the part so taken shall be required for such use or purpose, and the entire
amount of the condemnation award attributable to such taking or condemnation
shall be paid to Landlord. Tenant shall have no right in and to such award or
any portion thereof, such right, if any, being hereby expressly waived by
Tenant.
See Special Stipulation No. 6.
18. ALTERATIONS AND IMPROVEMENTS:
(a) Tenant shall make no alterations, additions or
improvements to any part of the Premises without the prior written consent of
Landlord, which shall not be unreasonably withheld. Landlord may impose those
conditions to its consent that Landlord deems appropriate, including, without
limitation, a requirement that a contractor or workman of Landlord's choice
perform all work required in connection with such alteration, addition, or
improvement and that, prior to the commencement of any work, Tenant pay all
anticipated costs to Landlord for later disbursement to said contractor. All
alterations, additions, or improvements (or any part of them), whether
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temporary or permanent in nature (except only movable office furniture or
equipment) shall, at the option of Landlord, become the property of Landlord
without compensation to Tenant, and be surrendered with the Premises at the
expiration or termination of this Lease. Notwithstanding any of the foregoing,
Landlord may require Tenant to remove such alterations or additions (or any part
of them) at the termination of this Lease. Tenant agrees to indemnify and hold
Landlord and the Premises fee from any liability, claim, lien, encumbrance or
judgement created or suffered in connection with any labor, services, or
materials relating to such alterations, additions or improvements. Tenant shall
require all contractors, subcontractors, materials suppliers rendering services
or materials to the Premises, to furnish to Landlord prior to entering the
Premises a waiver and release of all liens and privileges that may exist or
arise for work done, all labor performed, and all materials furnished under any
contract. In the event that any such waiver and release is not furnished as
required, Landlord shall have the right to order the immediate cessation of any
work being performed in the Premises by such contractors or material suppliers.
Notwithstanding anything hereinabove to the contrary, Tenant shall have no
obligation to remove any of the alterations or improvements constructed as a
part of the initial Tenant improvements and Tenant shall not be required to
remove any future leasehold improvements in the premises unless Landlord
notifies Tenant in writing at the time Landlord approves the plans for such
leasehold improvement, that some or all of such improvements will have to be
removed upon the expiration of this Lease or any renewal thereof.
(b) Tenant shall neither cut, drill into, disfigure, deface or
injure any part of the Building, nor obstruct or permit any obstruction,
alteration, addition, improvement, or installation in the Premises or the
Building without first obtaining the written consent of the Landlord.
19. ATTORNEY'S FEES: Tenant agrees to pay all reasonable attorney's
fees and expenses Landlord incurs in enforcing any of the obligations of Tenant
under this Lease, or in any litigation or negotiation in which Landlord shall,
without its fault,
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become involved through or on account of this Lease. These provisions shall
survive the termination of this Lease.
See Special Stipulation No. 7.
20. ENTIRE AGREEMENT: This Lease contains the entire agreement of the
parties and no representations or agreements, oral or otherwise, between the
parties not embodied herein shall be of any force or effect. No failure of
Landlord to exercise any power given Landlord hereunder, or to insist upon
strict compliance by Tenant of any obligation hereunder, and no custom or
practice of the parties at variance with the terms hereof shall constitute a
waiver of Landlord's right to demand exact compliance with the terms hereof.
21. TIME OF ESSENCE: Time is of the essence of Tenant's obligations
under this Lease.
22. RULES AND REGULATIONS: The Rules and Regulations attached hereto as
Exhibit "B" shall be and are hereby made a part of this Lease. Tenant, its
officers, partners, employees and agents, will perform and abide by said Rules
and Regulations, and any amendments, modifications, additions or substitutions
to said Rules and Regulations as may be made from time to time by Landlord.
23. SURRENDER OF PREMISES: Upon termination of this Lease for any
reason whatsoever, Tenant shall surrender the Premises and keys thereof to
Landlord broom clean and in the same condition as on the Commencement Date,
natural wear and tear only excepted, with all personal property of Tenant
removed therefrom, subject to the provisions of Paragraph 18. If Tenant fails to
remove any personalty from the Premises upon the termination of this Lease,
Landlord may dispose of or store the same at its election without liability to
Tenant for loss thereof and Tenant shall be liable to Landlord for the expense
of such removal, disposal and/or storage. Should Tenant refuse or fail to
surrender the premises upon the expiration of the Lease Term or earlier
termination thereof, Tenant shall be a tenant at sufferance and shall pay to
Landlord on
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demand each month a sum equal to double the Base and Additional Rental due
hereunder during such holdover period; provided, however, that there shall be no
renewal of this Lease by operation of law.
24. NOTICES: Any notice, demand, consent, authorization or other
communication (collectively, a "Notice") which either party is required or may
desire to give to or make upon the other party pursuant to this Lease shall be
effective and valid only if in writing, signed by the party giving such Notice,
and hand-delivered (upon an officer, general partner or officer of a general
partner of the other party if such party is not an individual) to the other
party or sent by registered or certified mail of the United States Postal
Service, return receipt requested, addressed to the other party as follows (or
to such other address or person as either party or person entitled to Notice may
be Notice to the other specify):
To Tenant:
Simione Central, Inc.
6600 Powers Ferry Road
Suite 300
Atlanta, Georgia 30339
To Landlord: With Copy To:
Resurgens Plaza South Associates, L.P. General Electric Capital Corp.
2929 Lenox Road One Georgia Center
Atlanta, Georgia 30324 600 West Peachtree Street, Ste. 900
Atlanta, Georgia 30308
Attn: Mr. Paul F. Martin
Unless otherwise specified, all notices shall be deemed given when
received, but if delivery is not accepted, on the earlier of the date delivery
is refused or the third day after the same is deposited with the United States
Postal Service.
25. BROKER: Tenant represents and warrants that, except for Brantley
Real Estate Company, Inc., no broker, agent, commission salesman or other person
has represented Tenant in the negotiations for the procurement of this Lease and
that, other than the commission payable to the said broker or agent, no
commission, fee or compensation of any kind is due and payable in connection
herewith to any other person or entity acting on Tenant's behalf. Tenant and
Landlord hereby acknowledge that the payment of a commission to the foregoing
broker in connection with the Lease is and
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shall be the sole responsibility of Landlord, and that said commission shall be
paid by Landlord to the said in accordance with the terms of a separate
agreement to be entered into by and between Landlord and Brantley Real Estate
Company, Inc. Tenant and Landlord also acknowledge that American Resurgens
Management Corp. has acted as agent solely for Landlord in this transaction and
is to be compensated solely by Landlord for its services in connection therewith
in accordance with a separate agreement with Landlord. American Resurgens
Management Corp. has not acted as agent for Tenant in connection with this
transaction.
26. AFFIRMATIVE WAIVERS: Landlord and Tenant hereby waive trial by jury
in any action, proceeding or counterclaim brought by either against the other or
any manner whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord and Tenant, Tenant's use occupancy of the Premises,
including any claim of injury or damage, and any emergency and other statutory
remedy with respect thereto. Tenant shall not interpose any counterclaim in any
action or proceeding for nonpayment of Base Rental and/or Additional Rental,
other than a compulsory counterclaim.
27. TERMS: "Landlord" as used in this Lease shall include Landlord, its
representatives, assigns and successors in title to the Premises. "Tenant" shall
include Tenant, its representatives, and if this Lease shall be validly assigned
or sublet, shall also include Tenant's assignees or sub-lessees, as to the
Premises covered by such assignment or sublease. "Landlord" and "Tenant" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties, and any other necessary grammatical changes
required to express singular, plural, male, female or neuter as applicable shall
be assumed in each case to be fully expressed. The use of the terms "hereof",
"hereunder", "hereinabove" and "herein" shall refer to this Lease as a whole,
inclusive of the Exhibits, except when specifically noted otherwise.
28. CONTROLLING LAW AND SEVERABILITY: The laws of the State of Georgia
shall govern the interpretation, validity, performance and enforcement of this
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Lease. Should any term, covenant, or provision of this Lease of the application
thereof be to any extent invalid or unenforceable, the remainder of this Lease
or the application of such provision to circumstances other than those to which
it is held invalid or unenforceable shall not be affected.
29. SUBMISSION OF LEASE: The submission of this Lease to Tenant for
examination does not constitute an offer to lease, and this Lease shall be
effective only upon its complete execution by both Landlord and Tenant.
Execution of this Lease by Tenant and delivery of this Lease to Landlord for its
execution shall constitute an offer to lease to Landlord.
30. SPECIAL STIPULATIONS: Insofar as the Special Stipulations attached
hereto as Exhibit "C: and by this reference made a part hereof conflict with any
of the foregoing provisions of this document (including all Exhibits), the
Special Stipulations shall control.
31. SUBORDINATION AND ATTORNMENT: This Lease, and all rights of Tenant
hereunder, are and shall be subject and subordinate to all leases of the entire
Building and/or the Land now or hereafter existing and to all security deeds
which may now or hereafter affect the Land and/or the Building and to all
renewals, modifications, replacements and extensions of such leases and such
security deeds. While this Paragraph 31 is self-operative and no further
instrument of subordination is necessary, Tenant shall at any time or times,
execute, acknowledge or deliver to Landlord or any successor to the title or
interest of Landlord any and all instruments requested by either of them to
evidence such subordination at the request of Landlord or any successor to the
title or interest of Landlord, and Tenant shall promptly execute, acknowledge
and deliver any and all instruments necessary to evidence such attornment.
Without in any way limiting or varying the foregoing, Landlord, Tenant and the
current Lender as to the Building and Land shall enter into that certain
"Non-Disturbance and Attornment Agreement" in the form and format shown as
Exhibit "E" hereto.
17
<PAGE> 20
32. ESTOPPEL CERTIFICATE AND FINANCIAL INFORMATION: Tenant agrees
within fifteen (15) days following request by Landlord:
(a) to execute and deliver to Landlord any documents
(including an Estoppel Certificate in the form set out as Exhibit "F" to this
Lease) certifying: (i) that this Lease is unmodified and in full force and
effect, or, if modified, stating the nature of such modification(s) and that
this Lease, as so modified, is in full force and effect and the date to which
the rent and other charges are paid in advance, if any; (ii) whether any renewal
or expansion options contained in the Special Stipulations have been exercised;
(iii) the amount of any security deposit held by Landlord; (iv) that there are
not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder (or specifying such defaults if they are claimed); and (v) such other
matters as may be reasonably requested by Landlord evidencing the status of this
Lease;
(b) to execute and deliver to Landlord the Tenant's written
consent to any assignment by Landlord of this Lease, said assignment being
subject to Tenant's rights and obligations under this Lease.
Tenant's failure to deliver a Certificate of Estoppel, the form
substantially as set out at Exhibit "F" hereto, within such time shall be
conclusive upon Tenant that: (i) this Lease is in full force and effect without
modification except as may be represented by Landlord; (ii) to Tenant's
knowledge, there are no uncured defaults in Landlord's performance; and (iii) no
Rental has been paid in advance except as set forth in this Lease.
33. PARKING:
(a) Tenant shall have the non-exclusive privilege, in common
with other occupants of the Building, to park vehicles in the parking area
provided by Landlord for use by Tenant, its employees, agents, invitees and
licensees; subject, however, to the rights given to other tenants of the
Building, and subject to the Rules and Regulations propounded by Landlord from
time to time.
18
<PAGE> 21
(b) Landlord reserves the right, at any time and from time to
time, to close temporarily all or any portions of the parking area when in
Landlord's reasonable judgment any such closing is necessary or desirable (i) to
make repairs or changes or to effect construction, (ii) to prevent the
acquisition of public rights in such area, (iii) to discourage unauthorized
parking, or (iv) to protect or preserve natural persons or property. Landlord
may do such other acts in and to the parking area as in its judgment may be
desirable to improve or maintain same.
(c) Tenant agrees that it, any subtenant or licensee and their
respective officers, employees, contractors and agents will park their
automobiles and other vehicles only where and as permitted by Landlord. Tenant
will, if and when so requested by Landlord, furnish Landlord with the license
numbers of any vehicles of Tenant, any subtenant or licensee and their
respective officers, employees, contractors and agents. Landlord may remove, at
Tenant's expense, any vehicles which are parked or abandoned in violation of the
Rules and Regulations propounded by Landlord from time to time.
IN WITNESS WHEREOF, the parties herein have hereunto set their
respective hands, the day and year first above written.
LANDLORD:
RESURGENS PLAZA SOUTH ASSOCIATES, L.P.,
A Georgia Limited Partnership
By: RESURGENS PLAZA SOUTH, LTD.,
A Georgia Limited Partnership
By: RESURGENS - AHE, L.P.,
A Georgia Limited Partnership,
its sole general partner
WITNESS/ATTEST: By: RESURGENS PLAZA - AHE, INC.,
A Georgia Corporation,
/s/ unintelligible Its sole general partner
- -----------------------
19
<PAGE> 22
By: /s/ James L. McMahan
--------------------------
James L. McMahan
Its: President
(CORPORATE SEAL)
ESTATE EQUITIES, INC.
By: /s/ Paul F. Martin
---------------------------
Paul F. Martin
Authorized Signatory
20
<PAGE> 1
EXHIBIT 21.1
Simione Central Holdings, Inc.
(a Delaware Corporation)
Subsidiaries
InfoMed, Inc., a New Jersey corporation.
Script Systems, Inc., a New Jersey corporation.
SC Holding, Inc., a Georgia corporation
Simione Central National, Inc., a Georgia corporation
Simione Central, Inc., a Georgia corporation
Simione Central Consulting, Inc., a Georgia corporation
Benchmark Healthcare Consulting, Inc., a Georgia corporation
Dezine Healthcare Solutions, L.L.C., a Georgia limited liability company
KSI Acquisition, L.L.C., a Georgia limited liability company
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-97772) pertaining to the 1994 Incentive Stock Option and
Non-Qualified Stock Option Plan of InfoMed Holdings, Inc. of our report dated
February 23, 1998, with respect to the financial statements and schedule of
Simione Central Holdings, Inc. included in the Annual Report (Form 10-K) for
the year ended December 31, 1997.
ERNST & YOUNG LLP
Atlanta, Georgia
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIMIONE CENTRAL HOLDINGS, INC. FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,266,860
<SECURITIES> 0
<RECEIVABLES> 10,940,786
<ALLOWANCES> 1,915,120
<INVENTORY> 0
<CURRENT-ASSETS> 18,449,694
<PP&E> 3,503,483
<DEPRECIATION> 1,137,975
<TOTAL-ASSETS> 28,919,490
<CURRENT-LIABILITIES> 9,430,831
<BONDS> 0
0
0
<COMMON> 8,523
<OTHER-SE> 19,480,136
<TOTAL-LIABILITY-AND-EQUITY> 28,919,490
<SALES> 46,945,270
<TOTAL-REVENUES> 46,945,270
<CGS> 0
<TOTAL-COSTS> 22,715,095
<OTHER-EXPENSES> 29,019,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,508
<INCOME-PRETAX> (4,513,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,513,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,513,669)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIMIONE CENTRAL HOLDINGS, INC. FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,530,966
<SECURITIES> 0
<RECEIVABLES> 10,099,302
<ALLOWANCES> 1,278,312
<INVENTORY> 0
<CURRENT-ASSETS> 29,068,535
<PP&E> 3,021,927
<DEPRECIATION> 1,098,094
<TOTAL-ASSETS> 36,383,153
<CURRENT-LIABILITIES> 9,780,559
<BONDS> 0
0
0
<COMMON> 8,501
<OTHER-SE> 26,302,608
<TOTAL-LIABILITY-AND-EQUITY> 36,383,153
<SALES> 34,776,714
<TOTAL-REVENUES> 34,776,714
<CGS> 16,131,302
<TOTAL-COSTS> 16,131,302
<OTHER-EXPENSES> 16,194,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,702
<INCOME-PRETAX> 2,511,360
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,511,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,511,360
<EPS-PRIMARY> .31
<EPS-DILUTED> .33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIMIONE CENTRAL HOLDINGS, INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,217,254
<SECURITIES> 0
<RECEIVABLES> 8,579,462
<ALLOWANCES> 1,376,895
<INVENTORY> 0
<CURRENT-ASSETS> 10,045,072
<PP&E> 2,662,431
<DEPRECIATION> 930,470
<TOTAL-ASSETS> 17,358,208
<CURRENT-LIABILITIES> 10,116,206
<BONDS> 0
0
0
<COMMON> 6,107
<OTHER-SE> 6,896,325
<TOTAL-LIABILITY-AND-EQUITY> 17,358,208
<SALES> 22,667,507
<TOTAL-REVENUES> 22,667,507
<CGS> 10,989,583
<TOTAL-COSTS> 10,989,583
<OTHER-EXPENSES> 10,358,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,380
<INCOME-PRETAX> 1,219,014
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,219,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,219,014
<EPS-PRIMARY> .20
<EPS-DILUTED> .17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIMIONE CENTRAL HOLDINGS, INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,532,923
<SECURITIES> 0
<RECEIVABLES> 7,957,381
<ALLOWANCES> 1,114,937
<INVENTORY> 0
<CURRENT-ASSETS> 583,636
<PP&E> 1,787,101
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,532,507
<CURRENT-LIABILITIES> 12,756,920
<BONDS> 0
0
0
<COMMON> 11,972
<OTHER-SE> 5,357,401
<TOTAL-LIABILITY-AND-EQUITY> 18,532,507
<SALES> 0
<TOTAL-REVENUES> 11,427,921
<CGS> 0
<TOTAL-COSTS> 5,478,591
<OTHER-EXPENSES> 5,257,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,841
<INCOME-PRETAX> 643,134
<INCOME-TAX> 0
<INCOME-CONTINUING> 643,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 643,134
<EPS-PRIMARY> .11
<EPS-DILUTED> .09
</TABLE>
