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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NUMBER 0-24988
LABORATORY SPECIALISTS OF AMERICA, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
OKLAHOMA 73-145065
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
101 PARK AVENUE, SUITE 810
OKLAHOMA CITY, OKLAHOMA 73102-7202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(405) 232-9800
(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No X .
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes____ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 12, 1996, 3,313,405 shares of issuer's Common Stock, $.001 par
value per share, were outstanding.
Transitional Small Business Disclosure Format (check one); Yes ____ No X
---
Total Sequentially Numbered Pages is 60
--
Index to Exhibits Appears on Sequentially Numbered Page 15
--
1
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LABORATORY SPECIALISTS OF AMERICA, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited)
June 30, 1996, and December 31, 1995.................. 3
Consolidated Statements of Income (Unaudited)
Three and Six Months Ended June 30, 1995 and 1996..... 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1995 and 1996............... 6
Notes to Consolidated Financial Statements (Unaudited).. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 9
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................... 13
ITEM 2. CHANGES IN SECURITIES................................... 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..... 13
ITEM 5. OTHER INFORMATION....................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................ 13
SIGNATURES......................................................... 14
</TABLE>
2
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PART I-FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents.................................. $2,411,051 $ 781,218
Accounts receivable, net of allowances of $91,546
in 1995 and $347,875 in 1996............................. 1,096,477 2,165,345
Income tax refund receivable............................... 131,626 20,922
Inventories................................................ 87,542 137,731
Prepaid expenses and other................................. 115,491 151,257
---------- -----------
Total current assets..................................... 3,842,187 3,256,473
---------- -----------
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $899,559 in 1995 and $1,016,247 in 1996.... 830,660 1,463,856
---------- -----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $69,104 in
1995 and $103,275 in 1996................................ 1,539,045 2,049,082
Customer list, net of accumulated amortization of $77,783
in 1995, and $147,106 in 1996............................ 1,001,707 3,932,384
Deferred costs............................................. 105,437 10,714
---------- -----------
Total other assets....................................... 2,646,189 5,992,180
---------- -----------
Total assets............................................. $7,319,036 $10,712,509
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
3
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LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable.................................................... $ 446,223 $ 837,341
Accrued payroll..................................................... 215,308 338,022
Accrued expenses.................................................... 51,838 409,423
Current portion of long-term debt................................... -- 229,631
---------- -----------
Total current liabilities......................................... 713,369 1,814,417
---------- -----------
LONG-TERM DEBT, net of current portion................................ 353,123 1,195,792
---------- -----------
DEFERRED INCOME TAXES................................................. 40,958 1,055,255
---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 20,000,000 shares authorized,
3,298,405 shares issued and outstanding at 12/31/95 and
3,313,405 shares issued and outstanding a 6/30/96................ 3,298 3,313
Paid in capital in excess of par, common stock...................... 5,341,667 5,366,027
Retained earnings................................................... 866,621 1,277,705
---------- -----------
Total stockholders' equity........................................ 6,211,586 6,647,045
---------- -----------
Total liabilities and stockholders' equity........................ $7,319,036 $10,712,509
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
4
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LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES..................................... $1,799,386 $2,291,171 $3,457,318 $4,239,707
---------- ---------- ---------- ----------
COST OF LABORATORY SERVICES.................. 797,474 1,016,373 1,529,822 1,856,534
---------- ---------- ---------- ----------
Gross profit............................... 1,001,912 1,274,798 1,927,496 2,383,173
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Selling.................................... 165,571 166,227 283,527 314,496
General and administrative................. 593,005 607,082 1,104,044 1,131,605
Depreciation and amortization.............. 55,391 130,108 109,636 221,444
---------- ---------- ---------- ----------
Total operating expenses................. 813,967 903,417 1,497,207 1,667,545
---------- ---------- ---------- ----------
Income from operations................... 187,945 371,381 430,289 715,628
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense........................... (9,361) (18,832) (16,883) (29,325)
Interest income............................ 34,130 9,701 65,931 19,672
Other income............................... 187,509 300 207,509 507
---------- ---------- ---------- ----------
Total other income (expense)............. 212,278 (8,831) 256,557 (9,146)
---------- ---------- ---------- ----------
Income before income taxes............... 400,223 362,550 686,846 706,482
INCOME TAX EXPENSE........................... 172,246 153,713 296,780 295,398
---------- ---------- ---------- ----------
Net income............................... $ 227,977 $ 208,837 $ 390,066 $ 411,084
========== ========== ========== ==========
DIVIDEND ON PREFERRED STOCK.................. 6,288 -- 12,576 --
---------- ---------- ---------- ----------
Net income available to common stockholders.. $ 221,689 $ 208,837 $ 377,490 $ 411, 084
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING...................... 3,298,405 3,326,135 3,298,405 3,318,127
========== ========== ========== ==========
NET INCOME PER COMMON STOCK
AND COMMON STOCK EQUIVALENT.................. $.07 $.06 $.11 $.12
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
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LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 390,066 $ 411,084
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization.................................. 109,636 221,444
Provision for bad debts and other.............................. 18,000 24,000
Impact of changes in assets and liabilities, net of effect of
the NPLI acquisition:
Accounts receivable........................................ (380,345) (457,593)
Inventories................................................ (15,341) 5,604
Income tax receivable...................................... -- 158,982
Prepaid expenses and other................................. (101,289) 100,391
Accounts payable and accrued expenses...................... 126,475 (278,271)
Income taxes payable....................................... 147,054 --
---------- -----------
Net cash provided by operating activities...................... 294,256 185,641
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................... (143,693) (61,533)
Purchase of NPLI Stock, net of cash acquired....................... -- (1,022,597)
Acquisition costs.................................................. (78,525) (120,699)
---------- -----------
Net cash used in investing
activities................................................... (222,218) (1,204,829)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term borrowing................................... -- (545,621)
Dividends paid..................................................... (12,576) --
Payments on long-term debt......................................... (42,263) (65,024)
---------- -----------
Net cash used in financing
activities................................................... (54,839) (610,645)
---------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................................ 17,199 (1,629,833)
---------- -----------
CASH AND CASH EQUIVALENTS, beginning
of period.......................................................... 2,444,442 2,411,051
---------- -----------
CASH AND CASH EQUIVALENTS, end of period............................. $2,461,641 $ 781,218
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for interest........................... $ 8,894 $ 16,170
========== ===========
Cash paid during the period for taxes.............................. $ 46,000 $ 197,949
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
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LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995, AND
JUNE 30, 1996, ARE UNAUDITED.)
1. GENERAL
The consolidated financial statements included in this report have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all adjustments which are,
in the opinion of management, necessary for a fair presentation. These
financial statements have not been audited by an independent accountant. The
consolidated balance sheet at December 31, 1995, has been derived from the
audited balance sheet of the Company.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations for
interim reporting. The Company believes that the disclosures are adequate to
make the information presented not misleading. However, these financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the annual report on Form 10-KSB filed by the
Company with the Securities and Exchange Commission on April 11, 1996. The
financial data for the interim periods presented may not necessarily reflect the
results to be expected for the full year.
2. NPLI ACQUISITION
On January 2, 1996, the Company acquired all of the issued and outstanding
capital stock (the "NPLI Stock") of National Psychopharmacology Laboratory,
Inc., a Tennessee corporation ("NPLI"), and purchased goodwill (the NPLI
Goodwill"), pursuant to a Stock Purchase Agreement dated January 1, 1996 (the
"Purchase Agreement"), and NPLI became a wholly-owned subsidiary of the Company
(the "NPLI Acquisition"). NPLI is engaged in forensic drug testing (urine drug
screening with chain of custody) and clinical testing and analysis.
Pursuant to the Purchase Agreement and in connection with the NPLI Acquisition,
(i) the Company agreed to pay $1,375,000 for the NPLI Stock ( the "NPLI Purchase
Cost") of which $1,075,000 was paid at closing to the shareholders of NPLI (the
"NPLI Shareholders"), and two unsecured promissory notes (the "NPLI Promissory
Notes"), valued at approximately $300,000, were issued and delivered to the NPLI
Shareholders, (ii) the Company agreed to pay $140,000 for the NPLI Goodwill
payable in 24 monthly installments commencing on February 1, 1996, (iii) assumed
net liabilities of NPLI of approximately $1,085,000, and (iv) incurred deferred
income taxes of approximately $1,000,000 as a result of NPLI's tax basis of its
assets being significantly less than the purchase price of the NPLI capital
stock. All of the above resulted in a total purchase price of approximately
$3,600,000, substantially all of which was recorded as intangible assets.
The aggregate principal amount of the NPLI Promissory Notes is subject to
adjustment (increase or decrease) in the event revenues from forensic testing
(employee urine drug screens that have a chain of custody) are greater or less
than a certain level during the 12 months ended on January 2, 1997, determined
in accordance with generally accepted accounting principles.
The forensic portion of NPLI's business was consolidated into LSI's operation
effective February 1996. NPLI's remaining revenues and expenses associated with
the clinical business were deferred for reporting purposes, pending the sale of
NPLI's clinical business. The Company intends to sell NPLI's clinical business
before the end of 1996. A letter of intent was signed in April, however a
definitive agreement was not reached. The Company is currently seeking
additional offers for the sale of the clinical business. Giving effect to the
inclusion of NPLI's revenues and income, consolidated net income, after tax
would have been $427,949 on revenues of $6,318,112, for the period
7
<PAGE>
ended June 30, 1996, resulting in earnings per common share of $.13 for the six
months ended June 30, 1996. The Company will adjust the NPLI Purchase Cost
purchase price allocation based upon amounts received from the expected
disposition of the clinical business.
3. EARNINGS PER COMMON SHARE
Earnings per common share were computed using the weighted average number of
common shares outstanding after adding the dilutive effect of the conversion of
stock options. Outstanding warrants are not included in the weighted average
shares outstanding for any period because their effect on the earnings per share
calculation is antidilutive.
4. GOODWILL AND CUSTOMER LIST
--------------------------
Goodwill and customer lists are being amortized on a straight-line basis over
twenty to forty years and fifteen years, respectively. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill and customer lists may warrant
revision or that the remaining unamortized balance of goodwill or customer lists
may not be recoverable. When factors, such as operating losses, loss of
customers, loss or suspension for an extended period of laboratory
certification, or changes in the drug testing industry, if present, indicate
that goodwill or customer lists should be evaluated for possible impairment, the
Company uses an estimate of the related undiscounted cash flows over the
remaining life of the goodwill or customer lists in measuring whether the
goodwill and the customer lists are recoverable. Although management believes
that goodwill and the customer lists are currently recoverable over the
respective remaining amortization periods, it is possible, due to a change in
circumstances, that the carrying value of goodwill and the customer lists could
become impaired in the future. Such impairment could have a material effect on
the results of operations in a particular reporting period.
5. CONTINGENT LIABILITIES
Incidental to its business, the Company from time to time is sued by individuals
who have tested positive for drugs of abuse or who allege that improper analysis
has been performed, generally arising from Laboratory Specialists, Inc.'s, the
company's wholly owned subsidiary ("LSI"), alleged failure to properly
administer drug urinalysis tests or NPLI's alleged improper analysis. LSI and
NPLI are currently defendants in several such lawsuits. Based upon prior
successful defense of similar-type lawsuits, the Company believes it has valid
defenses to each of such lawsuits, and intends to vigorously defend in such
actions. Although each of LSI and NPLI maintain insurance to protect itself
against such liability, and LSI and NPLI's insurance carriers have assumed the
defense of LSI and NPLI in connection with certain actions, the extent of such
insurance coverage is limited, both in terms of types of risks covered by the
policies and the amount of coverage. In the opinion of the Company's management
and it's legal counsel, these suits and claims should not result in judgments or
settlements which would have a material adverse effect on the Company's results
of operations or financial position. Although, neither LSI nor NPLI has
experienced any material liability related to such claims, there can be no
assurance that LSI or NPLI, and possibly LSAI, will not at some time in the
future experience significant liability in connection with such claims and such
liability may exceed the extent of such insurance coverage, both in terms of
risks covered by the policies and the amount of coverage, which could have a
material adverse effect upon the results of operations and financial condition
of the Company.
8
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6. SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
In conjunction with the acquisition of the NPLI Stock, liabilities were assumed
as follows:
Fair value of assets acquired $ 3,600,000
Cash paid at closing (1,075,000)
---------------
Liabilities and deferred income taxes assumed $ 2,525,000
==============
A capital lease obligation of approximately $650,000 was incurred when LSI
entered into an agreement with a vendor to buy equipment and certain lab
supplies at a fixed price per drug screen performed. The minimum monthly amount
under the agreement is approximately $47,000, with approximately $13,000 per
month allocated to the principal and interest of the capital lease obligation,
and the remaining cost being allocated to the cost of laboratory supplies. The
agreement resulted in LSI recording approximately $650,000 in additional
equipment, with an equal amount of capital lease obligation recorded as long-
term debt obligation payable over five years.
All of the above transactions, except the cash paid at closing in connection
with the purchase of the NPLI Stock and the monthly payment to the vendor, are
non-cash transactions and have been excluded from the accompanying statements of
cash flows.
7. SIGNIFICANT EVENTS
The Company entered into a five year employment agreement with Arthur R.
Peterson, Jr., the President of LSI, which became effective April 15, 1996. The
agreement provides for a base salary of $125,000 per year with a bonus equal to
10% of the pre-tax profits of LSI, up to $50,000 per year. The Company also
amended the employment agreements of Larry Howell and John Simonelli, the
Company's President and CEO, respectively, to extend the term of the
agreements to April 15, 2000, and to increase the annual compensation of each
individual to $112,500.
The Company entered into an office lease for approximately 1,800 square feet in
Oklahoma City. The lease calls for approximate annual payments of $20,000 and
is for a four year term.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
NPLI ACQUISITION. On January 2, 1996, the Company acquired all of the issued
and outstanding capital stock (the "NPLI Stock") of National Psychopharmacology
Laboratory, Inc., a Tennessee corporation ("NPLI"), and purchased goodwill (the
NPLI Goodwill"), pursuant to a Stock Purchase Agreement dated January 1, 1996
(the "Purchase Agreement"), and NPLI became a wholly-owned subsidiary of the
Company (the "NPLI Acquisition"). NPLI is engaged in forensic drug testing
(urine drug screening with chain of custody) and clinical testing and analysis.
Pursuant to the Purchase Agreement and in connection with the NPLI Acquisition,
(i) the Company agreed to pay $1,375,000 for the NPLI Stock ( the "NPLI Stock
Purchase Price") of which $1,075,000 was paid at closing to the shareholders of
NPLI (the "NPLI Shareholders"), and two unsecured promissory notes (the "NPLI
Promissory Notes"), valued at approximately $300,000, were issued and delivered
to the NPLI Shareholders, (ii) the Company agreed to pay $140,000 for the NPLI
Goodwill payable in 24 monthly installments commencing on February 1, 1996,
(iii) assumed net liabilities of NPLI of approximately $1,085,000, and (iv)
incurred deferred income taxes of
9
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approximately $1,000,000 as a result of NPLI's tax basis being significantly
less than the purchase price of the NPLI Stock. All of the above will result in
a total purchase price of approximately $3,600,000, substantially all of which
will be recorded as intangible assets.
The aggregate principal amount of the NPLI Promissory Notes is subject to
adjustment (increase or decrease) in the event revenues from forensic testing
(employee urine drug screens that have a chain of custody) are greater or less
than a certain level during the 12 months ended on January 2, 1997, determined
in accordance with generally accepted accounting principles.
RESULTS OF OPERATIONS
The following table sets forth selected results of operations for (i) the three
months ended June 30, 1995 and 1996, which are derived from the unaudited
financial statements of the Company and (ii) for the six months ended June 30,
1995 and 1996, which are derived from the unaudited financial statements of the
Company which include, in the opinion of management of the Company, all normal
recurring adjustments which management of the Company considers necessary for a
fair statement of the results for such periods The results of operations for
the periods presented are not necessarily indicative of the Company's future
operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- --------------------------------------------------
1995 1996 1995 1996
--------------------- --------------------- --------------------- ---------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ----------- -------- ----------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $1,799,386 100.0% $2,291,171 100.0% $3,457,318 100.0% $4,239,707 100.0%
Cost of revenues.............. 797,474 44.3% 1,016,373 44.4% 1,529,822 44.2% 1,856,534 43.8%
---------- ----- ---------- ----- ---------- ----- ---------- -----
Gross profit.................. 1,001,912 55.7% 1,274,798 55.6% 1,927,496 55.8% 2,383,173 56.2%
---------- ----- ---------- ----- ---------- ----- ---------- -----
Operating expenses:
Selling..................... 165,571 9.2% 166,227 7.2% 283,527 8.2% 314,496 7.4%
General and administrative.. 593,005 33.0% 607,082 26.5% 1,104,044 31.9% 1,131,605 26.7%
Depreciation and
amortization............. 55,391 3.1% 130,108 5.7% 109,636 3.2% 221,444 5.2%
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total operating expenses...... 813,967 45.3% 903,417 39.4% 1,497,207 43.3% 1,667,545 39.3%
---------- ----- ---------- ----- ---------- ----- ---------- -----
Income from operations........ $ 187,945 10.4% $ 371,381 16.2% $ 430,289 12.5% $ 715,628 16.9%
========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
During the three and six months ended June 30, 1996, LSI experienced a
3.1 percent and 3.4 percent decrease respectively in the price per specimen,
compared to the three and six months ended June 30, 1995, principally due to
increased price competition among providers of drug testing services, price per
specimen being the most important factor in obtaining and maintaining clients.
Management of LSI closely monitors its price per specimen, the prices of its
competitors and the costs of processing specimens to remain competitive, as well
as profitable. There can be no assurance that price decline per specimen
will not further decline during 1996. In the event price stabilization does not
occur as anticipated, LSI will, as it has in the past, take appropriate measures
to downsize its drug testing personnel and possibly further automate the testing
process and employ additional technology to continue profitability, although
there can be no assurance that such measures will assure profitability in the
event of substantial price reductions within the short term.
Comparison of Three-Month and Six-Month Periods Ended June 30, 1995 and 1996
Revenues increased to $4,239,707 in the six months ended June 30, 1996 (the
"1996 Interim Period"), from $3,457,318 in the six months ended June 30, 1995
(the "1995 Interim Period"), an increase of 22.6 percent. Revenues increased to
$2,291,171 in the three months ended June 30, 1996 (the "1996 Second Quarter"),
from $1,799,386 in the three months ended June 30, 1995 (the "1995 Second
Quarter"), an increase of 27.3 percent. The increase in revenues was due to a
30.5 percent increase and 35.4 percent increase in the number of specimens
analyzed during the 1996 Interim Period as compared to the 1995 Interim Period
and 1996 Second Quarter as compared to the 1995
10
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Second Quarter, respectively, although partially offset by a decrease of 4.2
percent and 3.1 percent respectively in the average price per specimen. The
increase in number of specimens analyzed was attributable to the NPLI
Acquisition as well as LSI's normal sales and marketing efforts. The decrease
in the average price per specimen was principally due to increased price
competition among providers of drug testing services, price per specimen being
the most important factor in obtaining and maintaining clients. There can be no
assurance that price decline per specimen will not further decline in 1996.
Operating expenses increased from $1,497,207 in the 1995 Interim Period to
$1,667,545 in the 1996 Interim Period and from $813,967 in the 1995 Second
Quarter to $903,417 in the 1996 Second Quarter, an increase of 11.4 percent and
11.0 percent, respectively, and decreased as a percentage of revenues from 43.3
percent to 39.3 percent and 45.3 percent to 39.4 percent, respectively. The
increase in operating expenses was attributable to the increase in general and
administrative expenses of $27,561 for the Interim Period and $14,077 for the
Second Quarter while selling expense increased by $30,969 for the Interim Period
and $656 for the Second Quarter and depreciation and amortization increased by
$111,808 in the 1996 Interim Period compared to the 1995 Interim Period and by
$74,717 in the 1996 Second Quarter as compared to the 1995 Second Quarter. The
increase in general and administrative expenses was principally as a result of
the increase in executive officer compensation along with accrued bonuses for
certain key employees of LSI. The increase in selling expenses was due to the
addition of one sales representative, added to assist in maintaining forensic
clients acquired in the NPLI Acquisition, although partially offset by a
reduction in commissions expense. Depreciation increased due to the addition of
new laboratory equipment at LSI in March of 1996, while amortization increased
due to the acquisition of NPLI and the amortization of the NPLI customer list
and goodwill.
Interest expense increased from $16,883 in the 1995 Interim Period to
$29,325 in 1996 Interim Period, a 73.7 percent increase, and from $9,361 in the
1995 Second Quarter to $18,832 in the 1996 Second Quarter. The increase in
interest expense was the result of a capital lease agreement for certain
laboratory equipment. Interest income decreased from $65,931 in the 1995 Interim
Period to $19,672 in the 1996 Interim Period, a 70.2 percent decrease, and from
$34,130 in the 1995 Second Quarter to $9,701 in the 1996 Second Quarter, a 71.6
percent decrease. The decrease is a result of less cash held for investment, due
to the acquisitions. Other income decreased from $207,509 in the 1995 Interim
Period to $507 in the 1996 Interim Period and from $187,509 in the 1995 Second
Quarter to $300 in the 1996 Second Quarter. The decrease in other income was
primarily due to a non-reoccurring settlement of a lawsuit in which LSI was the
plaintiff, received during 1995. Net income, after provision for income taxes,
increased from $390,066 in the 1995 Interim Period to $411,084 in the 1996
Interim Period, a 5.4 percent increase and decreased from $227,977 in the 1995
Second Quarter to $208,837 in the 1996 Second Quarter, a 8.4 percent decrease.
Quarterly Results of Operations
LSI and NPLI's operations are affected by seasonal trends to which drug
testing laboratories are generally subject. In LSI's experience, testing volume
tends to be higher in the second calendar quarter and lower in the winter
holiday season and the beginning of the first calendar quarter primarily due to
hiring patterns which affect pre-employment drug testing. Because the general
and administrative expenses associated with maintaining and adding to the
testing work force are relatively fixed over the short term, margins tend to
increase in periods of higher testing volume and decrease in periods of lower
testing volume. These effects are not always apparent because of the impact and
timing of the startup of new businesses and other factors such as the timing and
amount of price increases or decreases. Nevertheless, the results of operations
for a particular quarter may not be indicative of the results to be expected
during other quarters.
11
<PAGE>
Income Taxes
Income taxes accrued for the three and six months ended June 30, 1996,
were based on an effective combined federal and state corporate income tax rate
of approximately 40 percent of pretax income.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $185,641 in the six
months ended June 30, 1996, and $294,256 in the six months ended June 30, 1995.
As of June 30, 1996, LSAI had working capital of $1,442,056, compared to working
capital of $3,128,818, at December 31, 1995. In the event the Company's
revenues increase as anticipated by management of the Company, the Company's
working capital requirements will also increase and such requirements may exceed
the net cash provided by operating activities and require that cash be used in
operating activities from sources other than operations, including the available
cash and cash equivalents (which were $781,218 at June 30, 1996) and borrowing.
The increase in cash used in operations will principally be due to the timing
differential between Company's payment for materials and services to its
suppliers and employee work force, and the time at which the Company receives
payment from its customers.
On December 27, 1995, LSI entered into a revolving line of credit loan
agreement with Hibernia National Bank (the "Bank"), which will mature on
December 27, 1996, under which LSI may draw up to $1,000,000 (the "Revolving
Loan"). As of June 30, 1996, there were no borrowing outstanding under the
Revolving Loan. It is anticipated that any advances on the Revolving Loan will
be based upon LSI's liquid assets including its accounts receivable. Amounts
drawn under the Revolving Loan bear interest at Citibank, N.A. rate. The
Revolving Loan is secured by the accounts receivable, intangible assets, and by
a mortgage on the building owned by LSI, and is guaranteed by LSAI. The loan
agreement contains various covenants, including certain financial ratios.
FUTURE OPERATIONS AND LIQUIDITY
As of the date hereof the Company does not currently have any significant
future capital commitments. The Company anticipates that existing cash
balances, and funds to be generated from future operations will be sufficient to
fund operations, and budgeted capital expenditures of the Company through 1997.
FUTURE ASSESSMENT OF RECOVERABILITY AND IMPAIRMENT OF GOODWILL. The carrying
value and recoverability of unamortized goodwill and customer lists will be
periodically reviewed by management of the Company. If the facts and
circumstances suggest that the goodwill or customer lists may be impaired, the
carrying value of goodwill or customer lists will be adjusted which will result
in an immediate charge against income during the period of the adjustment and/or
the length of the remaining amortization period may be shortened which will
result in an increase in the amount of goodwill or customer list amortization
during the period of adjustment and each period thereafter until fully
amortized. Once adjusted, there can be no assurance that there will not be
further adjustments for impairment and recoverability in future periods. In the
event management of the Company determines that goodwill or the customer list
has become impaired, the adjustment for impairment and recoverability will most
likely occur during a period of operations in which the Company has sustained
losses or has only marginal profitability from operations, and the impairment
and/or increased amortization amount will either increase such losses from
operations or further reduce profitability.
12
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LSAI does not have any pending litigation. In the ordinary course of its
business, LSI and NPLI from time to time are sued by individuals who have tested
positive for drugs of abuse or who allege that improper clinical analysis has
been performed by NPLI. To date, LSI and NPLI have not experienced any
material liability related to these claims, although there can be no assurance
that LSI or NPLI will not at some time in the future experience significant
liability in connection with such claims. Based upon the prior successful
defense of similar-type litigation, LSI and NPLI believe they have valid
defenses to the plaintiffs claims in all pending litigation, and LSI and NPLI
intend to vigorously defend themselves in such litigation. LSI and NPLI are not
currently a defendant party in any other legal proceedings other than routine
litigation that is incidental to the business of LSI and NPLI, and management of
LSI and NPLI believe the outcome of such legal proceedings will not have a
material adverse effect upon the results of operations or financial condition of
LSI and NPLI. Furthermore, management of LSI and NPLI believe that the
liability coverage is adequate with respect to the pending litigation and, in
general, for business of LSI and NPLI.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No.
-----------
10.1 Employment Agreement between Arthur R. Peterson, Jr. and Laboratory
Specialists, Inc., dated as of April 23, 1996.
10.2 Employment Agreement (Amended and Restated) between Larry E. Howell and
the Registrant, dated as of April 23, 1996.
10.3 Employment Agreement (Amended and Restated) between John Simonelli and
the Registrant, dated as of April 23, 1996.
13
<PAGE>
10.4 Office Lease between 101 Park L.L.C. and the Registrant, dated as of July
10, 1996.
10.5 Office Lease between Swiss/M Limited Partners and Laboratory
Specialists, Inc., dated as of July 22, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LABORATORY SPECIALISTS OF
AMERICA, INC.
(Registrant)
Date: August 12, 1996 By: /s/ Arthur R. Peterson, Jr.
-------------------------------
Arthur R. Peterson, Jr.
Treasurer
14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ------------
<S> <C> <C>
10.1 Employment Agreement between Arthur R. Peterson, Jr. and 16
the Laboratory Specialists, Inc., dated as of April 23, 1996.
10.2 Employment Agreement (Amended and Restated) between 21
Larry E. Howell and the Registrant, dated as of April 23, 1996.
10.3 Employment Agreement (Amended and Restated) between 25
John Simonelli and the Registrant, dated as of April 23, 1996.
10.4 Office Lease between 101 Park L.L.C. and the Registrant, 30
dated as of July 10, 1996.
10.5 Office Lease between Swiss/M Limited Partners and Laboratory 49
Specialists, Inc., dated as of July 22, 1996.
27 Financial Data Schedule
</TABLE>
15
<PAGE>
EXHIBIT " 10.1"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated this 23rd day of April,
1996 (the "date hereof"), with an effective date of the 15th day of April, 1996
(the "effective date"), by and between Laboratory Specialists, Inc. (the
"Company"), a Louisiana corporation, and Arthur R. Peterson, Jr., an individual
("Peterson").
WHEREAS, Peterson is currently serving as President and Chief Executive Officer
of the Company;
WHEREAS, the Company is a wholly-owned subsidiary of Laboratory Specialists of
America, Inc., of which Peterson is currently serving as Treasurer;
WHEREAS, the Company desires to obtain the services of Peterson on a full-time
basis in order to preserve the continuation of the operations of the Company
with its suppliers, customers and others, and Peterson desires to render such
services to the Company;
NOW, THEREFORE, for and in consideration of the conditions hereinbelow to be
performed on the part of the respective parties hereto, and in consideration of
the mutuality thereof, the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to employ Peterson, and
Peterson hereby agrees to serve the Company, during the period beginning on
April 15, 1996, the effective date hereof, and ending on April 15, 2001, or on
such earlier date as provided in Sections 4 and 5 hereof.
2. Duties. Substantially all of the duties and responsibilities of Peterson,
subject to such travel as the duties of Peterson hereunder may reasonably
require, shall be performed by Peterson at and from the corporate offices of the
Company in Belle Chasse, Louisiana.
2.1 During the term of employment hereunder, Peterson shall serve as
President and Chief Executive Officer of the Company and shall devote his full
time, attention, skill, energy and best efforts to the duties assigned to him
from time to time by management and/or the Board of Directors of the Company,
and shall, but without obligation hereunder, serve the Company in such
additional executive officer positions to which he may be elected or appointed
by the Board of Directors of the Company, subject to acceptance by Peterson of
such additional executive officer position or positions. Notwithstanding the
foregoing, Peterson may engage in any other pursuit or endeavor which does not
conflict with his ability to perform his duties to the business interests of the
Company, provided that such other pursuit or endeavors does not violate the duty
of loyalty and care which Peterson has to the Company by reason of this
Agreement or in his capacity as an executive officer of the Company.
2.2 As an employee of the Company, Peterson shall be subject to the overall
supervision and instructions of management of the Company and, if applicable,
that are associated with the executive officer position or positions held by
Peterson which shall be subject to the overall supervision and instructions of
the Board of Directors to the Company.
3. Compensation and Other Benefits. During the term of this Agreement, the
Company shall pay or
1
<PAGE>
provide to Peterson and Peterson shall be entitled to receive or have maintained
for his benefit, the following:
3.1 Commencing on the effective date, the Company shall compensate Peterson
for the services to rendered by him hereunder at the rate of one hundred twenty-
five thousand dollars ($125,000) per year, payable in equal semi-monthly
installments on the first and fifteen day of each month, commencing on May 1,
1996.
3.2 In addition to the compensation payable to Peterson pursuant to Section
3.1 hereof, within 90 days following the end of each fiscal year of Laboratory
Specialists of America, Inc. ending during the term of this Agreement, the
Company shall pay Peterson a bonus equal to the lesser of (i) $50,000 or (ii) 10
percent of the net income of Laboratory Specialists of America, Inc. before
provision for income taxes determined in accordance with generally accepted
accounting principles as reflected on the audited financial statements of
Laboratory Specialists of America, Inc. for the immediately preceding fiscal
year. The bonus payable pursuant to this Section 3.2 shall be deemed earned by
Peterson as of the end of each such fiscal year of Laboratory Specialists of
America, Inc. for all intents and purposes, including for federal income tax
purposes, notwithstanding termination of the employment of Peterson on or after
the end of such fiscal year of Laboratory Specialists of America, Inc. To the
extent that stock options are granted by the Board of Directors of Laboratory
Specialists of America, Inc. to its executive officers, Peterson shall be deemed
to be a member of the group to which stock options are granted, and his stock
option grants shall be determined in the same manner as are the stock option
grants of other executives in the group.
3.3 Peterson is hereby authorized to incur reasonable expenses for the
promotion of the Company's business, including entertainment, travel and similar
expenses, and he shall be reimbursed therefore by the Company upon his
presentation of itemized accounts of such expenditures.
3.4 The Company shall provide to Peterson health and disability insurance
benefits comparable to those provided to the executive officers of the Company
either as a group or individually.
3.5 Peterson shall be entitled to reasonable periods of vacation with pay in
each year, and reasonable periods of sick leave with pay commensurate with his
position, in accordance with Company policy as established by the Board of
Directors.
3.6 The Company shall provide to Peterson and maintain insurance, at the
Company's cost and expense, covering the life of Peterson in the face amount of
one million dollars ($1,000,000), the proceeds of which shall be payable to such
beneficiary that Peterson shall designate or in the event of failure to
designate a named beneficiary shall be payable to the estate of Peterson.
3.7 The Company shall pay to Peterson an automobile allowance of five hundred
dollars ($500) per month, payable on the fifteen day of each month while
employed pursuant to this Agreement, and shall provide at the sole cost and
expense of the Company a mobile phone to assist Peterson in the performance of
his duties and responsibilities as an employee and, if applicable, executive
officer of the Company.
2
<PAGE>
4. Disability or Death.
4.1 In the event the Board of Directors of the Company determines in good
faith that Peterson is unable, because of physical or mental illness or
disability, to render services of the character contemplated hereby and that
such disability reasonably may be expected to be permanent or to continue for a
period of at least six (6) consecutive months (or for shorter periods totaling
more than six (6) months during any period of eighteen (18) consecutive months),
in such event the Board of Directors of the Company may elect to terminate the
employment of Peterson hereunder upon written notice by the Company to Peterson
effective on the next first or fifteenth day of the month following the date of
such notice. At any time and upon reasonable request therefor by the Company,
Peterson shall submit to medical examination by a physician designated by the
Company in New Orleans, Louisiana, for the purpose of determining the existence,
nature and extent of any such disability. In the event the Board of Directors
elects to terminate the employment of Peterson pursuant to this Section 4.1,
Peterson shall be entitled to receive any amount of compensation determined
pursuant to Section 3.1 hereof up to the date of the termination of the
employment of Peterson payable on the dates established pursuant to Section 3.1
hereof.
4.2 In the event Peterson shall die during the term of this Agreement, this
Agreement shall terminate effective on the next first or fifteenth day of the
month following the date of death, and the Company shall pay to the spouse of
Peterson, or if unmarried at the time of his death, to the estate of Peterson,
the compensation payable to Peterson pursuant to Section 3.1 hereof for a period
of three (3) months following the effective date of termination of this
Agreement pursuant to this Section 4.2, payable on the dates provided for such
compensation payment thereunder.
4.3 In the event of termination of this Agreement pursuant to Section 4.1
and/or Section 4.2 of this Agreement, Peterson (or his spouse or if unmarried on
the date of his death his estate) shall be entitled to receive accrued and
unpaid expense reimbursements, automobile allowance and any unpaid bonus amounts
awarded to Peterson prior to such termination and stock option grants awarded to
Peterson prior to such termination exercisable in accordance with the terms of
such stock option grants.
5. Termination for Cause. In the event the Board of Directors of the Company
determines in good faith that Peterson is guilty of gross negligence or fraud
materially injurious to the Company, the Company may terminate this Agreement,
and all obligations hereunder shall thereupon terminate.
6. Non-Competition. During the term of this Agreement, or, if longer, the
period of employment of Peterson by the Company, Peterson will not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity as an employee or executive officer of a competitor company in any
phase of the business carried on by the Company at any time.
7. Confidentiality. During the term of this Agreement, or, if longer, the
period of employment of Peterson by the Company, and for a period of three (3)
years thereafter, Peterson will not divulge to anyone, other than the Company or
persons designated by the Company in writing, any confidential material
information directly or indirectly useful in any aspect of the business of the
Company or any of its subsidiaries, as conducted from time to time, as to which
Peterson is now, or at any time during employment shall become, informed and
which is not then generally known to the public or recognized as standard
practice.
3
<PAGE>
8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Peterson, in consideration
of his employment hereunder to the date of such termination, shall remain bound
by the provisions of Section 6 and 7 hereof, and consequently, in addition to
all other remedies that may be available to it, the Company shall be entitled to
injunctive relief for any actual or threatened violation of such Sections.
9. Non-Assignability. Neither party hereto shall have the right to assign
this Agreement or any rights or obligations hereunder without the written
consent of the other party.
10. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitration proceedings shall be conducted in
New Orleans, Louisiana, unless otherwise agreed by the parties hereto. The
arbitrator or arbitrators shall be deemed to possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration;
provided, however, that nothing in this Section 10 hereof shall be construed so
as to deny the Company the right and power to seek and obtain injunctive relief
in a court of equity for any breach or threatened breach by Peterson of any of
his covenants contained in Sections 6 and 7 hereof.
11. Notice. All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been given forty-eight (48) hours after
depositing in the United States mail, certified mail, postage prepaid, addressed
to the party to receive such notice at the address set forth hereinbelow or such
other address as either party may give to the other in writing pursuant to
written notice pursuant to this Section:
If to Peterson: (PERSONAL AND CONFIDENTIAL)
Mr. Arthur R. Peterson, Jr.
113 Jarrell Drive
Belle Chasse, Louisiana 70037
If to the Company: Laboratory Specialists, Inc.
113 Jarrell Drive
Belle Chasse, Louisiana 70037
12. General. The terms and provisions herein contained (i) constitute the
entire Agreement between the Company and Peterson with respect to the subject
matter hereof, (ii) may be amended or modified only by a written instrument
executed by the parties hereto, and (iii) shall be construed and enforced in
accordance with the laws in effect in the State of Louisiana without regard to
its conflicts of law provisions. Failure by a party hereto to require
performance of any provision of this Agreement shall not affect, impair or waive
such party's right to require full performance at any time thereafter.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as
amended and restated, on the 23rd day of April, 1996, with an effective date of
the 15th day of April, 1996.
"Company" LABORATORY SPECIALISTS, INC.
By:_________________________________________________
Larry E. Howell, Vice President
"Peterson"
_________________________________________________
Arthur R. Peterson, Jr.
5
<PAGE>
EXHIBIT "10.2"
EMPLOYMENT AGREEMENT
(Amended and Restated)
THIS EMPLOYMENT AGREEMENT (this "Agreement"), shall be effective the 15th day
of April, 1994, by and between Laboratory Specialists of America, Inc. (the
"Company"), an Oklahoma corporation, and Larry E. Howell, an individual
("Howell").
WHEREAS, the parties hereto entered into this Employment Agreement on April 15,
1994, which was amended and restated on September 9, 1994;
WHEREAS, the parties have determined that it is in the best interest of the
Company that this Agreement be further amended to extend the term of this
Agreement and increase the annual compensation of Howell, effective as of April
15, 1996;
NOW, THEREFORE, for and in consideration of the conditions hereinbelow to be
performed on the part of the respective parties hereto, and in consideration of
the mutuality thereof, the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to employ Howell, and Howell
hereby agrees to serve the Company, during the period beginning on the date
hereof and ending on April 15, 2000, or on such earlier date as provided in
Sections 4 and 5 hereof.
2. Duties. Substantially all of the duties and responsibilities of Howell,
subject to such travel as the duties of Howell hereunder may reasonably require,
shall be performed by Howell at and from the corporate offices of the Company in
Oklahoma City, Oklahoma.
2.1 During the term of employment hereunder, Howell shall devote such time,
attention, skill, energy and best efforts to the duties assigned to him from
time to time by management and/or the Board of Directors of the Company, and
shall, but without obligation hereunder, serve the Company in the executive
officer positions to which he may be elected or appointed by the Board of
Directors of the Company, subject to acceptance by Howell of such executive
officer position or positions. Notwithstanding the foregoing, Howell shall be
required to devote not less than 50 percent of his full business time,
attention, skill, energy and efforts to the performance of his duties hereunder;
provided, however, that Howell may engage in any other employment or pursuit of
other endeavors which does not conflict with his ability to perform his duties
to the business interests of the Company, provided that such other employment or
pursuit of other endeavors does not violate the duty of loyalty and care which
Howell has to the Company by reason of this Agreement or in his capacity as an
executive officer of the Company.
2.2 As an employee of the Company, Howell shall be subject to the overall
supervision and instructions of management of the Company and, if applicable,
that are associated with the executive officer position or positions held by
Howell which shall be subject to the overall supervision and instructions of the
Board of Directors to the Company.
3. Compensation and Other Benefits. During the term of this Agreement, the
Company shall pay or provide to Howell and Howell shall be entitled to receive
or have maintained for his benefit, the following:
1
<PAGE>
3.1 Effective April 15, 1996, the Company shall compensate Howell for the
services to be rendered by him hereunder at the rate of one hundred twelve
thousand five hundred dollars ($112,500) per year, payable in equal semi-monthly
installments on the first and fifteen day of each month, commencing on May 1,
1996.
3.2 From time to time the Company may pay cash bonuses (but not in excess of
10 percent of the net income of the Company during the applicable fiscal year of
the Company determined in accordance with generally accepted accounting
principles) or grant stock options to its executive officers as determined by
the Board of Directors (or the Compensation Committee established by the Board
of Directors). To the extent that bonuses or stock options are paid or granted
by the Board of Directors to its executive officers, Howell shall be deemed to
be a member of the bonus group or group to which stock options are granted, and
his bonus or stock option grants shall be determined in the same manner as are
the bonuses or stock option grants of other executives in the group.
3.3 Howell is hereby authorized to incur reasonable expenses for the
promotion of the Company's business, including entertainment, travel and similar
expenses, and he shall be reimbursed therefore by the Company upon his
presentation of itemized accounts of such expenditures.
3.4 The Company shall provide to Howell health and disability insurance
benefits comparable to those provided to the executive officers of the Company
either as a group or individually.
3.5 Howell shall be entitled to reasonable periods of vacation with pay in
each year, and reasonable periods of sick leave with pay commensurate with his
position, in accordance with Company policy as established by the Board of
Directors.
3.6 The Company shall provide to Howell and maintain insurance, at the
Company's cost and expense, covering the life of Howell in the face amount of
five hundred thousand dollars ($500,000), the proceeds of which shall be payable
to such beneficiary that Howell shall designate or in the event of failure to
designate a named beneficiary shall be payable to the estate of Howell.
3.7 The Company shall pay to Howell an automobile allowance of five hundred
dollars ($500) per month, payable on the fifteen day of each month while
employed pursuant to this Agreement, and shall provide at the sole cost and
expense of the Company a mobile phone to assist Howell in the performance of his
duties and responsibilities as an employee and, if applicable, executive officer
of the Company.
4. Disability or Death.
4.1 In the event the Board of Directors of the Company determines in good
faith that Howell is unable, because of physical or mental illness or
disability, to render services of the character contemplated hereby and that
such disability reasonably may be expected to be permanent or to continue for a
period of at least six (6) consecutive months (or for shorter periods totaling
more than six (6) months during any period of eighteen (18) consecutive months),
in such event the Board of Directors of the Company may elect to terminate the
employment of Howell hereunder upon written notice by the Company to Howell
effective on the next first or fifteenth day of the month following the date of
such notice. At any time and upon reasonable request therefor by the Company,
Howell shall submit to medical examination by a physician designated by the
Company in Oklahoma City, Oklahoma, for the purpose of determining the
existence, nature and extent of any such disability. In the event the Board
2
<PAGE>
of Directors elects to terminate the employment of Howell pursuant to this
Section 4.1, Howell shall be entitled to receive any amount of compensation
determined pursuant to Section 3.1 up to the date of the termination of the
employment of Howell payable on the dates established pursuant to Section 3.1.
4.2 In the event Howell shall die during the term of this Agreement, this
Agreement shall terminate effective on the next first or fifteenth day of the
month following the date of death, and the Company shall pay to the spouse of
Howell, or if unmarried at the time of his death, to the estate of Howell, the
compensation payable to Howell pursuant to Section 3.1 for a period of three (3)
months following the effective date of termination of this Agreement pursuant to
this Section 4.2, payable on the dates provided for such compensation payment
thereunder.
4.3 In the event of termination of this Agreement pursuant to Section 4.1
and/or Section 4.2 of this Agreement, Howell (or his spouse or if unmarried on
the date of his death his estate) shall be entitled to receive accrued and
unpaid expense reimbursements, automobile allowance and any unpaid bonus amounts
awarded to Howell prior to such termination and stock option grants awarded to
Howell prior to such termination exercisable in accordance with the terms of
such stock option grants.
5. Termination for Cause. In the event the Board of Directors of the Company
determines in good faith that Howell is guilty of gross negligence or fraud
materially injurious to the Company, the Company may terminate this Agreement,
and all obligations hereunder shall thereupon terminate.
6. Non-Competition. During the term of this Agreement, or, if longer, the
period of employment of Howell by the Company, Howell will not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity as an employee or executive officer of a competitor company in any
phase of the business carried on by the Company at any time.
7. Confidentiality. During the term of this Agreement, or, if longer, the
period of employment of Howell by the Company, and for a period of three (3)
years thereafter, Howell will not divulge to anyone, other than the Company or
persons designated by the Company in writing, any confidential material
information directly or indirectly useful in any aspect of the business of the
Company or any of its subsidiaries, as conducted from time to time, as to which
Howell is now, or at any time during employment shall become, informed and which
is not then generally known to the public or recognized as standard practice.
8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Howell, in consideration of
his employment hereunder to the date of such termination, shall remain bound by
the provisions of Section 6 and 7, and consequently, in addition to all other
remedies that may be available to it, the Company shall be entitled to
injunctive relief for any actual or threatened violation of such Sections.
9. Non-Assignability. Neither party hereto shall have the right to assign
this Agreement or any rights or obligations hereunder without the written
consent of the other party.
10. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitration proceedings shall be conducted in
Oklahoma City, Oklahoma unless
3
<PAGE>
otherwise agreed by the parties hereto. The arbitrator or arbitrators shall be
deemed to possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Section 10 shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by Howell of any of his covenants contained in Sections 6 and
7 hereof.
11. Notice. All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been given forty-eight (48) hours after
depositing in the United States mail, certified mail, postage prepaid, addressed
to the party to receive such notice at the address set forth hereinbelow or such
other address as either party may give to the other in writing pursuant to
written notice pursuant to this Section:
If to Howell: Mr. Larry E. Howell
1101-A Sovereign Row
Oklahoma City, Oklahoma 73108
If to the Company: Laboratory Specialists of America, Inc.
1101-A Sovereign Row
Oklahoma City, Oklahoma 73108
Attention: John Simonelli
12. General. The terms and provisions herein contained (i) constitute the
entire Agreement between the Company and Howell with respect to the subject
matter hereof, (ii) may be amended or modified only by a written instrument
executed by the parties hereto, and (iii) shall be construed and enforced in
accordance with the laws in effect in the State of Oklahoma without regard to
its conflicts of law provisions. Failure by a party hereto to require
performance of any provision of this Agreement shall not affect, impair or waive
such party's right to require full performance at any time thereafter.
It is acknowledged that the furniture, equipment and artwork in the corporate
offices of the Company in Oklahoma City, Oklahoma are the property of John
Simonelli and Howell.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as
amended and restated, on the 23rd day of April, 1996, with an effective date of
the 15th day of April, 1996.
"Company" LABORATORY SPECIALISTS OF AMERICA, INC.
By:___________________________________________________________
John Simonelli, Chief Executive Officer
"Howell"
___________________________________________________________
Larry E. Howell
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EXHIBIT "10.3"
EMPLOYMENT AGREEMENT
(Amended and Restated)
THIS EMPLOYMENT AGREEMENT (this "Agreement"), shall be effective the 15th day
of April, 1994, by and between Laboratory Specialists of America, Inc. (the
"Company"), an Oklahoma corporation, and John Simonelli, an individual
("Simonelli").
WHEREAS, the parties hereto entered into this Employment Agreement on April 15,
1994, which was amended and restated on September 9, 1994;
WHEREAS, the parties have determined that it is in the best interest of the
Company that this Agreement be further amended to extend the term of this
Agreement and increase the annual compensation of Simonelli, effective as of
April 15, 1996;
NOW, THEREFORE, for and in consideration of the conditions hereinbelow to be
performed on the part of the respective parties hereto, and in consideration of
the mutuality thereof, the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to employ Simonelli, and
Simonelli hereby agrees to serve the Company, during the period beginning on the
date hereof and ending on April 15, 2000, or on such earlier date as provided in
Sections 4 and 5 hereof.
2. Duties. Substantially all of the duties and responsibilities of Simonelli,
subject to such travel as the duties of Simonelli hereunder may reasonably
require, shall be performed by Simonelli at and from the corporate offices of
the Company in Oklahoma City, Oklahoma.
2.1 During the term of employment hereunder, Simonelli shall devote such
time, attention, skill, energy and best efforts to the duties assigned to him
from time to time by management and/or the Board of Directors of the Company,
and shall, but without obligation hereunder, serve the Company in the executive
officer positions to which he may be elected or appointed by the Board of
Directors of the Company, subject to acceptance by Simonelli of such executive
officer position or positions. Notwithstanding the foregoing, Simonelli shall
be required to devote not less than 50 percent of his full business time,
attention, skill, energy and efforts to the performance of his duties hereunder;
provided, however, that Simonelli may engage in any other employment or pursuit
of other endeavors which does not conflict with his ability to perform his
duties to the business interests of the Company, provided that such other
employment or pursuit of other endeavors does not violate the duty of loyalty
and care which Simonelli has to the Company by reason of this Agreement or in
his capacity as an executive officer of the Company.
2.2 As an employee of the Company, Simonelli shall be subject to the overall
supervision and instructions of management of the Company and, if applicable,
that are associated with the executive officer position or positions held by
Simonelli which shall be subject to the overall supervision and instructions of
the Board of Directors to the Company.
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3. Compensation and Other Benefits. During the term of this Agreement, the
Company shall pay or provide to Simonelli and Simonelli shall be entitled to
receive or have maintained for his benefit, the following:
3.1 Effective April 15, 1996, the Company shall compensate Simonelli for the
services to be rendered by him hereunder at the rate of one hundred twelve
thousand five hundred dollars ($112,500) per year, payable in equal semi-
monthly installments on the first and fifteen day of each month, commencing on
May 1, 1996.
3.2 From time to time the Company may pay cash bonuses (but not in excess of
10 percent of the net income of the Company during the applicable fiscal year of
the Company determined in accordance with generally accepted accounting
principles) or grant stock options to its executive officers as determined by
the Board of Directors (or the Compensation Committee established by the Board
of Directors). To the extent that bonuses or stock options are paid or granted
by the Board of Directors to its executive officers, Simonelli shall be deemed
to be a member of the bonus group or group to which stock options are granted,
and his bonus or stock option grants shall be determined in the same manner as
are the bonuses or stock option grants of other executives in the group.
3.3 Simonelli is hereby authorized to incur reasonable expenses for the
promotion of the Company's business, including entertainment, travel and similar
expenses, and he shall be reimbursed therefore by the Company upon his
presentation of itemized accounts of such expenditures.
3.4 The Company shall provide to Simonelli health and disability insurance
benefits comparable to those provided to the executive officers of the Company
either as a group or individually.
3.5 Simonelli shall be entitled to reasonable periods of vacation with pay in
each year, and reasonable periods of sick leave with pay commensurate with his
position, in accordance with Company policy as established by the Board of
Directors.
3.6 The Company shall provide to Simonelli and maintain insurance, at the
Company's cost and expense, covering the life of Simonelli in the face amount of
five hundred thousand dollars ($500,000), the proceeds of which shall be payable
to such beneficiary that Simonelli shall designate or in the event of failure to
designate a named beneficiary shall be payable to the estate of Simonelli.
3.7 The Company shall pay to Simonelli an automobile allowance of five
hundred dollars ($500) per month, payable on the fifteen day of each month while
employed pursuant to this Agreement, and shall provide at the sole cost and
expense of the Company a mobile phone to assist Simonelli in the performance of
his duties and responsibilities as an employee and, if applicable, executive
officer of the Company.
4. Disability or Death.
4.1 In the event the Board of Directors of the Company determines in good
faith that Simonelli is unable, because of physical or mental illness or
disability, to render services of the character contemplated hereby and that
such disability reasonably may be expected to be permanent or to continue for a
period of at least six (6) consecutive months (or for shorter periods totaling
more than six (6) months during any period of eighteen (18) consecutive months),
in such event the Board of Directors
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of the Company may elect to terminate the employment of Simonelli hereunder upon
written notice by the Company to Simonelli effective on the next first or
fifteenth day of the month following the date of such notice. At any time and
upon reasonable request therefor by the Company, Simonelli shall submit to
medical examination by a physician designated by the Company in Oklahoma City,
Oklahoma, for the purpose of determining the existence, nature and extent of any
such disability. In the event the Board of Directors elects to terminate the
employment of Simonelli pursuant to this Section 4.1, Simonelli shall be
entitled to receive any amount of compensation determined pursuant to Section
3.1 up to the date of the termination of the employment of Simonelli payable on
the dates established pursuant to Section 3.1.
4.2 In the event Simonelli shall die during the term of this Agreement, this
Agreement shall terminate effective on the next first or fifteenth day of the
month following the date of death, and the Company shall pay to the spouse of
Simonelli, or if unmarried at the time of his death, to the estate of Simonelli,
the compensation payable to Simonelli pursuant to Section 3.1 for a period of
three (3) months following the effective date of termination of this Agreement
pursuant to this Section 4.2, payable on the dates provided for such
compensation payment thereunder.
4.3 In the event of termination of this Agreement pursuant to Section 4.1
and/or Section 4.2 of this Agreement, Simonelli (or his spouse or if unmarried
on the date of his death his estate) shall be entitled to receive accrued and
unpaid expense reimbursements, automobile allowance and any unpaid bonus amounts
awarded to Simonelli prior to such termination and stock option grants awarded
to Simonelli prior to such termination exercisable in accordance with the terms
of such stock option grants.
5. Termination for Cause. In the event the Board of Directors of the Company
determines in good faith that Simonelli is guilty of gross negligence or fraud
materially injurious to the Company, the Company may terminate this Agreement,
and all obligations hereunder shall thereupon terminate.
6. Non-Competition. During the term of this Agreement, or, if longer, the
period of employment of Simonelli by the Company, Simonelli will not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity as an employee or executive officer of a competitor company in any
phase of the business carried on by the Company at any time.
7. Confidentiality. During the term of this Agreement, or, if longer, the
period of employment of Simonelli by the Company, and for a period of three (3)
years thereafter, Simonelli will not divulge to anyone, other than the Company
or persons designated by the Company in writing, any confidential material
information directly or indirectly useful in any aspect of the business of the
Company or any of its subsidiaries, as conducted from time to time, as to which
Simonelli is now, or at any time during employment shall become, informed and
which is not then generally known to the public or recognized as standard
practice.
8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Simonelli, in consideration
of his employment hereunder to the date of such termination, shall remain bound
by the provisions of Section 6 and 7, and consequently, in addition to all other
remedies that may be available to it, the Company shall be entitled to
injunctive relief for any actual or threatened violation of such Sections.
9. Non-Assignability. Neither party hereto shall have the right to assign
this Agreement or any rights
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or obligations hereunder without the written consent of the other party.
10. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitration proceedings shall be conducted in
Oklahoma City, Oklahoma unless otherwise agreed by the parties hereto. The
arbitrator or arbitrators shall be deemed to possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration;
provided, however, that nothing in this Section 10 shall be construed so as to
deny the Company the right and power to seek and obtain injunctive relief in a
court of equity for any breach or threatened breach by Simonelli of any of his
covenants contained in Sections 6 and 7 hereof.
11. Notice. All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been given forty-eight (48) hours after
depositing in the United States mail, certified mail, postage prepaid, addressed
to the party to receive such notice at the address set forth hereinbelow or such
other address as either party may give to the other in writing pursuant to
written notice pursuant to this Section:
If to Simonelli: Mr. John Simonelli
1101-A Sovereign Row
Oklahoma City, Oklahoma 73108
If to the Company: Laboratory Specialists of America, Inc.
1101-A Sovereign Row
Oklahoma City, Oklahoma 73108
Attention: Larry E. Howell
12. General. The terms and provisions herein contained (i) constitute the
entire Agreement between the Company and Simonelli with respect to the subject
matter hereof, (ii) may be amended or modified only by a written instrument
executed by the parties hereto, and (iii) shall be construed and enforced in
accordance with the laws in effect in the State of Oklahoma without regard to
its conflicts of law provisions. Failure by a party hereto to require
performance of any provision of this Agreement shall not affect, impair or waive
such party's right to require full performance at any time thereafter.
It is acknowledged that the furniture, equipment and artwork in the corporate
offices of the Company in Oklahoma City, Oklahoma are the property of Larry E.
Howell and Simonelli.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as
amended and restated, on the 23rd day of April, 1996, with an effective date of
the 15th day of April, 1996.
"Company" LABORATORY SPECIALISTS OF AMERICA, INC.
By:___________________________________________________________
Larry E. Howell, President
"Simonelli"
___________________________________________________________
John Simonelli
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EXHIBIT "10.4"
STANDARD OKLAHOMA BUSINESS COMPLEX LEASE
Lease Preparation Date: June 25, 1996
Lessor: 101 Park L.L.C., an Oklahoma limited liability company
101 Park Avenue Building
Lessee: Laboratory Specialists of America, Inc., an Oklahoma
corporation
1. LEASE TERMS
1.01 Premises: The Premises referred to in this Lease contain
approximately 1801 rentable square feet and is located on Exhibit
"A" attached. The address of the leased Premises is: 101 PARK
AVENUE, SUITE 810, OKLAHOMA CITY, OK 73102.
1.02 Project: The Project consists of approximately 189,090 rentable
square feet.
1.03 Lessee's Notice Address: Lessee's Notice Address is the address
of the leased Premises as defined in paragraph 1.01 unless
otherwise specified here:
1.04 Lessor's Notice Address: Lessor's Notice Address is:
5801 N. Broadway
Oklahoma City, OK 73118
1.05 Lessee's Permitted Use and Trade Name: ONLY AS GENERAL
OFFICES FOR Laboratory Specialists of America, Inc.
1.06 Lease Term: The Lease Term commences on September 1, 1996,
and ends on August 31, 2000. ( 48 months, and 0- days).
1.07 Base Monthly Rent: Base Monthly Rent in lawful money of the
United States of America shall be as follows:
Year 1: $ 1,650.92 per month, $19,81 1.00 per year
Year 2: $ 1,725.96 per month, $20,711.50 per year
Year 3: $ 1,801.00 per month, $21,612.00 per year
Year 4: $ 1,876.04 per month, $22,512.50 per year
Total Base Rent $84,647.00
1.08 Security Deposit: $ N/A in lawful money
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of the United States of America.
1.09 Lease Documentation Fee: NOT APPLICABLE.
1.10 Proportionate Share: Lessee's Proportionate Share is
.0095
1.11 Index: NOT APPLICABLE
1.12 Expense Base Year: The calendar year beginning January 1, 1996
and ending on December 31, 1996.
1.13 Expense Base Rate: NOT APPLICABLE
1.14 Tax Base Year: The calendar year beginning January 1, 1996 and
ending on December 31, 1996.
2. DEMISE AND POSSESSION
2.01 Lessor leases to Lessee and Lessee leases from Lessor the Premises
described in 1.01.
By entering the Premises, Lessee acknowledges that it has examined the
Premises and accepts the Premises in their present condition subject to any
additional work Lessor has agreed to do as stated on Exhibit B.
2.02 If for any reason Lessor cannot deliver possession of the Premises on the
date the Lease commences, Lessor shall not be subject to any liability nor shall
the validity of this Lease be affected. If Lessee has not caused such delay
there shall be a proportionate reduction of the Base Monthly Rent covering the
period between the commencement of the Lease Term and the time when Lessor can
deliver possession. However, either Lessor or Lessee, unless it is the cause of
the delay, has the right to cancel this lease by written notification if
possession of the Premises is not delivered within ninety (90) days of the date
the Lease Term commences.
3. BASE MONTHLY RENT
3.01 Base Monthly Rent: On the first day of each calendar month of the Lease
Term, Lessee will pay, without deduction or offset, prior notice of demand, Base
Monthly Rent at the place designated by Lessor. However, the first month's rent
is due and payable upon execution of this Lease. In the event that the Term of
this Lease commences or ends on a day other than the first day of a calendar
month, a prorated amount of Base Monthly Rent shall be due upon execution and is
will be calculated using a thirty (30 ) day month.
3.02 (Deleted)
3.03 Any installment of rent or any other charge payable which is not paid
within the (10) days after if becomes due will be considered past due and Lessee
will pay to Lessor as Additional Rent a late charge equal to ten percent (10%)
of such installment or the sum of twenty-five dollars ($25.00), whichever is
greater, for each month or fractional month transpiring from the date due until
paid. A twenty-five dollar ($25.00) handling charge will be paid by Lessee to
Lessor for each returned check and, thereafter, Lessee will pay all future
paymentsof rent or other charges due by money order or cashier's check.
3.04 The amount of the Base Monthly Rent includes projected construction of
Lessee's improvements as indicated on Exhibit "B" attached. In the event that
Lessee requests Lessor to construct additional improvements and/or final
construction costs exceed original estimates, such costs or expenses upon
itemized notice by Lessor, shall be paid by Lessee to Lessor, or Lessor may
increase the Base Monthly Rent
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according to the terms and conditions outlined on Exhibit "B", or elsewhere in
this Lease.
4. ADDITIONAL RENT
4.01 All charges payable by Lessee other than Base Monthly Rent are called
"Additional Rent". Unless this lease provides otherwise, Additional Rent is to
be paid with the next monthly installment of Base Monthly Rent and is subject to
the provisions of 3.03. The term "rent" whenever used in this Lease means Base
Monthly Rent and Additional Rent.
4.02 Operating Expenses
A. Definitions:
"Expense Comparison Year": Each calendar year after the Expenses Base Year.
"Operating Expenses" are all costs and expenses of ownership, operation,
maintenance, management, repair and insurance of the Project, as determined
according to generally accepted accounting principles applied by Lessor in its
sole discretion, including, but not limited to the following costs: all
supplies, materials, labor and equipment, used in or related to the operation
and maintenance of the Project: all utilities, including but not limited to,
water, electricity, gas, heating, lighting, sewer, waste disposal, security,
air-conditioning and ventilating costs and all charges relating to the use,
ownership or operation of the Project: all maintenance, management, janitorial
and service agreements related to the Project: all expenses excluding those
legal expenses incurred as a result of lease negotiations, and accounting costs:
all insurance premiums and costs, including but not limited to the premiums and
costs of fire, casualty and liability coverage, rent abatement and earthquake
insurance and any other type of insurance related to the Project: all
maintenance costs relating to the public and service areas within and around the
Project, including but not limited to, sidewalks, landscaping, service areas,
driveways, parking areas, walkways, building exteriors (including painting),
signs and directories, including for example, costs of resurfacing and
restriping parking areas, amortization (along with reasonable financing charges)
of capital improvements made to the Project which may be required by any
government authority or which will improve the operating efficiency of the
Project: all Lessor's costs in managing, maintaining, repairing, operating and
insuring the project, including for example, clerical, supervisory and
janitorial staff: however, such costs shall not include depreciation on the
Project, loan payments, executive salaries, or real estate broker commissions.
B. If the Operating Expenses incurred or paid by Lessor for any Expense
Comparison Year during the Lease Term are greater than the Operating Expenses
incurred or paid by Lessor for the Expense Base Year, then Lessee will pay as
Additional Rent an amount equal to the increase multiplied by Lessee's
Proportionate Share as defined in 1.10. In the event of any partial Expense
Comparison Year, Lessee will pay the increase. If any, based on the number of
days of the Expense Comparison Year included within the Lease Term.
C. By April 1st of each Expenses Comparison Year, Lessor will provide
Lessee a statement of Lessor's best estimate of Lessee's share of the increase
in Operating Expenses for the coming year over the costs for the Expense Base
Year. This amount will be divided by twelve (12) and beginning with the next
regular Base Monthly Rent payment, Lessee will pay 1/12th of the increase
multiplied by the number of elapsed months from the commencement of the Expense
Comparison Year ant thereafter will continue to pay 1/12th of the increase each
month until Lessee receives the next Expense Comparison Year's statement. By
April 1st following each Expense Comparison Year, Lessor will provided Lessee a
statement showing the total actual Operating Expenses for the calendar year just
ended, and Lessee's share of any increase over the Expense Base Year. If
Lessee's estimates paid to date for the preceding calendar year are less than
Lessee's share of the Increase, Lessee will pay the difference concurrently with
the next payment of Base Monthly Rent. In the event
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that Lessee has paid more than his share of estimates for the preceding calendar
year; Lessor will credit the amount towards Lessee's future Operating Expense
obligations.
D. (Deleted)
E. Lessee will not be entitled to any reduction, refund, offset,
allowance or rebate in Base Monthly Rent or any other sums due if the Operating
Expenses for any Expense Comparison Year are less than those of the Expense Base
Year nor shall the failure by Lessor to provide Lessee with a statement by April
1st of each year constitute a waiver by Lessor of its right to collect Lessee's
share of any increase in Operating Expenses. In addition, if for any reason
Lessor should not elect to bill Lessee for lump sum Operating Expense increases
or estimates for a particular Expense Comparison Year, Lessor's right to charge
Lessee for such expenses in subsequent years in not waived.
4.03 Taxes
A. As Additional Rent, Lessee will reimburse Lessor upon demand for all
taxes payable by Lessor (other than net income) as defined and stated in the
following paragraphs.
B. Definitions:
"Tax Base Year" is the tax fiscal year as indicated in 1.14. However, if the
project in which the Premises are located is not yet fully assessed or completed
as improved real property by the tax fiscal year shown in 1.14, the Tax Base
Year is the year in which the first tax bill reflects the full assessed value
of the Property.
"Tax Comparison Year" is each tax fiscal year commencing on the anniversary of
the Tax Base Year and ending twelve (12) months thereafter.
"Real Property Taxes: are: (i) any fee, license fee, license tax, business
license fee, commercial rental tax, levy, charge, assessment, penalty or tax
imposed by any taxing authority against the Property: (ii) any tax or fee on
Lessor's right to receive, or the receipt of, rent or income from the Property
or against Landlord's business of leasing the Property, (iii) any tax or charge
for fire protection, streets, sidewalks, road maintenance, refuse or other
services provided to the Property by any governmental agency: (iv) any tax
imposed upon this transaction, or based upon a re-assessment of the Project due
to a change in ownership or transfer of all or part of Lessor's interest in the
Property;: and (v) any charge or fee replacing, substituting for, or in addition
to any tax previously included within the definition of real property tax. Real
Property Taxes do not, however, include Lessor's federal or state income,
franchise, inheritance or estate taxes.
C. If the Real Property Taxes incurred or paid by Lessor for any Tax
Comparison Year ending or commencing during the Lease Term, are greater than
the Real Property Taxes incurred or paid by Lessor for the Tax Base Year, then
Lessee will pay Lessor an amount equal to the increase multiplied by Lessee's
Proportionate Share as indicated in 1.10. In the event of any partial Tax
Comparison Year, Lessee shall pay the increase, if any, based on the number of
days of such Tax Comparison Year included within the Lease Term.
D. Following the end of each Tax Comparison Year, Lessor shall provide
Lessee a statement of the amount of the increase, if any, in Real Property
Taxes, but failure to do so by Lessor does not constitute a waiver of its right
to collect Lessee's share of the increase in Real Property Taxes. Upon receipt
of the statement, Lessee will pay in full the amount of its share of increase.
In the event that any Tax Comparison Year amount is less than the Tax Base Year
amount, Lessee will not be entitled to any reduction in rent or to any refund,
offset, allowance or rebate of any nature. At Lessor's sole discretion, Lessor
may charge Lessee estimated Real Property Taxes and such estimates shall be
calculated and paid in a similar manner as described in paragraph 4.02C for
Operating Expense estimates. Should Lessee's Lease expire before Lessor is able
to determine the increase, if any, for the Lessee's last Tax Comparison Year,
Lessor will estimate the increase and Lessee will pay the estimated amount upon
demand by Lessor.
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E. Personal Property Taxes: Lessee will pay all taxes charged against trade
fixtures, furnishings, equipment or any other personal property belonging to
Lessee. Lessee will have personal property taxed billed separately from the
Project. If any of Lessee's personal property is taxed with the Project,
Lessee will pay Lessor the taxes for the personal property upon demand by
Lessor.
4.04 Based on Lessee's Proportionate Share defined in 1.10, Lessee agrees to
pay as Additional Rent to Lessor its share of any parking charges, utility
surcharges, occupancy taxes, or any other costs resulting from the statues or
regulations, or interpretations thereof, enacted by any governmental authority
in connection with the use or occupancy of the Project or the parking facilities
serving the Project, or any part thereof.
5. SECURITY DEPOSIT
5.01 (Deleted)
6. LEASE DOCUMENTATION FEE
6.01 (Deleted)
7. USE OF PREMISES: QUIET CONDUCT
7.01 The Premises may be used and occupied only for Lessee's Permitted Use
as shown in 1.05 and for no other purpose, without obtaining Lessor's prior
written consent. Lessee will comply with all covenants, conditions and
restrictions affecting the Premises. Lessee will promptly comply with all laws,
ordinances, orders and regulations affecting the Premises. Lessee will not
perform any act or carry on any practices that may injure the Project or the
Premises or be a nuisance or menace, or disturb the quiet enjoyment of other
Lessees in the Project including but not limited to equipment which causes
vibration, use or storage of chemicals, or heat or noise which is not properly
insulated. Lessee will not cause, maintain or permit any outside storage on or
about the Premises. In addition, Lessee will not allow any condition or thing
to remain on or about the Premises which diminishes the appearance or aesthetic
qualities of the Premises an/or the Project or the surrounding property. The
keeping of a dog or other animal on or about the Premises is expressly
prohibited.
7.02 Hazardous Material. Lessor represents and warrants that, with respect to
the Premises and the building and land upon which the Premises are located, all
of which are hereinafter referred to as the "Property", Lessor has not received
written notice from any governmental agency with respect to any hazardous
condition on the Property related to any toxic or contaminated materials or
substances. In the event Lessor does receive such a notice, Lessor agrees to
take such actions as is necessary to bring the Property into compliance with
notice subject to the rights of Lessor to contest the validity of applicability
of such notice. In the event Lessor does not cure, in a timely fashion., the
violation described in such notice, Lessee shall have the right to terminate
this lease upon 90 days written notice to Lessor.
Lessee convenants not to introduce any toxic material onto the Project,
without limiting the generality of the foregoing, Lessee shall not store, use
or dispose of any toxic material in or on the Project, Lessee shall comply with
all applicable Federal, State, and local law or ordinances pertaining to the
storage, use or disposal of any toxic material.
8. TENANT IMPROVEMENTS
8.01 Tenant Improvements to be performed in the Premises, if any,
will be performed in accordance with the terms and provisions entitled "Lessor's
Work" contained in "Exhibit B" attached. Thereafter during the Lease Term,
Lessor will be under no obligation to alter, change, decorate or improve the
Premises.
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9. PARKING
9.01 (Deleted)
10. UTILITIES (delete 10.01 or 10.02)
10.01 Serviced Space: Lessor will provide to the Premises between
the hours of 8 a.m. and 6 p.m., Monday through Friday or any other time periods
established by Lessor:
A. All utilities including heat, electricity, gas, power and air-
conditioning, if any, as are commercially reasonable for normal office use. If
Lessee uses heat, water, electricity, gas, power or air-conditioning in excess
of normal office use, Lessor may separately meter such services at Lessee's
expense where applicable, or Lessor, may, at its sole discretion, measure or
estimate the increased use and Lessee will pay Lessor, on demand, the amount of
the measured or estimated increase. Lessor will also provide water for rest
room facilities (if any). However, Lessee will pay all services directly
contracted for by Lessee.
B. Such janitorial service as is commercially reasonable.
10.02 (Deleted)
10.03 Lessor will not be liable or deemed in default to Lessee nor will
there be any abatement of rent for any interruption or reduction of utilities or
services not caused by any act of Lessor or any act reasonably beyond Lessor's
control. Lessee agrees to comply with energy conservation programs implemented
by Lessor by reason of enacted laws or ordinances.
10.04 Lessee will contract and pay for all telephone and such other
services for the Premises subject to the provisions of 11.03.
11. ALTERATIONS, MECHANIC'S LIENS
11.01 Lessee will not make any alterations to the interior of the
Premises without Lessor's prior written consent which will not be unreasonably
withheld. If Lessor gives its consent, no such alterations will proceed
without Lessor's prior written approval of (i) Lessee's contractor, (ii)
certificates of insurance by Lessee's contractor for public liability and
automobile liability and property damage insurance with limits not less than
$1,000,000/$250,000/$500,000 respectively endorsed to show Lessor as an
additional insured and for worker's compensation as required, (iii) detailed
plans and specifications for such work. Lessee agrees that it will have its
contractor execute a waiver of mechanic's lien and that Lessee will guarantee
than any mechanic's lien placed against the Project will be removed by Lessee
within thirty (30) days of receipt of notice of intent to file lien. In
addition, before alterations may begin, valid building permits or other permits
or licenses required must be furnished to Lessor, and, once the alterations
begin, Lessee will diligently and continuously pursue their completion. At
Lessor's option, any alterations may become part of the realty and belong to
Lessor, without compensation to Lessee and will pass title to Lessor under this
Lease as by a Bill of Sale. If requested by Lessor, Lessee will pay, prior to
the commencement of construction, an amount determined by Lessor necessary to
cover the costs of demolishing such alterations and/or the cost of returning the
Premises to their condition before any such alterations. Lessor may also
require Lessee to provide Lessor, at Lessee's sole cost and expense, a payment
and performance bond in form acceptable to Lessor, in a principal amount not
less than one and one-half times the estimated cost of such alterations, to
insure Lessor against any liability for mechanic's and materialmen's liens and
to insure completion of the work.
11.02 Notwithstanding anything in 11.01, Lessee may, with written
consent of Lessor, install trade fixtures, equipment, and machinery in
conformance with the ordinances of the applicable city and county, and they may
be removed upon termination of this Lease provided the Premises are not damaged
by their
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removal.
11.03 All private telephone systems and/or other related
telecommunications equipment and lines may not be installed without Lessor's
prior written consent. In addition, if Lessor gives consent all equipment must
be installed within Lessee's Premises and, upon termination of this Lease
removed and the Premises restored to the same condition as before such
installation..
11.04 Lessee will pay all costs for alterations and will keep the
Premises, the Project and the underlying property free from any liens arising
out of work performed for, materials, furnished to or obligation incurred by
Lessee.
11.05 Lessor will have the right to construct or permit construction of
tenant improvements in or about the Project for existing and new lessees and to
alter any public areas in and around the Project. Notwithstanding anything
which may be contained in this Lease, Lessee understands this right of Lessor
and agrees that such construction will not be deemed to constitute a breach of
this Lease by Lessor and Lessee waives any such claim which might arise from
such construction.
12. FIRE INSURANCE: HAZARDS AND LIABILITY INSURANCE
12.01 Except as expressly provided as Lessee's Permitted Use, or as
otherwise consented to by Lessor in writing, Lessee shall not do or permit
anything to be done within or about the Premises which will increase the
existing rate of insurance on the Project or cause the cancellation of any
insurance policy covering the Project. Nor shall Lessee keep, use of sell, or
permit anyone to keep, use or sell, any article in or about the Premises, which
may be prohibited by the standard form of fire and other insurance policies.
Lessee shall, at its sole cost and expense, comply with any requirements
pertaining to the Premises or any insurance organizations insuring the Project
and Project-related apparatus. Lessee agrees to pay to Lessor, as Additional
Rent, any increases in premiums on policies resulting from Lessee's Permitted
Use or other use consented to by Lessor which increases Lessor's premiums or
requires extended coverage by Lessor to insure the Premises.
12.02 Lessee, at all times during the term of this Lease and at Lessee's
sole expense, will maintain a policy of standard fire and extended coverage
insurance with "all risk" coverage on all Lessee's improvements and alterations
in or about the Premises and on all personal property and equipment to the
extend of a least ninety percent (90%) of their full replacement value. The
proceeds from this policy will be used by Lessee for the replacement of personal
property and equipment and the restorations of Lessee's improvements and/or
alterations. This policy will contain an express waiver, in favor of Lessor, of
any right of subrogation by the Insurer.
12.03 Lessee, at all time during the term of this Lease and at Lessee's
sole expense, will maintain a policy of comprehensive general liability coverage
with limits of not less than $1,000,000 combined single limit for bodily injury
and property damage, insuring against all liability of Lessee and its authorized
representatives arising out of or in connection with Lessee's use or occupancy
of the Premises. This policy of insurance will name Lessor as an additional
insured and will include an express waiver of subrogation by the insurer in
favor of Lessor and will release Lessor from any claims for damage to any
person, to the Premises, and to the Project, and to Lessee's personal property,
equipment, improvements and alterations in or on the Premises of the Project,
caused by or resulting from risks which are to be insured against under this
Lease.
12.04 All insurance required to be provided by Lessee under this Lease
will (a) be issued by an insurance company authorized to do business in the
state in which the Premises are located and which is satisfactory to Lessor, (b)
be primary and noncontributing with any insurance carried by Lessor, and (c)
contain an endorsement requiring at least thirty (30) days prior written notice
of cancellation to Lessor before cancellation or change in coverage, scope or
limit of any policy. Lessee will deliver a certificate of insurance or
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a copy of the policy to Lessor within thirty (30) days of execution of this
Lease and will provide evidence of renewed insurance coverage at each
anniversary, prior to the expirations of any current policies. Lessee's failure
to provide evidence of this coverage to Lessor may, in Lessor's sole discretion,
constitute a default under this Lease.
13. INDEMNIFICATION AND WAIVER OF CLAIMS
13.01 Lessee waives all claims against Lessor for damage to any
property in or about the Premises and for injury to any persons including death
resulting therefrom, regardless of cause or time of occurrence. Lessee will
defend, indemnity and hold Lessor harmless from and against any and all claims,
actions. Proceedings, expenses, damages and liabilities, including attorneys'
fees, arising out of, connected with, or resulting from any use of the Premises
by Lessee, its employees, agents, visitors or licensees, including, without
limitation, any failure of Lessee to comply fully with all of the terms and
conditions of this Lease, except for any damage or injury which is the direct
result of intentional acts by Lessor, its employees, agents, visitors or
licensees.
14. REPAIRS
14.01 Lessee shall, at its sole expense, keep and maintain the
Premises and every part thereof (excepting air-conditioning, common use
equipment, exterior walls and roofs, which Lessor agrees to repair unless
damages are due to the neglect of intentional acts of Lessee or its agents,
employees, visitors, or licensees), including interior windows, skylights,
doors, any store fronts and the interior of the Premises, in good and sanitary
order, condition and repair,. Lessee will, also, at its sole cost keep and
maintain all utilities, fixtures, plumbing and mechanical equipment used by
Lessee in good order and repair and furnish all expendables(light bulbs (unless
provided by Lessor), paper goods, soaps, etc.) used in the Premises. The
standard for comparison and need of repair will be the condition of the Premises
at the time of commencement of this Lease and all repairs will be made by a
licensed and bonded contractor approved by Lessor.
14.02 Lessee will not make repairs to the Premises at the cost of Lessor
whether by reduction of rent or otherwise, or vacate the Premises or terminate
the Lease with abatement or termination of rent if repairs are not made. If
during the Term, any alteration, addition or change to the Premises if required
by legal authorities, Lessee, at its sole expense, shall promptly make the same.
Lessor reserves the right to make any such repairs not made or maintained in
good condition by Lessee and Lessee shall reimburse Lessor for all such costs
upon demand.
14.03 Lessor will not be liable for any failure to make any repairs or
perform any maintenance and there will be no abatement of rent, nor liability of
Lessor by reason of any injury to or interference with Lessee's business arising
from the making or failure to make any repair, alteration or improvement in or
to any portion of the Premises or to Lessee's fixtures, appurtenances and
equipment.
14.04 If repairs deemed necessary by Lessor or any government authority
are not made by Lessee within the prescribed time frame as requested in
writing, Lessee shall be in default of this Lease.
15. AUCTIONS, SIGNS, LANDSCAPING
15.01 Lessee will not conduct or permit to be conducted any sale by
auction on the Premises. Lessor will have the right to control landscaping and
approve the placement, size, and quality of signs. Lessee shall comply with the
terms and conditions regarding a sign criteria set forth in Exhibit "C"
attached. Lessee will not make alterations or additions to the landscaping and
will not place signs which are
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visible from the outside of any buildings of the Project without prior written
consent of Lessor. Lessor will have the right in its sole discretion to
withhold its consent. Any signs not in conformity with this Lease may be
removed by Lessor at Lessee's expense.
16. ENTRY BY LESSOR
16.01 Lessee will permit Lessor and Lessor's agents to enter the
Premises at all reasonable times for the purpose of inspecting the same, or for
the purpose of maintaining the Project, or for the purpose of making repairs,
alterations or additions to any portion of the Project, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, or for the purpose of posting notices of non responsibility for
alterations, additions or repairs, or for the purpose of showing the Premises to
prospective tenants during the last six months of the Lease Term, or placing
upon the Project any usual or ordinary "for sale" signs without any rebate of
rents and without an liability to Lessee for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned. Lessee will permit Lessor at any
time within sixty (60) days prior to the expirations of this Lease, to place
upon the Premises any usual or ordinary "to let" or "to lease" signs. For each
of the above purposes, Lessor will at all time have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Lessee's
vaults, safes and filing cabinets. Lessee will not alter any lock or install a
new or additional lock or any bolt on any door of the Premises without the prior
written consent of Lessor, which will not be unreasonably withheld. If Lessor
gives its consent, such work shall be undertaken by a locksmith approved by
Lessor, at Lessee's sole cost, and Lessee will furnish Lessor with a key.
Lessor retains the right the charge Lessee for restoring any altered doors to
their condition prior to the installation of the new or additional locks.
17. ABANDONMENT
17.01 (Deleted)
18. LANDLORD'S LIEN/STORAGE
18.01 As security for payment of rent, damages and all other
payments required to be made by this Lease, Lessee hereby grants to Lessor a
lien upon all property of Lessee now or subsequently located upon the leased
Premises. If Lessee abandons or vacates any substantial portion of the leased
Premises or is in default in the payment of any rent or additional rent, damages
or other payments required to be made by this Lease or is in default of any
other provision of this Lease, Lessor may enter upon the leased premises,
whether by changing or picking locks, and take possession pursuant to paragraph
22.01 of this Lease of all or any part of the personal property, and may sell
all or any part of the personal property at a public or private sale, in one
or successive sales to the highest bidder all of Lessee's title and interest in
the personal property sold to him. The proceeds of the sale of the personal
property shall be applied by Lessor toward the reasonable costs and expenses of
the sale, including attorney's fees, and then toward the payment of all sums
then due by Lessee to Lessor under the terms of this Lease; any excess remaining
shall be paid to Lessee or any other person entitle thereto by law.
18.02 Any and all property which may be removed from the Premises by
Lessor pursuant to the authority of this Lease or of law, to which Lessee is or
may be entitled, may be handled, removed and stored, as the case may be, by or
at the direction of Lessor at the risk, cost and expense of Lessee, and Lessor
shall in no event be responsible for he value, preservations or safekeeping
thereof. Lessee shall pay to Lessor, upon demand,any and all expenses incurred
in such removal and all storage charges against such property so long as the
same shall be in Lessor's possession or under Lessor's control. Any such
property of Lessee not
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retaken by Lessee from storage within 30 days after removal from the Premises
shall, at Lessor's option, be deemed conveyed by Lessee to Lessor under this
Lease as by a bill of sale without further payment or credit by Lessor to
Lessee.
19. DESTRUCTION
19.01 Should the Premises or the Project be partially destroyed by
any cause not the faulty of Lessee (or any person in or about the Premises with
the consent, expressed or implied, of Lessee), this Lease will continue in full
force and effect and Lessor, at Lessor's own cost and expense, will promptly
commence the work of repairing and restoring the Premises to their prior
condition providing that the work can be accomplished under all applicable
government laws and regulations within sixty (60) working days from the date of
damage at a cost not exceeding twenty-five (25%) of the total replacement cost
of the Premises. Within thirty (30) days of the occurrence of partial
destruction, Lessor may terminate this Lease as of the date of the occurrence if
nine (9) months or less remain in the Lease Terms.
Should the Premises or the building in which the Premises are a part
be so far destroyed by any cause not the fault of Lessee (or any person in or
about the Premises with the consent, expressed or implied, of Lessee) that they
cannot be repaired or restored to their former condition with sixty (60) days of
the date of damage or at a cost exceeding twenty-five (25%) of the total
replacement cost of the Premises or the building as the case may be, Lessor may
at Lessor's option either:
A. Continue this Lease in full force and effect by repairing and
restoring, at Lessor's own cost and expense, the Premises to their former
conditions: or
B. Terminate this Lease by giving Lessee written notice of such
termination.
Should the Premises by partially or totally destroyed by any cause of
Lessee, or any person in or about the Premises with the consent, expressed or
implied of Lessee, this Lease will remain in full force and effect and Lessee
shall immediately commence work to repair the damage and diligently pursue its
completion in accordance with the provisions of paragraph 11 hereof.
Any insurance proceeds received by Lessor because of the total or
partial destruction of the Premises or the building on the Premises will be the
sole property of Lessor, free from any claims of Lessee, and may be used by
Lessor for whatever purposes Lessor may desire.
Should Lessor elect to repair and restore the Premises to their former
condition, or should Lessor be required to restore the Premises to their former
condition, there will be a proportional abatement in the amount of rent payable
during the period of repair and restoration as long as Lessee (or any person in
or about the Premises with the consent, expressed or implied of Lessee) is not
the cause of the total or partial destruction. The rent due under the terms of
the Lease will be reduced between the date of destruction and the date of
completion of restoration and repairs based on the extend to which destruction
interferes with Lessee's use of the Premises.
20. ASSIGNMENT, SUBLETTING AND TRANSFERS OF OWNERSHIP
20.01 Lessee will not, without Lessor's prior written consent, assign,
sell, mortgage, encumber, convey, or otherwise transfer all or any part of
Lessee's leasehold estate, or permit the Premises to be occupied by anyone other
than Lessee and Lessee's employees or sublet the premises or any portion thereof
(collectively called "Transfer"). Lessee must supply Lessor with any and all
documents deemed necessary by Lessor to evaluate any proposed Transfer at least
sixty (60) days in advance of Lessee's proposed Transfer date.
20.02 Lessor, within thirty (30) days after receipt of such
documents, may terminate this Lease on the date the Transfer was to have taken
effect; in this event, Lessor may, but is not obligated to,
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effect a transfer directly with the transferee. In the case of a sublease,
Lessor will also have the right to terminate this Lease with respect to that
portion of the Premises subleased or that portion of the term during which the
sublease is in effect, in which event, Lessee's liability and this Lease will
remain in full force and effect for the remainder of the Premises or term.
20.03 If lessor does not terminate this Lease, in whole or in part, as
stated in Section 20.02, Lessor will not unreasonable withhold its consent
except that such consent need not be granted if: (a) in the reasonable judgment
of Lessor the transferee is of a character of is engaged in a business which is
not in keeping with the standards of Lessor for the Project; (b) in the
reasonable judgment of Lessor any purpose for which the transferee intends to
use the Premises is not in keeping with the standards of Lessor for the Project;
provided in no event may any purpose for which transferee intends to use the
Premises be in violation of the Lease; (c) the portion of the Premises subject
to the transfer is not regular in shape with appropriate means of entering and
exiting, including adherence to any local, county or other governmental codes,
or is not otherwise suitable for the normal purposes associated with such a
Transfer; or (d) Tenant is in default under this Lease or any other lease with
Lessor.
20.04 In the event Lessor consent to a Transfer, Lessee will pay Lessor
the excess, if any, of the rent and any other charges reserved in the Transfer
over the allocable portion of the rent and other charges hereunder for that
portion of the Premises subject to the Transfer. For the purpose of this
section, the rent reserved in the Transfer will be deemed to include any lump
sum payment or other consideration given to Lessee in consideration for the
Transfer. Lessee will pay or cause the transferee to pay to Lessor this
additional rent together with the monthly installment of rent due. Lessee shall
be allowed to deduct from this additional rent any expense related to the
transfer such as commissions, legal fees, etc.
20.05 Any consent to any Transfer which may be given by Lessor, or the
acceptance of any rent, charges or other consideration by Lessor from Lessee or
any third party, will not constitute a waiver by Lessor of the provisions of
this Lease or a release of Lessee from the full performance by it of the
covenants stated herein; any consent given by Lessor to any Transfer will not
relive Lessee (or any transferee of Lessee) from the above requirements for
obtaining the written consent of Lessor to any subsequent Transfer.
20.06 If a default under this Lease should occur while the Premises or
any part of the Premises are assigned, sublet or otherwise transferred, Lessor,
in addition to any other remedies provided for within this Lease or by law, may
at its option collect directly from the transferee all rent or other
consideration becoming due to Lessee under the Transfer and apply these monies
against any sums due to Lessor by Lessee; and Lessee authorizes and directs any
transferee to make payments of rent or other consideration direct to Lessor upon
receipt of notice from Lessor. No direct collection by Lessor from any
transferee should be construed to constitute a novation or a release of Lessee
or any guarantor Lessee from the further performance of is obligations in
connection with this Lease.
21. BREACH BY LESSEE
21.01 Lessee will be in breach of this Lease if any time during the
term of this Lease (and regardless of the pendency of any bankruptcy,
reorganization, receivership, insolvency or other proceedings in law, in equity
or before any administrative tribunal which have or might have the effect of
preventing Lessee from complying with the terms of this Lease):
A. Lessee falls to make payment of any installment of Base
Monthly Rent, Additional Rent, or of any other sum herein specified to be paid
by Lessee, and such failure is not cured within three (3) days after Lessor's
written notice to Lessee of such failure of payment; or
B. Lessee fails to observe or perform any of its other covenants,
agreements to
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obligations hereunder, and such failure is not cured within ten (10) days after
Lessor's written notice to Lessee of such failure; provided, however, that is
the nature of Lessee's obligation is such that more than ten (10) days are
required for performance, then Lessee will not be in breach if Lessee commences
performance within such 10 day period and thereafter diligently prosecutes the
same to completion; or
C. Lessee become insolvent, makes a transfer in fraud of its
creditors
makes a transfer for the benefit of its creditors, voluntarily files for
bankruptcy, is adjudged bankrupt or insolvent in proceedings files against
Lessee, a receiver, trustee, or custodian is appointed for all or substantially
all of Lessee's assets, fails to pay its debts as the become due, convenes a
meeting of all or a portion of its creditors, or performs any acts of bankruptcy
of insolvency, including the selling of its assets to pay creditors; or
D. Lessee has abandoned the Premises as defined in paragraph 17
above.
22. REMEDIES OF LESSOR UPON LESSEE'S DEFAULT
22.01 Repossession of Premises: Upon any termination of this Lease,
whether by lapse of time or upon termination of Lessee's right to possession
without termination of the Lease, Lessee will surrender possession and vacate
the Premises immediately and deliver possession to Lessor. Lessor reserves all
rights and remedies available to it pursuant to the terms and conditions of this
Lease as well as under state law; including but not limited to its statutory
right to change locks. Lessee hereby grants Lessor the full and free right
whether by changing or picking locks, if necessary, to enter and respossess the
Premises, with or without process of law. Lessee releases Lessor of any
liability for any damage resulting therefrom and waives any right to claim
damage for such re-entry. Lessee also agrees that Lessor's right to re-lease
or any other right given to Lessor hereunder or by operation of law is not
relinquished.
22.02 Termination of Lease After Breach: If Lessee breaches this Lease
before the end of the term, or if its right to possession is terminated by
Lessor because of Lessee's breach of this Lease, then this Lease may be
terminated by Lessor at is option. On such termination Lessor may recover from
Lessee, in addition to the remedies permitted by law:
A. The worth, at the time of the award, of the unpaid Base Monthly
Rents and Additional Rents which had been earned at the time of termination of
this Lease:
B. The worth, at the time of the award, of the amount by which the
unpaid Base Monthly Rents and Additional Rents which would have been earned
after the date of termination of this Lease until the time of award exceeds the
amount of the loss of rents that Lessee proves could have been reasonably
avoided:
C. The worth, at the time of award, of the amount by which the unpaid
Base Monthly Rents and Additional Rents for the balance of the Lease Term after
the time of award exceeds the amount of such rental loss for such period that
Lessee proves could be reasonably avoided: and
D. Any other amount, and court costs, necessary to compensate Lessor
for all detriment proximately caused by Lessee's breach of its obligations under
this Lease, or which in the ordinary course of events would be likely to result
therefrom. The detriment proximately caused by Lessee's breach will include,
without limitation, (i) expenses for cleaning, repairing or restoring the
Premises, (ii) expenses for altering, remodeling or otherwise improving the
Premises for the purpose of reletting, (iii) brokers' fees and commissions ,
advertising costs and other expenses of reletting the Premises, (iv) costs of
carrying the Premises such as taxes, insurance premiums, utilities and security
precautions, (v) expenses in retaking possession of the Premises, (vi)
attorney's fees and court costs, (vii) any unearned brokerage commissions paid
in connection with the Lease, (viii) parking fees or occupancy taxes due under
the Lease, (ix) reimbursement of any previously waived Base Rent, Additional
Rent, free rent, or reduced rental rate, and (x) any concession made or paid by
Lessor to the benefit of Lessee in consideration of this Lease including, but
not limited to, any moving allowances,
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contributions or payments by Lessor for tenant improvements to build-out
allowances, or assumptions by Lessor of any of Lessee's previous Lease
obligations.
22.03 Continuation of Lease After Breach: Notwithstanding the
foregoing, in the event Lessee has breached this Lease, this Lease at Lessor's
option, will continue in full force and effect s long as Lessor does not
terminate Lessee's right to possession of the Premises, and in such event Lessor
may enforce all of its rights and remedies under this Lease, including the right
to recover rent as it becomes due. In addition, Lessor shall not be liable in
any way whatsoever for its failure or refusal to relet the Premises. For
purposes of this subparagraph 22.03, the following acts by Lessor will not
constitute the termination of Lessee's rights to possession of the premises:
A. Acts of maintenance or preservation or efforts to relet the
Premises, including, but not limited to alterations, remodeling, redecorating,
repairs, replacements and/or painting as Lessor shall consider advisable for the
purpose of reletting the Premises or any part thereof; or
B. The appointment of a receiver upon the initiative of Lessor to
protect Lessor's interest under this Lease in the Premises.
22.04 In the event of bankruptcy, Lessee assigns to Lessor all its
rights, title and interest in the Premises as security for its obligations and
covenants set forth in the Lease.
22.05 Definitions and Incidental Rights
A. "The worth, at the time of the award" of the amounts referred to in
22.02A, and 22.02 B, will be computed by allowing interest at the rate of ten
percent (10%) per annum. "The worth, at the time of the award" of the amount
referred to above in 22.02C will be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco in effect at the time
of the award, plus one percent (1%).
B. Any efforts by Lessor to lessen the damages caused by Lessee's
breach of this Lease will not waive Lessor's right to recover the damages set
forth above.
C. Nothing herein will be construed to affect other provisions of this
Lease regarding Lessor's right to indemnification from Lessee for liability
arising prior to the termination of this Lease for personal injuries or
property damage.
D. No right or remedy conferred upon or reserved to Lessor in this
Lease is intended to be exclusive of any right or remedy granted to Lessor by
statute or common law, and each and every such right and remedy will be
cumulative.
23. SURRENDER OF LEASE NOT MERGER
23.01 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, will not work a merger and will, at the option of
Lessor, terminate all or any existing transfers, or may, at the option of
Lessor, operate as an assignment to it of any or all of such transfers.
24. ATTORNEYS FEES/COLLECTION CHARGES
24.01 In the event of any legal action or proceeding between the
parties hereto, actual attorneys' fees and expenses of the prevailing party in
any such action or proceeding will be added to the judgment therein. Should
Lessor be named as defendant in any suit brought against Lessee in connection
with or arising out of Lessee's occupancy hereunder, Lessee will pay to Lessor
its costs and expenses incurred in such suit, including actual attorney's fees.
24.02 If Lessor utilizes the services of any attorney at law for the
purpose of collecting any rent due and unpaid by Lessee after three (3) days'
written notice to Lessee of such nonpayment of rent or in
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connection with any other breach of this Lease by Lessee, Lessee agrees to pay
Lessor actual attorneys' fees as determined by Lessor such services, regardless
of the fact that no legal action may be commenced or filed by Lessor.
25. CONDEMNATION
25.01 If twenty-five (25%) or more of the Premises is taken for any
public or quasi-public purposes by any lawful government power or authority, by
exercise of the right of appropriation, reverse condemnation, condemnation or
eminent domain, or sold to prevent such taking, the Lessee or the Lessor may at
its option terminate this Lease as of the effective date thereof. Lessee will
not because of such taking assert any claim against the Lessor or the taking
authority for any compensation because of such taking, and Lessor will be
entitled to receive the entire amount of any award without deduction for any
estate of interest of Lessee. If less than twenty-five (25%) of the Premises is
taken, Lessor at its option may terminate this Lease. If Lessor does not so
elect, Lessor will promptly proceed to restore the Premises to substantially its
same condition prior to such partial taking, allowing for any reasonable effects
of such taking, an a proportionate allowance will be made to Lessee for the rent
corresponding to the time during which, and to the part of the Premises which,
Lessee is deprived on account of such taking and restoration.
26. RULES AND REGULATIONS
26.01 Lessee will faithfully observe and comply with the Rules and
Regulations printed on or attached to this Lease and Lessor reserves the right
to modify and amend them as it deems necessary. Lessor will not be responsible
to Lessee for the nonperformance by any other Lessee or occupant of the Project
of any of said Rules and Regulations.
26.02 In the event that Lessee fails to cure any violations of such
Rules and Regulations following ten (10) days' written notice by Lessor, such
failure to cure shall be deemed a material breach of Lease by Lessee.
27. ESTOPPEL CERTIFICATE
27.01 Lessee will execute and deliver to Lessor, upon not less than
ten (10) days prior written notice, a statement in writing certifying that his
Lease is in full force and effect, and that the Base Monthly Rent and Additional
Rent payable hereunder is unmodified and in full force and effect (or, if
modified, stating the nature of such modification) and the date to which rent
and other charges are paid in advance, if any, and acknowledging that there are
not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder
or specifying such defaults if they are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee that (1) this Lease is in full force and effect, without
modification except as may be represented by Lessor; (2) there are no uncured
defaults in Lessor's performance; and (3) not more than one (1) month's rents
has been paid in advance.
28. SALE BY LESSOR
28.01 In the event of a sale or conveyance by Lessor of the Project the
same shall operate to release Lessor from any liability upon any of the
covenants or conditions, expressed or implied, herein, contained in favor of
Lessee, an in such event Lessee agrees to look solely to the responsibility of
the successor in interest of Lessor in and to this Lease. This Lease will not
be affected by any such sale, and Lessee agrees to attorn to the purchaser or
assignee.
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29. NOTICES
29.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments, or designations under this
Lease by either party to the other will be in writing and will be considered
sufficiently given and served upon the other party if sent by certified mail or
registered, return receipt requested, postage prepaid, and addressed as
indicated in 1.03 and 1.04.
30. NO WAIVER
30.01 The failure of Lessor insist in any one of more cases upon the
strict performance of any term, covenant or condition of this Lease will not be
construed as a waiver of a subsequent breach of the same or any covenant, term
or condition; nor shall any delay or omission by Lessor to seek a remedy for any
breach of this Lease be deemed a waiver by Lessor of its remedies or rights with
respect to such a breach.
31. LESSEE'S INTENT
31.01 If Lessee intends to vacate the Premises on the Lease
Expiration date, Lessee will give Lessor ninety (90) days prior written notice
of such intent to vacate the Premises. If Lessee remains in the Premises after
the Lease Expiration date, and has not given prior written notice to Lessor,
such continuance of possession by Lessee will be deemed to be a month-to month
tenancy at the sufferance of Lessor terminable on thirty (30) day notice at any
time by either party. All provisions of this Lease, except those pertaining to
term and rent, will apply to the month-to month tenancy. Lessee will pay Base
Monthly Rent in an amount equal to 150% of the rents payable for the last full
calendar month during the regular term.
32. PROJECT PLAN
32.01 In the event Lessor requires the Premises for use in conjunction
with another suite or for other reasons connected with the Project planning
program, Lessor, upon notifying Lessee in writing, shall have the right to move
Lessee to comparable space in the Project of which the Premises forms a part, at
Lessor's sole cost and expense and the terms and conditions of the original
Lease will remain in full force and effect excepting that the Premises will be
in a new location and the Base Monthly Rent and any Additional Rent will be
adjusted as necessary to reflect any increase or decrease in square footage.
However, if the new space does not meet with Lessee's approval, Lessee will have
the right to cancel this Lease upon giving Lessor thirty (30) days' notice
within ten (10) days of receipt of Lessor's notification. Should Lessee elect
to cancel the Lease as provided in this paragraph, the effective expiration date
will equal the projected move-in date of the space Lessor wishes Lessee to move
to as indicated in Lessor's written notification to Lessee.
33. DEFAULT OF LESSOR/LIMITATION OF LIABILITY
33.01 In the event of any default by Lessor hereunder, Lessee agrees
to give notice of such default, by registered mail, to Lessor at Lessor's Notice
Address as stated in 1.04 and to offer Lessor a reasonable opportunity to cure
the default.
In the event of any actual or alleged failure, breach or default
hereunder by Lessor, Lessee's sold and exclusive remedy will be against Lessor's
interest in the Project, and no partner of Lessor will be sued, be subject to
service of process, or have a judgment obtained against him in connection with
any alleged breach or default, and no writ of execution will be levied against
the assets of any partner, shareholder or officer of Lessor. The covenants and
agreements are enforceable by Lessor and also by any partner, shareholder or
officer of Lessor.
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34. EXPANSION CLAUSE
34.01 If during the Lease Term, Lessee executes a lease within the
Project for space larger than the present Premises with a lease equal to that
which remains on this Lease or one (1) year, whichever is greater, with a Base
Monthly Rent amount at least equal to the present Base Monthly Rent of this
Lease, this Lease shall be terminated upon the commencement date of the Lease
for such substitute space. Nowithstanding the above-stated, Lessee shall remain
obligated to pay for any adjustments in rent pursuant to Paragraphs 3 and 4 due
Lessor as a result of Lessee's tenancy hereunder and this obligation shall
survive the termination of this Lease pursuant to this Paragraph 34.
35. SUBORDINATION
35.01 Without the necessity of any additional document being executed by
Lessee for the purpose of effecting a subordination, and at the election of
Lessor or any mortgages with a lien on the Project or any ground lessor with
respect to the Project, this Lease will be subject and subordinate at all time
to (a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Project, and (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Project, ground leases or underlying leases, nor Lessor's interest or estate in
any of said items is specified as security. In the event that any ground lease
or underlying lease terminates for any reason or any mortgage or deed of trust
is foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Lessee will, notwithstanding any subordination, attorn to and become the Lessee
of the successor in interest to Lessor, at the option of such successor in
interest. Lessee covenants and agrees to execute and deliver, upon demand by
Lessor and in the form requested by Lessor any additional documents evidencing
the priority or subordination of this Lease with respect to any such ground
lease or underlying leases or the lien of any such mortgage or deed of trust.
Lessee hereby irrevocably appoints Lessor as attorney-in fact of Lessee to
execute, deliver and record any such document in the name and on behalf of
Lessee.
36. MISCELLANEOUS PROVISIONS
36.01 Whenever the singular number is used in this Lease and when
required by the context, the same will include the plural, and the masculine
gender will include the feminine and neuter genders, and the work "person" will
include corporations, firm, partnership, or association. If there be more than
one Lessee, the obligations imposed upon Lessee under this Lease will be joint
and several.
36.02 The headings or titles to paragraphs of this Lease are not a part
of this Lease and will have no effect upon the construction or interpretation of
any part of this Lease.
36.03 This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by an agreement in writing signed by duly authorized representatives
of all parties to this Lease. Lessee acknowledges that neither Lessor nor
Lessor's agents have made any representation or warranty as to the suitability
of the Premises to the conduct of Lessee's business. Any agreements, warranties
or representations not expressly contained herein will in no way bind either
Lessor or Lessee, and Lessor and Lessee expressly waive all claims for damages
by reason of any statement, representation, warranty, promise or agreement, if
any, not contained in this Lease.
36.04 Time is of the essence of each term and provision of this Lease.
36.05 Except as otherwise expressly stated, each payment required to be
made by Lessee is in addition to and not in substitution for other payments to
be made by Lessee.
36.06 Subject to Paragraph 20, the terms and provisions of this Lease
are binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of Lessor and Lessee.
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36.07 All covenants and agreements to be performed by Lessee under any
of the terms of this Lease will be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent.
36.08 In consideration of Lessor's covenants and agreements hereunder,
Lessee hereby covenants and agrees not to disclose any terms, covenants or
conditions of this Lease to any other party without the prior written consent of
Lessor.
36.09 If Lessee shall request Lessor's consent and Lessor shall fall or
refuse to give such consent, Lessee shall not be entitled to any damages for
any withholding by Lessor of its consent; Lessee's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Lessor has expressly agreed in writing not
to unreasonable withheld its consent or where as a matter of law Lessor may not
unreasonably withhold its consent.
37. DEPOSIT AGREEMENT
37.01 Lessor and Lessee hereby agree that Lessor will be entitled to
immediately endorse and cash Lessee's good faith rent and the Security Deposit
check(s) accompanying this Lease. It is further agreed and understood that such
action will not guarantee acceptance of this Lease by Lessor, but, in the event
Lessor does not accept this Lease, such deposits will be refunded in full to
Lessee. This Lease will be effective only after Lessee has received a copy
fully executed by Lessor.
38. GOVERNING LAW
38.01 This Lease is governed by and construed in accordance with the
laws of the state in which the Premises are located, and venue of any suit will
be in the county where the Premises are located.
39. NEGOTIATED TERMS
39.01 This Lease is the result of the negotiations of the parties and
has been agreed to by both Lessor and Lessee after prolonged discussion.
40. SEVERABILITY
40.01 If any provision of this Lease is found to be unenforceable,
all other provisions shall remain in full force and effect.
41. LANDLORD'S LIEN
41.01 LESSOR HEREUNDER WILL HAVE THE BENEFIT OF, AND THE RIGHT TO,
ANY AND ALL LANDLORD'S LIENS PROVIDED UNDER THE LAW BY WHICH THIS LEASE IS
GOVERNED.
42. SPECIAL PROVISIONS
42.01 Special provisions of the Lease number 43.01
through 43.01 and are attached hereto and made a
part hereof.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as
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of the day and year indicated by Lessor's execution date as written
below.
Individuals signing on behalf of a Lessee warrant that they have
the authority to bind their principals. in the event that Lessee
is a corporation, Lessee shall deliver of this Lease, a certified
copy of corporate resolutions adopted by Lessee authorizing said
corporation to enter into and perform the Lease and authorizing said
execution and delivery of -the lease on behalf or the corporation by
the parties executing and delivering this Lease. THIS LEASE,
WHETHER OR NOT EXECUTED BY LESSEE, IS SUBJECT TO ACCEPTANCE AND
EXECUTION BY LESSOR, ACTING ITSELF OR BY ITS AGENT ACTING THROUGH
ITS SENIOR VICE PRESIDENT, VICE PRESIDENT, REGIONAL VICE PRESIDENT,
REGIONAL MANAGER, ASSISTANT REGIONAL MANAGER, OR AREA MANAGER
AT ITS HOME OFFICE.
LESSOR: 101 Park L.L.C., an Oklahoma LESSEE: Laboratory Specialists of
limited liability corporation America, Inc. an Oklahoma
corporation.
101 PARK AVENUE BUILDING
BY: BY:/s/John Simonelli
DATE: 7/10/96 DATE: 6/28/96
(Execution Date) (Execution Date)
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43. SPECIAL PROVISIONS
43.01 Lessor shall occupy approximately 1,443 rentable square feet located
at Suite 490, 101 Park Avenue Building, Oklahoma City, OK, on a temporary
basis until construction is completed on the Premises.
A. The term of the temporary occupancy will be from July 1, 1996,
until Lessor takes occupancy of the Premises.
B. Lessee shall pay Base Monthly Rent of $1,142.38, for the term
of the temporary occupancy.
C. All other terms and conditions of this Lease shall apply to
the temporary occupancy.
THE FOLLOWING EXHIBITS HAVE NOT BEEN INCLUDED:
EXHIBIT A LEGAL DESCRIPTION OF PROPERTY
EXHIBIT B AGREEMENT FOR CONSTRUCTION IMPROVEMENTS
EXHIBIT C SIGNAGE
EXHIBIT D RULES AND REGULATIONS
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EXHIBIT "10.5"
Gardens Offices Building Lease Agreement
This Lease Agreement (hereinafter referred to as "Lease" ) made this 22nd
day of July , A.D., 1996 , by and between Swiss/M Ltd Partners
, known herein as Lessor, Laboratory Specialists, Inc ,
known herein as lessee, (The terms "Lessor" and "Lessee" shall be construed in
the singular or plural number according as they respectively represent one or
more than one person.)
ARTICLE I.
Premises
WITNESSETH, That the said Lessor does by these present Lease and Demise unto
the said Lessee the following described property, to-wit: Lying and being
situated in the City of Irving and County of Dallas State of Texas, and being
suite number 46, containing approximately 1,085 RSF net rentable square feet,
located at 2117 W Airport Freeway, Irving, Texas 75062 (the improvements thereon
being hereinafter referred to as "Building"), such floor area as shown on the
floor plan attached hereto as Exhibit "A", Page 1 (hereinafter referred to as
"Lease premises"). Lessee acknowledges that Lessor has explained to Lessee how
the net rentable square feet is calculated by Lessor. Based on these
calculations, it is understood by Lessor and Lessee and they agree that the
above number of net rentable square feet to be occupied under the terms of this
Lease is 8.26% of the total rentable Building area which is approximately 13,131
square feet Exhibit "A", Page 2. The real property on which the Building is
located and a part of is more particularly described on Exhibit "A", Page 3
which is attached hereto and incorporated herein by reference for all purposes.
ARTICLE II.
Term
The term of this lease shall be for 12 months beginning on the 1st
day of September A.D.1996 and ending the on 31th day of August A.D.1997
to be occupied as General Office and not otherwise.
Option: Additional One (1) Year terms
over the next four years and the rate for any given term may be increased up to
10% of the preceding term. In the event lessor intends to raise the base rate of
any given term lessor will give to lessee thirty (30) day written notice of the
increase in rent. Failure of lessor to give such statement by the end of any
given term shall not constitute a waiver by lessor of its right to increase base
rent for a given term. Increase will commence thirty (30) days after notice.
Each term will commence immediately unless written notice is given thirty (30)
days prior to the end of this twenty four (24) months term or any of the
optional terms that Lessee intends to vacate.
ARTICLE III.
Rent
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3.01 Base Rent. Lessee shall pay to Lessor the sum of Thirteen Thousand
Eight Hundred .... 0\100 DOLLARS ($13,800.00 ), payable in equal monthly
installments of Eleven Hundred Fifty... 0/100 Dollars ($1,150.00 ) each, from
the commencement date of this lease and continuing thereafter for the number of
months in the Lease term, payable in advance on the first (1st) day of each
month, without notice or demand. Rent for any fractional month at the beginning
or ending of the lease term shall be Pro rated on a daily basis.
That the Lessee shall pay the rent at 2121 W Airport Freeway Suite #460, Irving,
Texas 75062, monthly in advance as aforesaid, as the same shall fall due.
3.02 Additional Rent.
(a) Impositions. Lessee agrees to pay as additional rental of Lessee's
proportionate share of all increases in direct expenses. The term "Direct
Expense" as used herein shall include all taxes and assessments (general and
special), all utilities rates, insurance, operation and maintenance of the
Building, the land on which it is located and areas adjacent to it, and the
parking area and surrounding premises and all other impositions (ordinary and
extraordinary) of every kind and nature whatsoever, which may be levied,
assessed or imposed upon leased premises or any part thereof, or upon any
improvements at any time situated hereon, accruing or becoming due and payable
during the term of this lease. However, the following shall be excluded from
direct expenses: Costs of structural, alterations, commissions paid for leasing,
and depreciation. No decrease in direct expenses shall reduce Lessee's rent
below the annual sum set forth in this Lease. Lessee's proportionate share shall
be a fraction of the numerator of which is the net rentable square feet
comprising the Leased Premises and the denominator of which is 13,131 square
feet (the "total rentable Building area").
(b) Lessor shall give to Lessee on or after the first day of each calendar
year subsequent to the commencement date of this lease, a statement of the
increase or decrease , in rent payable by Lessee due to Lessee's proportionate
share of increases or decreases in direct expenses, but failure of Lessor to
give such statement by said date shall not constitute a waiver by Lessor of its
rights to require additional rental under the terms of this paragraph
correspondent to Lessee's proportionate share of such increases in direct
expenses.
(c) The amount of direct expenses for the preceding calendar year divided by
the total net rentable Building area hereunder shall be used as an estimate for
the current year and this amount less the base expense amount shall be divided
in twelve (12) equal monthly installments which Lessee shall pay to Lessor as
additional rent concurrently with the monthly payments of base rent payable
hereunder , commencing with the monthly rent payment next following receipt of
statement. These payments shall continue until the following year's statement is
rendered. If actual direct expenses exceed the estimated amount payable
hereunder, then upon receipt of a statement from Lessor, Lessee shall pay a lump
sum equal to any unpaid amount of his prorate share of the preceding calendar
years actual increase in direct expenses over the base expense amount; and the
monthly installments to be paid for the then current year shall be adjusted to
reflect such increase. If Lessee leased the Lease Premises for less than a full
calendar year, Lessee's liability for additional rent as computed herein shall
be prorated.
(d) Notwithstanding anything contained herein, the rent payable by Lessee
shall in no event be less than the base rent specified in this paragraph.
3.03 Late Charge. Each and every installment of rent, including any
additional rental or other charges which is not received within five (5) days
after the due date hereunder for any reason whatsoever, Lessee shall bear a late
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fee at the rate of 10% of all charges due and $10.00 per day from the due date
under the terms of this lease until the date it is paid.
3.04 Security Deposit. $1,150.00 shall be deposited for the designated
premises. The security deposit shall be held by Lessor without liability for
interest and as security for the performance by Lessee and Lessee's covenants
and obligations under the terms of this Lease. It is expressly understood that
the security deposit shall not be considered as advance payment of rental or a
measure of Lessor's damages in case of default by Lessee. Lessor may commingle
the security deposit with Lessor's other funds. This amount shall be retained by
Lessor until the following conditions have been met:
(a) Thirty (30) days written notice of intent to vacate prior to the
ending lease date or any holding over by Lessee; and
(b) Deductions,if any, have been made from the Security Deposit for (1)
any unpaid sum due under the lease,(2) any impositions and assessments or
repairs (beyond reasonable wear), and failure to clean vacated premises;
and
(C) After Inspection by Lessor of the vacated premises.
ARTICLE IV.
Use of Premises
(a) That the Lessor at his own expense shall be responsible for repairs to its
equipment and fixtures due to ordinary use. Lessee shall take good care of the
property and its fixtures, and suffer no waste; and shall, at Lessee's own
expense and cost, keep said premises (including plate glass); the plumbing work,
closets, pipes and fixtures from misuse and negligence belonging thereto in good
repair; and to the satisfaction of the municipal and police authorities, during
the term of this lease, and at the end or other expiration of the term shall
deliver up the demised premises in good order and condition, natural
deterioration and damage by fire and the elements only excepted; all alterations
and improvements, except trade fixtures, put in at the expense of Lessee shall
be the property of the Lessor and shall remain upon and be surrendered with the
premises as a part thereof at the termination of this lease. Lessee agrees to
accept possession of the premises in their present condition and to allow for
changes in such condition occurring by reasonable deterioration between the date
Lessee occupies said premises; that no improvements or alterations shall be made
in or to the hereby demised premises without the consent of the Lessor in
writing.
(b) That the Lessee within his control, shall promptly execute and fulfill
all the ordinances of the city corporation applicable to said premises and all
orders and requirements imposed by the Board of Health, Sanitary and Police
Departments, for the correction, prevention and abatement of nuisances in or
upon or connected with said premises during the said term, at Lessee's expense.
(c) That the Lessee shall not assign this agreement or underlet the premises,
or any part thereof (except as may be mentioned herein) or make any alterations
in the building (except as may be mentioned herein), without the
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consent of the Lessor in writing; or occupy or permit or suffer the same to be
occupied for any business or purpose deemed extra hazardous on account of fire.
(d) That Lessee shall, in case of fire, give to the Lessor, who shall
thereupon cause the damage to be repaired forthwith; but if the premises be by
the Lessor deemed so damaged as to be unfit for occupancy, or if the Lessor
shall decide to rebuild or remodel the said building, the lease shall cease, and
the rent be paid to the time of fire.
ARTICLE V.
Maintenance And Acceptance
5.01 Acceptance of Premises. Unless Exhibit "A" Page 4 is accepted, signed and
attached, Lessee agree that the Lease premise has been inspected and Lessee has
accepted lease space as is.
5.02 Landlord's Services. So long as Lessee is not in default hereunder,
Lessor shall furnish to Lessee and the Lease Premises during reasonable and
usual business hours the following services:
(a) Water (cold and hot) at those points of supply if currently being
provided in lease space.
(b) Waste Containers is provided for tenants use.
(c) Heated or refrigerated air is available during normal work hours and for
a reasonable time there after, except for such time needed for repairs or
routine maintenance, in season, at such temperatures and in such amounts as are
considered by Lessor to be reasonable. Whenever machines or equipment which
generate excessive heat are used in the Lease Premises which affect the
temperature otherwise maintained by the air conditioning system, Lessor may, at
its option, install supplementary air conditioning units in the Lease Premises
and the cost of all equipment, materials, installations, repair and maintenance
thereof, shall be borne solely by Lessee, and Lessee agrees to pay such costs to
Lessor, within ten (10) days after receipt from Lessor by Lessee of written
notice of such amount due. Lessor agrees to notify Lessee in advance if any
equipment Lessee elects to install in the Lease Premises will cause
supplementary air conditioning units to be installed, if Lessee first gives
written notice to Lessor of its intent together with a description of the
subject equipment sufficient for Lessor to make its determination. Notice is to
be given at least ten (10) days prior to installation.
(d) Electric lighting for all public and common areas in the manner and to
the extent deemed by Lessor to be standard;
(e) Electric current in the manner and to the extent deemed by Lessor to
be standard for office use;
(f) Parking lot, walkways and other common areas will be maintained in a
manner deemed suitable by Lessor;
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(g) Reasonable security measures for the common areas of the Building during
normal business hours.
Failure to any extent to furnish or any stoppage, interruption, failure or
any inadequacy of these defined services resulting from causes beyond the
control of Lessor, shall not render Lessor liable in any respect for damages to
either person or property, nor be construed as an eviction of Lessee, or permit
an abatement of rent, nor relieve Lessee from compliance with any covenant,
condition or agreement hereof. Should any equipment or machinery installed by
Lessor as part of the Lease Premises, or otherwise be an appurtenant part of the
Building in which the Lease Premises are located, breakdown, or for any cause
except the negligent acts or omissions of Landlord or its agents, cease to
function properly Lessor shall use reasonable diligence to repair same promptly,
but Lessee shall have no right to abatement of rent or damages on account of any
interruption in service occasioned thereby or resulting therefrom.
5.03 Lessor's Liability for Utility Cost. Lessor's liability for costs and
expenses for heating and air conditioning services and electricity services
shall include the furnishing of said services to the Lease Premises as long as
Lessee is not in breach hereof and subject to 5.02 (c).
5.04 Rules of Building. Lessee and Lessee's agents, employees, invitees,
licensees and visitors shall, at all times, fully comply with all the
requirements or rules of the Building which are attached hereto as Exhibit "B",
and made a part hereof as though fully set forth herein.
5.05 Repair and Maintenance. Lessee will, at Lessee's own cost and expense,
keep the Lease Premises in sound condition and good repair; provided that Lessor
shall maintain the structural and exterior components of the Building in sound
condition and good repair at Lessor's cost and expense. Lessee shall repair or
replace any damage or injury done to the Building or any part thereof by Lessee,
Lessee's agents, employees or invitees, and if Lessee fails to make such repairs
or replacements promptly, or within fifteen (15) days of occurrence, Lessor may,
at its option, make such repair or replacement and Lessee shall repay the cost
thereof to Lessor upon demand. Lessee shall permit Lessor, its officers, agents
and representatives, after proper notice, to enter into and upon any and all
parts of the Leased Premises, at all reasonable hours to inspect same or clean
or make repairs or alterations or additions as Lessor may deem necessary, and
Lessee shall not be entitled to any abatement or any reduction of rent by reason
thereof. Lessor shall have the absolute right to enter Lessee premises for
emergency repairs without notice.
ARTICLE VI.
Obligations of Lessor and Lessee
6.01 Taxes on Lessee's Property. Lessee shall be liable for all taxes levied or
assessed against personal property, furniture, or fixtures placed by Lessee in
the Promises. If any such taxes for which Lessee is liable are levied or
assessed against Lessor, or Lessor's property, and if Lessor elects to pay the
same or if the assessed value of Lessor's property is increased by inclusion of
personal property, furniture, or fixtures placed by Lessee in the Lease
Premises, and Lessor elects to pay the taxes based on such increase, Lessee
shall pay to Lessor upon demand that part of such taxes for which Lessee is
primarily liable hereunder.
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6.02 Alteration, Additions and Improvements. Lessee shall not make any
alterations, additions or improvements to the Lease Premises without the prior
written consent of Lessor. Consent for nonstructural alterations, additions, or
improvements shall not be unreasonably withheld by Lessor. Any additions,
alterations or improvements made by Lessee to the Lease Premises shall become
and remain the property of the Lessor. However, upon termination of this Lease,
and if termination is not due to an event of default by Lessee, Lessee shall
immediately repair and restore, at Lessee's expense, all plumbing, walls,
flooring, carpet, and ceiling to the same condition as existed immediately prior
to said installation and as required by Lessor.
6.03 Damage or Destruction. If the Leased Premises shall be damaged by fire or
other cause without fault or neglect of Lessee, its agents, employees,
licensees, or invitees, the damage shall be promptly repaired by the Lessor and
the rent, until such repairs are substantially completed, shall be abated on a
per them basis as to the part of the Lease Premises which is not usable for
ordinary business purposes of Lessee as determined by Lessor or Lessor's
architect, If all or any part of the Lease Premises or Building is damaged due
to fault or neglect of Lessee, its invitees, agents, employees, or licensees,
without prejudice to any other rights and remedies of Lessor, the damage shall
be promptly repaired by Lessor at Lessee's expense and there shall not be
apportionment or abatement of rent. In the event that Lessor makes such repairs,
Lessee agrees to pay on demand all of Lessor's costs and expenses so incurred,
together with interest on all sums so advanced at the rate of twelve percent
(12%) per annum from the date of expenditure of such sums until repayment by
Lessee, Any such charges shall be payable as additional rent hereunder.
6.04 Condemnation. If during the term of this Lease or any extension or
renewal thereof, all or a portion of the Leased Premises should be taken for any
public or quasi- public use under any governmental law, ordinance, or
regulation, or by right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, at the option of the Lessor or Lessee
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective as of the date of the taking of said Lease
Promises by the condemning authority. Lessor shall receive the entire award
from any such taking, except any portion of the award attributable to fixtures,
tenant improvements, and personal property placed on the Lease Premises at
Lessee's expense.
6.05 Mechanic's Lien. Lessee will not permit any mechanic's lien or liens to
be placed upon the Lease Premises or the Building or improvements thereon during
the term hereof, and in case of the filing of any such Lien, Lessee will
promptly pay same. If default in payment thereof shall continue for twenty (20)
days after written notice thereof from Lessor to Lessee, the Lessor shall have
the right and privilege, at Lessor's option, of paying the same or any portion
thereof without inquiry as to the validity thereof, and any amounts so paid,
including expenses and interest, shall be so much additional indebtedness
hereunder due from Lessee to Lessor and shall be repaid to Lessor immediately on
rendition of its bill therefor, together with interest at ten percent (10%) per
annum until repaid.
ARTICLE VII.
Indemnity, Liability and Insurance
7.01 Indemnification. Lessee agrees to indemnify and hold harmless Lessor
against any and all claims, demands, damages, costs and expenses, including
reasonable attorney's fees not to exceed $150.00 Dallas Per Hour for the defense
thereof, arising from the conduct or management (if Lessee's business or its use
of the Lease Premises
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or from any breach on the part of Lessee of any term or condition of this Lease,
or from any act or negligence of Lessee, its agents, contractors, employees,
subtenants, guests, or invitees, in or about the Lease Premises. In case of any
such action or proceeding brought against Lessor, Lessee covenants to defend
such action or proceeding by counsel acceptable to Lessor.
7.02 Insurance. Lessee shall, at its sole cost and expense, procure and
maintain throughout the term of this Lease a policy or policies of insurance
insuring Lessee against any and all liability for bodily or other injury to, or
death of a person or persons, and for damage to or destruction of property
occasioned by or arising out of or in connection with the use or occupancy of
the Lease Premises or by the conditions of the Lease Premises (including the
contractual liability of Lessee to indemnify Lessor contained herein), the
limits of such policy or policies is to be in an amount not less than Three
Hundred Thousand Dollars ($300,000) in respect to injuries to or death of any
one person, and in the amount of not less than One Hundred Thousand Dollars ($1
00,000) with respect to property damaged or destroyed or with such other limits
as may be required by Lessor, and to be written by an insurance company or
companies satisfactory to Lessor and licensed to do business in the State of
Texas, with Lessor named as an additional insured. Lessee shall obtain a written
obligation from each insurance company to notify Lessor at least ten (10) days
prior to cancellation of such insurance. Such policies or duly executed
certificate of insurance relating thereto shall be promptly delivered to Lessor
and renewals thereof, as required, shall be delivered to Lessor upon the
expiration of each respective policy term, If Lessee fails to comply with the
foregoing requirements relating to insurance, Lessor may obtain such insurance
and Lessee shall pay to Lessor immediately on demand premium costs thereof plus
interest on any sums so advanced at the highest lawful rate per annum (if there
is no maximum rate of interest provided by law with respect to such sums so
advanced, said sums shall bear interest at the rate of twelve percent (12%) per
annum from the date of the expenditure of such amount until repayment by
Lessee.) Any such charges shall be payable in addition to other rent hereunder.
ARTICLE VIII.
Assignment and Sublease
8.01 Assignment and Subletting by Lessee. Lessee shall have the right, but
only with the prior written consent of Lessor, to assign this Lease, and any
interest therein, and to sublet the Lease Promises, or any part thereof, or any
right or privilege appurtenant thereto, provided each assignee assumes in
writing all of Lessee's obligations under this Lease, and Lessee shall remain
liable for each and every obligation under this Lease. Lessor agrees that its
consent shall not be unreasonably withheld.
8.02 Assignment by Lessor. Lessor is expressly given the right to assign any
or all of its interest under the terms of this Lease.
ARTICLE IX.
Events of Default
9.01 The following events shall be deemed to be "events of default" by Lessee
under this Lease:
(a) Lessee shall fail to Pay any installment of rent and/or additional
rent as the same becomes due
7
<PAGE>
and payable and continues in default for ten (10) days after written notice of
default from Lessor.
(b) Lessee shall fail to comply with any term, provision, or covenant of
this Lease, other than the payment of rent, and shall not cure such failure
within twenty (20) days after written notice thereof to Lessee.
(c) Lessee shall make an assignment for the benefit of creditors.
(d) Lessee shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any state thereof, or Lessee shall be adjudged bankrupt or
insolvent in proceedings filed against Lessee thereunder and such adjudication
shall not be vacated or set aside or stayed within the time permitted by law.
(e) A receiver or trustee shall be appointed for all or substantially all
of the assets of Lessee and such receivership shall not be terminated or stayed
within the time permitted by law.
(f) Lessee has removed a substantial amount of furnishings from the Lease
Premises and rental is delinquent at the time of removal.
9.02 Remedies. Upon the occurrence of any event of default specified in
Section 9.01 hereof, Lessor shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever.
(a) Terminate this Lease in which event Lessee shall immediately
surrender the Lease Promises to Lessor, and if Lessee fails to do so, Lessor
may, without prejudice to another remedy which it may have for possession or
arrearages in rent, enter upon and take possession and expel or remove Lessee
and any other person who may be occupying said premises or any part thereof, and
Lessee agrees to pay to Lessor on demand the amount of all loss and damage which
Lessor may suffer by reason of such terminations, whether through inability to
relet the premises on satisfactory terms or otherwise. Lessor shall have no duty
of mitigation.
(b) Enter upon the Lease Premises and do whatever Lessee is obligated to
do under the terms of this Lease; and Lessee agrees to reimburse Lessor on
demand for any reasonable expenses which Lessor may incur in thus effecting
compliance with Lessee's obligations under this Lease, and Lessee further agrees
that Lessor shall not be liable for any damages resulting to Lessee from such
action.
No re-entry or taking possession of the Lease Premises by Lessor shall
be construed as an election on its part to terminate this Lease, unless a
written notice of such intention be given to Lessee. Notwithstanding any such
reletting or re-entry or taking possession, Lessor may at any time thereafter
elect to terminate this Lease for a previous default, Pursuit of any of the
foregoing remedies shall not preclude pursuit of any of the other remedies
herein provided or any other remedies provided by law, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of any rent due to
Lessor hereunder or of any damages accruing to Lessor by reason of the violation
of any of the terms, provisions, and covenants herein contained. Forbearance by
Lessor to enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of such default.
The loss or damage that Lessor may suffer by reason of an event of default
hereunder shall include the expense of repossession and any repairs or
remodeling undertaken by Lessor following repossession. Should Lessor at any
time terminate this Lease for any event of default, in addition to any other
remedy Lessor may
8
<PAGE>
have, Lessor may recover from Lessee all damages Lessor may incur by reason of
such default, including reasonable attorney fees, cost of recovering the
premises and the worth at the time of such termination of the excess, if any, of
the amount of rent and charges equivalent to rent reserved in this Lease for the
remainder of the stated term over the then reasonable rental value of the
premises for the remainder of said term, all of which amounts shall be
immediately payable from Lessee to Lessor.
Lessor shall not be liable to Lessee, its officers, agents, executor, or
assigns for any act by Lessor or its employees to enter the Lease Premises by
force or otherwise, or for retaking of the Lease Premises following any event of
default by Lessee.
9.03 Surrender of Premises. No act or thing done by the Lessor or its agents
during the term hereby granted shall be deemed an acceptance of a surrender of
the Lease Premises, and no agreement to accept a surrender of the premises shall
be valid unless the same be made in writing and subscribed by Lessor.
9.04 Lessor's Lien. Lessor shall retain all statutory Landlord's Liens on the
property of Lessee.
ARTICLE X.
Lessee's Authority
10.01 If Lessee is a corporation then Lessee represents and warrants that its
execution of this Lease is by its duly authorized officer(s) or agent(s) and
that all legal and corporate prerequisites have been completed, and that by such
execution and signing, the Lessee shall be bound hereunder.
10.02 Lessee upon request by Lessor, agrees to furnish to Lessor a copy of the
appropriate resolution evidencing the corporate approval by Lessee, setting
forth the authority of its officer(s) or agent(s) executing this Lease on behalf
of Lessee, certified by the current Secretary of the Lessee to be true, correct,
and unchanged, and in effect on the day of execution of this Lease,
10.03 Lessee acknowledges the Guaranty attached hereto as Exhibit "C" and
Incorporated herein for all purposes and given to induce Lessor to enter Into
this Lease.
ARTICLE XI.
Miscellaneous
11.01 Holding Over. Should Lessee, or any of its successors in interest, hold
over the Lease Premises, or any part hereof, after the expiration of the term of
this Lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy from month to month only, at a rental
equal to the rent payable for the last month of the term of this Lease Plus ten
percent (10%) of such amount. The Inclusion of the preceding sentence shall not
be construed as Lessor's consent for Lessee to hold over.
11.02 Mortgages. Lessee accepts this Lease subject to any Deeds of Trust,
security interest, or mortgages which might now or hereafter constitute a lien
upon the Building or improvements therein or on the Lease Premises
9
<PAGE>
and to zoning ordinances and other building and fire ordinances and governmental
regulations relating to the use of the Building. Lessee shall at any time
hereafter, on demand, execute any instruments, releases, or other document that
may be required by any mortgages for the purpose of subjecting and subordinating
this Lease to the lien of any such Deed of Trust, security interest, or mortgage
hereafter constituting a lien on the Building or improvements therein or the
Lease Premises. Lessor at its sole option shall have the right to waive the
applicability of this section so that this Lease will not be subject and
subordinate to any such Deed of Trust, security interest, or mortgage hereafter
constituting a lien on the Building or improvements therein or the Lease
Premises, Lessor at its sole option shall have the right to waive the
applicability of this section so that this Lease will not be subject and
subordinate to any such Deed of Trust, security interest or mortgage.
11.03 Notices and Address. All notices provided to be given under this Lease
shall be given by certified or registered mall addressed to the party at the
location shown hereinbelow, and the same shall be deemed mailed when properly
addressed and deposited in a U.S. Mail receptacle:
LESSOR:
Swiss/M Limited Partnership
dba: Plaza Tower & Garden Offices
2121 W. Airport Freeway Ste # 460
Irving, Texas 75062
LESSEE:
Labortatory Specialists, Inc.
113 Jarrell Dr.
Belle Chasse, LA 70037
11.04 Gender. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the contest otherwise requires.
11.05 Parties Bound. This Lease shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
legal representatives, successors, and assigns where permitted by this Lease.
11.06 Texas Law to Apply. This Lease shall be construed under and in
accordance with the laws of the State of Texas, and all obligations of the
parties created hereunder are performable in Irving, Dallas County, Texas.
11.07 Legal Construction. In case any one or more of the provisions contained
in this Lease shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions thereof and this Lease shall be construed
as if such invalid, illegal, or unenforceable provisions had never been
contained herein.
10
<PAGE>
11.08 Prior Agreements Superseded. This agreement constitutes the sole and
only agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the within subject
matter.
11.09 Amendment. No amendment, modification, or alteration of the terms hereof
shall be binding unless the same be in writing, dated subsequent to the date
hereof and duly executed by the parties hereto.
11.10 Joint and Several Liability. If there be more than one Lessee, the
obligations hereunder imposed upon Lessee shall be joint and several. If there
be a guarantor of Lessee's obligations hereunder, the obligations hereunder
imposed upon Lessee shall be the joint and several obligations of Lessee and
such guarantor and Lessor need not first proceed against the Lessee hereunder
before proceeding against such guarantor, nor shall any such guarantor be
released from its guaranty for any reason whatsoever, including without
limitation, incase of any amendments hereto, waivers hereof or failure to give
such guarantor any notices hereunder.
11.11 Rights and Remedies Cumulative. The rights and remedies provided by this
Lease agreement are cumulative and the use of any one right or remedy by either
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, stature, ordinance or otherwise.
11.12 Waiver of Default. Any waiver by, or failure to act, by the Parties
hereto of any default, breach of any term, condition, or covenant of this Lease
shall not be deemed to be a waiver of any other breach of the same or any other
term, condition, or covenant contained herein.
11.13 Attorney's Fees. If either Lessor, or Lessee brings suit to enforce its
rights hereunder then the prevailing party shall be entitled to recover its
reasonable attorney's fees and costs incurred in the proceeding from the non-
prevailing party.
11.14 Force Majeure. Neither Lessor nor Lessee shall be required to perform
any term, condition, or covenant in this Lease for so long as such performance
is delayed or prevented by force majeure, which shall mean acts of God, strikes,
lockouts, material or labor restrictions by any governmental authority, civil
riot, floods, and any Other cause not reasonably within the control of Lessor
and Lessee and which by the exercise of due diligence Lessor or Lessee is
unable, wholly or in part, to prevent or overcome.
11.15 Time of the Essence. Time is of the essence of this agreement.
11.16 Corporate Authority. If Lessee or any guarantor hereunder is a
corporation, each individual executing this Lease on behalf of said corporation
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the By-Laws of said corporation, and that this Lease is binding upon said
corporation and in accordance with its terms.
11.17 Subordination. Lessee hereby subordinates this Lease and all rights of
Lessee hereunder to any mortgage, or mortgages, or Vendors Lien, or similar
instruments which now are or may from time to time be placed upon the premises
covered by this Lease; and such mortgage, or mortgages, or liens or other
instruments shall be
11
<PAGE>
superior to and prior to this Lease. Lessee agrees to execute any instrument or
instruments which may be deemed necessary, or desirable to effect the
subordination of this lease to each mortgage, Lien, or instrument.
11.18 Waiver of Subrogation. Lessor and Lessee hereby waive all rights of
subrogation by any insurance company issuing policies carried by the other with
respect to the Building, Lease Premises, Lessee's fixtures, personal property,
leasehold improvements, or Lessee's business.
11.19 Estoppel Certificates. Lessee will, at any time and from time to time,
upon not less than ten (10) business days prior request by Lessor execute,
acknowledge and deliver to Lessor a statement in writing, executed by Lessee,
certifying that this Lease is unmodified and in full effect, or if there have
been modifications, that this Lease is in full effect as modified, setting forth
such modifications, and the dates to which the rent has been paid, and either
stating that to the knowledge of the signor of such certificate no default
exists hereunder or specifying each such default of which the signor has
knowledge; it being intended that such statement by Lessee may be relied upon by
any prospective purchaser or mortgagee of the Building.
11.20 Special Provisions. The Parties hereto acknowledge and agree that the
terms and provisions of each Exhibit or Addendum attached hereto, if any, shall
be and constitute a part of this Lease as though fully Set forth herein. In the
event that a provision of any Exhibit or Addendum attached hereto shall be
inconsistent with the provision In the body of this Lease, the provision as set
forth in the Exhibit or Addendum shall control. Such other and further terms and
provisions of this Lease as agreed to by the Parties hereto are as follows:
IN WITNESS WHEREOF, the undersigned Lessor and Lessee hereto execute this
agreement in duplicate as of the day and year first above written.
LESSOR: PLAZA TOWER OFFICE BUILDING
By:
By:
LESSEE: LABORATORY SPECIALISTS, INC.
By: /s/Robert A. Gardebled, Jr.
THE FOLLOWING EXHIBITS HAVE NOT BEEN INCLUDED:
EXHIBIT A FLOOR PLAN
EXHIBIT B RULES AND REGULATIONS
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF LABORATORY SPECIALISTS OF AMERICA, INC. AND SUBSIDIARIES FOR THE
SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 781,218
<SECURITIES> 0
<RECEIVABLES> 2,513,220
<ALLOWANCES> 347,875
<INVENTORY> 137,731
<CURRENT-ASSETS> 3,256,473
<PP&E> 2,480,103
<DEPRECIATION> 1,016,247
<TOTAL-ASSETS> 10,712,509
<CURRENT-LIABILITIES> 1,814,417
<BONDS> 1,195,792
3,313
0
<COMMON> 0
<OTHER-SE> 6,643,732
<TOTAL-LIABILITY-AND-EQUITY> 10,712,509
<SALES> 0
<TOTAL-REVENUES> 4,239,707
<CGS> 0
<TOTAL-COSTS> 1,856,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,000
<INTEREST-EXPENSE> 29,325
<INCOME-PRETAX> 706,482
<INCOME-TAX> 295,398
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411,084
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
