UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
-------- --------
Commission file number 0-26420
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AMBASSADORS INTERNATIONAL, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1688605
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Dwight D. Eisenhower Building
110 South Ferrall Street
Spokane, Washington 99202
------------------------------- -----------------
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (509) 534-6200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
Indicate number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common shares outstanding as of July 31, 1998: 9,910,287
<PAGE>
AMBASSADORS INTERNATIONAL, INC.
FORM 10-Q QUARTERLY REPORT
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets at June 30, 1998 and December 31, 1997
Consolidated Statements of Income and Comprehensive Income for the
Three and Six Months Ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Ambassadors International, Inc.
Consolidated Balance Sheets (Unaudited)
June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $108,953,157 $ 22,870,546
Restricted cash equivalents 125,000 125,000
Accounts receivable 2,249,524 1,753,369
Inventory 105,370 76,033
Prepaid program costs and expenses 14,672,350 2,004,995
Deferred income taxes 31,229 31,229
Other assets 2,532 422,096
------------ ------------
Total current assets 126,139,162 27,283,268
Property, plant and equipment, net 3,081,817 2,148,305
Other investments 462,500 462,500
Goodwill and covenant-not-to-compete,
net of $1,042,906 and $470,196
of accumulated amortization 19,191,428 4,442,734
Other assets 133,594 85,573
Deferred income taxes 26,608 26,608
------------ ------------
Total assets $149,035,109 $ 34,448,988
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Ambassadors International, Inc.
Consolidated Balance Sheets (Unaudited), Continued
June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,924,251 $ 1,616,120
Accrued expenses 8,701,925 724,008
Participants' deposits 31,258,562 7,397,924
Customer advances 856,631 980,834
Note payable, current portion 84,019 171,241
Unrealized loss on foreign currency
exchange contracts 202,715 674,625
------------ ------------
Total current liabilities 45,028,103 11,564,752
Notes payable due after one year 328,696 328,696
------------ ------------
Total liabilities 45,356,799 11,893,448
------------ ------------
Shareholders' equity:
Preferred stock, $.01 par value;
2,000,000 shares authorized;
none issued and outstanding
Common stock, $.01 par value;
authorized, 20,000,000 shares;
issued and outstanding, 9,908,787
and 6,768,223 shares 99,088 67,682
Additional paid-in capital 89,880,831 13,760,963
Retained earnings 13,698,391 8,726,895
------------ ------------
Total shareholders' equity 103,678,310 22,555,540
------------ ------------
Total liabilities and share-
holders' equity $149,035,109 $ 34,448,988
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Ambassadors International, Inc.
Consolidated Statements of Income and Comprehensive Income (Unaudited)
for the three and six months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ -------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $19,363,531 $13,715,100 $16,342,817 $11,733,447
----------- ----------- ----------- -----------
Operating expenses:
Selling and tour promotion 6,653,455 4,044,630 3,908,330 1,908,848
General and administrative 6,279,898 3,714,669 3,473,546 1,821,843
----------- ----------- ----------- -----------
12,933,353 7,759,299 7,381,876 3,730,691
----------- ----------- ----------- -----------
Operating income 6,430,178 5,955,801 8,960,941 8,002,756
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (14,798) (383) (9,430) (62)
Interest and dividend income 1,498,628 863,053 1,183,256 547,539
Realized and unrealized loss on
investments (25,787) (472,146) (189,350) (210,633)
Other, net (171) 647 (57) 183
----------- ----------- ----------- -----------
1,457,872 391,171 984,419 337,027
----------- ----------- ----------- -----------
Income before income taxes 7,888,050 6,346,972 9,945,360 8,339,783
Provision for income taxes 2,916,554 2,304,162 3,677,716 2,918,917
----------- ----------- ----------- -----------
Net income $ 4,971,496 $ 4,042,810 $ 6,267,644 $ 5,420,866
=========== =========== =========== ===========
Net income per share - basic $ 0.63 $ 0.60 $ 0.70 $ 0.80
=========== =========== =========== ===========
Weighted-average common shares out-
standing - basic 7,949,868 6,754,632 8,999,573 6,755,227
=========== =========== =========== ===========
Net income per share - diluted $ 0.61 $ 0.59 $ 0.67 $ 0.79
=========== =========== =========== ===========
Weighted-average common shares out-
standing - diluted 8,213,676 6,801,192 9,293,804 6,824,456
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
Ambassadors International, Inc.
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 30, 1998 and 1997
1998 1997
----------- -----------
Cash flows from operating activities:
Net income $ 4,971,496 $ 4,042,810
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 874,384 419,511
Deferred income tax provision (7,017)
Loss on investments 25,787 472,146
Change in assets and liabilities,
net of effects of purchases of
subsidiaries:
Restricted cash (33,000)
Accounts receivable 1,823,142 (252,204)
Inventory (29,337) 33,355
Prepaid program costs and
expenses (12,302,696) (5,129,460)
Other assets 257,704 9,812
Accounts payable and accrued
expenses 7,985,317 3,371,356
Participants' deposits 16,975,980 17,413,339
Customer advances (124,203) (1,168,130)
----------- -----------
Net cash provided by
operating activities 20,457,574 19,172,518
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (751,991) (609,541)
Cash paid for acquisitions of
subsidiaries, net of cash received (3,991,948) (88,051)
Payment for covenant-not-to-compete (112,500) (104,793)
Maturity of investment 345,732
Amounts received (paid) on note
receivable 162,237 (162,237)
----------- -----------
Net cash used in investing
activities (4,694,202) (618,890)
----------- -----------
<PAGE>
Ambassadors International, Inc.
Consolidated Statements of Cash Flows (Unaudited), Continued
for the six months ended June 30, 1998 and 1997
1998 1997
------------ ------------
Cash flows from financing activities:
Payment of notes payable $ (138,597) $ (201,146)
Cash received from exercise of
stock options 109,865 16,642
Net proceeds from sale of common
stock 70,347,971
------------ ------------
Net cash used in
financing activities 70,319,239 (184,504)
------------ ------------
Net increase in cash and cash
equivalents 86,082,611 18,369,124
Cash and cash equivalents, beginning
of period 22,870,546 18,281,433
------------ ------------
Cash and cash equivalents, end of
period $108,953,157 $ 36,650,557
============ ============
Noncash investing and financing
activities:
Common shares issued for
acquisition of subsidiaries $ 5,693,438
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
AMBASSADORS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by Ambassadors International, Inc. (the Company), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have
been condensed or omitted as permitted by such rules and
regulations. The Company believes the disclosures included herein
are adequate; however, these consolidated financial statements
should be read in conjunction with the financial statements and
the notes thereto for the year ended December 31, 1997 previously
filed with the Securities and Exchange Commission on Form 10-K.
In the opinion of management, these unaudited, consolidated
financial statements contain all of the adjustments (normal and
recurring in nature) necessary to present fairly the consolidated
financial position of the Company at June 30, 1998, the
consolidated results of operations for the three- and six-month
periods ended June 30, 1998 and 1997 and the consolidated cash
flows for the six-month periods ended June 30, 1998 and 1997. The
results of operations for the periods presented may not be
indicative of those which may be expected for the full year.
2. PRINCIPLES OF CONSOLIDATION
The Company was incorporated in the state of Washington in 1967
and was reincorporated on August 4, 1995 in the state of Delaware.
The consolidated financial statements include the accounts of
Ambassadors International, Inc. and its wholly owned operating
subsidiaries, Ambassadors Education Group, Inc. (AEG) and
Ambassadors Performance Group, Inc. (APG). AEG has two wholly
owned operating subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation.
3. 1998 ACQUISITIONS
In February 1998, the Company acquired certain assets of a company
engaged in providing comprehensive housing reservation,
registration and travel services for meetings, conventions,
expositions and trade shows. That company is located in Boston,
Massachusetts. In February 1998, the Company also acquired all of
the outstanding stock of a performance incentives and meeting
management company located in Westlake Village, California. In
April 1998, the Company acquired all of the outstanding stock of a
performance incentives and meeting management company located in
Laguna Hills, California. In May 1998, the Company acquired
certain assets of a specialized golf tour company located in
Burbank, California.
<PAGE>
AMBASSADORS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. 1998 ACQUISITIONS, CONTINUED
The total purchase price for these acquisitions was $9.5 million
and 277,927 shares of the Company's restricted common stock and
certain contingent consideration. The common stock issued to
effect the transactions was recorded at fair value. The
contingent consideration to be paid is dependent upon the success
of the acquired companies' programs. The contingent consideration
will be accounted for as goodwill and will be amortized
accordingly when, and if, the contingency is removed and
additional consideration is paid.
These acquisitions have been accounted for using the purchase
method of accounting. The results of operations of these
companies have been included in the consolidated statement of
income and comprehensive income since their respective dates of
acquisition.
In July 1998, the Company acquired certain assets of a housing
reservation and registration company located in Atlanta, Georgia.
As of the date of this report, the Company is engaged in informal
acquisition discussions with several other companies; however,
other than the acquisitions described above, the Company is not
currently a party to any additional agreements.
4. EARNINGS PER SHARE
Net income per share - basic is computed by dividing net income by
the weighted-average number of common shares outstanding during
the period. Net income per share - diluted is computed by
increasing the weighted-average number of common shares
outstanding by the additional common shares that would have been
outstanding if the dilutive potential common shares had been
issued.
In accordance with SFAS No. 128, the following table presents a
reconciliation of the numerators and denominators used in the
basic and diluted EPS computations.
<PAGE>
AMBASSADORS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. EARNINGS PER SHARE, CONTINUED
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net income for basic and
diluted earnings per share $4,971,496 $4,042,810 $6,267,644 $5,420,866
========== ========== ========== ==========
Denominator:
Weighted-average shares
outstanding - basic 7,949,868 6,754,632 8,999,573 6,755,227
Effect of dilutive common
stock options 263,808 46,560 294,231 69,229
---------- ---------- ---------- ----------
Weighted-average shares
outstanding - diluted 8,213,676 6,801,192 9,293,804 6,824,456
========== ========== ========== ==========
Earnings Per Share:
Net income per share - basic $ 0.63 $ 0.60 $ 0.70 $ 0.80
========== ========== ========== ==========
Net income per share -
diluted $ 0.61 $ 0.59 $ 0.67 $ 0.79
========== ========== ========== ==========
</TABLE>
5. SECONDARY OFFERING
On April 29, 1998, the Company completed a public offering of
2,838,700 shares of the Company's common stock. The net proceeds
of approximately $70.3 million have been and will be used for the
acquisition of educational travel and performance improvement
companies and related businesses and for general corporate
purposes.
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued, which requires reporting of comprehensive income.
Comprehensive income is defined as the change in equity of a
business enterprise arising from non-owner sources. There was no
effect of implementing this statement on January 1, 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, "Disclosures About Segments for an Enterprise and Related
Information." This Statement requires presentation of segment
information in reports to shareholders, including disclosures
about the products and services an entity provides and its major
customers. The disclosure required by this statement will be
provided in the Company's 1998 annual financial statements.
<PAGE>
AMBASSADORS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED
In June 1998, Statement of Financial Accounting Standards No. 133
(SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999,
however, earlier application of all of the provisions of this
Statement is encouraged as of the beginning of any fiscal quarter.
The Company has not yet determined the effect of SFAS 133 on its
consolidated financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking
statements. A forward-looking statement may contain words such as
"will continue to be," "will be," "continue to," "expect to,"
"anticipates that," "to be" or "can impact." Management cautions that
forward-looking statements are subject to risks and uncertainties that
could cause the Company's actual results to differ materially from
those projected in forward-looking statements.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THE THREE MONTHS
ENDED JUNE 30, 1997
During 1998, the Company and its subsidiaries acquired four companies
which operate housing reservation, incentive management and travel
programs. Although these companies contributed to the gross program
receipts and revenues of the consolidated group in the first six
months of 1998, due to the timing of the acquisitions and future
changes which management plans to make to the operations of these
companies, management believes that the future contribution of these
four acquisitions will increase the Company's gross program receipts
and revenues.
GROSS PROGRAM RECEIPTS
----------------------
Gross program receipts increased to $49.5 million in the second
quarter of 1998 from $35.5 million in the second quarter of 1997.
This increase is primarily attributed to the acquisitions during 1998
as well as improvement of Ambassadors Performance Group, Inc.'s (APG)
existing business. Ambassadors Education Group, Inc. (AEG) also
increased its business; however, the majority of the planned increase
in volume for the year will occur in the third quarter.
NET REVENUE
-----------
Increased gross program receipts, combined with a consistent 33% gross
margin during the second quarters of 1998 and 1997, resulted in
increased net revenues to $16.3 million in 1998 from $11.7 million in
1997. This $4.6 million increase is primarily due to the
aforementioned acquisitions made in 1998.
SELLING AND TOUR PROMOTION EXPENSES
-----------------------------------
The Company's policy is to expense all selling and tour promotion
costs as they are incurred.
Selling and tour promotion expenses increased to $3.9 million in 1998
from $1.9 million in 1997. This increase is a result of the
acquisitions during 1998 within APG, coupled with an increase in
marketing campaigns within the AEG.
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
General and administrative expenses increased to $3.5 million in 1998
from $1.8 million in 1997. This increase is primarily due to the
acquisitions in 1998 within APG and increases within the existing
businesses.
OTHER INCOME/EXPENSE
--------------------
Other income includes foreign currency gains or losses, interest
income and interest expense. For the quarter ended June 30, 1998,
other income increased to $1.0 million from $0.3 million in the
comparable 1997 period. This increase was primarily due to interest
income earned on the proceeds from the secondary offering. Net
proceeds of approximately $70.3 million were received from this
offering in April 1998. The Company is investing the offering
proceeds in short-term interest-bearing investments pending their use
for acquisition of target companies.
INCOME TAXES
------------
The Company has recorded an income tax provision of $3.7 million for
the quarter ended June 30, 1998, which represents an effective tax
rate of 37%, in comparison to a $2.9 million income tax provision
during the second quarter of 1997 at a 35% effective tax rate. Income
tax provisions have been recorded based upon the estimated effective
income tax rate applied to the pre-tax income.
NET INCOME AND EARNINGS PER SHARE
---------------------------------
Net income for the second quarter of 1998 increased to $6.3 million
from $5.4 million in 1997. Although net income increased, the 33%
increase in basic weighted average number of shares outstanding
resulted in earnings per share in 1998 of $0.70 which is a decrease
from the $0.80 per share recorded in the comparable 1997 period. This
was an expected result of the stock issued in the secondary offering.
Diluted earnings per share were $0.67 in 1998 and $0.79 in 1997. The
increase in the basic and diluted shares outstanding is due to the
secondary offering of 2,838,700 shares in April 1998.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO THE SIX MONTHS ENDED
JUNE 30, 1997
GROSS PROGRAM RECEIPTS
----------------------
Gross program receipts increased to $58.8 million during the six
months ended June 30, 1998 from $43.1 million in the same period of
1997. This increase is primarily attributed to the acquisitions
during the first six months of 1998 as well as improvement of APG's
existing business. Gross receipts within AEG which were due to an
increase in the number of participants and increased gross receipts
per participant also contributed to the overall increase in gross
program receipts.
<PAGE>
NET REVENUE
-----------
Increased gross program receipts and a consistent gross margin during
the six months ended June 30, 1998 and 1997, resulted in increased net
revenues to $19.4 million in 1998 from $13.7 million in 1997. This
$5.7 million increase is the result of the aforementioned acquisitions
made in 1998 as well as the increase in AEG's number of participants
and increased net revenue per participant.
SELLING AND TOUR PROMOTION EXPENSES
-----------------------------------
The Company's policy is to expense all selling and tour promotion
costs as they are incurred.
Selling and tour promotion expenses increased to $6.7 million during
1998 from $4.0 million in 1997. This increase is the result of
acquisitions during 1998 and the assumption of their additional costs
within APG, coupled with an increase in marketing campaigns within
AEG.
GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
General and administrative expenses increased in 1998 to $6.3 million
from $3.7 million in 1997. This increase is primarily due to the
acquisitions in 1998 within APG and increases within the existing
businesses.
OTHER INCOME/EXPENSE
--------------------
Other income includes foreign currency gains or losses, interest
income and interest expense. For the six months ended June 30, 1998,
other income increased to $1.5 million from $0.4 million. This
increase was due to a $0.4 million improvement in foreign currency
gains and losses as well as interest income earned on the $70.3
million of secondary offering proceeds received in April 1998.
The Company enters into forward foreign exchange contracts and foreign
currency option contracts to offset certain operational exposures from
changes in foreign currency exchange rates. These foreign exchange
contracts and options are entered into to support normal recurring
purchases, and accordingly, are not entered into for speculative
purposes. Forward foreign exchange contracts are utilized to manage
the risk associated with currency fluctuations on certain purchase
commitments. The Company is exposed to credit risk under the forward
contracts and options to the extent that the counter-party is unable
to perform under the agreement. The Company anticipates hedging the
majority of its foreign currency risk in future periods. There can be
no assurance that the Company's hedging strategies will be successful
in mitigating the impact of foreign currency fluctuations. The face
amount of forward foreign exchange contracts outstanding at June 30,
1998 was $7.2 million.
<PAGE>
INCOME TAXES
------------
The Company has recorded an income tax provision of $2.9 million for
1998 in comparison to a $2.3 million income tax provision during the
six months ended June 30, 1997. Income tax provisions have been
recorded based upon the estimated effective income tax rate applied to
the pre-tax income.
NET INCOME AND EARNINGS PER SHARE
---------------------------------
Net income for the six months increased to $5.0 million in 1998 from
$4.0 million in 1997. Even with an 18% increase in basic weighted
average number of shares outstanding, the increased net income
resulted in basic earnings per share in 1998 of $0.63, an increase
from $0.60 per share in 1997. Diluted earnings per share also
increased to $0.61 in 1998 from $0.59 per share in 1997. The increase
in the basic and diluted shares outstanding is due to the secondary
offering of 2,838,700 shares in April 1998.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's business is not capital intensive. However, the Company
does retain funds for operating purposes in order to conduct sales and
marketing efforts for future programs and to facilitate acquisitions
of other companies.
Net cash provided by operations for the six months ended June 30, 1998
increased to $20.4 million from $19.1 million in 1997. The increased
net income of $0.9 million in 1998 over the comparable 1997 period is
the primary cause of the increased cash flows from operations.
Net cash used in investing activities increased to $4.7 million in
1998 from $0.6 million 1997. The increase is primarily due to $4.0
million used in 1998 for acquisitions of businesses. The Company does
not have any material capital expenditure commitments for the next
twelve months. However, the Company's acquisitions of certain
subsidiaries include contingent consideration. The remaining
contingent consideration, which is dependent upon the success of the
acquired companies' businesses, will not have a significant effect on
the Company's cash flows. Also, the Company is continuing to pursue
further acquisitions of related educational travel and performance
improvement companies that will require some of its available cash and
cash equivalents. The Company had no significant long- or short-term
debt as of June 30, 1998.
In April 1998, the Company raised $70.3 million of cash through a
secondary public offering.
The Company has a credit facility available with Seafirst Bank for
$25.0 million for foreign currency purchases and forward contracts.
At June 30, 1998, the Company had approximately $109 million of cash
and cash equivalents. Management believes existing cash and cash
equivalents and cash flows from operations will be sufficient to fund
the Company's anticipated operating needs, capital expenditures and
acquisitions for at least the next twelve months.
<PAGE>
FOREIGN CURRENCY; HEDGING POLICY
--------------------------------
The substantial majority of the Company's programs take place outside
of the United States and most foreign suppliers require payment in
local currency rather than U.S. dollars. Accordingly, the Company is
exposed to foreign currency risks in certain countries as foreign
currency exchange rates between those currencies and the U.S. dollar
fluctuate. To manage these risks, the Company enters into forward
foreign exchange contracts and foreign currency option contracts.
These foreign exchange contracts and options are entered into to
support normal recurring purchases, and accordingly, are not entered
into for speculative purposes. The Company is exposed to credit risk
under the forward contracts and options to the extent that the
counterparty is unable to perform under the agreement. The Company
anticipates hedging the majority of its foreign currency risk in
future periods. There can be no assurance that the Company's hedging
strategies will be successful in mitigating the impact of foreign
currency fluctuations. The Company records its forward foreign
exchange contracts at market value on a quarterly basis. Unrealized
and realized gains and losses on these securities are recognized in
the statement of income and comprehensive income.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued, which requires reporting of comprehensive income.
Comprehensive income is defined as the change in equity of a business
enterprise arising from non-owner sources. There was no effect of
implementing this statement January 1, 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures About Segments for an Enterprise and Related
Information." This Statement requires presentation of segment
information in reports to shareholders, including disclosures about
the products and services an entity provides and its major customers.
The disclosure required by this statement will be provided in the
Company's 1998 annual financial statements.
In June 1998, Statement of Financial Accounting Standards No. 133
(SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999, however, earlier application of all of
the provisions of this Statement is encouraged as of the beginning of
any fiscal quarter. The Company has not yet determined the effect of
SFAS 133 on its consolidated financial statements.
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The Company's Registration Statement for its initial public offering
of securities (File No. 33-93586) became effective on August 3, 1995.
The net proceeds to the Company from the offering of $12,054,491, have
been completely used from the date of the offering though the date of
this report as follows:
Amount of
Category of Use Use
----------------------------------------------------- ------------
Acquisition of other businesses $ 11,081,556
Working capital 972,935
None of the net proceeds to the Company of the offering was paid to
directors, officers, ten percent shareholders or affiliates of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 15, 1998, the following
actions were taken:
1. Election of Directors (Class I Directors)
Name For Withheld
----------------------- --------- --------
Peter V. Ueberroth 6,050,861 0
Richard D. C. Whilden 6,050,861 0
The terms of office of Class II Directors, John A. Ueberroth and
James L. Easton, and Class III Directors, John C. Spence and Rafer
L. Johnson, continued beyond the date of the 1998 Annual Meeting
of Shareholders.
2. Approval of certain amendments to the Company's 1995 Equity
Participation Plan
For 5,997,051
Against 53,205
Abstain 0
<PAGE>
3. Ratification of PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand L.L.P.) as independent auditors for the year ending
December 31, 1998
For 6,050,661
Against 200
Abstain 0
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.15 The Amended and Restated 1995 Equity
Participation Plan of Ambassadors International,
Inc.
10.16 The Atlanta Merchandise Mart Lease Agreement
dated April 17, 1998 by and between AMC, Inc. and
Destination, Inc.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed Amendment No. 1 to a Current Report on
Form 8-K/A on April 2, 1998, with respect to a Current
Report on Form 8-K originally filed on February 20,
1998, relating the acquisition of Rogal America Co.
This Current Report, as amended, responded to Items 2
and 7 and included audited financial statements, and an
unaudited condensed pro forma balance sheet and a
condensed pro forma combined statement of operations.
The Company filed a Current Report on Form 8-K on
June 5, 1998 (subsequently amended on Amendment No. 1 to
Current Report on Form 8-K/A filed on July 23, 1998 and
Amendment No. 2 to Current Report on Form 8-K/A filed on
August 5, 1998), relating to the acquisition of
Incentive Associates, Inc. This Current Report, as
amended, responded to Items 2 and 7 and included audited
financial statements, and an unaudited condensed pro
forma balance sheet and a condensed pro forma combined
statement of operations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMBASSADORS INTERNATIONAL, INC.
Date: August 14, 1998 By: /s/ Jeffrey D. Thomas
----------------------------------
Jeffrey D. Thomas,
Chief Financial Officer
<PAGE>
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EXHIBIT 10.15
-------------
THE AMENDED AND RESTATED
1995 EQUITY PARTICIPATION PLAN
OF
AMBASSADORS INTERNATIONAL, INC.
Ambassadors International, Inc., a Delaware corporation, has adopted
The Amended and Restated 1995 Equity Participation Plan of Ambassadors
International, Inc. (the "Plan"), effective May 15, 1998, for the
benefit of its eligible employees, consultants and directors. The Plan
consists of two plans, one for the benefit of key Employees (as such
term is defined below) and consultants and one for the benefit of
Independent Directors (as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial
success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to
the long range success of the Company by offering them an
opportunity to own stock in the Company and/or rights which will
reflect the growth, development and financial success of the
Company.
ARTICLE I
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan
they shall have the meaning specified below, unless the context
clearly indicates otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean 100,000 shares of Common
Stock.
1.3 BOARD. "Board" shall mean the Board of Directors of the
Company.
1.4 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 COMMITTEE. "Committee" shall mean the Compensation Committee
of the Board, or a subcommittee of the Board, appointed as
provided in Section 9.1.
<PAGE>
1.6 COMMON STOCK. "Common Stock" shall mean the common stock of
the Company, par value $0.01 per share, and any equity security
of the Company issued or authorized to be issued in the future,
but excluding any warrants, options or other rights to purchase
Common Stock. Debt securities of the Company convertible into
Common Stock shall be deemed equity securities of the Company.
1.7 COMPANY. "Company" shall mean Ambassadors International, Inc.,
a Delaware corporation.
1.8 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.
1.9 DIRECTOR. "Director" shall mean a member of the Board.
1.10 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a right
to receive the equivalent value (in cash or Common Stock) of
dividends paid on Common Stock awarded under Article VII of
this Plan.
1.11 EMPLOYEE. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of
the Company, or of any corporation which is a Subsidiary.
1.12 EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.13 FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the mean between the
highest and lowest selling price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then
trading, if any, on such date, or if shares were not traded on
such date, then on the closest preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange,
the mean between the closing representative bid and asked
prices for the Common Stock on such date as reported by NASDAQ
or, if NASDAQ is not then in existence, by its successor
quotation system; or (iii) if Common Stock is not publicly
traded, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of
Options granted to Independent Directors) acting in good faith.
1.14 GRANTEE. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment
or Stock Appreciation Right, or an award of Deferred Stock,
under this Plan.
1.15 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section
422 of the Code and which is designated as an Incentive Stock
Option by the Committee.
<PAGE>
1.16 INDEPENDENT DIRECTOR. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.17 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock
Option by the Committee.
1.18 OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan
shall, as determined by the Committee, be either a Non-
Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.19 OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.20 PERFORMANCE AWARD. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that
is paid in cash, Common Stock or a combination of both, awarded
under Article VII of this Plan.
1.21 PLAN. "Plan" shall mean The Amended and Restated 1995 Equity
Participation Plan of Ambassadors International, Inc.
1.22 RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.23 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock
under Article VI of this Plan.
1.24 RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time
to time.
1.25 STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of
this Plan.
1.26 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other
right to purchase shares of Common Stock, as part of a deferred
compensation arrangement, made in lieu of all or any portion of
the compensation, including without limitation, salary, bonuses
and commissions, that would otherwise become payable to a key
Employee or consultant in cash, awarded under Article VII of
this Plan.
<PAGE>
1.27 SUBSIDIARY. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
1.28 TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall
mean the time when the engagement of Optionee, Grantee or
Restricted Stockholder as a Consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause,
including without limitation, resignation, discharge, death or
retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of
limitation, the question of whether a Termination of
Consultancy resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute
Terminations of Employment. Notwithstanding any other provision
of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any
time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.
1.29 TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent
Director ceases to be a Director for any reason, including, but
not by way of limitation, a termination by resignation, failure
to be elected, death or retirement. The Board, in its sole and
absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Directorship.
1.30 TERMINATION OF EMPLOYMENT. "Termination of Employment " shall
mean the time when the employee-employer relationship between
the Optionee, Grantee or Restricted Stockholder and the Company
or any Subsidiary is terminated for any reason, including, but
not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment,
continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company or any Subsidiary, (ii) at the
discretion of the Committee, terminations which result in a
temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting
relationship by the Company or a Subsidiary with the former
employee. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment
<PAGE>
resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence, change in status from an
employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination
of Employment if, and to the extent that such leave of absence,
change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company
or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason
whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options, awards of
Restricted Stock, Performance Awards, Dividend
Equivalents, awards of Deferred Stock, Stock Payments or
Stock Appreciation Rights shall be Common Stock, initially
shares of the Company's Common Stock, par value $0.01 per
share. The aggregate number of such shares which may be
issued upon exercise of such options or rights or upon any
such awards under the Plan shall not exceed nine hundred
thousand (900,000). The shares of Common Stock issuable
upon exercise of such options or rights or upon any such
awards may be either previously authorized but unissued
shares or treasury shares.
(b) The maximum number of shares which may be subject to
Options or Stock Appreciation Rights granted under the
Plan to any individual in any calendar year shall not
exceed the Award Limit. To the extent required by Section
162(m) of the Code, shares subject to Options which are
cancelled continue to be counted against the Award Limit
and if, after grant of an Option, the price of shares
subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and a grant of a
new Option and both the Option deemed to be canceled and
the Option deemed to be granted are counted against the
Award Limit. Furthermore, to the extent required by
Section 162(m) of the Code, if, after grant of a Stock
Appreciation Right, the base amount on which stock
appreciation is calculated is reduced to reflect a
reduction in the Fair Market Value of the Company's Common
Stock, the transaction is treated as a cancellation of the
Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right
deemed to be canceled and the Stock Appreciation Right
deemed to be granted are counted against the Award Limit.
<PAGE>
2.2 UNEXERCISED OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award
under this Plan, expires or is cancelled without having been
fully exercised, the number of shares subject to such Option or
other right but as to which such Option or other right was not
exercised prior to its expiration or cancellation may again be
optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Subject to the Award Limit, any Employee or
consultant selected by the Committee pursuant to Section
3.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in
Section 3.4(d).
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted
an Incentive Stock Option under this Plan if such person, at
the time the Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any then
existing Subsidiary unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted unless such Option, when granted,
qualifies as an "incentive stock option" under Section 422 of
the Code. No Incentive Stock Option shall be granted to any
person who is not an Employee.
3.4 GRANTING OF OPTIONS.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to the applicable limitations of
this Plan:
(i) Determine which Employees are key Employees and
select from among the key Employees or consultants
(including Employees or consultants who have
previously received Options or other awards under
this Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the
selected key Employees or consultants;
(iii) Determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-
based compensation as described in Section
162(m)(4)(C) of the Code; and
<PAGE>
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that
the terms and conditions of Options intended to
qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and
conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the
Secretary of the Company to issue the Option and may
impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee or
consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options,
awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments or other rights which have been previously
granted to him under this Plan or otherwise. An Option,
the grant of which is conditioned upon such surrender, may
have an option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover
the same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other
terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard
to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or
other award.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from
treatment as an "incentive stock option" under Section 422
of the Code.
(d) Each person who is an Independent Director as of the date
of the initial public offering of Common Stock
automatically shall be granted an option to purchase ten
thousand (10,000) shares of Common Stock (subject to
adjustment as provided in Section 10.3) on the date of
such initial public offering. When a person is initially
elected to the Board following the date of the initial
public offering of Common Stock and is then an Independent
Director, each such new Independent Director automatically
shall be granted an Option to purchase ten thousand
(10,000) shares of Common Stock (subject to adjustment as
provided in Section 10.3) on the date of his or her
<PAGE>
election to the Board. Members of the Board who are
Employees who subsequently retire from the Company and
remain on the Board will not receive an Option grant
pursuant to this Section 3.4(d). All the foregoing Option
grants authorized by this Section 3.4(d) are subject to
stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee
and an authorized officer of the Company and which shall
contain such terms and conditions as the Committee (or the
Board, in the case of Options granted to Independent Directors)
shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Stock Option
Agreements evidencing Incentive Stock Options shall contain
such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to
each Option shall be set by the Committee; provided, however,
that such price shall be no less than the par value of a share
of Common Stock, and in the case of Options intended to qualify
as performance-based compensation as described in Section
162(m)(4)(C) of the Code, as well as Options granted to
Independent Directors, such price shall be no less than 100% of
the Fair Market Value of a share of Common Stock on the date
the Option is granted and in the case of Incentive Stock
Options such price shall not be less than the greater of: (i)
100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted, or (ii) 110% of the Fair Market
Value of a share of Common Stock on the date such Option is
granted in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock of the
Company or any Subsidiary.
4.3 OPTION TERM. The term of an Option (other than an Option
granted to an Independent Director) shall be set by the
Committee in its discretion; provided, however, that, in the
case of Incentive Stock Options, the term shall not be more
than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive
Stock Option is granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock of the
Company or any Subsidiary.
<PAGE>
4.4 OPTION VESTING.
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the
Committee and the Committee may determine that an Option
may not be exercised in whole or in part for a specified
period after it is granted; provided, however, that no
Option granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six
months have elapsed from (but excluding) the date on which
the Option was granted. At any time after grant of an
Option, the Committee (or the Board) may, in its sole
discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option
vests. Notwithstanding the foregoing, all Options granted
to Independent Directors shall become exercisable in
cumulative annual installments of 25% on each of the
first, second, third and fourth anniversaries of the date
of Option grant, and the term of each such Option shall be
ten years without variation or acceleration hereunder,
except as provided in Section 10.4 and except that any
Option granted to an Independent Director shall become
immediately exercisable in full upon the retirement of the
Independent Director in accordance with the Company's
retirement policy applicable to Directors.
(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or
Termination of a Consultancy, as applicable, shall
thereafter become exercisable, except as may be otherwise
provided by the Committee with respect to Options granted
to Employees or consultants, either in the Stock Option
Agreement or in a resolution adopted following the grant
of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but
without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other incentive
stock option plans of the Company and any Subsidiary)
exceeds $100,000, such Options shall be treated as Non-
Qualified Options to the extent required by Section 422 of
the Code. The rule set forth in the preceding sentence
shall be applied by taking Options into account in the
order in which they were granted. For purposes of this
Section 4.4(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such
stock is granted.
<PAGE>
4.5 CONSIDERATION. In consideration of the granting of an Option,
the Optionee shall agree, in the written Stock Option
Agreement, to remain in the employ of (or to consult for or to
serve as an Independent Director of, as applicable) the Company
or any Subsidiary for a period of at least one year after the
Option is granted (or until the next annual meeting of
stockholders of the Company, in the case of an Independent
Director). Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company
or any Subsidiary, or as a director of the Company, or shall
interfere with or restrict in any way the rights of the Company
and any Subsidiary, which are hereby expressly reserved, to
discharge any Optionee at any time for any reason whatsoever,
with or without good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable
with respect to fractional shares and the Committee (or the
Board, in the case of Options granted to Independent Directors)
may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following
to the Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Committee or the Board stating that the
Option, or a portion thereof, is exercised. The notice
shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee or the
Board, in its absolute discretion, deems necessary or
advisable to effect compliance with all applicable
provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations.
The Committee or Board may, in its absolute discretion,
also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-
transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant
to Section 10.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or
persons to exercise the Option; and
<PAGE>
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion
thereof, is exercised. However, at the discretion of the
Committee (or the Board, in the case of Options granted to
Independent Directors), the terms of the Option may (i)
allow a delay in payment up to thirty (30) days from the
date the Option, or portion thereof, is exercised; (ii)
allow payment, in whole or in part, through the delivery
of shares of Common Stock owned by the Optionee, duly
endorsed for transfer to the Company with a Fair Market
Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof;
(iii) subject to the timing requirements of Section 5.3,
allow payment, in whole or in part, through the surrender
of shares of Common Stock then issuable upon exercise of
the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of
the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part,
through the delivery of a full recourse promissory note
bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the
Committee or the Board, or (vi) allow payment through any
combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv) and (v). In the case of a
promissory note, the Committee or the Board may also
prescribe the form of such note and the security to be
given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other
extension of credit is prohibited by law.
5.3 CERTAIN TIMING REQUIREMENTS. At the discretion of the
Committee (or Board, in the case of Options granted to
Independent Directors), shares of Common Stock issuable to the
Optionee upon exercise of the Option may be used to satisfy the
Option exercise price or the tax withholding consequences of
such exercise, in the case of persons subject to Section 16 of
the Exchange Act, only (i) during the period beginning on the
third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of
the Company and ending on the twelfth business day following
such date or (ii) pursuant to an irrevocable written election
by the Optionee to use shares of Common
<PAGE>
Stock issuable to the Optionee upon exercise of the Option to
pay all or part of the Option price or the withholding taxes
made at least six months prior to the payment of such Option
price or withholding taxes. 5.4 CONDITIONS TO ISSUANCE OF
STOCK CERTIFICATES. The Company shall not be required to issue
or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under
the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body which
the Committee or Board shall, in its absolute discretion,
deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee
or Board shall, in its absolute discretion, determine to
be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or Board may
establish from time to time for reasons of administrative
convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding
tax.
5.5 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be,
nor have any of the rights or privileges of, stockholders of
the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to
such holders.
5.6 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board,
in the case of Options granted to Independent Directors), in
its absolute discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon
the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option
Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee to give the
Company prompt notice of any disposition of shares of Common
Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to
such requirement to give prompt notice of disposition.
<PAGE>
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK.
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the key Employees or consultants
(including Employees or consultants who have
previously received other awards under this Plan)
such of them as in its opinion should be awarded
Restricted Stock; and
(ii) Determine the purchase price, if any, and other
terms and conditions applicable to such Restricted
Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; PROVIDED,
HOWEVER, that such purchase price shall be no less than
the par value of the Common Stock to be purchased. In all
cases, legal consideration shall be required for each
issuance of Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the
Secretary of the Company to issue such Restricted Stock
and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued
only pursuant to a written Restricted Stock Agreement, which
shall be executed by the selected key Employee or consultant
and an authorized officer of the Company and which shall
contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
6.3 CONSIDERATION. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the
Restricted Stockholder shall agree, in the written Restricted
Stock Agreement, to remain in the employ of, or to consult for,
the Company or any Subsidiary for a period of at least one year
after the Restricted Stock is issued. Nothing in this Plan or
in any Restricted Stock Agreement hereunder shall confer on any
Restricted Stockholder any right to continue in the employ of,
or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company
and any Subsidiary, which are hereby expressly reserved, to
discharge any Restricted Stockholder at any time for any reason
whatsoever, with or without good cause.
<PAGE>
6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7,
the Restricted Stockholder shall have, unless otherwise
provided by the Committee, all the rights of a stockholder with
respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all
dividends and other distributions paid or made with respect to
the shares; PROVIDED, HOWEVER, that in the discretion of the
Committee, any extraordinary distributions with respect to the
Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5 RESTRICTION. All shares of Restricted Stock issued under this
Plan (including any shares received by holders thereof with
respect to shares of Restricted Stock as a result of stock
dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without
limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of
employment with the Company, Company performance and individual
performance; PROVIDED, HOWEVER, that no share of Restricted
Stock granted to a person subject to Section 16 of the Exchange
Act shall be sold, assigned or otherwise transferred until at
least six months have elapsed from (but excluding) the date on
which the Restricted Stock was issued, and PROVIDED, FURTHER,
that by a resolution adopted after the Restricted Stock is
issued, the Committee may, on such terms and conditions as it
may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Restricted Stock
Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. Unless provided
otherwise by the Committee, if no consideration was paid by the
Restricted Stockholder upon issuance, a Restricted
Stockholder's rights in unvested Restricted Stock shall lapse
upon Termination of Employment or, if applicable, upon the
termination of his consulting relationship with the Company.
6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide in
the terms of each individual Restricted Stock Agreement that
the Company shall have the right to repurchase from the
Restricted Stockholder the Restricted Stock then subject to
restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a
termination of any consulting relationship between the
Restricted Stockholder and the Company, at a cash price per
share equal to the price paid by the Restricted Stockholder for
such Restricted Stock; PROVIDED, HOWEVER, that provision may be
made that no such right of repurchase shall exist in the event
of a Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company
or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
<PAGE>
6.7 ESCROW. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical
custody of each certificate representing Restricted Stock until
all of the restrictions imposed under the Restricted Stock
Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 LEGEND. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause
a legend or legends to be placed on certificates representing
all shares of Restricted Stock that are still subject to
restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions
imposed thereby.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any key Employee or consultant selected by
the Committee may be granted one or more Performance Awards.
The value of such Performance Awards may be linked to the
market value, book value, net profits or other measure of the
value of Common Stock or other specific performance criteria
determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods
determined by the Committee, or may be based upon the
appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of
Common Stock over a fixed period or periods determined by the
Committee. In making such determinations, the Committee shall
consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key
Employee or consultant.
7.2 DIVIDEND EQUIVALENTS. Any key Employee or consultant selected
by the Committee may be granted Dividend Equivalents based on
the dividends declared on Common Stock, to be credited as of
dividend payment dates, during the period between the date an
Option, Stock Appreciation Right, Deferred Stock or Performance
Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests
or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to
such limitations as may be determined by the Committee.
7.3 STOCK PAYMENTS. Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined
from time to time by the Committee. The number of shares shall
be determined by the Committee and may be based upon the Fair
<PAGE>
Market Value, book value, net profits or other measure of the
value of Common Stock or other specific performance criteria
determined appropriate by the Committee on the date such Stock
Payment is made or on any date thereafter.
7.4 DEFERRED STOCK. Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the
manner determined from time to time by the Committee. The
number of shares of Deferred Stock shall be determined by the
Committee and may be linked to the market value, book value,
net profits or other measure of the value of Common Stock or
other specific performance criteria determined appropriate by
the Committee, in each case on a specified date or dates or
over any period or periods determined by the Committee. Common
Stock underlying a Deferred Stock award will not be issued
until the Deferred Stock award has vested, pursuant to a
vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Grantee of
Deferred Stock shall have no rights as a Company stockholder
with respect to such Deferred Stock until such time as the
award has vested and the Common Stock underlying the award has
been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each
Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment shall be evidenced by a written agreement,
which shall be executed by the Grantee and an authorized
Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with
this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent
award of Deferred Stock and/or Stock Payment shall be set by
the Committee in its discretion.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the
Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment may be exercised subsequent to Termination
of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the
Grantee's retirement, death or disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a
combination of both, as determined by the Committee. To the
extent any payment under this Article VII is effected in Common
Stock, it shall be made subject to satisfaction of all
provisions of Section 5.4.
<PAGE>
7.9 CONSIDERATION. In consideration of the granting of a
Performance Award, Dividend Equivalent award of Deferred Stock
and/or Stock Payment, the Grantee shall agree, in a written
agreement, to remain in the employ of, or to consult for, the
Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is granted. Nothing in this
Plan or in any agreement hereunder shall confer on any Grantee
any right to continue in the employ of, or as a consultant for,
the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or
without good cause.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. Subject to the Award
Limit, a Stock Appreciation Right may be granted to any key
Employee or consultant selected by the Committee. A Stock
Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect
to a previously granted Option, or (iii) independent of an
Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the
Committee shall impose, and shall be evidenced by a written
Stock Appreciation Right Agreement, which shall be executed by
the Grantee and an authorized officer of the Company. The
Committee, in its discretion, may determine whether a Stock
Appreciation Right is to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code
and Stock Appreciation Right Agreements evidencing Stock
Appreciation Rights intended to so qualify shall contain such
terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Without limiting the
generality of the foregoing, the Committee may, in its
discretion and on such terms as it deems appropriate, require
as a condition of the grant of a Stock Appreciation Right to an
Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised
Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock
Appreciation Right, the grant of which is conditioned upon such
surrender, may have an exercise price lower (or higher) than
the exercise price of the surrendered Option or other award,
may cover the same (or a lesser or greater) number of shares as
such surrendered Option or other award, may contain such other
terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
<PAGE>
8.2 COUPLED STOCK APPRECIATION RIGHTS.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable
only when and to the extent the related Option is
exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or
previously granted Option to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled
to exercise the Option pursuant to this Plan) to surrender
to the Company unexercised a portion of the Option to
which the CSAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the
difference obtained by subtracting the Option exercise
price from the Fair Market Value of a share of Common
Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR
shall have been exercised, subject to any limitations the
Committee may impose.
8.3 INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the
Committee. An ISAR shall be exercisable in such
installments as the Committee may determine. An ISAR shall
cover such number of shares of Common Stock as the
Committee may determine; PROVIDED, HOWEVER, that no ISAR
granted to a person subject to Section 16 of the Exchange
Act shall be exercisable until at least six months have
elapsed from (but excluding) the date on which the Option
was granted. The exercise price per share of Common Stock
subject to each ISAR shall be set by the Committee. An
ISAR is exercisable only while the Grantee is an Employee
or consultant; provided that the Committee may determine
that the ISAR may be exercised subsequent to Termination
of Employment or Termination of Consultancy without cause,
or following a change in control of the Company, or
because of the Grantee's retirement, death or disability,
or otherwise.
(b) An ISAR shall entitle the Grantee (or other person
entitled to exercise the ISAR pursuant to this Plan) to
exercise all or a specified portion of the ISAR (to the
extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by
multiplying the difference obtained by subtracting the
exercise price per share of the ISAR from the Fair Market
<PAGE>
Value of a share of Common Stock on the date of exercise
of the ISAR by the number of shares of Common Stock with
respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.
8.4 PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on
its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both,
as determined by the Committee. To the extent such payment
is effected in Common Stock it shall be made subject to
satisfaction of all provisions of Section 5.4 hereinabove
pertaining to Options.
(b) Grantees of Stock Appreciation Rights who are subject to
Section 16 of the Exchange Act may, in the discretion of
the Board or Committee, be required to comply with any
timing or other restrictions under Rule 16b-3 applicable
to the settlement or exercise of a Stock Appreciation
Right.
8.5 CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written
Stock Appreciation Right Agreement, to remain in the employ of,
or to consult for, the Company or any Subsidiary for a period
of at least one year after the Stock Appreciation Right is
granted. Nothing in this Plan or in any Stock Appreciation
Right Agreement hereunder shall confer on any Grantee any right
to continue in the employ of, or as a consultant for, the
Company or any Subsidiary or shall interfere with or restrict
in any way the rights of the Company and any Subsidiary, which
are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE IX
ADMINISTRATION
9.1 COMPENSATION COMMITTEE. The Compensation Committee (or a
subcommittee of the Board assuming the functions of the
Committee under this Plan) shall consist of two or more
Independent Directors appointed by and holding office at the
pleasure of the Board, each of whom is both a "disinterested
person" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of
Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board. 9.2 DUTIES AND POWERS
OF COMMITTEE. It shall be the duty of the Committee to conduct
the general administration of this Plan in accordance with its
<PAGE>
provisions. The Committee shall have the power to interpret
this Plan and the agreements pursuant to which Options, awards
of Restricted Stock or Deferred Stock, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock
Payments are granted or awarded, and to adopt such rules for
the administration, interpretation, and application of this
Plan as are consistent therewith and to interpret, amend or
revoke any such rules. Notwithstanding the foregoing, the full
Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to
Options granted to Independent Directors. Any such grant or
award under this Plan need not be the same with respect to each
Optionee, Grantee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and
duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code,
or any regulations or rules issued thereunder, are required to
be determined in the sole discretion of the Committee.
9.3 MAJORITY RULE. The Committee shall act by a majority of its
members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all
members of the Committee.
9.4 COMPENSATION: PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board.
All expenses and liabilities which members of the Committee
incur in connection with the administration of this Plan shall
be borne by the Company. The Committee may, with the approval
of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the
Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be
final and binding upon all Optionees. Grantees, Restricted
Stockholders, the Company and all other interested persons. No
members of the Committee or Board shall be personally liable
for any action, determination or interpretation made in good
faith with respect to this Plan, Options, awards of Restricted
Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, and all members
of the Committee shall be fully protected by the Company in
respect of any such action, determination or interpretation.
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments under this Plan may not
be sold, pledged, assigned, or transferred in any manner other
than by will or the laws of descent and distribution, unless
and until such rights or awards have been exercised, or the
shares underlying such rights or awards have been issued, and
all restrictions applicable to such shares have lapsed. No
Option,A-13 Restricted Stock award, Deferred Stock award,
Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment or interest or right therein shall
be liable for the debts, contracts or engagements of the
Optionee, Grantee or Restricted Stockholder or his successors
in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or
any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect.
During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion
thereof) granted to him under the Plan. After the death of the
Optionee or Grantee, any exercisable portion of an Option or
other right or award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock
Option Agreement or other agreement, be exercised by his
personal representative or by any person empowered to do so
under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.
10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. This Plan
may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the
Committee. However, without approval of the Company's
stockholders given within twelve months before or after the
action by the Committee, no action of the Committee may, except
as provided in Section 10.3, increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued
under this Plan or modify the Award Limit, and no action of the
Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule.
Notwithstanding the foregoing, the provisions of this Plan
relating to formula Option grants to Independent Directors,
including the amount, price and timing thereof, shall not be
amended more than once in any six-month period other than to
comport with changes, in the Code, the Employee Retirement
<PAGE>
Income Security Act, or the respective rules thereunder. No
amendment, suspension or termination of this Plan shall,
without the consent of the holder of Options, Restricted Stock
awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments,
alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments theretofore granted or awarded, unless the award
itself otherwise expressly so provides. No Options, Restricted
Stock, Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments may be granted
or awarded during any period of suspension or after termination
of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the
following events:
(a) The expiration of ten years from the date the Plan is
adopted by the Board; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 10.5.
10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY. In the event
that the outstanding shares of Common Stock are hereafter
changed into or exchanged for cash or a different number or
kind of shares or other securities of the Company, or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
splitup, stock dividend, or combination of shares, appropriate
adjustments shall be made by the Committee in the number and
kind of shares for which Options, Restricted Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Deferred Stock awards or Stock Payments may be
granted, including adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be
issued and of the Award limit described in Section 1.2, and
appropriate adjustments shall be made by the Board in the
number and kind of shares for the purchase of which Options are
granted to Independent Directors under Section 3.4(d).
In the event of such a change or exchange, subject to the other
provisions of this Plan, the Committee (or the Board, in the
case of Options granted to Independent Directors) shall also
make an appropriate and equitable adjustment in the number and
kind of shares as to which all outstanding Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, or portions thereof then unexercised, shall be
exercisable and in the number and kind of shares of outstanding
Restricted Stock or Deferred Stock. Such adjustment shall be
made with the intent that after the change or exchange of
shares, each Optionee's and each Grantee's and each Restricted
<PAGE>
Stockholder's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an
outstanding Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment may include a
necessary or appropriate corresponding adjustment in Option,
Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment exercise price, but shall be made
without change in the total price applicable to the Option,
Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment, or the unexercised portion thereof
(except for any change in the aggregate price resulting from
rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will
be made in a manner which will not be considered a
"modification" under the provisions of subsection 424(h)(3) of
the Code.
Notwithstanding the foregoing, in the event of such a
reorganization, merger, consolidation, recapitalization,
reclassification, stock splitup, stock dividend or combination,
or other adjustment or event which results in shares of Common
Stock being exchanged for or converted into cash, securities or
other property, the Company will have the right to terminate
this Plan as of the date of the exchange or conversion, in
which case all options, rights and other awards under this Plan
shall become the right to receive such cash, securities or
other property, net of any applicable exercise price.
In the event of a "spin-off" or other substantial distribution
of assets of the Company which has a material diminutive effect
upon the Fair Market Value of the Company's Common Stock, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may in its discretion make an
appropriate and equitable adjustment to the Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment exercise price to reflect such diminution.
10.4 MERGER OF THE COMPANY. In the event of the merger or
consolidation of the Company with or into another corporation,
the exchange of all or substantially all of the assets of the
Company for the securities of another corporation, the
acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the
Company's then outstanding voting stock or the liquidation or
dissolution of the Company:
(a) At the discretion of the Committee (or the Board, in the
case of Options granted to Independent Directors), the
terms of an Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment may provide
that it cannot be exercised after such event.
<PAGE>
(b) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide either by the terms of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment or by a resolution adopted prior to the
occurrence of such event that, for a specified period of
time prior to such event, such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock
Payment shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in this
Plan or in the provisions of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment.
(c) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide either by the terms of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment or by a resolution adopted prior to the
occurrence of such event that upon such event, such
Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment shall be assumed by
the successor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor
corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of
shares and prices.
(d) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or Deferred Stock award
or by a resolution adopted prior to the occurrence of such
event that, for a specified period of time prior to such
event, the restrictions imposed under a Restricted Stock
Agreement or a Deferred Stock Agreement upon some or all
shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or
all shares of such Restricted Stock may cease to be
subject to repurchase under Section 6.6 after such event.
(e) None of the foregoing discretionary terms of this Section
10.4 shall be permitted with respect to Options granted
under Section 3.4(d) to Independent Directors to the
extent that such discretion would be inconsistent with the
requirements of Rule 16b-3.
<PAGE>
10.5 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted
for the approval of the Company's stockholders within twelve
months after the date of the Board's initial adoption of this
Plan, Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such
stockholder approval, provided that such Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments shall not be exercisable and such Restricted
Stock or Deferred Stock shall not vest prior to the time when
this Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said
twelve-month period, all Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments
previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be cancelled
and become null and void.
10.6 TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to
each Optionee, Grantee or Restricted Stockholder of any sums
required by federal, state or local tax law to be withheld with
respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment.
Subject to the timing requirements of Section 5.3, the
Committee (or the Board, in the case of Options granted to
Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee,
Grantee or Restricted Stockholder to elect to have the Company
withhold shares of Common Stock (or allow the return of shares
of Common Stock) having a Fair Market Value equal to the sums
required to be withheld.
10.7 LOANS. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or
receipt of an Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment granted under this
Plan, or the issuance of Restricted Stock or Deferred Stock
awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-
BASED COMPENSATION. Notwithstanding any other provision of
this Plan, any Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment granted, or
Restricted Stock or Deferred Stock awarded, to a key Employee
or Director who is then subject to Section 16 of the Exchange
Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such
<PAGE>
exemptive rule, and this Plan shall be deemed amended to the
extent necessary to conform to such limitations. Furthermore,
notwithstanding any other provision of this Plan, any Option or
Stock Appreciation Right intended to qualify as performance-
based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth
in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as
performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended
to the extent necessary to conform to such requirements.
10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation
or incentive plans in effect for the Company or any Subsidiary.
Nothing in this Plan shall be construed to limit the right of
the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or consultants of the
Company or any Subsidiary or (ii) to grant or assume options or
other rights otherwise than under this Plan in connection with
any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation
or otherwise, of the business, stock or assets of any
corporation, partnership, firm or association. 10.10
COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan and the issuance
and delivery of shares of Common Stock and the payment of money
under this Plan or under Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments
granted or Restricted Stock or Deferred Stock awarded hereunder
are subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state
and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall,
if requested by the Company, provide such assurances and
representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law,
the Plan, Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
<PAGE>
10.11 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction
of this Plan. 10.12 GOVERNING LAW. This Plan and any
agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of Delaware
without regard to conflicts of laws thereof.
10.12 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws
of the State of Delaware without regard to conflicts of laws
thereof.
<PAGE>
EXHIBIT 10.16
-------------
THE ATLANTA MERCHANDISE MART
LEASE AGREEMENT
This Lease Agreement made and entered into this 17th day of April 1998
by and between AMC, INC., a Georgia corporation (hereinafter referred
to as "Lessor"), and DESTINATION, INC., a corporation under the laws
of the State of Georgia (hereinafter referred to as "Lessee").
WITNESSETH:
In consideration of the promises and covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lessor hereby leases to Lessee, and
Lessee hereby leases from Lessor, those certain premises more
particularly described herein, in accordance with the Terms and
Conditions attached hereto and incorporated herein by this reference.
This lease shall consist of the following Basic Lease Information, any
special stipulations set forth herein, the attached Terms and
Conditions, and any exhibits expressly incorporated herein
(collectively hereinafter referred to as the "Lease").
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION:
<S> <C>
Section 1.2 Showroom: 22-S-20
Section 1.2 Gross Square Feet of Showroom: Approximately 9,933
Section 2.1 Term Commencement Date: May 1, 1998
Section 2.1 Expiration Date: June 30, 2002
Section 3.1 Base Rent: $11,333.00 per month from May 1, 1998
to June 30, 1999
$11,786.32 per month from July 1, 1999
to June 30, 2000
$12,257.77 per month from July 1, 2000
to June 30, 2001
$12,748.08 per month from July 1, 2001
to June 30, 2002
Section 3.3 Base Year: 1998
Section 3.3 Gross Leasable Square Feet
in Building: 2,027,385
Section 3.3 Lease's Percentage Share: .0048994%
Section 3.5 Security Deposit N/A
Section 6.9 Time of Operation: 8:00 AM - 6:00 PM Monday through Friday, and such hours as
may be designated by Lessor during all Market Exhibition
Periods.
</TABLE>
<PAGE>
BASIC LEASE INFORMATION, CONTINUED:
Section 12.12 Address of Parties:
Lessor: AMC, Inc.
240 Peachtree Street, N.W.
Suite 2200
Atlanta, GA 30303
Attention: Lease Administrator
With a copy to:
AMC, Inc.
240 Peachtree Street, N.W.
Suite 2200
Atlanta, GA 30303
Attention: Legal Department
Lessee: Destination, Inc.
240 Peachtree Street, N.W.
Suite 22-S-20
Atlanta, GA 30303
Attention: Greg Cunningham
Section 12.18 Special Stipulations (if any):
12.18 CONSTRUCTION LOAN. Notwithstanding anything contained herein
to the contrary, Lessor agrees to loan to Lessee an amount
equal to fifty thousand dollars ($50,000.00) (hereinafter
referred to as the "Construction Loan"), for Lessee's total
cost of the construction of Lessee Improvements made to the
Premises, as indicated in EXHIBIT "C" HERETO. Lease agrees to
reimburse and pay to Lessor the Construction Loan in accordance
with the terms of the Promissory Note, a copy of which is
attached hereto as EXHIBIT "B" and made a part hereof. The
parties further agree that any default under said Promissory
Note shall be deemed an Event of Default under this Lease.
12.19 (a) In the event the Agreement dated April 17, 1998 is
terminated on the Termination Date (as said term is
defined in the Agreement), or if sooner terminated (except
if such termination is due to a monetary default by
Lessee), this Lease shall terminate within one hundred
eighty (180) days from the effective date of termination
of the Agreement. Lessee agrees that all Rent and other
amounts paid to Lessor are non-refundable, including
without limitation, any payments made pursuant to the
Promissory Note dated April 17, 1998, and Lessee shall not
have any claim thereto. Lessee will have the right to
vacate and surrender the Premises in accordance with the
terms and conditions of this Lease, within one hundred
eighty (180) days from the effective date of termination
of the Agreement, by providing written notice to Lessor of
<PAGE>
the effective date of vacation and surrender of the
Premises, which shall also be the effective date of
termination of the Lease. Lessee agrees that it shall
remain in compliance with all of the terms and conditions
of the Lease during said time period, including without
limitation the payment of Rent and installment payments
under the Promissory Note dated April 17, 1998.
(b) This Lease may not be terminated as provided in this
Section 12.19 at any time during which Lessee is in
default of its covenants and obligations under this Lease,
and no termination shall be effective if Lessee shall be
in default of its obligations and covenants under this
Lease as of the date of such termination, unless Lessor
otherwise expressly agrees in writing.
12.20 PRIOR LEASE. Lessee's lease dated May 18, 1993, for the
premises known as Space 13-A-11, and a Portion of B2, B3 and B5
in the Building (the "Prior Lease") shall be deemed to
terminate on April 30, 1998. Notwithstanding the above, Lessee
shall continue to pay Lessor Base Rent and Additional Rent and
any other charges due pursuant to the terms of both the Prior
Lease and the Lease, until possession of the former premises is
actually delivered by Lessee to Lessor. Following Lessee's
delivery of the former premises to Lessor, Lessee shall be
responsible only for payment of Base Rent, Additional Rent, and
any other charges due pursuant to the terms of the Lease.
12.21 TERM. The Term of this Lease is intended to be co-terminus
with that certain Agreement between Destination, Inc. and AMC,
Inc. dated April 17, 1998 (the "Agreement"), provided that, in
accordance with the terms of Section 12.19 of this Lease,
Lessee shall have up to one hundred eighty (180) days to vacate
the Premises upon termination of the Agreement.
The Sections of the Terms and Conditions identified above in the left
margin are those sections where references to particular Basic Lease
Information appear. Each such reference shall incorporate the
applicable Basic Lease Information. In the event of any conflict
between any Basic Lessee Information and the Terms and Conditions, the
latter shall control.
Lessor: AMC, Inc.
By: /s/ Jeffrey L. Portman
---------------------------------------------
Title: Executive Vice President
Attest: _________________________________________
Name: ___________________________________________
Title: ___________________________________________
<PAGE>
Lessee: Destination, Inc.
By: /s/Gregory S. Cunningham
---------------------------------------------
Title: Secretary/Treasurer
Name: ____________________________________________
Title: ___________________________________________
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
<PAGE>
ATLANTA MERCHANDISE MART
TERMS AND CONDITIONS
Article 1
---------
PREMISES
1.1 DEFINITIONS. Unless the context of this Agreement shall
require otherwise:
(a) "Bare wall," "bare wall premises," and "bare wall
condition" shall mean and refer to the unfinished interior
walls as originally constructed, including, without
limitation, drywall, concrete block, aluminum and/or
glass.
(b) "BLI" shall mean and refer to the Basic Lease Information
pages attached hereto and incorporated herein by
reference.
(c) "Building" shall mean and refer to that structure owned or
operated by Lessor and located at 240 Peachtree Street
N.W., Atlanta, Georgia 30303 and known as the Atlanta
Merchandise Mart, as said structure may from time to time
hereafter be expanded or modified.
(d) "Common Area" shall mean and refer to all areas of the
Building used or available for use in common by lessees,
their employees and invitees, including, without
limitation, lobbies, stairs, escalators, elevators,
corridors, restrooms, parking areas, landscaped areas,
loading docks, and all other areas and improvements which
may be provided by Lessor for the convenience and use of
the lessees and occupants of the Building, and their
respective agents, employees and invitees.
(e) "Market Exhibition Period" shall mean and refer to those
market periods for professional buyers, wholesalers, and
retail shop owners in the rugs, furniture, gift, textile
and decorative accessories industries, as may be organized
and arranged by Lessor from time to time during this
Lease. Such market periods shall be held on such dates, at
such times, and for such duration as may be established by
Lessor in its sole discretion.
(f) "Gross Square Feet" shall mean and refer to that area
contained in the Premises as measured from centerline to
centerline of all perimeter partitions of the Premises and
from the outermost portion of the showroom front of all
corridors to either the inside face of all exterior
building walls or the centerline of an interior partition,
as the case may be, plus Lessee's prorata share of the
Common Area. It is acknowledged and agreed by the parties
that the total gross square feet in the Premises as
<PAGE>
defined herein shall be subject to adjustment only in the
event the area of the actual as-built Premises varies by
more than one percent (1%) from the gross square footage
set forth in the BLI.
(g) "Gross Leasable Square Feet" shall mean the aggregate of
all gross square feet in the Building.
(h) "Premises" shall mean and refer to that particular demised
showroom referred to in Section 1.2.
(i) "Rent" shall mean and refer to all charges payable by
Lessee to Lessor hereunder, including, without limitation,
Base Rent and Additional Rent (as said terms are hereafter
defined).
1.2 PREMISES.
(a) Lessor does hereby lease, demise, and rent to Lessee and
Lessee does hereby lease, take, and rent from Lessor under
and according to the provisions of this Agreement, those
certain premises described on the BLI containing
approximately the number of Gross Square Feet set forth on
the BLI, as more specifically shown on the floor plan
attached hereto as "Exhibit A" and incorporated herein by
reference (hereinafter referred to as the "Premises");
provided, however, that the Premises shall exclude the
foundations, concrete floorslabs, exterior walls (except
plate glass or other glass), and the roof of the Building.
(b) Subject to the Building Manual (a copy of which Lessee
hereby acknowledges receipt of) and such other rules and
regulations as may be prescribed by Lessor from time to
time, the use and occupancy by the Lessee of the Premises
shall include the use of the Common Area in common with
all others to whom Lessor has or may hereafter grant
rights to use the same and the use of such other
facilities of Lessor as may be designated from time to
time by Lessor as Common Area. The Common Area shall be
under the control of Lessor and any use thereof by Lessee
is under revocable license. Lessor reserves the right at
any time, and from time to time, to change the
configuration of the Common Area, to eliminate all or part
of the Common Area, to subject the Common Area and the use
thereof to any restrictions which Lessor, in its sole
discretion, may determine, to close temporarily any part
or portion of the Common Area to make repairs to changes
or to perform such other acts in and to the Common Area as
Lessor, in its sole judgment, may deem desirable.
(c) Lessor expressly reserves the right to relocate Lessee, at
Lessor's sole cost and expense, to any other space or
showroom within the Building of comparable size, with
comparable improvements, and at a comparable Rent.
<PAGE>
(d) No easement of light or view is included in this Lease of
the Premises, and no diminution or shutting off of light
or air or view shall affect this Lease.
Article II
----------
TERM
2.1 TERM.
(a) The term of this Lease (hereinafter referred to as the
"Lease Term") shall commence on the Term Commencement Date
set forth on the BLI, or on the date that Lessor delivers
the Premises to Lessee, whichever is earlier (hereinafter
referred to as the "Commencement Date") and shall cease,
unless terminated earlier in accordance with the terms of
this Lease, on midnight of the Expiration Date set forth
on the BLI (hereinafter referred to as "Expiration Date").
Lessor shall have no liability to Lessee if Lessor is
unable to deliver possession of the Premises on the above
Commencement Date by reason of the holding over of the
prior occupant, or by reason of delay in completion of the
Building or Lessor's improvements, if any, to the
Premises, or for any other cause beyond the reasonable
control of Lessor, but in such event Base Rent shall not
commence until possession of the Premises is tendered to
Lessee. An adjustment in the date Base Rent shall commence
shall not adjust the Expiration Date or Commencement Date
of this Lease. If Lessee shall occupy the Premises prior
to the Commencement Date with the consent of Lessor, such
occupancy shall be subject to all the terms and conditions
of this Lease.
(b) In the event Lessee holds possession of the Premises
beyond the Expiration Date set forth herein and obtains
the written consent of Lessor therefor, then this Lease
and the Lease Term hereof shall be deemed to be extended
on a month-to-month basis upon all of the terms and
conditions herein set forth except that: (i) Such tenancy
may be terminated upon not less than thirty (30) days
prior written notice by either party hereto; and (ii)
Lessee shall pay to Lessor monthly Rent in advanced on the
first day of such extension period and thereafter on the
first day of each calendar month or portion thereof during
such extension period in an amount equal to one hundred
fifty percent (150%) of the Rent payable in the last full
calendar month preceding the first day of such extension
period.
2.2 INSPECTION AND ACCEPTANCE OF PREMISES.
(a) Lessor agrees to grant Lessee reasonable time and access
to inspect the Premises prior to occupancy.
<PAGE>
(b) Occupancy of the Premises by Lessee shall be deemed
conclusively to establish that the Premises and all other
improvements required to be made by Lessor hereunder, if
any, have been completed per specifications and floor
plans and in accordance with Lessee's wishes and needs and
are accepted by Lessee as being in good and satisfactory
condition.
Article III
-----------
RENT
3.1 BASE RENT. Lessee shall pay Lessor Base Rent for the Premises
in the amounts set forth on the BLI. Base Rent shall be due and
payable in advance upon the Commencement Date (except as may be
provided in Section 2.1(a) hereof) and upon the first day of
each calendar month thereafter during the Lease Term; provided,
however, that if the Lease Term shall commence on a day other
than the first day of the calendar month, then the Base Rent
for such first fractional month shall be such proportion of the
monthly rental set forth above as the numbers of days in such
fractional month bears to the total number of days in that
calendar month, and shall be payable along with the first full
month's rent on or before the Commencement Date.
3.2 PAYMENT OF RENT. Base Rent, Additional Rent, and all other
charges payable by Lessee hereunder are cumulative, shall be
promptly paid by Lessee to Lessor without prior demand therefor
by Lessor, and shall be made without deduction or set-offs of
any kind or nature whatsoever in lawful money of the United
States of America at the office of Lessor, or such other
location as Lessor may request. Overdue Base Rent, Additional
Rent, and all other charges payable by Lessee hereunder shall
bear interest as set forth in Section 12.6 herein. Lessor shall
have no obligation to accept less than the full amount of all
amounts payable by Lessee hereunder and any applicable interest
thereon, and if Lessor shall accept less than the full amount
owing, Lessor may apply the sums received, in Lessor's sole
discretion, toward any of Lessee's obligations to Lessor, and
such acceptance of less than the full amount due and owing at
any given time shall not constitute a waiver of any Events of
Default hereunder.
3.3 ADDITIONAL RENT.
(a) Lessor shall pay all real estate taxes, assessments, and
other governmental levies against the Building
(hereinafter referred to as "Real Estate Taxes"), except
as otherwise hereinafter provided. Commencing in the first
calendar year after the Base Year (as described on the
BLI), if the amount of the Real Estate Taxes levied or
assessed against the Building shall exceed by more than
<PAGE>
six percent (6%) per annum the Real Estate Taxes assessed
in the Base Year, Lessee shall pay as Additional Rent
Lessee's Percentage Share of that portion of such excess
(e.g., over and above six percent (6%) per annum).
The computation of Additional Rent under this Section
3.3(a) is expressed by the following formula:
A = [T-B(1+(0.6 x C))] x L
A = Additional Rent
T = Real Estate Taxes for the calendar year in
question
B = Real Estate Taxes for the Base Year
C = The number of calendar years since the end of
the Base Year
L = Lessee's Percentage Share
(b) Lessor shall pay the costs of providing water, gas and
electricity (hereinafter collectively called the "Utility
Costs") to the Building. Commencing in the first calendar
year after the Base Year, if the amount of the Utility
Costs shall exceed by more than six percent (6%) per annum
the Utility Costs for the Base Year, Lessee shall pay as
Additional Rent under this Section 3.3(b) is expressed by
the following formula:
A = (U-B(1+0.6 x C)) x L
A = Additional Rent
U = Utility Costs for the calendar year in question
B = Utility Costs for Base Year
C = The number of calendar years since the end of
the Base Year
L = Lessee's Percentage Share
(c) In any calendar year in which the tenancy of the Lessee is
for less than the full calendar year, the Additional Rent
due under this Section 3.3 shall be adjusted and prorated
so that the Lessee's Percentage Share of said sum shall
bear the same percentage that the partial calendar year
bears to the full calendar year. Such Additional Rent due
under this Section 3.3 shall be paid in one (1) lump sum
which shall be due and payable thirty (30 days after
Lessee is invoiced therefor. Lessee's obligation to pay
such Additional Rent shall survive the termination of this
Lease in the event the Real Estate Taxes or Utility Costs
payable during the last year of Lease cannot reasonably be
determined until after the termination of this Lease.
<PAGE>
(d) Lessor shall cause an independent certified public
accountant selected by Lessor, in its sole discretion, to
prepare on an annual basis a statement of the Utility
Costs and Real Estate Taxes paid by Lessor, a copy of
which shall be made available to Lessee upon written
request. The Statement of said independent certified
public accountant shall be final and binding upon Lessor
and Lessee, absent manifest error. Lessee hereby waives
any further accounting by Lessor.
3.4 ACCORD AND SATISFACTION. No endorsement or statement on a
check or letter accompanying any check or payment by Lessee to
Lessor shall be deemed an accord and satisfaction or a release
of liability, and Lessor may accept such check or payment
without prejudice to Lessor's rights to recover the balance of
all sums due to Lessor hereunder or to pursue any other remedy
set forth in this Lease or granted by law or in equity.
3.5 SECURITY DEPOSIT. Lessee has deposited with Lessor a Security
Deposit as set forth on the BLI (the "Deposit"). The Deposit
shall be held by Lessor as security for the faithful
performance by Lessee of all the provisions of this Lease to be
performed or observed by Lessee. If Lessee fails to pay Base
Rent, Additional Rent, or other charges due hereunder, or an
Event of Default otherwise occurs with respect to any provision
of this lease, Lessor may use, apply, or retain all or any
portion of the Deposit for the payment of any such Base Rent,
Additional Rent, or other charge for which Lessor may become
obligated by reason of Lessee's Event of Default or for
compensation to Lessor for any loss, expense, or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or
any portion of the Deposit, Lessee shall, within ten (10) days
after demand therefor, deposit cash with Lessor in an amount
sufficient to restore the Deposit to the full amount thereof
and Lessee's failure to do so shall be a material breach of
this Lease. If Lessee performs all of Lessee's obligations
hereunder, the Deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned without
payment of interest or other increment for its use to Lessee at
the expiration of the Lease Term after Lessee has vacated the
Premises. No trust relationship is created herein between
Lessor and Lessee with respect to the Deposit, and Lessor shall
not be required to keep the Deposit separate from its general
accounts.
<PAGE>
Article IV
----------
PREMISES CONSTRUCTION, MAINTENANCE AND ALTERATION
4.1 LESSOR'S IMPROVEMENTS.
(a) Lessor is responsible for the construction and maintenance
of the Building, including the Common Area and the
structural portion of the Building from the exterior of
the Building to the perimeters of the Premises and of the
premises of other lessees. If this Lease is for the
Premises which are unfinished at the date of execution
hereof, Lessor agrees to provide, without expense to
Lessee, except as otherwise expressly provided herein,
including without limitation Section 12.18 hereof, the
following items: (i) Concrete ceiling and floor comprising
structure of Building; (ii) Demising walls in bare wall
condition defining the perimeter of the Premises; (iii)
Electrical service to junction box(es) located in the
concrete ceiling of the Premises; (iv) Conditioned air;
(v) glass door(s); and those items listed on Exhibit "C"
hereto.
(b) If this Lease is for space which has been previously
furnished prior to execution hereof, Lessor provides the
Premises to Lessee on an "as is" basis, and by taking
possession of the Premises, Lessee acknowledges that the
Premises are in good and satisfactory condition and that
Lessor has agreed to perform no improvements to the
Premises unless the same are expressly set forth herein.
4.2 LESSOR'S MAINTENANCE OF THE PREMISES. After Lessor has
completed its improvements to the Premises as set forth in
Section 4.1 herein, if applicable, Lessor shall provide
maintenance service only to those portions of the Premises
constituting structural portions of the Building, as set forth
in section 4.1(a) herein, including parts and labor for fan
units and maintenance for electrical equipment constituting
structural portions of the Building, and electrical conduits
and lines to the perimeter of the Premises and of other lessees
(but not including light fixtures, lamps, light bulbs, and
other electrical accessories).
4.3 LESSEE'S IMPROVEMENTS AND ALTERATIONS.
(a) Lessee agrees to cause the Premises to be finished, in
accordance with this Agreement, with paintings and other
interior decoration suitable for a trade mart and of a
quality and design consistent with the standards generally
observed in Lessee's industry. All alterations or
improvements to the bare wall Premises or previously
finished Premises shall be made by Lessee at Lessee's sole
cost and expense, shall be of good and workmanlike
construction, and shall in every respect comply with all
<PAGE>
governmental laws, codes, ordinances, regulations, and
other requirements, whether federal, state, or local,
which may govern construction of said alterations or
improvements, including, without limitation, obtaining the
proper building permits and certificates of occupancy.
Lessee shall not make or cause to be made any said
alterations or improvements or erect, remove or alter
partitions in the Premises without first delivering to
Lessor final plans and specifications therefor and
obtaining Lessor's prior written consent thereto, but such
review and consent by Lessor shall not waive or in any
manner diminish Lessee's responsibilities with respect to
such construction as set forth in this Lease or estop
Lessor from latter asserting breach by Lessee of such
responsibilities in the event such breach later becomes
apparent to Lessor; provided, however, that Lessee may,
without the consent of Lessor, but at its own cost and
expense and in good and workmanlike manner, make such
minor alterations, additions, or other improvements to the
Premises as it may deem advisable, without altering the
basic character or layout of the Premises or the Building
or the improvements to the Premises, such as erecting
shelves and display fixtures. (For purposes of this
Agreement, the term "display fixtures" shall mean those
trade fixtures which are common in Lessee's business.)
Within ninety (90) days of the projected date of occupancy
of the Premises by Lessee or, if later, the date on which
the Lease is executed, Lessor shall provide Lessee with a
suggested list of contractors from which list Lessee may
select its contractor to make alterations or improvements
to the Premises. Such list may be amended by Lessor from
time to time. In the event Lessee desires to use a
contractor not on such list, Lessee shall first obtain the
written approval of Lessor for such contractor.
(b) Lessee shall require in any agreement with any contractor
or any subcontractor for alterations or improvement to the
Premises that such contractor or subcontractor must obtain
and maintain such insurance as Lessor shall reasonably
require, and must comply with all rules and regulations
governing the Building and the Premises, and the use or
access thereto, and such further rules and regulations
governing the building and premises as may be promulgated
by Lessor from time to time.
(c) All alterations, additions and improvements to or of the
Premises and all fixtures, equipment and signs attached to
the Premises, whether now in existence or hereinafter made
by either Lessor or Lessee (herein referred to
collectively as the "Improvements") shall, during the
Lease Term, be Lessee's property, and all taxes or
governmental charges with respect thereto during the Lease
Term shall be paid by Lessee. Upon the expiration or
sooner termination of this Agreement or upon the entry,
<PAGE>
repossession or reentry of the Premises by Lessor pursuant
to Section 11.2 hereinbelow, whichever is earlier, all
such Improvements (including, without limitation, all
components of any track lighting or other lighting system
installed within the Premises, but excluding personal
property, movable furniture, trade fixtures which can be
removed without leaving the Premises in an unsightly
condition or rendering any systems in the Premises non-
functional, and such Improvements that Lessee is to remove
in accordance with Section 12.15) shall be and become
Lessor's property without compensation to Lessee.
Improvements shall include, but not be limited to all
partitions, all portions of any ceiling or wall-mounted
light fixtures, wall racks, floor coverings, conditioned
air ducts, drapery hardware, wall coverings, ceiling
cover, electrical wiring, pipes and conduits. Lessee shall
not remove any Improvements from the Premises except as
herein provided, and shall fully repair any damage
occasioned by any such permitted removal.
4.4 LESSEE'S MAINTENANCE OF THE PREMISES. Lessee shall, at all
times during the Lease Term and at Lessee's sole cost and
expense, keep and maintain the Premises and every part thereof
(including, without limitation, all Improvements, glazing, and
store fronts, but excluding exterior walls, roofs, floors and
structural elements) in good and sanitary condition and repair
and free from pests. Lessee hereby waives all rights to make
repairs at the expense of Lessor as may be provided by any law,
statute or ordinance now or hereafter in effect.
4.5 ENTRY BY LESSOR. In the event of the expansion of or other
structural alteration to the Building by Lessor, or in the
event any repairs are to be made by Lessor pursuant to this
Lease or any other lease of showrooms in the Building. Lessor
shall have the right to enter the Premises and make use of any
portion of the Premises as are necessary to accomplish said
expansion, structural alteration or repair, and Lessee shall be
entitled to an abatement of Rent in such event only to the
extent such entry prevents Lessee from conducting its normal
business in the Premises. In addition, Lessor and its
employees, agents, and assigns shall have the right to enter
the Premises at any time during normal business hours (i) to
inspect the condition of the Premises for the compliance by
Lessee with this Lease, but no such inspection or failure to
inspect shall waive any rights of Lessor with respect to any
Event of Default by Lessee, whether any such Event of Default
was or should have been discovered; (ii) to post "For Lease"
signs upon or within the premises during the last ninety (90)
days of the lease term or during any period of holding over by
lessee; (iii) to exhibit the Premises to Prospective lessees or
purchasers; and (iv) to post notices of non-responsibility
and/or non-payment. In the event Lessee fails to maintain and
clean the Premises as required hereunder, Lessor may enter the
Premises at any time for the purpose of cleaning
<PAGE>
and restoring same to a clean and sanitary condition, and
Lessee shall pay on demand Lessor's actual expenses incurred
thereby as Additional Rent hereunder. The foregoing shall not
obligate Lessor to take any actions with respect to the
Premises. Lessor shall use its best efforts to accomplish its
actions within the Premises with minimum interference with
Lessee, provided, however, that any liability of Lessor arising
out of any such entry shall be limited to Lessor's gross
negligence or willful misconduct.
Article V
---------
ADDITIONAL OBLIGATIONS OF LESSOR
5.1 UTILITIES AND OTHER SERVICES. Lessor agrees to provide
physical connections for electricity to the perimeter of the
Premises in addition to conditioned air to the Premises and of
the Common Area of the Building at such times as Lessor in its
sole discretion deems reasonably necessary for the comfortable
occupancy thereof; provided, however, Lessor shall not be
required to deliver or furnish in excess of five (5) watts of
electricity per square foot to the Premises. Lessee agrees to
reimburse to Lessor, upon demand, all costs incurred by Lessor
in connection with Lessee's use of electrical power in excess
of five (5) watts per square foot of the Premises. Lessor
further agrees to provide public escalator or elevator service
for the Building. Lessor reserves the right to discontinue
escalator and elevator service, the supply of conditioned air,
and other similar services to the Premises and Common Area of
the Building on Saturdays, Sundays, and holidays between the
hours of 5:00 p.m. and 8:00 a.m. and at such other times as
Lessor may reasonably specify; provided, however, such services
shall remain in operation during the business hours of all
Market Exhibition Periods.
5.2 COMMON AREA MAINTENANCE. Lessor will maintain and operate the
Common Area in reasonably good order and condition. The cost
of repairing damage to any part of the Common Area caused by
the act of the Lessee or its agents, employees, or invitees
shall be paid by Lessee upon demand by Lessor.
5.3 SHIPPING AND RECEIVING SERVICES. Lessor may provide, but shall
be under no obligation to provide, services in connection with
the shipping and receiving of merchandise by Lessee to or from
the Premises or the Building. In the event such services are
provided, Lessee expressly agrees that the acceptance by
Lessor, its contractors, agents or employees, of custody or
control of any merchandise or other personal property of Lessee
shall not constitute a bailment, and lessee expressly waives
any claim against Lessor, its contractors, agents or employees,
arising out of or relating to any loss of or damage to any such
personal property, unless such loss or damage results solely
from the gross negligence or intentional misconduct of Lessor,
<PAGE>
its employees or agents acting within the scope of their
employment or agency.
Article VI
----------
ADDITIONAL OBLIGATIONS OF LESSEE
6.1 INSURANCE. Lessee at its sole expense, shall procure and
maintain during the Lease Term: (i) broad form commercial
general liability insurance, including fire legal liability
coverage, bodily injury coverage (which includes personal
injury coverage), and property damage liability coverage
insuring against any and all liability of Lessee, its agents
and its employees with respect to the Premises or arising out
of the maintenance, use, or occupancy thereof, said liability
insurance to have combined limits in the aggregate for bodily
injury and property damage of not less than $1,000,000 in any
one incident; and (ii) fire and extended coverage insurance on
all improvements to the Premises and all contents therein in an
amount not less than one hundred percent (100%) of the
replacement cost thereof.
All such insurance shall insure the performance by Lessee of
the indemnity agreement contained in Section 6.7 herein with
respect to liability for injury to or death of persons and
injury to or damage to property. Lessor shall be named as an
additional insured on all such policies, as lessor's interest
may appear. The policy or policies evidencing such insurance
shall provide that same may not be canceled or amended without
thirty (30) days prior written notice to Lessor, and shall be
issued by an insurance company licensed to do business in
Georgia. Prior to the Commencement Date Lessee shall furnish
to Lessor a certificate of insurance evidencing the existence
of all insurance required to be maintained by Lessee pursuant
to this Lease. Lessee will not permit the Premises to be used
for any purpose which would render the insurance thereon or on
the Building void or the insurance risk more hazardous or
increase the premium rate therefor, it being understood and
agreed that the use of the Premises in the proper and ordinary
conduct of Lessee's business for the purposes set forth in
Section 7.1 herein shall not in any event be considered a
violation of this Section.
6.2 RULES AND REGULATIONS. Lessee, its employees, guests and
invitees shall observe and comply with any and all rules and
regulations established by Lessor from time to time, written
notice of which shall be provided to Lessee, including, without
limitation, all rules and regulations set forth in the Building
Manual. Said rules and regulations, including those set forth
in the Building Manual, are a part of this Lease as if fully
set forth herein in their entirety.
<PAGE>
6.3 COMPLIANCE AND LAWS. Lessee shall, at its sole cost and
expense, promptly comply with, keep and maintain the Premises
in compliance with the following as now in effect or as may be
hereinafter in effect; all laws, statutes and ordinances and
all rules, regulations and orders of any governmental authority
including, without limitation, City of Atlanta Building Codes;
any direction or occupancy certificate issued pursuant to any
law, regulation or rule by any public officer, the
provisions of any and all recorded documents affecting the
Premises; insofar as any of the foregoing related to or
affect the condition, use or occupancy of the Premises,
excluding requirements of structural change unless related
to or affected by Lessee's improvements or acts.
6.4 LIENS. Lessees shall keep the Premises, the Building, and the
land upon which the Building is situated free from any liens
and claims of lien arising out of any work performed, materials
furnished, or obligations incurred by, for, or at the instance
of Lessee or its licensees, sublessees, assigns, or
concessionaires. Lessor shall have the right to post or keep
posted on the Premises any notices that may now or hereafter be
provided by law or which Lessor may deem to be proper for the
protection from and against such liens. Should any such lien or
claim of lien be filed or recorded, Lessee shall bond against
or discharge the same within five (5) days after notice of such
lien or claim of lien is received by Lessee or Lessor, and
shall immediately notify Lessor upon receipt of any notice or
claim of lien, including a preliminary notice of lien. Lessee
authorizes Lessor, at its sole option, to deliver on its behalf
any statutory demand for filing lien claims to any person who
has delivered material and equipment to or has furnished labor
or services upon the Premises. Nothing contained in this Lease
or in any subsequent agreement between Lessor and Lessee or any
contractor or subcontractor of Lessee relating to improvements,
alterations or repairs shall be deemed or construed in any way
as constituting the consent or request of Lessor, expressed or
implied, by inference or otherwise, to any contractor,
subcontractor, laborer, mechanic or materialman for the
performance of any labor or the furnishing of any materials for
any specific improvement, alteration, or repair of or to the
Premises, or any part thereof, or as giving Lessee a right,
power, or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give
rise to the filing of any mechanic's or materialmen's liens or
claims of lien against the Premises or Lessee's interest
therein, the Building, or the land upon which the Building is
situated.
6.5 FURTHER ASSURANCE. Lessee agrees, at any time and from time to
time upon not less than ten (10) days prior written notice by
Lessor, to execute, acknowledge, and deliver to Lessor a
written statement in a form acceptable to Lessor addressed to
Lessor and such other party or parties as Lessor shall direct,
in which statement Lessee shall (i) certify that this lease is
<PAGE>
unmodified and in full force and effect or, if there have been
modifications, that this lease, as modified, is in full force
and effect; (ii) state the dates through which all Rent has
been paid; (iii) certify that there exists no default in the
performance of any covenant, agreement, term, provision, or
condition of this Lease or, if there exists such a default,
specify the nature of each such default; and (iv) certify that
there are no set-offs, counterclaims, or defenses available to
Lessee against Lessor, or, if there exists any such set-off,
counterclaim or defense, specify the nature thereof. Lessee
hereby agrees that Lessor and such other party or parties to
whom such certificate is addressed may and will rely upon
Lessee's certifications and statements in connection with any
financing or sale of the Building or of the Building and the
land on which it is located.
6.6 DEFECTS. Lessee shall report immediately and in writing to
Lessor any defective condition in or about the Premises,
actually known, or if Lessee should have reasonably known by
its actual occupancy of the Premises, which Lessor is required
to repair under the terms of this Lease. A failure to report
same shall make Lessee liable to Lessor for any expense or
damage, whether direct or indirect, to Lessor arising out of
any such failure to report a defective condition. Lessee's
liability for indirect damages in connection with the
negligence of Lessee, its agents, contractors and employees in
failing to report any such defective condition shall be limited
to the amount of comprehensive general liability insurance and
fire extended coverage insurance required under the Lease.
There shall be no limit on indirect damages caused by or in
connection with the gross negligence or willful misconduct of
Lessee, its agents, contractors and employees in filing to
report same.
6.7 INDEMNIFICATION. Lessee agrees to indemnify and hold Lessor
harmless from and against any and all claims, liabilities,
actions, expenses, losses, or damages whatsoever on account of
or in connection with any loss, injury, death or damage to
persons or property or business arising out of or in connection
with Lessee's use or occupancy of the Premises, including,
without limitation, the condition of the Premises, or any act
or omission, whether or not negligent, of Lessee, its agents,
contractors, employees, guests, or invitees, or any water
and/or plumbing system malfunction, developing as a result of
lessee's extension and use of Lessor's water and sewage systems
(such indemnification included, but shall not be limited to
water damage to the Premises and the Building; the costs for
repair, restoration and replacement of any surfaces, finish,
structure, equipment, furnishings, or merchandise damaged or
altered by said extension, as well as any attendant liability
arising therefrom); provided, however, Lessee shall not be
required to indemnify or hold Lessor harmless from or against
any claims, liabilities, actions, expenses, losses, or damages
to the extent same arise directly out of the gross negligence
<PAGE>
or intentional misconduct of Lessor, its agents or employees
acting within the scope of their agency or employment. Lessee
shall further indemnify and hold Lessor harmless from and
against the performance or non-performance of any covenant or
agreement to be performed by Lessee pursuant to the terms and
conditions of this Lease. In addition, Lessee shall hold Lessor
harmless from and against all costs, reasonable attorney fees,
expenses, and liabilities incurred in connection with any
claim, action or proceeding brought or in any way connected
with the matters against which Lessee has agreed to hold Lessor
harmless.
6.8 TAXES. Lessee shall pay before delinquency any and all taxes,
assessments or governmental charges (whether same are now in
effect or subsequently enacted) during the Lease Term which are
levied or assessed against Lessee's business in the Premises or
upon Lessee's improvements, fixtures, furniture, appliances or
personal property installed or located in the Premises or which
constitute a lien against any of the foregoing.
6.9 TIME OF OPERATION. Lessee shall keep the Premises illuminated
and open for business with an adequate staff in attendance and
its products available for display and marketing during all
Market Exhibition Periods, and during such other times as are
set forth in the BLI (as such times may reasonably be adjusted
by Lessor, from time to time).
Article VII
-----------
USE OF PREMISES
7.1 USE.
(a) The Premises shall be used and occupied by the Lessee as
an office and for no other purpose. Lessee agrees to
conduct its business at all times in a reputable manner
and to operate all of the Premises unless prevented from
doing so because of fire, accident or force majeure.
Lessee shall, at its own cost and expense, obtain any and
all licenses and permits necessary for the aforesaid use.
(b) Lessee shall not solicit, peddle, canvas or distribute
handbills or other written material or permit any such
acts in its behalf, in the hallways, corridors, or other
Common Areas of the Building, or on the grounds, parking
areas, and sidewalks surrounding the Building. All such
activities shall be confined to the Premises. Lessee shall
not solicit sales from persons other than accredited
retail and wholesale merchants and their representatives.
(c) Lessor reserves the right to prescribe qualifications and
time for admission to the Building, including but not
limited to the payment of an admission fee, and to
restrict access to the Building or any portion thereof to
<PAGE>
accredited retail and wholesale merchants and their
representatives, and to make admission into the Building
conditioned upon presentation and exhibition of such
credentials as Lessor may deem necessary or appropriate.
Lessee shall be furnished with credentials for admission
into the Building if deemed necessary by Lessor.
(d) No sign, tag, label, picture, advertisement, or notice
shall be displayed, installed, distributed, inscribed,
painted or affixed by Lessee on the exterior doors, plate
glass or exterior or interior walls of the Premises or on
any part of the outside or inside of the Building without
the prior written consent of the Lessor as to the content
and design thereof. Lessee shall remove all signs, if any,
at the termination of this Lease. Installation and removal
of all signs shall be made in a good and workmanlike
manner so as to avoid injury to or defacement of the
Building, Premises and the improvements therein. No show
cases or other fixtures or objects shall be placed by
Lessee in front of the Building, in the corridors or
elsewhere in or about the Building, other than within the
Premises.
(e) Furniture, products, merchandise, and other bulky objects
shall be brought into and removed from the Building only
through the freight entrance and freight elevators, and
movement of such objects shall be subject to reasonable
requirements of Lessor as to time and manner of moving. No
such items shall be brought into or removed from the
Building during any major Market Exhibition Period without
prior written consent from Lessor.
(f) No additional locks shall be placed on the doors of the
Premises by Lessee, nor shall any existing locks be
changed. Lessor will without charge, furnish Lessee with
three keys for each lock existing upon the entrance doors
to the Premises when Lessee assumes possession. A charge
of five dollars ($5.00) shall be required for additional
keys. Keys are to be issued to authorized personnel only.
(g) Safes and other unusually heavy objects shall be placed by
Lessee only in such places as may be approved by Lessor.
Any damage caused by overloading the floor or by taking in
or removing any object from the Premises shall be paid by
Lessee. Lessee may not place upon the floor of the
Premises any object whatsoever that weights in excess of
fifty (50) pounds per square foot of floor area covered.
(h) Models, salespersons, or other employees or
representatives of Lessee, shall not model, demonstrate,
display, or show in any manner any products outside of the
Premises without Lessor's prior written consent.
<PAGE>
(i) Lessee shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or
interfere with the rights of other tenants of the
Building, or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or
objectional purpose, nor shall Lessee cause, maintain or
permit any nuisance in, on or about the Premises. The
Premises may not be used for timeshare, hotel, or
residential purposes.
(j) Neither Lessee nor its contractors, subcontractors,
agents, laborers, mechanics, or materialmen shall use,
generate, store or dispose of any hazardous waste, toxic
substance, or related materials, including, without
limitation, asbestos and polychlorinated biphenyl ("PCB"),
in or on the Premises, the Building, and the land upon
which the Building is situated.
(k) All plate glass windows and sliding glass doors which face
any corridor shall at all times be and remain totally
clear and unobstructed (except for such identifying signs
as Lessor may approve in writing) so that a full and
obstructed view of the Premises and the corridors beyond,
if applicable, may be had through said plate glass windows
and sliding glass doors. All sliding doors which face any
corridor shall be and remain open and free of obstructions
during all applicable Market Exhibition Periods.
(l) Lessee will conduct its business in the Premises in a
lawful manner in compliance with all governmental laws,
ordinances, regulations, and other requirements, whether
federal, state, or local, applicable to the use of the
Premises and will promptly comply with all governmental
orders and directives applicable to the Lessee's use and
occupancy of the Premises, including, without limitation,
such orders and directives for the correction, prevention,
and abatement of nuisances in or connected with the
Premises, all at Lessee's sole expense.
(m) Lessee will not do any act tending to injure the
reputation of Lessor or to interfere with the operation,
public relations, or promotions of Lessor.
Article VIII
------------
INTEREST OF LESSEE
8.1 SUBORDINATION OF LEASE. The rights of Lessee under this Lease
shall be and are subject and subordinate to any ground leases
for the land on which the Building is located and the lien and
security title of any mortgage or security deed now or
hereafter placed on the Building or the land on which the
Building is located, or any part thereof, and to any renewals,
<PAGE>
modifications, extensions, consolidations and replacements
thereof. Although such subordination shall be self-operative,
Lessees shall execute and deliver, upon demand, such further
instruments confirming such subordination as may be requested
by Lessor. In the event any such security deed shall be
foreclosed (whether by judicial foreclosure or by exercise of a
private power of sale), the party foreclosing such security
deed shall have the option (i) of foreclosing subject to this
Lease so that this Lease will in no way be disturbed or
terminated by such foreclosure, whereupon at the request of the
purchaser at the foreclosure sale (or purchaser by deed in lieu
of a foreclosure), Lessee will attorn to such purchaser and
will execute such instruments as may be necessary or
appropriate to evidence such attornment, or (ii) of terminating
this Lease by such foreclosure. Lessee hereby irrevocably
appoints Lessor as attorney-in-fact for Lessee with full power
and authority to execute and deliver in the name of Lessee any
instrument or instruments required by Lessee under this Section
8.1.
8.2 INTEREST CONVEYED. This Lease shall create only the
relationship of lessee and lessor between the parties hereto;
no estate shall pass out of Lessor, and Lessee has only a
usufruct, which is not subject to levy and sale.
Article IX
----------
TRANSFER
9.1 ASSIGNMENT AND SUBLETTING. Lessee may not assign this Lease or
any interest herein or in the Premises or mortgage, pledge,
encumber, hypothecate or otherwise transfer or sublet the
Premises or any part thereof, or permit the use of the Premises
by any party other than Lessee, without the prior written
consent of Lessor. Notwithstanding anything contained herein to
the contrary, in the event Lessee shall sublet a portion of the
Premises to an affiliate company whose predominant business is
in the travel or hospitality industry, Lessor's consent shall
not be unreasonably withheld. This prohibition against
assignment and subletting shall include, without limitation, a
specific prohibition against Lessee permitting any person,
firm, or entity other than Lessee and its employees from
temporarily or permanently licensing, using, or otherwise
operating out of the Premises in any manner whatsoever. For the
purpose of this Section, the term "employee" shall mean a
natural person whose compensation is directly paid and funded
by Lessee and is primarily in the form of wages upon which
Lessee is required to withhold state and federal taxes and
whose job functions, responsibilities, and activities are
exclusively controlled by Lessee. In addition, in the event
that the beneficial owners of Lessee sell, exchange, bequeath,
or otherwise transfer all or any portion of their interest in
Lessee such that after the date hereof forty-nine percent (49%)
<PAGE>
or more of the beneficial ownership interest of Lessee is
changed, such change in ownership shall be deemed a transfer of
the Premises for the purposes of this Section, except if Greg
Cunningham is manager in charge of Lessor's accounts and
continues to control the day to day operations of Lessee's
business. Lessor reserves the right to examine Lessee's
business records upon reasonable notice to insure Lessee's
compliance with the provisions of this Section.
Article X
---------
DAMAGE, DESTRUCTION AND CONDEMNATION
10.1 DAMAGE OR DESTRUCTION OF BUILDING. In the event of such
substantial damage to or destruction of the Building by fire or
other casualty that the roof, walls, floors, or other
structural members thereof are damaged or that a substantial
number of the premises in the Building are damaged, but
regardless of whether the Premises of the Lessee are damaged
thereby, then Lessor shall have the option to terminate this
Lease upon written notice to Lessee given within ninety (90)
days of such casualty. If Lessor chooses, in its sole
discretion, so to terminate this Lease, such termination shall
be effective on the day specified in such notice, but not
earlier than thirty (30) days following the date of such
written notice.
10.2 RESTORATION OF PREMISES AND IMPROVEMENTS; ABATEMENT OF RENT.
(a) In the event of any damage to or destruction of the
Premises or the improvements therein by fire or other
casualty, then unless this Lease is terminated by Lessor
pursuant to Section 10.1 above: (i) Lessor shall promptly
take appropriate action to repair and restore a sufficient
portion of the Building to permit access to and occupancy
of the Premises by Lessee and to restore the Premises to
bare wall condition, including all improvements described
in Section 4.1(a) herein; and (ii) Lessee shall promptly
repair, replace, or restore the improvements in the
Premises to a condition comparable to that existing prior
to the casualty at Lessee's sole cost and expense without
contribution or reimbursement by Lessor, except that any
insurance proceeds applicable to such improvements which
are paid to Lessor, pursuant to the loss payee provisions
of insurance coverage required of Lessee under Section
6.1, shall be distributed to Lessee after completion of
such improvements for the purpose of reimbursing Lessee
for such repairs and restoration. If any improvements to
the Premises are damaged or destroyed at any time and not
subsequently replaced, restored, or repaired by Lessee,
the entire amount of the proceeds of any insurance
thereon, including, without limitation, the insurance
<PAGE>
required to be maintained by Lessee pursuant to Section
6.1 herein, shall be paid to and retained by Lessor.
(b) In the event that the Premises are rendered untenantable
as a result of fire or other casualty and this Lease
remains in force, then commencing on the date of such
casualty, Base Rent shall abate in proportion to the area
of the Premises which is untenantable until the date the
Premises are restored, provided, however, that if Lessee
unreasonably delays in its obligation to restore the
improvements to the Premises, as required by Section
10.2(a)(ii) herein, then the Base Rent abatement period
shall terminate on the date the Premises would have been
tenantable had Lessee not so unreasonably delayed.
10.3 CONDEMNATION.
(a) If the whole of the Building or the Premises should be
permanently taken for any public or quasi-public use under
any governmental law, ordinance, or regulation or by right
of eminent domain or by private purchase in lieu thereof
(hereinafter referred to as "Condemnation"), this Lease
shall terminate effective when the physical taking of said
Building or Premises shall occur. If any substantial part
of the Building or the Premises should be permanently
taken by Condemnation, at the option of Lessor this Lease
shall terminate, effective when the physical taking of
said portion of the Building or Premises shall occur. In
the event that a Condemnation of a portion of the Building
or Premises shall occur and this Lease shall not be
terminated by Lessor as aforesaid: (i) Lessor shall
promptly, upon receipt of the Condemnation proceeds, take
appropriate action to repair or restore a sufficient
portion of the Building to permit access to and occupancy
of the Premises by Lessee and to restore the Premises to
bare wall condition, including all the improvements
described in Section 4.1(a) herein; and (ii) Lessee shall
promptly repair, replace, and restore any damaged or
removed improvements to the Premises to a condition
comparable to that existing prior to the Condemnation at
Lessee's sole cost and expense without contribution or
reimbursement by Lessor, except as provided in Section
10.3(c).
(b) In the event that a portion of the Premises are taken by
Condemnation but this Lease is not terminated by Lessor,
then, effective when the physical taking of said Premises
shall occur, the Base Rent payable under this Lease during
the unexpired portion of the Lease Term shall be reduced
by a proportion which the untenantable portion of the
Premises bears to the tenantable portion of the Premises.
<PAGE>
(c) All proceeds of any Condemnation, including proceeds
attributable to the improvement to the Premises, shall be
paid to Lessor. In the event that Lessee is required to
repair, replace, or restore the improvements to the
Premises in accordance with this Lease, Lessor shall
distribute to Lessee after completion of such improvements
that portion of the Condemnation proceeds applicable to
such improvements, provided, however, that in the event
Lessee fails to repair, replace, or restore such
improvements within a reasonable period of time, then that
portion of the Condemnation proceeds applicable to such
improvements shall be retained by Lessor and Lessee shall
be in default hereunder.
Article XI
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DEFAULT
11.1 EVENTS OF DEFAULT. The occurrence or any of the following
shall constitute an "Event of Default" hereunder:
(i) Failure by Lessee to pay in full any Base Rent,
Additional Rent or other charge payable hereunder
within ten (10) days from the date due, and after
ten (10) days' written notice, which notice shall
only be provided once during each calendar year
during the Lease Term;
(ii) Failure by Lessee to abide by the terms of Section
7.1, 8.1 or 9.1;
(iii) Failure by Lessee to observe or perform any of the
terms, covenants, agreements, or conditions
contained in this Lease (other than as specified
elsewhere in this Section) or in the Building
Manual (and any additional rules and regulations
now or hereafter established by Lessor to govern
the operation of the Building) for a period of
thirty (30) days after written notice thereof by
Lessor;
(iv) Filing by Lessee of a voluntary petition in
bankruptcy or a voluntary petition or answer
seeking reorganization, arrangement, readjustment
of its debts, or for any other relief under the
provisions of the United States Code relating to
Bankruptcy, as amended (hereinafter referred to as
the "Bankruptcy Code"), or under any other
insolvency act or law, state or federal, now or
hereafter existing; the application by Lessee for
the appointment of a receiver or trustee for all or
a substantial part of Lessee's property; the making
by Lessee of any assignment for the benefit of its
<PAGE>
creditors; the insolvency or inability of Lessee to
pay its debts as they mature; or the issuance of
attachment, execution, or other similar process
against any substantial part of the property of
Lessee;
(v) The continuation for a period of sixty (60) days
undismissed, unbonded, or undischarged of any
involuntary proceeding against Lessee in bankruptcy
or seeking reorganization, arrangement,
readjustment of its debts, or for any other relief
under the Bankruptcy Code or under any other
insolvency act or law, state or federal, now or
hereafter existing, or of any involuntary
appointment of a receiver or trustee of Lessee, for
all or a substantial part of its property;
(vi) The desertion, vacation, or abandonment of the
Premises, or the failure of Lessee to observe the
provisions of Section 6.9 hereof more than two (2)
times during the Lease Term; or
(vii) Default by Lessee or any Lessee affiliate of any
other lease agreement between Lessee or any Lessee
affiliate and Lessor for any premises in the
Building. As used therein, "Lessee affiliate" shall
mean any sole proprietorship, partnership,
corporation, joint venture, or other business
association in which Lessee is a beneficial owner
or active participant.
11.2 RIGHTS OF LESSOR UPON EVENTS OF DEFAULT.
(a) At any time after the occurrence or existence of any Event
of Default, Lessor, at its option and without prejudice to
any other rights arising from such default which Lessor
may have under this Lease or which may be allowed at law
or in equity, shall have the right to:
(i) remove, in any manner not prohibited by law, Lessee
and any or all property of Lessee from the Premises
and repossess the Premises and all improvements
therein, without terminating the Lease; in which
event the rights and obligations of Lessor and
Lessee under this Lease shall be hereinafter
provided in this Article XI;
(ii) regardless of whether or not Lessor has previously
exercised its rights pursuant to subparagraph (i)
above, terminate this Lease upon written notice to
Lessee, which notice will specify the date upon
which this Lease shall terminate;
<PAGE>
(iii) following repossession of the Premises by Lessor,
regardless of whether this Lease has been
terminated by Lessor, from time to time, to re-let
the premises or any part thereof, or to re-let the
Premises or any part thereof together with
additional premises, for such term or terms (which
may be greater or less than the original Lease Term
herein specified) and on such conditions (which may
include concessions, free rent, or alterations of
the Premises) and for such uses as Lessor, in
Lessor's sole discretion, may determine, whereupon
Lessor may collect and receive all rent paid
pursuant to such re-letting. Lessor shall in no way
be responsible or liable for any failure to re-let
the Premises or any part thereof or for any failure
to collect any Rent due upon such re-letting. Any
such sums from such re-letting collected by Lessor
prior to termination of this Lease, net of all
costs incurred by Lessor in connection with such
re-letting, shall be collected by Lessor as agent
of Lessee and applied by Lessor against the sums
due and owing by Lessee to Lessor pursuant to this
Lease. Should such rentals and other payments
received from such re-letting during any month be
less than the amount of Rent and other charges
payable by Lessee for such month hereunder, then
Lessee shall pay such deficiency to Lessor. Such
deficiency shall be calculated and paid monthly;
(iv) if Lessee shall fail to pay any sum of money, other
than Rent, required to be paid by it hereunder or
shall fail to perform any other act on its part to
be performed hereunder and if such failure shall
continue for thirty (30) days after notice thereof
by Lessor, Lessor may (but shall not be obligated
so to do) without waiving or releasing Lessee from
any obligations of Lessee, make any such payment or
perform any such other act on Lessee's part to be
made or performed as provided in this Lease. All
sums so paid by Lessor and all necessary incidental
costs shall be deemed Additional Rent hereunder and
shall be payable to Lessor on demand; and/or
(v) in the event of any breach or threatened breach by
Lessee of any of the agreements, terms, covenants,
or conditions contained in this Lease, Lessor shall
be entitled to enjoin such breach or threatened
breach and shall have the right to invoke any
rights and/or remedies allowed at law or in equity
or by statute or otherwise as though re-entry,
summary proceedings, and other remedies were not
provided for in this Lease.
<PAGE>
(b) Upon the occurrence or existence of an Event of Default,
neither the removal of Lessee or any property of Lessee
from the Premises nor the re-entry, repair, alteration, or
re-letting of the Premises by Lessor shall constitute a
termination of this Lease or a surrender of acceptance of
the Premises, unless and until Lessor has given to Lessee
the written notice hereinabove described expressly
terminating this Lease.
(c) No vacancy or abandonment of the Premises by Lessee,
repossession of the Premises by Lessor, or re-letting of
the Premises by Lessor shall relieve Lessee of Lessee's
liability and obligations under this Lease. Termination of
this Lease by Lessor upon the occurrence of existence of
an Event of Default shall likewise not relieve Lessee of
its liability for damages for Lessee's breach of its
obligations under this Lease, and upon termination Lessor
may, at Lessor's option, elect to accelerate the
difference, if any, between all Rent due under this Lease
from the date of termination through the end of the Lease
Term, and the fair rental value of the Premises (taking
into account, among other factors, the reasonably
anticipated costs and delays occasioned by re-letting the
Premises) through the end of the Lease Term, in which
event all such sums shall become immediately due and
payable by Lessee to Lessor, provided, however, that such
payments shall not constitute a penalty or forfeiture or
liquidated damages, but shall merely constitute payment in
advance of such sums for the remainder of the Lease Term.
In the event of such acceleration by Lessor, the amount
due and payable shall be adjusted to present value at the
date of termination by discounting all payments due after
such date at the then current prime rate of NationsBank,
or any bank or financial institution into which same shall
be merged or consolidated. Such amount shall then accrue
interest until paid at the rate specified in Section 12.6.
The payment by Lessee of such accelerated amounts shall in
no way reduce or diminish any other liability of Lessee to
Lessor for breach of this Lease.
(d) No termination of this Lease shall affect the right of
Lessor to collect any damages occasioned by Lessor as a
result of such termination, including, without limitation,
all unpaid Rent arising hereunder for the period prior to
such termination, and Lessee shall pay to Lessor the
aggregate amount thereof (together with accrued interest
thereon as provided herein) upon the date of termination.
(e) In the event of the occurrence of any Event of Default
(including, without limitation, termination of this Lease
by operation of law), then it is agreed and understood and
the parties contemplate that the damages to Lessor arising
from such breach shall include all expenses incurred by
Lessor in enforcing Lessor's rights hereunder and
<PAGE>
recovering, restoring, and re-letting the Premises
(including, without limitation, reasonable brokerage fees
and attorneys' fees in the amount of fifteen percent
(15%)for monetary defaults and in a reasonable amount for
non-monetary defaults), said damages being due and payable
by Lessee immediately upon their being incurred by Lessor.
(f) If Lessor shall not be permitted to terminate this Lease
as hereinabove provided because of the provisions of the
Bankruptcy Code, then Lessee as a debtor in possession or
any trustee for Lessor agrees to assume or reject this
Lease within sixty (60) days after the filing of a
voluntary or involuntary petition in which Lessee is named
as the debtor, and Lessee on behalf of itself and any
trustee agrees not to seek or request any extension or
adjournment of any such application by Lessor with such
Court. In such event, Lessee as a debtor in possession, or
any trustee of lessee, may only assume this Lease if (a)
it cures or provides adequate assurance that it will
promptly cure any default hereunder, (b) it compensates or
provides adequate assurance that Lessee will promptly
compensate Lessor for any actual pecuniary loss to Lessor
from Lessee's defaults, and (c) it provides adequate
assurance of performance during the fully stated Lease
Term hereof of all the terms, covenants, and conditions of
this Lease to be performed by Lessee. In no event after
the assumption of this Lease shall any then existing
default remain uncured for a period in excess of ten (10)
days. Adequate assurance of performance of this Lease, as
set forth hereinabove, shall include, without limitation,
adequate assurance (1) of the source of Rent reserved
hereunder, and (2) that the assumption of this Lease will
not breach any provision hereunder. In the event of a
filing of a petition under the Bankruptcy Code, Lessor
shall have no obligation to provide Lessee with any
services or utilities as herein required unless Lessee
shall have paid and be current in all payments due Lessor
under this Lease.
(g) Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right
or remedy provided for in this Lease or now or hereafter
existing at law or in equity or by the statute or
otherwise, and the exercise of beginning of the exercise
by Lessor or Lessee of any one or more of such rights or
remedies shall not preclude the simultaneous or later
exercise by the party in question of any or all other of
such rights or remedies.
(h) Lessee waives all homestead rights and exemptions which
Lessee may have under any law with respect to any
obligation owing under this Lease.
<PAGE>
11.3 LESSOR'S DEFAULT. In the event of any default by Lessor under
this Lease, Lessee's sole and exclusive remedy shall be an
action for actual damages (Lessee hereby waiving any right of
deduction or setoff against Rent due hereunder, and any claim
for indirect, special or consequential damages). Prior to any
such action, Lessee will give Lessor written notice specifying
such default with particularity, and Lessor shall have sixty
(60) days in which to cure any such default; provided, however,
in the event any such default cannot, with reasonable
diligence, be cured within such sixty-day period, Lessor shall
have additional reasonable period of time as is necessary to
cure such default, so long as Lessor commences such cure within
such sixty-day period, and thereafter diligently prosecutes
such cure to completion.
Article XII
-----------
MISCELLANEOUS PROVISIONS
12.1 TRANSFER BY LESSOR. Lessor shall have the right to assign any
of its rights under this Lease or to transfer all or part of
its interest in the Building, or both, at any time, and from
time to time. In the event of any such assignment or transfer
by Lessor, Lessee agrees to attorn to any such assignee,
successor, or other transferee under all of the terms,
covenants and conditions of this Lease for the balance of the
Lease Term and to execute any acknowledgment of and consent to
such assignment or transfer.
12.2 SCOPE. The terms, covenants, conditions, and agreements
contained herein shall, subject to the provisions herein as to
transfer, apply and bind the heirs, successors, executors,
administrators, and assigns of the parties hereto. "Lessor"
and "Lessee" include male and female, singular and plural,
corporation, partnership, or individual, as may fit the
particular parties. If there be more than one Lessee, the
obligations hereunder imposed shall be joint and several.
12.3 CAPTIONS. The captions used herein are for reference
convenience only, are not part of the Lease, and shall have no
effect upon the construction or interpretation of any part
hereof.
12.4 TIME OF THE ESSENCE. Time is of the essence of this Lease and
each and all of its provisions.
12.5 ENTIRE AGREEMENT. This Lease represents the entire
understanding and agreement between the parties relating to the
subject matter hereof and supersedes and cancels any and all
prior negotiations, agreements, understandings, and inducements
relative thereto. The language in all parts of this Lease shall
in all events be construed as a whole according to its fair
<PAGE>
meaning and not strictly for or against either Lessor or
Lessee.
12.6 INTEREST. All sums payable by Lessee to Lessor under this
Lease, if not paid when due, shall accrue interest from their
due date until paid, at a rate equal to the greater of (a) the
prime interest rate announced by NationBank, Atlanta, Georgia,
from time to time, plus four percent (4%), or (b) twelve and
one-half percent (12 1/2%). Said interest shall be Additional
Rent under this Lease and be paid to Lessor by Lessee upon
demand.
12.7 ATTORNEY'S FEES. If either party uses the services of an
attorney at law to enforce the terms thereof, or to collect any
amount due hereunder, the defaulting party shall reimburse to
the non-defaulting party, upon demand, any and all reasonable
attorney's fees and expenses so incurred by the non-defaulting
party.
12.8 GOVERNING LAW. This Lease shall in all respects be interpreted
in accordance with the laws of the State of Georgia.
12.9 COUNTERPARTS. This Lease may be executed in counterparts, each
of which when fully executed shall be deemed an original and
all of which shall be but one agreement. In the event of any
such counterparts, the original or copy thereof held by Lessor,
including all exhibits thereto, shall control.
12.10 SEVERABILITY. If any term, covenant, or condition of this
Lease, or the application thereof to any person or
circumstance, shall to any extent be invalid or unenforceable,
neither the remainder of this Lease nor the application of such
term, covenant, or condition to any other person or
circumstance shall be affected thereby, and each term,
covenant, or condition of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
12.11 SURVIVAL. It is expressly understood and agreed that each and
every term, covenant, and agreement contained herein shall
survive any expiration or sooner termination of this Lease and
shall remain in full force and effect as between Lessee and
Lessor, to the extent that any such term, covenant, or
agreement: (i) has not been fully performed in accordance with
this Lease prior to such expiration or sooner termination; or
(ii) contemplates performance by either party hereto subsequent
to such expiration or sooner termination.
12.12 NOTICES. All notices and demands which may be or are required
to be given by either party to the other hereunder shall be
deemed to have been fully given when made in writing and
delivered personally or postmarked by the United States Post
Office by certified or registered mail, return receipt
requested, postage prepaid, and addressed as set forth in the
BLI, or to such other single place as such party may from time
<PAGE>
to time designate in writing to the other party. Any notice
shall be deemed to have been received on the date personally
delivered or on (a) the date set forth on the Return Receipt;
(b) the date of delivery as shown on the Post Office records,
(c) the date delivery was refused as shown on the Post Office
records, or (d) the date delivery was unable to be made because
of an address change for which no notice was given.
12.13 MODIFICATION OF LEASE, WAIVER. The terms, covenants and
conditions of this Lease may not be waived, changed or amended
orally but only by an instrument in writing signed by the party
against whom enforcement of the waiver or change is sought.
Neither the failure of either party hereto to insist in any one
or more cases upon the strict performance of any agreement,
term, covenant or condition of this Lease to be performed or
observed by the other party hereto or to exercise any right or
remedy consequent upon a breach thereof, nor the acceptance by
Lessor of full or partial Rent during the continuance of any
Event of Default by Lessee shall constitute a waiver or
relinquishment for the future of any such agreement, term,
covenant, condition, right, remedy or default. No waiver of any
default shall affect or alter this Agreement, but each and
every agreement, term, covenant and condition hereof shall
continue in full force and effect with respect to any other
then existing or any subsequent default.
12.14 RELEASE. Lessee agrees that Lessor shall not at any time or to
any extent whatsoever be liable, responsible, or accountable
for, and Lessee hereby releases Lessor and waives all claims of
Lessee, its successors and assigns against Lessor for: (i) any
injury or damage to person, property, or business, whether
direct or indirect, caused by or arising out of the condition
of the Premises or the Building, the condition or operation of
or defects in any equipment, machinery, or utility systems
located therein, including without limitation the interruption
or stoppage of electrical, escalator or elevator service or the
supply of conditioned air, or the act or omission of any person
or persons, except to the extent such damage or injury is
directly caused by or due to the gross negligence or willful
misconduct of Lessor, its employees or its agents acting within
the scope of their employment or agency; (ii) the theft,
mysterious disappearance, or loss of any property from the
Premises or the Building, unless such theft, disappearance or
loss is solely due to the gross negligence of intentional
misconduct of Lessor, its employees or agents acting within the
scope of their employment or agency; (iii) any interference or
disturbance by third persons, including, without limitation,
any other lessee or lessees of the Building, or the non-
compliance by any other such lessee of any other lease or of
any rules and regulations established by Lessor, and it is
further agreed that the happening of any one or more of the
events described in the immediately preceding clauses (i),
(ii), or (iii) shall not be an actual or constructive eviction
of Lessee, and no such event shall operate to relieve Lessee
<PAGE>
from the payment of Rent or the prompt and punctual performance
of the terms and conditions of this Lease.
12.15 SURRENDER OF POSSESSION. Upon the expiration or sooner
termination of this Lease, or upon the election of Lessor
pursuant to Section 11.2, Lessee shall at once quietly and
peacefully surrender the Premises and all improvements therein
to Lessor. Lessee shall remove all rubbish, debris, personal
property, including merchandise and unattached display
fixtures, from the Premises prior to such time, and, if not so
removed, such personal property shall become the property of
Lessor, or, at Lessor's option may be removed and stored at
Lessee's expense. Upon the written request of Lessor, Lessee
shall also remove such of the Improvements as Lessor, in its
sole discretion, may designate and shall restore the damage to
the Premises or the Building occasioned by such removal,
whereupon all remaining Improvements shall become the sole
property of Lessor. If Lessee shall fail to return peacefully
the Premises to Lessor or to remove any Improvements designated
by Lessor, Lessor may, without prejudice to any other remedy
Lessor may have for possession or otherwise, enter upon the
Premises and repossess itself thereof by any lawful means and
thereupon dispossess Lessee and expel or remove Lessee and all
other persons and property from the Premises and remove such
Improvements at Lessee's expense.
12.16 CORPORATE AUTHORITY. If Lessee signs this Lease as a
corporation, each person executing this Lease on behalf of
Lessee does hereby covenant and warrant that Lessee is a duly
authorized and existing corporation, that Lessee has and is
qualified to do business in the State of Georgia, that this
corporation has full power and authority to enter into this
Lease, and that each and every person who signs on behalf of
the corporation is authorized to do so.
12.17 LESSOR'S LIABILITY. The term "Lessor" as used in this Lease
shall be limited to and mean only the owner or owners of the
Lessor's interest in this Lease at the time in question, and in
the event of any transfer or transfers of such interest by the
Lessor, or by any entity which comprises the Lessor, the Lessor
named herein (and in case of any subsequent transfer, the then
transferor), shall be automatically freed and relieved from and
after the date of such transfer of all personal liability with
respect to the performance of any covenants or agreements on
the part of the Lessor contained in this Lease thereafter to be
performed, provided that any funds in the hands of such Lessor
(or the then transferor at the time of such transfer) in which
the Lessee has an interest shall be turned over to the
transferee, and upon any such transfer, the transferee shall be
deemed to have assumed, subject to the limitations of this
Section, all of the covenants, agreements and conditions
contained in this Lease to be performed on the part of the
Lessor, it being intended hereby that the covenants and
agreements contained in this Lease on the part of the Lessor to
<PAGE>
be performed shall, subject as aforesaid, be binding on the
Lessor, its successors and assigns, and on any entity which
comprises Lessor, only during and in respect to their
respective periods of ownership, either as Lessor or as an
entity which comprises Lessor. Neither Lessor, nor any officer,
director, shareholder, or partner of Lessor, shall have any
personal liability whatsoever with respect to this Lease,
Lessee agreeing that any claim by Lessee or judgment of Lessee
against Lessor shall be confined to and satisfied only out of,
and only to the extent of, Lessor's interest in the Building.
12.18 SPECIAL STIPULATIONS. Insofar as the special stipulations set
forth in the BLI conflict with any of the foregoing provisions,
the special stipulations shall control.
<PAGE>
Exhibit "A"
AMERICASMART
ATLANTA
22ND FLOOR MAP
Floor plan of AmericasMart Atlanta, 22nd Floor offices.
<PAGE>
Exhibit "B"
INSTALLMENT PROMISSORY NOTE
$50,000.00 April 17, 1998
For and in consideration of value received, the receipt of which is
hereby acknowledged, DESTINATION, INC. (hereinafter referred to as
"Maker"), promises to pay to the order of AMC, INC. (together with any
subsequent holder of the note, hereinafter referred to as "Holder"),
the sum of Fifty thousand and no/100 dollars ($50,000.00), together
with interest thereon from the date hereof at the effective rate of
seven and one-half percent(7.5%). Such amount shall be due and payable
as follows:
48 consecutive monthly installments commencing on May 1, 1998
and continuing thereafter on or before the first day of each
successive month until paid in full. Each installment shall be
made in the sum of One thousand two hundred eight and 95/100
dollars ($1,208.95). This note shall be paid to Holder at 240
Peachtree Street, N.W., Suite 2200, Atlanta, GA 30303,
Attention: Collections Department.
Should Maker fail to make any payment when due, or if Maker shall file
a voluntary petition of bankruptcy, be adjudicated as bankrupt or
insolvent, file any petition or answer seeking or acquiescing in any
reorganization, arrangement, readjustment or similar relief for Maker
under any Federal, State or other statute relating to bankruptcy,
insolvency or other similar relief for debtors, or should Maker make a
general assignment for the benefit of creditors, or should Maker be
deemed in default under the terms and conditions of that certain Lease
dated April 17, 1998 (the "Lease"), Holder, at its option, shall be
entitled to accelerate all the indebtedness evidenced by this
Installment Promissory Note, without notice, together with all costs
of collection, including fifteen percent (15%) of attorney's fees if
collected by law or through an attorney at law, and together with
fifteen percent (15%) interest on the unpaid balance of principal
until paid. Failure to exercise this option shall not constitute a
waiver of the right to exercise it in the event of any subsequent
defaults. Notwithstanding anything contained hereunder to the
contrary, prior to the exercise of any remedies hereunder, holder
agrees to provide Maker any rights to cure afforded Lessee pursuant to
the terms of the Lease.
Notwithstanding anything to the contrary contained herein, in the
event the agreement between Destination, Inc. and AMC, Inc. dated
April 17, 1998 (the "Agreement") is terminated, and/or the Lease is
terminated (and such respective termination is not due to any monetary
default(s) by Maker under the Lease or any monetary default(s) by
Maker under the Agreement), then Maker's obligation to pay any and all
sums due after the date Maker vacates the Premises demised under the
Lease shall be null and void, and this Note shall be deemed satisfied.
<PAGE>
Time is of the essence with respect to this Installment Promissory
Note, and except as otherwise provided herein, demand, protest, notice
of demand and non-payment and all other notices whatsoever, are hereby
waived by Maker.
Maker reserves the right at any time to pay any part or all of the
then remaining balance due with no penalty of prepayment.
This Installment Promissory Note shall be governed by and construed in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Maker has caused this Installment Promissory Note
to be executed on the day and year first above written.
MAKER: DESTINATION, INC.
-----------------
By:
-----------------------------
Its: President
<PAGE>
Exhibit "C"
Construction improvement plans of Atlanta Merchandise Mart, including
general notes and legends, demolition plan, partition plan, electrical
plans, reflected ceiling plans and furniture plan.
<PAGE>
