-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cnUAOZMuvPddx3UFi0aDzXl6aiWPtX4gYBVnnpg91HoZ76osMAC/Hxcl074Mbs5j v08kqmwwPqY7qZBvAdzkCQ== 0000727010-95-000017.txt : 19950516 0000727010-95-000017.hdr.sgml : 19950516 ACCESSION NUMBER: 0000727010-95-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELEXSYS INTERNATIONAL INC CENTRAL INDEX KEY: 0000727010 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 953534864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11691 FILM NUMBER: 95538381 BUSINESS ADDRESS: STREET 1: 18522 VON KARMAN AVE CITY: IRVINE STATE: CA ZIP: 92715 BUSINESS PHONE: 7148330870 MAIL ADDRESS: STREET 1: 18522 VON KARMAN AVENUE CITY: IRVINE STATE: CA ZIP: 92715 FORMER COMPANY: FORMER CONFORMED NAME: DICEON ELECTRONICS INC DATE OF NAME CHANGE: 19920703 10-Q 1 SECOND QUARTER REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC. 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 April 1, 1995 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 0-11691 ELEXSYS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 95-3534864 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 18522 Von Karman Avenue, Irvine, California 92715 (Address of principal executive offices) (Zip Code) (714) 833-0870 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No__ At May 7, 1995, there were 8,874,320 outstanding shares of common stock. This report consists of 13 pages ELEXSYS INTERNATIONAL, INC. FORM 10-Q INDEX
Page Part I. Financial Information: Item 1. Consolidated Balance Sheets as of April 1, 1995 and September 30, 1994.......... 2 Consolidated Statements of Operations for the Three and Six Months Ended April 1, 1995 and April 2, 1994............................................ 3 Consolidated Statements of Cash Flows for the Six Months Ended April 1, 1995 and April 2, 1994............................................ 4 Notes to the Consolidated Financial Statements................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 8 Part II. Other Information............................................................... 12
ELEXSYS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Thousands of dollars, except share data) April 1, September 30, 1995 1994 ASSETS (Unaudited) Current assets Cash and cash equivalents $ 325 $ 1,562 Accounts receivable - net 11,557 9,063 Inventories 6,721 7,277 Prepaid expenses and other current assets 702 381 --- --- Total current assets 19,305 18,283 ------ ------ Property, plant and equipment 66,153 65,481 Less accumulated depreciation and amortization (49,483) (47,703) ------- ------- Property, plant and equipment, net 16,670 17,778 ------ ------ Other assets 981 922 --- --- Total assets $ 36,956 $ 36,983 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 6,892 $ 6,170 Accrued payroll and related costs 2,130 1,950 Other current liabilities 2,323 2,866 Short-term borrowings 3,636 3,456 Current portion of long-term debt 50 50 -- -- Total current liabilities 15,031 14,492 ------ ------ Long term debt 381 406 Convertible subordinated debentures 12,000 16,000 Stockholders' equity Common stock, $1.00 par value, 20,000,000 shares authorized, 8,808,520 and 8,334,960 shares issued and outstanding at April 1, 1995 and at September 30, 1994 8,809 8,335 Additional paid-in capital 5,145 3,373 Accumulated deficit (4,410) (5,623) ------ ------ Net stockholders' equity 9,544 6,085 ----- ----- Total liabilities and stockholders' equity $ 36,956 $ 36,983 ======== ======== The accompanying notes are an integral part of these financial statements. ELEXSYS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended April 1, April 2 April 1 April 2 1995 1994 1995 1995 Net sales $ 23,407 $ 26,153 $ 46,160 $ 50,464 Cost of sales 21,541 23,306 41,424 46,997 ------ ------ ------ ------ Gross profit 1,866 2,847 4,736 3,467 Operating expenses: Selling, general and administrative 2,200 2,670 4,266 5,331 Research and development 126 171 249 437 Provision for restructuring of operations 0 0 0 600 - - - --- Total operating expenses 2,326 2,841 4,515 6,368 ----- ----- ----- ----- Income/(loss) from operations (460) 6 221 (2,901) Other (income) expenses: Interest expense 410 591 842 1,060 Interest income 0 (3) (1) (26) - -- -- --- Loss before extraordinary item (870) (582) (620) (3,935) Extraordinary item: (Note 5) Gain from exchange of 5 1/2 percent Convertible Subordinated Debentures due 2012 for common stock, net of expenses 1,833 0 1,833 0 ----- - ----- - Net income (loss) $ 963 $ (582) $ 1,213 $ (3,935) ======== ======== ======== ======== Earnings (loss) per share (Note 3) Primary $0.11 $(0.11) $0.14 $(0.77) Fully diluted $0.10 $(0.11) $0.13 $(0.77) ----- ------ ----- ------ Weighted average common shares and common equivalent shares outstanding Primary 8,751 5,135 8,751 5,135 Fully diluted 9,278 5,135 9,278 5,135 ===== ===== ===== =====
The accompanying notes are an integral part of these financial statements. ELEXSYS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of dollars) (Unaudited) Six Month Ended April 1, April 2, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,213 $(3,935) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Extraordinary gain (1,833) 0 Depreciation and amortization 2,780 3,344 Provision for restructuring of operations 0 600 Increase in accounts receivable (2,494) (1,005) Decrease in inventories 556 422 (Increase) decrease in prepaid expenses and other current assets (321) 113 Increase (decrease) in accounts payable 722 (4,633) Increase (decrease) in accrued payroll and related taxes 180 (470) Decrease in other current liabilities (543) (1389) Other (207) (163) ---- ---- Net cash provided (used) by operating activities 53 (7,116) -- ------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of short-term investments 0 4,000 Purchase of property, plant and equipment (1,666) (1,159) ------ ------ Net cash (used) provided by investing activities (1,666) 2,841 ------ ----- CASH FLOWS USED BY FINANCING ACTIVITIES Net borrowings on short-term borrowings 180 3,392 Principal payments on long term debt (25) (23) Proceeds from options exercised 221 0 --- - Net cash provided by financing activities 376 3,369 --- ----- Net decrease in cash and cash equivalents (1,237) (906) Cash and cash equivalents, beginning of period 1,562 2,415 ----- ----- Cash and cash equivalents, end of period $ 325 $ 1,509 ------- ------- SUPPLEMENTAL CASH FLOW INFORMATION: Interest payments $470 $910 ==== ==== Income tax payments $ 24 $ 4 ==== ==== The accompanying notes are an integral part of these financial statements. ELEXSYS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying unaudited consolidated financial statements of Elexsys International, Inc. and its subsidiaries (the "Company") contain all adjustments, consisting of only normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position of the Company as of April 1, 1995 and September 30, 1994, the results of its operations for the three and six months ended April 1, 1995 and April 2, 1994 and its cash flows for the six months ended April 1, 1995 and April 2, 1994. Certain information and footnote disclosures normally included in the financial statements have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures in the consolidated financial statements are adequate to make the information presented not misleading. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 1994, included in the Company's Annual Report on Form 10-K for that fiscal year. Note 2 - Inventories Inventories consist of the following (thousands of dollars): April 1, September 30, 1995 1994 (Unaudited) Raw materials $2,682 $4,233 Work in progress 4,039 3,044 ----- ----- Totals $6,721 $7,277 ====== ====== ELEXSYS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Earnings (Loss) Per Common Share Earnings or loss per common share for the three and six months ended April 1, 1995 has been computed based on weighted average common shares outstanding and common stock equivalents as of the above dates and does not include the assumed conversion of the 5 1/2 percent Convertible Subordinated Debentures due 2012 as such effect would have been anti-dilutive. The loss per share for the three and six months ended April 2, 1994 has been computed based on average common shares outstanding as of April 2, 1994 and does not include the effect of common stock equivalents as such effect would have been anti-dilutive. Three Months Six Months April 1,1995 April 1, 1995 (Unaudited) (Unaudited) Net Loss before extraordinary item $(870) $(620) Net income $ 963 $1,213 Earnings (loss) per common share and common share equivalent, primary Loss before extraordinary item $(0.10) $(0.07) Extraordinary item $ 0.21 $ 0.21 Net income $ 0.11 $ 0.14 Earnings (loss) per common share and common share equivalent, fully diluted Loss before extraordinary item $(0.10) $(0.07) Extraordinary item $ 0.20 $ 0.20 Net income $ 0.10 $ 0.13 Weighted average of common and dilutive common equivalent shares outstanding Primary weighted average shares 8,366 8,366 Stock option equivalent 385 385 Primary common and common equivalent shares 8,751 8,751 Fully diluted weighted average shares 8,809 8,809 Stock option equivalent 469 469 Fully diluted common and common equivalent share 9,278 9,278 Note 4 - Income Taxes As of September 30, 1994, the Company had net operating losses carryforwards for federal and state income tax purposes of $29,636,000 and $25,296,000, respectively. Net operating loss carryforwards were used to offset income before income taxes resulting in no income tax provision for the three and six months ended April 1, 1995. The remaining carryforwards, for which future benefit is not assured, expire through 2008. ELEXSYS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Extraordinary Item On March 31, 1995, Elexsys International, Inc. exchanged for $4,000,000 of 5 1/2 percent Convertible Subordinated Debentures due 2012 an aggregate of 400,000 newly issued shares of common stock, par value $1.00 per share, to Mr. Milan Mandaric. The net gain of $1,833,000 was recorded as an extraordinary item. The net gain included a reduction of debt issuance costs related to the 5 1/2 percent Convertible Subordinated Debentures due 2012 and additional professional fees associated with the transaction. The transaction included a payment of $18,333 for accrued interest on the debentures exchanged. Note 6 - Subsequent Event On April 28, 1995, the Company announced it had acquired substantially all the assets of Technet Electronics Limited, a manufacturer of printed circuit boards located in Great Britain for approximately $3,300,000 which consisted of $560,000 of cash and assumption of liabilities of approximately $2,740,000 including its current lines of credit. To complete the transaction, the Company borrowed $1,300,000 on its line of credit from the asset based lender of which $740,000 will be utilized as working capital. ELEXSYS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained elsewhere within this Report on Form 10-Q. Results of Operations Net sales Net sales for the three months ended April 1, 1995 decreased 10.5 percent compared to the second quarter of fiscal year 1994. Net sales for the six months ended April 1, 1995 decreased 8.5 percent from the comparable six month period of fiscal 1994. The decrease in net sales resulted from lower volume of sales from the Company's backpanel line due to changes in product mix. Circuit board sales decreased due to a change in product mix. The circuit board product mix consisted of less advanced technology product resulting in higher volumes of product being shipped at competitive prices. Management is reviewing the changes in product mix, but does not expect improvement in the near-future. Cost of sales Cost of sales as a percentage of net sales increased from 89.1 percent in the second quarter of fiscal year 1994 to 92 percent for the second quarter of fiscal year 1995. The increase was attributable to a change in product mix resulting in higher material costs per units shipped for the backpanel product line, and, to a lesser extent, higher outside processing and service costs per units shipped for the circuit board product line. The higher outside processing and service costs were a direct result of outsourcing manufacturing processes for which the Company is not currently equipped to perform. The increase in costs was partially offset by improved productivity resulting in lower labor costs per units shipped. The improvement in labor costs is attributable to the October 3, 1994 reduction in workforce. Management is working on the problem of matching product with the operations' capabilities. For the six months ended April 1, 1995, cost of sales as a percentage of net sales decreased from 93.1 percent for the first six months of fiscal year 1994 to 89.7 percent for the six month period ended April 1, 1995. The decrease was attributable to lower labor and benefit cost per units shipped due to better utilization of labor after the October 3, 1994 reduction in employees. To a lesser extent, lower indirect material cost per units shipped contributed to the improvement in cost of sales. The improvement in indirect material costs is attributable to operating efficiencies and cost reductions. The decrease in costs was partially offset by higher material cost per units shipped for the backpanel product line. Selling, General and Administrative Selling, general and administrative (SG&A) expense for the three months ended April 1, 1995 decreased 17.6 percent compared to the second quarter of fiscal 1994. As a percentage of net sales, SG&A decreased from 10.2 percent for the second quarter of fiscal year 1994 to 9.4 percent for the second quarter of fiscal 1995. For the six months ended April 1, 1995, SG&A decreased 20 percent from the comparable six month period of fiscal 1994. As a percentage of net sales, SG&A decreased from 10.6 percent for the six month ended April 2, 1994 to 9.2 percent for the six month ended April 1, 1995. The decrease in SG&A for the three and six months ended April 1, 1995 was primarily due to a reduction in legal and consulting fees and cost reductions, partially offset by higher commission costs to manufacturers' representatives. ELEXSYS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Research and development Research and development expenditures decreased 26.3 percent during the three months ended April 1, 1995 compared to the second quarter of fiscal 1994. For the six months ended April 1, 1995, research and development expenditures decreased 43 percent from the comparable six month period of fiscal 1994. The decrease in expenditures is directly attributable to lower labor and benefit costs of engineers related to the restructuring on January 6, 1994, as described below. Restructure At the beginning of fiscal 1995 the Company's balance for restructuring reserve was $861,000, which is expected to be fully paid out by the end of the current fiscal year, mainly to executives who have severance agreements. During the first six months of fiscal 1995, the Company reduced its restructuring reserve by $342,000 through severance payments to such executives. As of April 1, 1995, the Compnay's other current liabilities included $519,000 of restructuring reserve. Interest income and interest expense Interest income decreased 100 percent and 96.3 percent for the three and six months ended April 1, 1995, respectively, from the comparable fiscal 1994 periods. The decrease was primarily due to a reduction in interest bearing investments held by the Company during fiscal 1995 compared to fiscal 1994. Interest expense decreased 30.6 percent and 20.6 percent for the three and six months ended April 1, 1995, respectively, as compared to the similar fiscal 1994 periods. The decrease is attributable to lower interest expense due to the exchange of $16,000,000 in principal amount of Debentures held by Mr. Milan Mandaric for 3,200,000 newly issued shares of the Company's common stock in a two part transaction which closed on June 30, 1994 and July 13, 1994. Partially offsetting the lower interest expense was interest due to short-term borrowings from the Company's asset based lender. Liquidity and Capital Resources At April 1, 1995, the Company had cash, cash equivalents and short-term investments of $325,000 which reflects a $1,237,000 decrease in the balance from September 30, 1994. Cash of $53,000 was generated from operating activities. The increase in accounts receivable is attributable to lower net sales during the fourth quarter of fiscal year 1994. The decrease in inventories is attributable to better purchasing practices of raw materials utilized in the Company's backpanel product line, partially offset by an increase in work in process due to improvement in the order cycle. The decrease in other current liabilities was due in part to the $342,000 decrease in agreements. In addition, during the second quarter, the Company met its obligations to pay the semi-annual interest on its 5 1/2 percent Convertible Subordinated Debentures. All other operating activities experienced normal fluctuations. The cash generated from operating activities was offset by investing activities of $1,666,000 for the purchase of capital equipment. The purchase of capital equipment was for normal replacement and equipment for processes that the Company has outsourced. ELEXSYS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Investing activities were partially funded by the exercise of stock options by certain employees. As of April 1, 1995, the Company had borrowed $ 4,834,000 under the line of credit that was established December 17, 1993 with the aforementioned lender. In the first six months of fiscal 1995, the Company repaid borrowings of $520,000, leaving net borrowings of $.4,314,000 Also, under the terms of the agreement, the Company's cash collections are applied to any outstanding borrowings upon the receipts clearing the bank. At April 1, 1995, the asset based lender was in possession of $ 678,000 of the Company's cash collections and, accordingly, such funds have been applied to the $ 4,148,000 borrowing. On April 28, 1995, the Company announced it had acquired substantially all the assets of Technet Electronics Limited, a manufacturer of printed circuit boards located in Great Britain for approximately $3,300,000 which consisted of $560,000 of cash and assumption of liabilities of approximately $2,740,000, including its current lines of credit. To complete the transaction, the Company borrowed $1,300,000 from its line of credit from the asset based lender, of which $740,000 will be utilized as working capital. As of April 1, 1995, the Company's ratio of current assets to current liabilities was 1.3 to 1. In addition, the Company had $325,000 in cash and cash equivalents which are available for current operations, capital expenditures or other purposes. Other than the acquisition, the Company has no material cash obligations other than normal replacements. Management believes that the Company's existing working capital, the remaining borrowing capacity, and funds generated from operations will be sufficient to meet presently anticipated working capital requirements. In June 1994, the Company agreed with Mr. Milan Mandaric to exchange $16,000,000 of 5 1/2 percent Convertible Subordinated Debentures due 2012 for 3,200,000 newly issued shares of common stock. The transaction included a payment of $293,000 for accrued interest on the debentures exchanged and reimbursement of $50,000 for Mr. Mandaric's professional expenses. All legal and consulting costs related to those discussions were accrued for in the third quarter of fiscal 1994 and were applied against the extraordinary gain recorded in the third quarter of fiscal 1994. There was no cash infusion made by Mr. Mandaric as a result of this transaction. The Company subsequently delivered those Debentures to the Trustee for credit against the future sinking fund payments under the terms of the indenture relating to the Debentures. In March 1995, the Company agreed with Mr. Milan Mandaric to exchange $4,000,000 of 5 1/2 percent Convertible Subordinated Debentures due 2012 for 400,000 newly issued shares of common stock. The transaction included a payment of $18,333 for accrued interest on the debentures exchanged. All legal and consulting costs related to those discussions were accrued for in the second quarter of fiscal 1995 and were applied against the extraordinary gain recorded in the second quarter of fiscal 1995. There was no cash infusion made by Mr. Mandaric as a result of this transaction. The Company subsequently delivered those Debentures to the Trustee for credit against the future sinking fund payments under the terms of the indenture relating to the Debentures. ELEXSYS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Environmental The Company's manufacturing processes utilize substantial quantities of heavy metals, acids and other hazardous substances, as well as substantial quantities of water. The Company is subject to federal, state and local environmental laws and regulations regarding air, water and land use, the generation, use, storage and disposal of hazardous materials and wastes, and the operation and closure of manufacturing facilities at which hazardous materials are used or hazardous wastes are generated. The Company is aware of contamination of soil and ground water (principally by metals and solvents) at two of its former facilities in Northern California. The Company incurred costs of $109,000 to clean-up soil at one of the former facilities and the property was returned to its owner during the second quarter of fiscal 1994. The likely future cost of ground water cleanup at that facility is not yet reasonably estimable, but investigative costs of $30,000 have been incurred. At the other former facility in Northern California the Company incurred costs of approximately $137,000 for clean-up of soil contamination and the property was returned to its owner during the second quarter of fiscal 1995. In addition the facility is adjacent to an existing State of California administered Superfund site and may become part of a related State of California administered regional ground water investigation; the likely future cost to the Company in connection with possible ground water cleanup is not yet reasonably estimable. During the second quarter of fiscal 1994, the Company also incurred costs of $235,000 to cleanup soil contamination at a former facility in Southern California and the property was returned to its owner. Notification was made to the proper agencies. At another former facility in Southern California, the Company conducted limited groundwater sampling in connection with a potential sale of the property, and low concentrations of solvents were detected. At this time, it is not possible to determine whether any response actions will need to be taken; and accordingly, the likely future cost to the Company is not yet reasonably estimable. The Company is further aware of soil and ground water contamination (principally by metals and solvents) at two currently used facilities, one in Northern California and one in Southern California. At its Northern California facility, the Company is indemnified by the former property owner who acknowledged his obligation. At its Southern California facility, the Company's preliminary estimate of remedial costs, expected to be incurred over five to seven years, ranges from approximately, $880,000 to $1,480,000 (including between approximately $300,000 and $400,000 estimated capital expenditures for waste treatment equipment acquisition and installation costs). At its Northern California facility, the Company has also received notice that regulatory authorities plan to reduce the discharge limits for industrial waste water discharge containing heavy metals. New limits are expected to become effective in October 1994. Based on proposed limits, the cost to the Company of additional equipment and process modifications needed to comply with the reduced limits is preliminary estimated by the Company less than $100,000. As of April 1, 1995, the Company believes it has appropriately recorded all known costs related to environmental matters, including the minimum amounts where the estimated costs are within a range, and are primarily accrued in other current liabilities. However, actual future environmental related expenditures are subject to numerous uncertainties, including the discovery of additional environmental concerns, further development of cost estimates, new and changing environmental laws and requirements, or new interpretations of existing laws and requirements. Accordingly, there can be no assurance that future environmental related expenditures will not exceed the Company's current estimates, or that they will not have a materially adverse effect on the Company. Part II. OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders The Company held its annual meeting of Shareholders ("Annual Meeting") on February 28, 1995. At the Annual Meeting the Shareholders voted upon and approved the following proposals: (1) the election of one director, Mr. Charles H. Handley, to serve for a three-year term (2) the ratification of certain amendments to the Company's Certificate of Incorporation and (3) the ratification of the Company's 1994 Incentive Stock Option Plan. For proposal No. 1, 7,327,124 votes were cast in favor, and 6,350 votes were withheld. Proposal No. 2 received 4,802,355 votes in favor, 32,850 against and 2,498,269 abstentions or broker non-votes. Proposal No. 3 received 5,469,675 votes in favor, 21,345 votes against and 1,842,454 abstentions or broker non-votes. Item 6 a. Exhibits 10.2 Lease for 2609 Technology Drive, Plano, Texas 75074, dated March 1995, between Elexsys International, Inc. and Property Reserve, Inc. 10.3 Asset Purchase Agreement dated April 28, 1995 between Elexsys International, Inc. and Technet UK 27 Financial Data Schedule b. Current reports on Form 8-K February 28, 1995 Approval by Registrant's stockholders of Registrant's Amended and Restated Certificate of Incorporation which, among other things, changed Registrant's name to "Elexsys International, Inc." and election of William "Barry" Hegarty as Executive Vice President and Chief Operating Officer. March 20, 1995 Listing of Registrant's Common Stock on The Nasdaq Stock Market's SmallCap Market under the symbol "ELEX." March 31, 1995 Exchange by Mr. Milan Mandaric and Registrant of 400,000 newly issued shares of Registrant's Common Stock for $4 million in aggregate principal amount of Registrant's outstanding 5 1/2 % Convertible Subordinated debentures due 2012, pursuant to the terms of the Second Exchange Agreement dated as of March 29, 1995. 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. ELEXSYS INTERNATIONAL, INC. (Registrant) Date: May 12, 1995 By: /s/ Michael S Shimada ------------ --------------------- Michael S. Shimada Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) EX-10.2 2 DALLAS LEASE Property TENANT: g:\wpdocs\lease\elex.pt LEASE AGREEMENT TABLE OF CONTENTS I. LEASED PREMISES 1.00 Leased Premises 1.01 Rentable Area II. LEASE TERM 2.00 Term III. RENTAL 3.00 Rental Payment 3.01 Proportionate Share 3.02 Miscellaneous Rent Provisions 3.03 Additional Rent IV. SECURITY DEPOSIT 4.00 Security Deposit V. USE OF THE PREMISES 5.00 Proposed Use 5.01 Prohibited Activities 5.02 Use of Name of Business Park 5.03 Business Park Name VI. UTILITIES AND SERVICES 6.00 Utilities 6.01 Services 6.02 Graphics 6.03 Improvements to be Made by Landlord 6.04 Repairs by Landlord 6.05 Peaceful Enjoyment 6.06 Parking 6.07 Regulations VII. CONDITION OF THE PREMISES 7.00 Condition of the Premises 7.01 Windows 7.02 Repairs, Maintenance and Alterations 7.03 Alterations 7.04 Trade Fixtures 7.05 Compliance with the Laws VIII. TENANT COVENANTS AND REPRESENTATIONS 8.00 Obligations of Tenant Regarding Improvements 8.01 Tenant Trade Fixtures 8.02 Repairs by Tenant 8.03 Care of Leased Premises 8.04 Alterations, Additions and Improvements 8.05 Tenant to Keep the Premises Lien Free 8.06 Legal use and Violations of Insurance Coverage 8.07 Laws, Ordinances, Regulations and ADA 8.08 Entry for Repairs and Inspection 8.09 Nuisance 8.10 Subordination to Mortgages 8.11 Estoppel Certificate 8.12 Tenant's Remedies 8.13 Abandonment 8.14 Toxic Waste IX. TAX 9.00 Personal Property Tax X. DAMAGE OR DESTRUCTION 10.00 Damage to Premises 10.01 Election by Landlord to Repair 10.02 Tenant's Election to Terminate 10.03 Inconvenience Damage 10.04 Total Destruction 10.05 Tenant's Property XI. EMINENT DOMAIN 11.00 Total Taking - Termination 11.01 Partial Taking 11.02 Temporary Taking XII. DEFAULTS AND REMEDIES 12.00 Default by Tenant 12.01 Waiver XIII. INSURANCE 13.00 Landlord 13.01 Tenant XIV. HOLDING OVER 14.00 Holding Over XV. ATTORNEY'S FEES 15.00 Attorney's Fees XVI. ASSIGNMENT AND SUBLETTING 16.00 Assignment Prohibited 16.01 Assignment of Sublease 16.02 No Release of Liability 16.03 Joint Liability XVII. HOLD HARMLESS AND NON-LIABILITY 17.00 Hold Harmless and Non-Liability XVIII. WAIVER OF SUBROGATION 18.00 Waiver of Subrogation XIX. GENERAL PROVISIONS 19.00 Severability 19.01 Notices 19.02 No Joint Venture 19.03 Successors and Assigns 19.04 Choice of Law 19.05 Entire Agreement 19.06 Broker's Commission 19.07 Force Majeure 19.08 Binding 19.09 Lease Memorandum XX. EXHIBITS Exhibits EXHIBIT "A" Site Plan EXHIBIT "B" Improvements to be Made by Landlord EXHIBIT "C" Rules and Regulations Jupiter Resource Center LEASE AGREEMENT THIS LEASE AGREEMENT made and entered into this day of March, 1995, between PROPERTY RESERVE, INC., (hereinafter referred to as "Landlord") whose address for purposes hereof is Jupiter Resource Center, c/o JSC Realty Services, Inc., 3860 West Northwest Highway, Suite #400 Dallas, Texas 75220 and ELEXSYS INTERNATIONAL, INC. , hereinafter referred to as "Tenant), whose address for purposes hereof is 2609 Technology Drive, Plano, Texas, 75074. W I T N E S S E T H: ARTICLE I. LEASED PREMISES 1.00 Leased Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, subject to the terms and conditions of this Lease Agreement, those certain premises hereinafter described, and referred to as the "Leased Premises" in the Project known as Jupiter Resource Center located at 2609 Technology Dr. , Plano, Texas (hereinafter referred to as the "Business Park"), together with the right in common with others to the use of all common entrance ways, drives, and other similar access and service ways and common areas in and adjacent to the Business Park of which said Leased Premises are a part. The Leased Premises are more particularly described as approximately 31,415 square feet of rentable area located at 2609 Technology Dr. of the Business Park, as reflected on the building and floor plan of such Leased Premises attached hereto and made a part hereof as Exhibit "A". 1.01 Rentable Area. The Leased Premises shall include the appurtenant right to use, in common with others, the public portions in the Business Park. Landlord reserves all air rights over the Leased Premises, the use of the exterior walls, demising walls, and the roof, and the right to install, maintain, use, repair and replace pipes, ducts, conduits and wires leading through the Premises in locations which will not materially interfere with Tenant's use thereof. Further, Landlord has the right to use the land below and the area above the Premises in any manner which does not materially interfere with Tenant's use of the Premises. ARTICLE II LEASE TERM 2.00 Term. Subject to and upon the terms and conditions set forth herein, or in any Exhibit or Addendum hereto, this Lease Agreement shall continue in force for a term of eighty four (84) months, beginning on the 1st day of September, 1995, and ending on the 31st day of August, 2002. In the event that the Leased Premises should not be ready for occupancy by said commencement date for any reason this lease shall not be void or voidable, and Landlord shall not be liable or responsible for any claims, damages or liabilities in connection therewith or by reason thereof and the term of this Lease Agreement shall be for the same term of months as set forth in the sentence above, but the commencement date shall be effective only from the time that the Leased Premises are prepared for occupancy by the Tenant in accordance with the terms and conditions set forth herein. Should the term of this Lease Agreement commence on a date other than that specified in this Paragraph, Landlord and Tenant will, at the request of either, execute a declaration specifying the revised commencement date of the term of this Lease Agreement. In such event rental under this Lease Agreement shall not commence until said revised commencement date, and the stated term in this Lease Agreement shall thereupon commence and the expiration date shall be extended so as to give effect to the full stated term. Within five (5) days after Tenant receives Landlord's notice that the Leased Premises are ready for occupancy, Tenant shall inspect the Leased Premises, and except for items specified by Tenant to Landlord within five (5) days of Tenant's inspection, Tenant shall be deemed to have accepted the Leased Premises in their then condition, as is. The existence of "punch list" (as that term is generally used in the construction industry) items shall not postpone the commencement date of this Lease Agreement. ARTICLE III. RENTAL 3.00 Rental Payment. Tenant shall pay to Landlord in legal tender of the United States of America, without prior notice or demand and without any set off or deduction whatsoever, at the office of the Landlord, or at such place or to such agent as Landlord may from time to time designate in writing, rental comprised of both base rental and additional rental as hereinafter described: g:\wpdocs\lease\elex.pt (a) Base Rental. Tenant hereby agrees to pay a base rental ("Base Rental") of $* see below in advance on the 1st day of each month during the term of this Lease Agreement, and any extensions or renewals thereof. If the Tenant's obligation to pay base rental does not commence on the first day of a calendar month nor expire on the last day of the calendar month, the base rental payable by Tenant on the first fractional month, or the last fractional month, as the case may be, shall be prorated for said month. Tenant shall, however, be required to pay the first month's rent upon execution of this Lease Agreement. (b) Late Charges. Tenant agrees that if any rental, either Base Rental, other monies due hereunder from Tenant to Landlord remains unpaid five (5) calendar days after said amount is due, a late charge shall be paid to Landlord by Tenant in the amount of the greater of five (5%) percent of such delinquent payment or twenty five ($25.00) dollars provided that in no event shall such charge be greater than that permitted by state law. Tenant agrees that such amount is a reasonable estimate of Landlord's collection and administrative expenses. 3.01 Additional Rent. Additional Monthly Rental Charges - In addition to the Base Rental provided in Section 3.00 and separate from the computation of such amounts, Tenant shall pay on the first day of each month of the following: (a) Taxes and Insurance: (1) In the event the "Tax and Insurance Expenses" (as defined below of the Business Park shall in any calendar year during the term of the Lease exceed the sum of $ a 1996 Base Year per square foot, then with respect to such excess (the "Tax and Insurance Differential"). Tenant agrees to pay, as additional rental, Tenant's pro rata share of the Tax and Insurance Differential within ten (10) days following receipt of an invoice from Landlord stating the amount due. The pro rata share to be paid by Tenant is one hundred percent (100)% subject, however, to adjustment for any expansion of the Leased Premises. In the case of a multi-building Project, if such Tax and Insurance Expenses are not separately assessed to the Business Park but are assessed against the Project as a whole, Landlord shall determine the portion of such Tax and Insurance Expenses allocable to the Business Park in which the Leased Premises are located. (2) At or prior to the commencement of this Lease and at any time during the Lease term, Landlord may deliver to Tenant a written estimate of any additional rent applicable to the Leased Premises (based on the pro rata share stated above) which may be anticipated for excess Tax and Insurance Expenses during the calendar year in which this Lease commences or for any succeeding calendar year, as the case may be. Based upon such written estimate, the monthly Base Rental shall be increased by one-twelfth (1/12) of the estimated additional rent. (3) Statements showing the actual Tax and Insurance Expenses (as well as the actual Common Area Maintenance Expenses, as defined in Paragraph 3.01(b)(2) below, and Tenant's proportionate share thereof (hereinafter referred to as the "Statement of Actual Adjustment") shall be delivered by Landlord to Tenant after any calendar year in which additional rental was paid or due by Tenant. Within ten (10) days after the delivery by Landlord to Tenant of such Statement of Actual Adjustment, Tenant shall pay Landlord the amount of any additional rental shown on such statement as being due and unpaid. If such Statement of Actual Adjustment shows that Tenant has paid more than the amount of additional rental actually due from Tenant for the preceding calendar year and if Tenant is not then in default under this Lease, Landlord shall credit the amount of such excess to the next Base Rental installment due from Tenant. (4) "Tax and Insurance Expenses" shall mean: (i) all ad valorem, rental, sales, use, and other taxes (other than Landlord's income taxes), special assessments, and other governmental charges, and all assessments due to deed restrictions and/or owner's associations which accrue against the Business Park during the term of this Lease; and (ii) all insurance premiums paid by Landlord with respect to the Business Park including, without limitation, public liability, casualty, rental, and property damage insurance. (b) Common Area Maintenance: (1) In addition to the rental payable under "Paragraphs 3.00 and 3.01(a) above, Tenant agrees to pay, as additional monthly rental, its pro rata share (as stated in Paragraph 3.01(a) above), of the "Common Area Maintenance Expenses" (hereinafter defined)which exceed the actual expenses incurred in the 1996 Base Year. At or prior to the commencement of the Lease, and at any time during the Lease term, Landlord may deliver to Tenant a written * Base Rental Months 1 thru 36 = $13,352.00 per month Months 37 thru 60 = $13,614.00 per month Months 61 thru 84 = $14,137.00 per month g:\wpdocs\lease\elex.pt 2 estimate, the monthly Base Rental shall be increased by one-twelfth (1/12) of said estimated additional rent. The Statement of Actual Adjustment shall then include the actual Common Area Maintenance Expenses for the preceding period, and adjustments effected, as provided in Paragraph 3.01(a)(3) above. In the case of a multi-building Project, if such Common Area Maintenance Expenses are not separately assessed or charged to the Building but are assessed or charged against the Project as a whole, Landlord shall determine the portion of such Common Area Maintenance Expenses allocable to the Building in which the Leased Premises are located. (2) "Common Area Maintenance Expenses" shall mean all expenses (other than the Tax and Insurance Expenses described above, incurred by Landlord for the maintenance, repair, and operation of the Project, (excluding only structural soundness of the roof, foundation, and exterior walls) including, but not limited to, management fees, utility expenses (if not separately metered), maintenance and repair costs, sewer, landscaping, trash and security costs (if furnished by Landlord), wages and fringe benefits payable to employees of Landlord whose duties are connected with the operation and maintenance of the Project, amounts paid to contractors or subcontractors for work or services performed in connection with the operation and maintenance of the Project, all services, supplies, repairs, replacements or other expenses for maintaining, repairing, and operating the Project, including, without limitation, common areas and parking areas and roof, exterior wall and foundation work that is not related to structural soundness. (3) The term "Common Area Maintenance Expenses" does not include the cost of any capital improvement to the Project other than the reasonably amortized cost of capital improvements which result in the reduction of Insurance Expenses or Common Area Maintenance Expenses. Further, the term "Common Area Maintenance Expenses" shall not include repair, restoration or other work occasioned by fire, windstorm or other casualty with respect to which Landlord actually receives insurance proceeds, income and franchise taxes of Landlord, expenses incurred in leasing to or procuring of tenants, leasing commissions, advertising expenses, expenses for the renovating of space for new tenants, interest or principal payments on any mortgage or other indebtedness of Landlord, compensation paid to any employee of Landlord above the grade of building superintendent, or depreciation allowance or expense. (c) if the Commencement Date of this Lease is a day other than the first day of a month, or if the Termination Date is a day other than the last day of a month, the amount shown as due by Tenant on the Statement of Actual Adjustment shall reflect a proration based on the ratio that the number of days this Lease was in effect during such month bears to the actual number of days in said month. (d) The failure of Landlord to exercise its rights hereunder to estimate expenses and require payment of same as additional rental shall not constitute a waiver of such rights which rights may be exercised from time to time at Landlord's discretion. (e) If the nature of Tenant's business or use of the Leased Premises is such that additional costs are incurred by Landlord for cleaning, sanitation, trash collection or disposal services, Tenant agrees to pay as additional rental to Landlord the amount of such additional costs upon demand. 3.02 Miscellaneous Rent Provisions. If any amounts necessary to calculate the Additional Monthly Rental Charges are unavailable so that it is unlikely the calculation can be timely made, Landlord's estimate shall be used in lieu thereof. When the actual amounts become available, the Landlord shall recompute the adjustment and rebill or credit Tenant accordingly. The Landlord may make changes in the size, shape and location of common areas, but such changes shall not entitle Tenant to any abatement of rent, provided such changes are reasonable and do not interfere with the normal operations of Tenant's business or substantially impair Tenant's ability to use the Premises. Rent for any period which is for less than 1 month shall be prorated based upon a 30-day month. Unless otherwise specifically provided herein, Tenant shall pay Landlord all additional rent on demand and in no event later than the date of which the next rent payment hereunder is due and payable. 3.03. Additional Rent. In addition to minimum rent, all other sums to be paid or reimbursed by Tenant to Landlord, whether or not so designated, shall be "additional rent" for the purposes of this Lease. If Tenant defaults in the performance of any of its obligations hereunder, Landlord may, but shall not be obligated to, perform such obligations, and the cost thereof to Landlord shall also be additional rent. ARTICLE IV SECURITY DEPOSIT 4.00 Security Deposit. Upon execution of this Lease Agreement, Tenant shall also deposit with Landlord the sum of $13,352.00 which sum shall be held by Landlord without payment of interest to Tenant, as security for Tenant's full and faithful performance of every provision of this Lease Agreement. Landlord may g:\wpdocs\lease\elex.pt 3 commingle the deposit with other funds of Landlord and may apply the deposit to the cost of performing any obligation which Tenant fails to perform within the time required by this Lease Agreement, but such application shall not be Landlord's exclusive remedy for Tenant's default. If any portion of said deposit is applied by Landlord, Tenant shall pay the sum necessary to replenish the deposit to its original amount upon demand by Landlord. ARTICLE V USE OF THE PREMISES 5.00 Proposed Use. Tenant represents, covenants and warrants that the premises will be used lawfully for the following purposes and for no other purposes: office, production and distribution of electronic circuit boards.. Tenant shall continuously operate within the Leased Premises during the term of the Lease Agreement. 5.01 Prohibited Activities. Tenant shall not do or permit anything to be done in or about the Leased Premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or other insurance upon the Business Park or any of its contents, or cause cancellation of any insurance policy covering said Business Park or any part thereof or any of its contents. Tenant shall not do or permit anything to be done in or about the Leased Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Business Park or injure or annoy them or use or allow the Leased Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on, or about the Leased Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Leased Premises. Tenant shall not do or permit to be done in or about the Leased Premises, any of the following: (a) Commit any violation of any Federal, State or Municipal Ordinance, or any regulation, ordinance, order or directive of a governmental agency, as such statutes, ordinances, regulations, orders or directives that now exist or may hereafter concern the use, safety, or environment of the Property; (b) Commit any violation of any Certificate of Occupancy covering or affecting the use of the Property or any part thereof; (c) Commit any public or private nuisance. 5.02 Use of Name of Business Park. Tenant shall not use the name of the Business Park for any purpose other than as an address of the business to be conducted by the Tenant. 5.03 Business Park Name. Landlord and its agents shall have the right to change the name, number, or designation of the Business Park without liability to Tenant. ARTICLE VI UTILITIES AND SERVICES Landlord shall furnish or cause to be furnished from the operating expenses of the Business Park, except as otherwise provided, the following utilities and services: 6.00 Utilities. Tenant shall pay for all gas, water, heat, light, power, sewer, garbage, fire protection and all other service metered or chargeable to the Leased Premises. Landlord further reserves the right to install separate meters for any public utility involved. 6.01 Services. To furnish Tenant during Tenant's occupancy of the Leased Premises: (a) Routine maintenance, painting and electric lighting service for all public areas and special service areas of the Business Park in the manner and to the extent deemed by Landlord to be standard. (b) Initial lamps, bulbs, starters and ballasts used on the Leased Premises; Tenant agrees, at his expense, maintain and replace such lamps, bulbs, starters and ballasts. (c) It is understood that Landlord does not warrant that any of the services referred to above, or any other services which Landlord may supply, will be free from interruption. Tenant acknowledges that any one or more such services may be suspended or reduced by reason of accident or repairs, alterations or improvements necessary to be made, by strikes or accident or by any cause beyond the reasonable control of Landlord, or by orders or regulations of any federal, state, county or municipal authority. Any such interruption or suspension of services shall never be deemed an eviction or disturbance to Tenant's use and possession of the demised premises or any part thereof, or render Landlord liable to Tenant for damages by abatement of rent or relieve Tenant of performance of Tenant's obligation under this Lease Agreement. g:\wpdocs\lease\elex.pt 4 6.02 Graphics. Tenant to provide at his cost, one sign complying with the sign criteria approved by Landlord. Sign to be installed within sixty days of the signing of this Lease Agreement. 6.03 Improvements to be Made by Landlord. Landlord's obligation to construct and install tenant improvements in the Leased Premises is set forth in Exhibit "B" hereto (sometimes called "Landlord Improvement Items" herein). The cost for installation of these improvements, space planning, construction drawings and permits in excess of $See Exhibit B shall be paid for by Tenant, said costs shall be regarded as additional rent hereunder, and Tenant shall be required to promptly pay said amount upon being invoiced therefor, and failure by Tenant to pay same in full within thirty (30) days shall constitute failure to pay rent when due and shall constitute an event of default by Tenant hereunder, giving rise to all remedies available to Landlord under this Lease Agreement and at law for nonpayment of rent. 6.04 Repairs by Landlord. That Landlord shall only be required to make such repairs or replacements as may be required for normal maintenance which shall include the repairs to walls, floors, corridors, windows and other structures and equipment within and serving the Leased Premises, and such additional maintenance as may be necessary because of damages by persons other than Tenant, its agents, employees, invitees or visitors; provided, however, that if Landlord is required to make repairs or take other corrective action by reason of Tenant's acts or omissions to act, Landlord shall have the right to recover from Tenant the cost of the repairs or other work, plus interest as provided for herein. Otherwise, Landlord shall only be responsible to maintain and repair the structural portions of the Premises and Business Park, including the exterior walls and roof structure. 6.05 Peaceful Enjoyment. That Tenant shall, and may peacefully have, hold and enjoy the Leased Premises, subject to the other provisions hereof, provided that Tenant pays the rent herein recited and performs all of Tenant's covenants and agreements herein contained, including the observance of all reasonable Rules and Regulations made by Landlord from time to time pursuant to this Lease Agreement. It is understood and agreed that this covenant and any and all other covenants of Landlord contained in this Lease Agreement shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownerships of Landlord's interest hereunder. 6.06 Parking. Tenant shall have the right to use the parking stalls in common with other tenants or occupants of the Business Park in the parking facilities of the building, subject to the rules and regulations, as stated in Exhibit "C", and any other rules of Landlord for such parking facilities which may be established or altered by Landlord at any time or from time to time during the term hereof. Landlord shall designate handicapped loading, reserved, and visitor parking stalls. Additional Rules and Regulations governing parking restrictions shall be set forth in the Rules and Regulations pertaining to this Business Park, as hereinafter described. 6.07 Regulations. Landlord shall have the right to make and enforce Rules and Regulations consistent with this Lease Agreement for the purposes of regulating access, parking, use of the common areas and promoting safety, order, cleanliness and good service to the Business Park and Project. Tenant will promptly comply with all such Rules and Regulations. The parties acknowledge that the Rules and Regulations attached hereto as Exhibit "C" are presently the Rules and Regulations now in effect; however, Landlord, may at its option and at any time, reasonably amend and modify said Rules and Regulations and Tenant shall be obligated to comply with said Rules and Regulations. ARTICLE VII CONDITION OF THE PREMISES 7.00 Condition of Premises. Tenant's taking possession of the Leased Premises shall be deemed conclusive evidence that as of the date of taking possession, the Leased Premises are in good order and satisfactory condition. No promise of Landlord to alter or remodel, repair or improve the premises, the Business Park or the Project and no representation, express or implied, respecting any matter or thing relating to the Leased Premises, the Business Park or this Lease, including, without limitation, the condition of the Leased Premises has been made to Tenant by Landlord other than as may be contained herein or in a separate Exhibit or Addendum signed by Landlord and Tenant. 7.01 Windows. Tenant agrees that no window covering shall be permitted in any window other than the mini-blinds specified by the Landlord. No windows shall be tinted in any way. 7.02 Repairs, Maintenance and Alterations. (a) Tenant shall at all times throughout the Lease Term at its sole cost and expense, keep the Premises (including exterior doors and entrances, all windows and moldings and trim of all doors and windows and excluding structural defects not caused by Tenant or its invitees) and all partitions, door surfaces, fixtures, equipment and appurtenances thereof (including lighting, heating and plumbing fixtures and any air conditioning system) in good working order, condition and repair (including damage from burglary or attempted burglary of the Premises). Without limiting the generality of the foregoing, Tenant shall keep the glass of all windows and doors clean and presentable; replace immediately all broken glass in the Premises; at reasonable intervals paint or refinish the interior of the Premises; including entrances as determined by Landlord; make any necessary repairs to, or g:\wpdocs\lease\elex.pt 5 replacements of, all door closure apparatuses and mechanism; keep all plumbing clean and in good state of repair including pipes, drains, toilets, basins, and those portions of the heating system within the walls of the Premises; at Landlord's request, assist Landlord to remove all snow and ice from the sidewalk in front of the Premises and from the roof thereof; and keep all utilities within the Premises in a good state of repair. (b) If the Tenant does not make repairs promptly and adequately, or fails to maintain the premises in good repair, Landlord may make repairs upon notice to Tenant, and Tenant shall pay promptly the reasonable cost thereof, as additional rent, on the next rent date thereafter. Landlord shall have a right of entry upon the Premises for such purposes. Tenant agrees that "reasonable cost" as used herein shall mean Landlord's out-of-pocket costs. Tenant shall, upon the termination of this Lease, surrender the Premises to Landlord, in the same condition as when received or when first installed, except for ordinary wear or for damage covered by Landlord's fire and extended coverage insurance. (c) Subject to provisions of this Lease, Landlord shall maintain and repair the structural portions of the Business Park and Premises, including the exterior walls and roof structure, unless such maintenance or repair is caused by any negligent act or omission of Tenant or invitees, in which case Tenant shall pay Landlord the reasonable cost of such maintenance or repair. Landlord shall not be liable to Tenant for any claims for damages resulting from leaking or ruptured ceiling, pipes, or otherwise. Landlord shall paint the exterior portion of the Premises as needed, and the Tenant shall reimburse the Landlord for the cost and expense incurred for such painting. (d) Tenant shall not keep or display any merchandise on or otherwise obstruct the sidewalks, parking, service or common areas of the Business Park. (e) At the expiration or sooner termination of this lease, Tenants shall return the Leased Premises to Landlord in the same condition in which receive, at Tenant's sole cost and expenses or, if altered by Landlord, then the Leased Premises shall be returned in such altered condition, reasonable wear and tear excepted. Prior to such return, Tenant shall remove all trade fixtures and appliances and equipment which do not become a part of the Leased Premises, but not including the heating, ventilation and air conditioning systems, however installed, and shall restore the Leased Premises to the condition they were in prior to the installation of said items. Tenant's obligation to perform this covenant shall survive the expiration or termination of this Lease. 7.03 Alterations. Tenant shall not make any alterations, additions or improvements in or to the Premises. Any alterations, additions or improvements shall be made by Landlord, and the Lease shall be modified as to the fixed minimum rent as provided in Section 1.01. 7.04 Trade Fixtures. Prior to the termination of this Lease, if not in default, Tenant shall have the right to remove all trade fixtures, movable furniture and equipment located on the Premises which belong to the Tenant, upon the condition that Tenant repairs at its expense any damage caused to the Premises by such removal. At any time Tenant is in default hereunder, Tenant shall not remove any trade fixtures, equipment or movable furniture from the Premises. 7.05 Compliance with the Laws. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will conflict with any law or regulation. ARTICLE VIII TENANT COVENANTS AND REPRESENTATIONS Tenant covenants and agrees with Landlord. 8.00 Obligations of Tenant Regarding Improvements. Tenant's obligations regarding tenant improvements to be installed in the Leased Premises are set forth in Exhibit "B" hereto ("Tenant Installed Items"). Should Tenant fail to perform its obligations set forth in Exhibit "B", Tenant shall pay to Landlord, an additional rent (for the purpose of reimbursing Landlord for additional expenses which will be incurred by Landlord because of its inability to proceed), one (1) day's Gross Rental on the Leased Premises for each day that Landlord is delayed because of Tenant's failure to perform its obligations. Such additional rent shall be paid by Tenant to Landlord within thirty (30) days after receipt by Tenant of Landlord's invoice therefor. 8.01 Tenant Trade Fixtures. Tenant may, upon written consent of Landlord, install trade fixtures (exclusive of trade fixtures or other trade equipment which would effectively convert warehouse area as shown in Exhibit "A" attached hereto to additional office area), machinery or other trade equipment in conformance with the ordinances of the applicable city and county, and the same may be removed upon the termination of this Lease Agreement provided Tenant shall not be in default under any of the terms and conditions of this Lease Agreement, and the Leased Premises are not damaged by such removal. Tenant shall return the Leased Premises on the termination of this Lease in the same condition as when rented to Tenant, reasonable wear and tear excepted. Tenant shall keep the Leased Premises and the Project free from any liens arising out of any work performed for, materials furnished to, or obligations incurred by Tenant. All such work, provided for above, shall be done at such times and in such manner as Landlord may from time to time designate. Tenant shall give g:\wpdocs\lease\elex.pt 6 Landlord written notice five (5) days prior to employing any laborer or contractor to perform work resulting in an alteration of the Leased Premises so that Landlord may post a notice of non-responsibility. 8.02 Repairs by Tenant. Tenant shall make no alterations or additions to the Leased Premises or landscaping and shall place no exterior signs on the Leased Premises without the prior written consent of Landlord. Any signs not in conformity with this Lease Agreement may be immediately removed and destroyed by Landlord. To repair or replace any damage or injury done to the Business Park, or any part thereof, caused by Tenant or Tenant's agents, employees, invitees or visitors at Tenant's own cost and expense; provided however, if Tenant fails to make such repairs or replacements promptly, Landlord may, at its option, make such repairs or replacements, and Tenant shall repay the cost thereof to the Landlord on demand. However, Tenant shall not suffer any repair work to be performed by it or its agents without Landlord's written consent. 8.03 Care of Leased Premises. Not to commit or allow any waste or damage to be committed on any portion of the Leased Premises, and at the termination of this Lease Agreement, by lapse of time or otherwise, to deliver up said Leased Premises to Landlord in as good condition as such premises existed at the date of possession by Tenant, subject to depreciation and ordinary wear and tear. Upon such termination of this Lease Agreement, Landlord shall have the right to re-enter and resume possession of the Leased Premises. Landlord's costs of post-termination clean-up required to return the Leased Premises to the above-described condition, shall be billed to and paid by Tenant within 30 days after receipt by Tenant of Landlord's invoice. 8.04 Alterations, Additions and Improvements. Not to permit the Leased Premises to be used for any purpose other than that stated in the Lease Agreement, or in the Business Park Rules and Regulations, or to make or allow to be made any alterations or physical additions in or to the Leased Premises without first obtaining the written consent of Landlord. Any and all such alterations, physical additions or improvements, when made to the Leased Premises by Tenant shall at once become the property of Landlord and shall be surrendered to Landlord upon the termination of this Lease Agreement by lapse of time or otherwise; provided, however, this clause shall not apply to movable equipment or furniture owned by Tenant. Landlord reserves the right to require Tenant, at its expense, to remove such alterations, physical additions or improvements upon termination of this Lease Agreement and to repair any damage caused by such removal. 8.05 Tenant to Keep the Premises Lien Free. Tenant shall keep the Leased Premises and Business Park free from any mechanic's liens arising from any work performed, material furnished or obligations incurred by Tenant, provided that Tenant may contest the imposition of mechanic's liens or the amount due in connection therewith as long as such contest suspends the rights to foreclose such lien and as long as forfeiture of the Business Park is not imminent. Tenant shall keep Landlord informed of the status of any contest and shall agree to defend, indemnify and hold harmless Landlord from and against any such lien or claim or action thereon, together with costs of suit and reasonable attorneys' fees incurred by Landlord in connection with any such claim or action. 8.06 Legal Use and Violations of Insurance Coverage. Not to occupy or use, or permit any portion of the Leased Premises to be occupied or used for any business or purpose which violates any deed restrictions or covenants, conditions or restrictions encumbering the Business Park or which is unlawful, disrespectful or deemed to be extra hazardous on account of fire, or permit anything to be done which would in any way increase the rate of fire casualty or other insurance coverage on the Business Park and/or its contents. Tenant agrees specifically that no food, soft drink or other vending machine will be installed within the Leased Premises without the prior written consent of Landlord. 8.07 Laws, Ordinances, Regulations and ADA . To comply with all laws, ordinances, orders, rules and regulations (state, federal, municipal, or promulgated by other agencies or bodies having any jurisdiction thereof) relating to the use, condition or occupancy of the Leased Premises. Tenant shall comply with requirements of the ADA law which provides for the removal of architectural barriers that prevent equal access to disabled persons. To the extent that barrier removal relates to access within the Leased Premises, the obligation would be that of the Tenant. 8.08 Entry for Repairs and Inspection. To permit Landlord or its agents or representatives to enter into and upon any part of the Leased Premises at all reasonable hours to inspect same, clean, make repairs, alterations or additions thereto or others for any reasonable purpose as Landlord may deem necessary or desirable, the Tenant shall not be entitled to any abatement or reduction of Base Rental or any other sums due under this Lease Agreement by reason thereof. 8.09 Nuisance. To conduct its business and control its agents, employees, invitees, and visitors in such manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant or Landlord in its operation of the Business Park. 8.10 Subordination to Mortgages. That this Lease Agreement shall be subject and subordinate to the lien of any mortgage or deed of trust given by Landlord which may hereafter encumber the Business Park of which the Leased Premises form a part and to all renewals, modifications, consolidations, replacements and extensions thereof. Landlord shall also have the right to assign its interest in this Lease Agreement for security pur-poses to any mortgagee or trust deed beneficiary. Tenant agrees that it will execute any appropriate instrument g:\wpdocs\lease\elex.pt 7 or certificate that Landlord or any mortgagee or trust deed beneficiary may require to effect this subordination, provided that such mortgagee or trust deed beneficiary shall agree with Tenant not to disturb Tenant's right to possess the Leased Premises so long as Tenant complies with all of the terms and conditions of this Lease Agreement. Tenant further agrees that it will provide any such mortgagee or trust deed beneficiary with any evidence required to show the authority of Tenant to execute any such subordination instrument or certificate and will, if so requested by any such mortgagee or trust deed beneficiary, provide a copy of any notice Tenant gives or is required to give Landlord under this Lease Agreement. In the event of the enforcement by the mortgagee or the beneficiary under such mortgage or deed of trust of the remedies provided for by law or by such mortgage or deed of trust, or in the event Landlord gives a deed-in-lieu-offoreclosure to such mortgage or trust deed beneficiary, Tenant will, upon request of any person or party succeeding to the interest of Landlord as a result of such enforcement or termination, automatically become the Tenant of such successor in interest without change in the terms or other provisions of this Lease Agreement; provided however, that such successor in interest shall not be bound by (i) any payment of rent or additional rent for more than one month in advance, (ii) any amendment or modification of this Lease Agreement made without the written consent of such mortgagee or such beneficiary or such successor in interest, or (iii) any defaults of Landlord under this Lease Agreement which remain uncured at the time such successor in interest obtains title to the Business Park. Tenant shall execute and deliver any instrument or instruments confirming the Attornment herein provided for. In the event of any act or omission by Landlord by reason of which Tenant may claim the right to terminate this Lease Agreement or claim a defense or offset against the Gross Rent due hereunder, Tenant agrees not to exercise any such right until: (i) Tenant has notified the mortgagee or trust deed beneficiary in writing of such act or omission by Landlord, and (ii) Tenant has given the mortgagee or trust deed beneficiary a reasonable opportunity to cure such act or omission, including the time as shall be reasonably required to obtain possession of the property and to commence and carry to completion the foreclosure of its mortgage or deed of trust. 8.11 Estoppel Certificate. Tenant shall at any time and from time to time upon not less than ten (10) days prior written notice from Landlord execute, acknowledge and deliver to Landlord a statement in writing, (a) certifying that this Lease Agreement is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease Agreement as so modified, is in full force and effect), and the date to which the rental and other charges are paid in advance, and the amount of the Base Rental, and the commencement and termination dates of the Lease Agreement, and (b) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of the Landlord hereunder, or specifying such defaults if any are claimed. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Leased Premises are a part. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that: (i) this Lease Agreement is in full force and effect, without modification except as may be represented by Landlord; (ii) there are no uncured defaults in Landlord's performance, and (iii) not more than one month's Base Rental has been paid in advance. If Landlord desires to finance or refinance the Business Park, or any part thereof, Tenant agrees to deliver to any lender designated by Landlord such financial statements of Tenant as may be reasonably required by such financial institution. All such financial statements shall be received by Landlord in confidence and shall be used only for the purpose herein set forth. 8.12 Tenant's Remedies. That Tenant specifically agrees to look solely to Landlord's interest in the Business Park for the recovery of any personal judgment from Landlord; it being agreed that Landlord, or if Landlord is a partnership, its partners whether general or limited, or if Landlord is a corporation, its directors, officers, or shareholders, shall never be personally liable for any such judgment. 8.13 Abandonment. Tenant shall not vacate nor abandon Leased Premises at any time during the term of this Lease Agreement, nor permit the Leased Premises to remain unoccupied for a period longer than fifteen (15) consecutive days during the term of this Lease Agreement; and such abandonment is a default of the Lease Agreement. If Tenant shall abandon, vacate or surrender the Leased Premises, or be dispossessed by process of law, or otherwise, any personal property belonging to Tenant and left on the Leased Premises shall, at the option of the Landlord, be deemed abandoned and title thereto shall vest to Landlord. 8.14 Toxic Waste. Tenant and Landlord does hereby represent to each other and does hereby agree to certify to each other at any time during the lease term or any extension thereof, , that to the best of their knowledge, no toxic or hazardous substances have been deposited in or located on the Leased Premises, or has any activity been undertaken in the Leased Premises which would cause hazardous waste or pollutants. Tenant, at its sole cost, shall comply with all laws relating to the storage, use and disposal of hazardous toxic or radioactive matter within the Leased Premises and Landlord at its sole cost shall comply in the Business Park outside the Leased Premises. If Tenant does store, use, or dispose of any Toxic Materials as currently defined in Federal and State or Local ordinances, Tenant shall inform Landlord in writing at least ten (10) days prior to their first appearance on the Premises and Tenant's failure to do so shall constitute default under the Lease. Tenant and Landlord shall be solely responsible for and shall defend, indemnify and hold each other and their agents, harmless from and against all claims, costs and liabilities, including attorney's fees and costs, arising out of or in connection with the removal, clean-up and restoration work and materials necessary to return the Leased Premises or the Business Park and any other property of whatsoever nature to their condition existing prior to the appearance of the Toxic Materials on the Premises or in the Business Park. Tenant's and Landlord's obligations hereunder shall survive the termination g:\wpdocs\lease\elex.pt 8 of this Lease Agreement. It is expressly understood and agreed between Landlord and Tenant that Tenant shall not have any liability or responsibility for any soil or water contamination which pre-exist Tenants occupancy of the premises of the lease, which is projected to be on or about September 1, 1995. ARTICLE IX TAX 9.00 Personal Property Tax. Tenant shall be liable for and shall pay not later than ten (10) days before delinquency, all taxes levied against any person or property or trade fixture placed by Tenant, in or about the Leased Premises. If any such taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property and if Landlord, after written notice to Tenant, pays the same, which Landlord shall have the right to do regardless of the validity of such levy, but only under proper protest if requested by Tenant, or if the assessed value of Landlord's property is increased by the inclusion therein of a value placed upon such personal property or trade fixture of Tenant and if Landlord, after written notice to Tenant, pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof, but only proper protest if requested by Tenant, Tenant shall upon demand, as the case may be, repay to Landlord the taxes so levied against Landlord, or the proportion of such taxes resulting from such increase in the assessment; provided that, in any such event Tenant shall have the right, in the name of the Landlord and with Landlord's full cooperation, at no cost to Landlord, to bring suit in any court of competent jurisdiction to recover the amount of any such taxes so paid under protest, any amounts so recovered to belong to Tenant. ARTICLE X DAMAGE OR DESTRUCTION 10.00 Damage to Premises. If all or a portion of the Leased Premises are rendered untenable by damage by any casualty, the damage shall be repaired forthwith by and at the expense of Landlord, provided such repairs can, in Landlord's opinion, be made within one hundred twenty (120) days after notice to Landlord of the occurrence of such damage, without the payment of overtime or other premiums. Except as set forth herein below, until such repairs are completed, the rent shall be abated in proportion to the part of the Leased Premises which is unusable by Tenant in the conduct of business. There shall be no abatement of rent by reason of any portion of the premises being unusable for a period equal to one day or less. The Landlord's opinion as to completion date of any repair shall be given to Tenant in writing within 30 days of the occurrence of the damage. 10.01 Election by Landlord to Repair. If such repairs cannot, in Landlord's opinion, be made within such one hundred twenty (120) day period Landlord may, at its option, make them within a reasonable time, which reasonable time shall not exceed an additional sixty (60) days for a total repair time of six months, and in such event this Lease Agreement shall continue in effect and the rent shall be abated in the manner and to the extent provided above. Landlord's election to make such repairs must be evidenced by written notice to Tenant within thirty (30) days after notice to Landlord of the occurrence of the significant damage advising Tenant whether or not Landlord will make such repairs and the estimated time for completing the same. If Landlord does not so elect to make such repairs which cannot be made within such one hundred twenty (120) day period, then either party may by written notice to the other cancel this Lease Agreement as of the date of the occurrence of such damage. The Landlord will make all reasonable efforts to repair the damaged premises. 10.02 Tenant's Election to Terminate. In case of any significant damage or destruction mentioned in this Article which Landlord is required or undertakes to repair as provided herein, Tenant may terminate this Lease Agreement by written notice to Landlord any time prior to completion of the required repairs if Landlord has not restored and rebuilt the premises (exclusive of any property of Tenant or improvements installed by Tenant located therein) to substantially the same condition as existed immediately prior to such damage or destruction within one hundred twenty (120) days after notice to Landlord of the occurrence of such damage or destruction, or such longer period as Landlord has estimated pursuant to Section 10.01, plus such additional period thereafter (not exceeding six months) as shall equal the aggregate period Landlord may have been delayed in doing so by acts of God, adjustment of insurance, labor trouble, governmental controls, unavailability of materials, or any other cause beyond Landlord's reasonable control. 10.03 Inconvenience Damage. No damages, compensation or claim shall be payable by landlord for inconvenience, loss of business or annoyance arising from any repair or restoration of any portion of the premises or other portion of the Business Park. Landlord shall use its best efforts to effect such repair or restoration promptly and in such manner as to not unreasonably interfere with Tenant's use and occupancy. 10.04 Total Destruction. A total destruction of the Business Park shall automatically terminate this Lease Agreement. 10.05 Tenant's Property. Landlord shall not be required to carry insurance of any kind on Tenant's personal property and shall not be obligated to repair any damage thereto or replace the same for any reason. g:\wpdocs\lease\elex.pt 9 ARTICLE XI EMINENT DOMAIN 11.00 Total Taking - Termination. If the whole of the Leased Premises or so much thereof as to render the balance unusable by Tenant shall be taken by any governmental authority under power of Eminent Domain, this Lease Agreement shall automatically terminate as of the date of such condemnation, or as of the date possession is taken by the condemning authority, whichever is earlier. No award for any partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for the taking of personal property, equipment and fixtures belonging to Tenant and/or for the interruption of or damage to Tenant's business or for Tenant's unamortized cost of leasehold improvements and/or the cost of moving and/or the lost value of Tenant's unexpired lease term. 11.01 Partial Taking. In the event of a partial taking, which does not result in a termination of this Lease Agreement, rent shall be abated in proportion to the part of the premises so made unusable by said partial taking.. 11.02 Temporary Taking. No temporary taking of the Leased Premises and/or of Tenant's rights therein or under this Lease Agreement shall terminate this Lease Agreement or give Tenant any right to any abatement of rent hereunder; any award made to Tenant by reason of any such temporary taking shall belong entirely to Tenant and Landlord shall not be entitled to share therein. The Tenant and Landlord will work together to cause the governmental agency responsible for the taking to restore the Leased Premises and Business Park to its original condition prior to the taking. ARTICLE XII DEFAULTS AND REMEDIES 12.00 Default by Tenant. If default shall be made in the payment of any sum to be paid by Tenant under this Lease Agreement, and default shall continue for ten (10) days after written notice by Landlord, or default shall be made in the performance of any of the other covenants or conditions which Tenant is required to observe and to perform, and such default shall continue for thirty (30) days after written notice by Landlord, or if the interest of Tenant under this Lease Agreement shall be levied, or under execution or other legal process, or if any petition shall be filed by or against Tenant to declare Tenant as bankrupt or to delay, reduce or modify Tenant's debts or obligations, or if any petition shall be filed or other action taken to reorganize or modify Tenant's capital structure if Tenant be a corporation or other entity, or if Tenant be declared insolvent, or if any assignment or Tenant's property shall be made for the benefit of creditors or if a receiver or trustee is appointed for Tenant or its property, or if Tenant abandons the Leased Premises during the term of this Lease Agreement or any extensions thereof, or if Tenant makes any transfer of any interest in the Leased Premises not in accordance with the requirements of this Lease Agreement, then Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease Agreement (provided that no such execution, legal process or petition filed against Tenant shall constitute a breach of this Lease Agreement if Tenant shall vigorously contest the same by appropriate proceedings and shall remove or vacate the same within sixty (60) days from the date of the creation, service or filing) and thereupon at Landlord's option, Landlord shall have one or more of the following described remedies in addition to all other rights and remedies provided at law or in equity: (a) Landlord may terminate this Lease Agreement and forthwith repossess the Leased Premises and remove all persons or property therefrom, and be entitled to recover forthwith as damages a sum of money equal to the total of (i) the cost of recovering the Leased Premises (ii) the unpaid rent owed thereon from due date at the rate of 18% per annum or the maximum rate permitted by applicable law, whichever is lower, (iii) the balance of the rent for the remainder of the term and (iv) any other sum of money and damages owed by Tenant to Landlord; or (b) Landlord shall also be entitled to terminate Tenant's right of possession and to repossess the Leased Premises, without demand or notice of any kind to Tenant, by summary proceedings, any other applicable action or proceeding, or otherwise, all without terminating this Lease Agreement, in which event Landlord may, but shall be under no obligation to, relet the same for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord. None of these actions will be deemed an acceptance of surrender of the Leased Premises. For the purpose of such reletting Landlord is authorized to decorate or to make any repairs, changes, alterations or additions in or to the Leased Premises that may be necessary or convenient, and (i) if Landlord shall fail or refuse to relet the Leased Premises, or (ii) if the same are relet and a sufficient sum shall not be realized from such reletting, after paying the unpaid Gross Rental due hereunder earned or unpaid at the time of reletting, plus interest thereon at the rate set forth herein, the cost of recovering possession, and all of the costs and expenses of such decoration, repairs, changes, alterations and additions, and the expense of such reletting, and of the collection of the rent accruing therefrom to satisfy the rent provided for in this Lease Agreement to be paid, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rental reserved in this Lease Agreement for such period or periods, or if g:\wpdocs\lease\elex.pt 10 the Leased Premises have been relet, Tenant shall satisfy and pay any such deficiency upon demand therefor from time to time, and Tenant agrees that Landlord may file suit to recover any sums falling due under the terms of this Article from time to time on one or more occasions without Landlord being obligated to wait until expiration of the term of this Lease Agreement and without barring or affecting in any manner Landlord's right to bring a later action or actions for further damages; nor shall such reletting be construed as an election on the part of Landlord to terminate this Lease Agreement unless a written notice of such intention be given to Tenant by Landlord. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease Agreement for such previous breach. (c) Without prejudice to any other remedy for default, Landlord may perform any obligation or make any payment required to cure a default by Tenant. The cost of performance, including attorneys' fees and all disbursements, shall immediately be paid by Tenant to Landlord upon demand as additional rental. (d) Any monies or rent (whether Base Rental, or additional rent) due from Tenant to Landlord, which is not paid when due, shall bear interest at the rate of 18% per annum or the maximum rate per-mitted by law, whichever is lower, from the due date until paid. 12.01 Waiver. Failure of Landlord to declare any default immediately upon occurrence thereof, or delay in taking any action in connection therewith, shall not waive such default, but Landlord shall have the right to declare any such default at any time thereafter. ARTICLE XIII INSURANCE 13.00 Landlord. Landlord shall, at all times during the term of this Lease Agreement, insure the building, including personal property owned by Landlord, against all risks of direct physical loss or damage, for the actual repair or replacement value thereof, without depreciation. Landlord shall not be obligated to insure any furniture, equipment, machinery, goods, or supplies owned by Tenant or which Tenant may bring or obtain upon the Leased Premises, or any additional improvement which Tenant may construct thereon. If the annual premiums charged Landlord for such insurance exceed the standard premium rates because of the nature of Tenant's operations, then Tenant shall, upon receipt of appropriate premium invoices, reimburse Landlord for such increases in premium. 13.01 Tenant. Tenant shall, at all times during the term of this Lease Agreement, insure Tenant's personal property, including any additional improvements made by Tenant, while in or upon the Leased Premises. In addition, tenant shall maintain a policy or policies of Commercial General Liability insurance with the premiums thereon fully paid on or before due date, issued by an insurance company having at least an A.M. Best rating of B VII or better, and licensed to do business within the state the project is located. The limits afforded by said liability policy shall not be less than One Million Dollars ($1,000,000) combined single limit, for personal injury and property damage, in respect to any one occurrence, $2,000,000 annual aggregate. Landlord shall be added as an additional insured thereto and said policy shall not be canceled or substantially modified without first giving Landlord thirty (30) days written notice thereof. In addition, Tenants shall maintain Workers Compensation as required by statute. Tenant shall furnish, subject to Landlord's request and approval, a certificate of insurance evidencing the Commercial General Liability and Workers Compensation coverages referred to herein. ARTICLE XIV HOLDING OVER 14.00 Holding Over. In the event of holding over by Tenant, after expiration or termination of this Lease Agreement without the written consent of Landlord, Tenant shall pay to Landlord, twice the Gross Rental which Tenant was obligated to pay for the month immediately preceding the end of the term of this Lease Agreement for each month or any part thereof of any such holdover period. No holding over by Tenant after the termination of this Lease Agreement shall operate to extend the lease term; in the event of any unauthorized holding over, Tenant shall indemnify Landlord against all claims for damages by any other tenant to whom Landlord may have leased all or any part of the Leased Premises covered hereby effective upon the termination of this Lease Agreement. Any holding over with the written consent of Landlord shall thereafter constitute this Lease Agreement a lease from month to month. ARTICLE XV ATTORNEY'S FEES 15.00 Attorney's Fees. In the event either party places the enforcement of this Lease Agreement, or any part thereof, or the collection of any rent due, or to become due hereunder, or recovery of the possession of the Leased Premises in the hands of an attorney, or files suit upon the same, the non-prevailing (or defaulting) party shall pay the other party's reasonable attorney's fees and court costs, in any proceeding, whether at trial, or appeal therefrom, or on any petition for review. g:\wpdocs\lease\elex.pt 11 ARTICLE XVI ASSIGNMENT AND SUBLETTING 16.00 Assignment Prohibited. Tenant shall not, either voluntarily or by operation of law, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of Tenant's leasehold estate hereunder, or permit the Leased Premises to be occupied by anyone other than Tenant or Tenant's employees or sublet the Leased Premises or any portion thereof without Landlord's prior written consent in any instance, which consent shall not be unreasonably withheld. 16.01 Assignment or Sublease. In the event Tenant should desire to assign this Lease Agreement or sublet the Leased Premises or any part thereof, Tenant shall give Landlord written notice of such desire at least sixty (60) days in advance of the date on which Tenant desires to make such assignment or sublease, which notice shall include the name, address, evidence of financial capability, and other pertinent information regarding the proposed assignee or sublessee. Landlord shall then have a period of thirty (30) days following receipt of such notice within which to notify Tenant in writing that Landlord elects (i) to terminate this Lease Agreement as to the space so affected on the date so specified by Tenant in which event Tenant will be relieved of all further obligations hereunder as to such space, or (ii) to permit Tenant to assign or sublet such space, subject, however, to subsequent written approval of the proposed assignee or sublessee by Landlord, such consent not to be unreasonably withheld so long as the use of the Leased Premises by such proposed assignee or sublessee would be similar to Tenant's use of such premises, the proposed assignee or sublessee is of sound financial condition as determined by Landlord and any rent or other consideration to be paid by such proposed assignee or sublessee, which exceeds the rent paid by Tenant for such space, is paid to Landlord pursuant to the terms of the proposed assignment or sublease. If Landlord should fail to notify Tenant in writing of such election within said thirty (30) day period, Landlord shall be deemed to have elected option (ii) above, but subsequent written approval by Landlord of the proposed assignee or sublessee shall be required. No assignment or subletting by Tenant shall relieve Tenant of any obligations under this Lease Agreement. If Tenant is a corporation, partnership, trust or other legal fictional entity, the transfer of fifty percent (50%) or more of the beneficial ownership of Tenant shall be deemed an assignment of this Lease Agreement for purposes of this paragraph. Any attempted transfer by Tenant without the consent of Landlord, shall be null and void and, at the option of Landlord, shall cause termination of this Lease Agreement. The giving of consent by Landlord in one instance shall not preclude the need for Tenant, and its successors and assigns, to obtain Landlord's consent to further transfers. In the event Tenant shall assign or sublet the Leased Premises, or request the consent of Landlord to any assignment or subletting, or if Tenant shall request consent of Landlord to any act Tenant proposes to do, as herein provided, then Tenant shall pay Landlord's reasonable attorney's or assignment fees incurred in connection therewith, such attorney's or assignment fees not to exceed $500.00 for each request. Any profit derived as a result of any sublease or assignment shall be paid directly to Landlord. Any assignment or subletting shall not relieve Tenant from responsibility under the Lease Agreement, and Tenant shall therefore remain liable for the faithful performance of the Lease Agreement in case of breach or default by assignee or sublessee. 16.02 No Release of Liability. No consent by Landlord to any assignment or subletting by Tenant shall relieve Tenant of any obligation to be performed by the Tenant under this Lease Agreement, whether accruing before or after such assignment or subletting unless granted by Landlord to Tenant in writing. The consent by Landlord to any assignment or subletting shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other assignment or subletting. Any assignment or subletting which is not in compliance with this Article shall be void, and at the option of Landlord, shall constitute a material default by Tenant under this Lease Agreement. 16.03 Joint Liability. Each assignee or transferee other than Landlord, shall assume, as provided in this section, all obligations of the Tenant under this Lease Agreement which relates to all or a portion of the Leased Premises assigned or sublet, as the case may be and shall be and remain liable jointly and severally with Tenant for the payment of the rent, and for due performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the term of this Lease Agreement. ARTICLE XVII HOLD HARMLESS AND NON-LIABILITY 17.00 Hold Harmless and Non-liability. (a) Tenant hereby indemnifies and holds Landlord harmless from and against any injury, expense, damage liability or claim, imposed on Landlord by any person whomsoever, whether due to damage to the Premises, claims for injuries to the person or property of any other tenant of the Building or of any other person in or about the Building for any purpose whatsoever, or administrative or criminal action by a governmental authority, whether such injury, expense, damage, liability or claim results either directly or indirectly from the act, omission, negligence, misconduct or breach of any provisions of this Lease Agreement by Tenant, the agents servants, or employees of Tenant, or any other person entering upon the Leased Premises under express or implied invitation or consent of Tenant. g:\wpdocs\lease\elex.pt 12 Tenant further agrees to reimburse Landlord for any costs or expenses, including, but not limited to, court costs and reasonable attorney's fees, which Landlord may incur in investigating, handling, or litigating any such claim or any action by a governmental authority. (b) Tenant agrees to report in writing to Landlord any defective condition in or about the Leased Premises known to Tenant, and further agrees to attempt to contact Landlord by telephone immediately in such instance. ARTICLE XVIII WAIVER OF SUBROGATION 18.00 Waiver of Subrogation. Anything in this Lease Agreement to the contrary notwithstanding, to the extent of insurance coverage required to be obtained under this Lease Agreement, Landlord and Tenant each hereby waives any and all rights of recovery, claim, action or cause of action, against the officers, directors, shareholders or employees, for any loss or damage that may occur to the Leased Premises, or any improvements thereto, or said Project of which the Leased Premises are a part, or any improvements thereof, or any personal property of such party therein, by reason of fire, the elements, or any other cause which is or could have been insured against, regardless of cause, under the terms of standard fire and extended coverage insurance policies, regardless of cause or origin, including negligence of the other party hereto, its agents, officers or employees, and covenants that no insurer shall hold any right of subrogation against such other party. ARTICLE XIX GENERAL PROVISIONS 19.00 Severability. If any term or provision of this Lease Agreement, or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease Agreement, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease Agreement shall be valid and shall be enforceable to the extent permitted by law. 19.01 Notices. All notices, demands, consents and approvals, which may or are required to be given by either party to the other hereunder, shall be in writing and shall be deemed to have been fully given when personally delivered or, if the notice is deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, and addressed to the party to be notified at the address for such party specified in this Lease Agreement (with copies to Investment Properties, 60 E. South Temple Street, Suite 780, Salt Lake City, Utah 84111 and Kirton, McConkie, Poelman, 60 E. South Temple Street, Suite 1800, Salt Lake City, UT 84111), then the notice shall be deemed fully given on earlier of (i) the date set forth on the receipt or (ii) three (3) days after the notice is deposited in the mail. Either party may change its address for notification as the party to be notified may from time to time designate by at least fifteen (15) days written notice to the notifying party. Tenant hereby appoints as its agent to receive the service of all dispossessory or distraint proceedings and notices thereunder the person in charge of or occupying the Leased Premises at the time, and, if no person shall be in charge of or occupying the same, then such service may be made by attaching the same on the main entrance of the Leased Premises. 19.02 No Joint Venture. This Lease Agreement shall not be deemed or construed to create or establish any relationship of partnership or joint venture or similar relationship or arrangement between Landlord and Tenant hereunder. 19.03 Successors and Assigns. This Lease Agreement shall be binding upon and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, its successors, and, to the extent assignment may be approved by Landlord hereunder, Tenant's assigns. 19.04 Choice of Law. All rights and remedies of Landlord under this Lease Agreement shall be cumulative and none shall exclude any other rights or remedies allowed by law. All of the terms hereof shall be construed and enforced according to the laws of the State of Texas. 19.05 Entire Agreement. This instrument along with any exhibits and attachments or other documents affixed hereto or referred to herein, constitute the entire and exclusive agreement between Landlord and Tenant relative to the Leased Premises herein described, and this Lease Agreement and said exhibits and attachments and other documents may be altered and/or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant hereby agree that all prior written and oral agreements, understandings and/or practices relative to the leasing of the Leased Premises are merged in or revoked by this Lease Agreement. 19.06 Broker's Commission. Tenant represents and warrants to Landlord that Tenant has not entered into any agreements whereby Landlord would be obligated to pay any broker's commissions or finder's fees in connection with Tenant's execution of this Lease Agreement. Tenant agrees to indemnify Landlord against, and to hold Landlord harmless from, all liabilities arising from any such claim. Tenant does acknowledge the following as broker or agent for Landlord who are due fees or commissions from Landlord: JSC Realty Services, Inc. and Preston Commercial Group, Inc. g:\wpdocs\lease\elex.pt 13 19.07 Force Majeure. Any prevention, delay or stoppage of work to be performed by Landlord or Tenant which is due to strikes, labor disputes, inability to obtain labor or materials, equipment or reasonable substitutes therefor, acts of God, governmental restrictions or regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualties, or other causes beyond the reasonable control of the party obligated to perform hereunder, shall excuse performance of the work by that party for a period equal to the duration of that prevention, delay or stoppage. Nothing in this Article shall excuse or delay Tenant's obligation to pay rent or other charges under this Lease Agreement, except as otherwise provided in this Lease Agreement. 19.08 Binding. Each individual executing this Lease on behalf of Tenant and Landlord, represents and warrants that he/she is duly authorized to execute and deliver this Lease on behalf of the Tenant and Landlord, and that this Lease is binding upon each in accordance with its terms. This Lease Agreement shall not be considered binding until it has been fully executed by the Landlord. 19.09 Lease Memorandum. Neither this Lease, nor any notice nor memorandum regarding the terms hereof, shall be recorded by Tenant without the written consent of the Landlord. ARTICLE XX EXHIBITS 20.00 Exhibit. Attached hereto as a Exhibit to this Lease Agreement, are additional provisions which shall be determined to be a part of this Lease Agreement. In the event there is a conflict between the body of the Lease Agreement and the Exhibits, the language of the Exhibits shall prevail. IN WITNESS WHEREOF, the parties have executed this Lease Agreement the day and year first above written. PROPERTY RESERVE, INC. ELEXSYS INTERNATIONAL, INC. By: By: W.F. Hegarty --------------------------- ---------------------------------- Its: Vice President Its: Vice President & COO g:\wpdocs\lease\elex.pt 14 EXHIBIT "A" Site Plan g:\wpdocs\lease\elex.pt 15 EXHIBIT "B" Improvements to Be Made by Landlord Landlord shall design and construct in the Premises, at Landlord's sole cost and expense, such leasehold improvements as are described on the attached space plan. The final plans and specifications for such leasehold improvements, when approved in writing by both Landlord and Tenant, shall be deemed by this reference to have been incorporated into this Lease as Exhibit "B" and thereafter to be a part hereof. Neither the Commencement Date of this Lease nor the obligation to pay any rentals shall be adjusted or delayed by virtue of the failure of the Tenant to provide its design and space planning criteria by the date set forth below, by virtue of the failure of Tenant to agree upon the final plans and specifications for the construction of such leasehold improvements nor by virtue of any delay caused by Tenant during the course of construction. Tenant shall furnish to Landlord, or to Landlord's designated architect, Tenant's design and space planning criteria no later than April 1, 1995. Landlord is responsible for making application for a Certificate of Occupancy for the premises and paying all fees associated with such application. g:\wpdocs\lease\elex.pt 16 EXHIBIT "C" Rules and Regulations 1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building without the written consent of Landlord first had and obtained, and Landlord shall have the right to remove any such sign, placard, picture, advertisement, name or notice without notice to, and at the expense of, Tenant. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by Landlord. Tenant shall not place anything, or allow anything to be placed, near the glass of any window, door, partition, or wall which appear unsightly from outside the Leased Premises; Tenant shall not, without prior written consent of Landlord cause or otherwise sunscreen any window. 2. The sidewalks, passages, exits, and entrances, shall not be obstructed by any of the tenants or used by them for any purpose other than for ingress and egress from their respective Premises. 3. Tenant shall not alter any lock or install any new or additional locks or any bolts on any doors or windows of the Premises. Under no circumstances shall Tenant allow any person or persons, not in the employ of Tenant, to use or have access to keys to the Lease Premises or of the Project of which the Leased Premises is a part. Furthermore, Tenant on termination of its tenancy, shall deliver to Landlord all keys that are furnished to Tenant or that Tenant has made. In case of loss of any keys furnished by Landlord, Tenant shall pay the cost of replacing such keys to Landlord. Landlord shall supply Tenant with two keys to Tenant's Leased Premises, additional keys will be at Tenant's expense. 4. Tenant shall not make, drive nails, screw, or drill into the partitions, woodwork, or plaster, or in any way deface the Leased Premises, without Landlord's approval; however, Tenant may hang pictures in reasonable quantities and of reasonable weight. 5. The toilet rooms, urinals, wash bowls, and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant, who, or whose employees, shall have caused it. 6. Tenant shall not overload the floor of the Leased Premises or in any way deface the Leased Premises or any part thereof. 7. No cooking shall be done or permitted by Tenant on the Leased Premises, nor shall the Leased Premises be used for the storage of merchandise, for washing clothes, for lodging, or for any improper, objectionable or immoral purposes. 8. Tenant shall not use or keep in the Leased Premises or in the Business Park any kerosene, gasoline, or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by Landlord. 9. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Leased Premises, or permit or suffer the Leased Premises to be occupied or used in a manner offensive or objectionable to the Landlord or other occupants of the Business Park by reason of notice, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Leased Premises or the Business Park. 10. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. No boring or cutting for wires will be allowed without the consent of the Landlord. The location of telephones, call boxes, and other office equipment affixed to the Leased Premises shall be subject to the approval of Landlord. 11. The following acts shall not be allowed or suffered to be done or conditions to exist upon the Leased Premises of any part thereof: a. Any violation of any federal, state, or municipal statute or ordinance, or any regulation, orders, or directive, of a governmental agency, as such statutes, ordinances, regulations, order, or directives now exist or may hereafter provide, concerning the use and safety of the Leased Premises. b. Any violation of any certificate or occupancy covering or affecting the use of the Leased Premises or any part hereof. c. Any public or private nuisance; g:\wpdocs\lease\elex.pt 17 d. The display or distribution of drug paraphernalia, or sexual paraphernalia, except as the same may be legally dispensed by a physician or surgeon, dentist or pharmacist, duly licensed to practice such profession. e. The manufacturer, distribution, sales, or dispensing, in any manner, of illegal drugs; or any type of illegal drug activity or consumption. f. The sale or dispensing of alcoholic beverages on all other portions of the real property conveyed hereunder. g. The showing, displaying, viewing, renting or selling of movie films which would be classified or rated as "X-rated" and "R-rated" under present standards or criteria for such classification and rating; and provided, that insofar as movie films, whether present or future are shown, displayed, viewed, rented, or sold upon the said real property, preference shall be given to those films which meet the standards and criterion presently existing for classification and rate as "G rated" or "PG rated". h. Gambling. i. The establishment or maintenance of a bawdy house, bar, nightclub or tavern. j. Any other act or condition which shall be lewd, obscene or licentious. 12. Landlord reserves the right to exclude or expel from the Business Park any person who, in the judgement of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building. 13. No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the written consent of the Landlord. 14. Landlord shall have the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Business Park of which the Leased Premises are a part. 15. Without the written consent of Landlord, Tenant shall not use the name of the Business Park in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 16. Landlord shall have the right to control and operate the public portions of the Business Park, and the public facilities, and heating and air conditioning, as well as facilities furnished for the common use of tenants, in such manner as it deems best for the benefit of the tenants generally. 17. Tenant shall not disturb, solicit, or canvass any occupant of the Business Park and shall cooperate to prevent same. 18. A condition of the use of any parking facility for the Business Park shall be compliance by the parker with parking rules and regulations established by Landlord or its Parking Operator. a. Landlord reserves the right to modify and/or adopt such other reasonable and nondiscriminatory rules and regulations as it deems necessary for the operation of the parking lot. Landlord may refuse to permit any person who violates the within rules to park in the parking lot, and any violation of the rules shall subject the car to removal. Landlord shall have no obligation to provide any parking spaces for the campers, trailers, motor homes, or other nonstandard sized vehicles. b. Cars must be parked entirely within the painted stall lines. Parking is prohibited: in areas not striped for parking: in aisles; where "no parking" signs are posted; and in crosshatched areas. c. Spaces are for the express purpose of parking one automobile per space. Washing, waxing, cleaning or servicing of any vehicle by the parker and/or his agents is prohibited. d. Landlord shall not be liable to Tenant for damages or otherwise, nor shall Landlord be in default hereunder, because of Tenant's inability to park in the parking lot therein due to force majeure or any other cause beyond Landlord's control. e. Landlord shall not be liable and Tenant hereby waives any and all claims for theft, fire damage, or loss of use to any automobile or motor vehicle or for articles left therein while parked in Landlord's parking lot. f. Tenant agrees to acquaint all persons to whom Tenant assigns parking spaces with the above rules and regulations. g. The common parking facilities are available for use by any and all Tenants. Landlord reserves the right to assign or allocate parking in the event of conflicts, abuse, or improper use of g:\wpdocs\lease\elex.pt 18 these common parking facilities. It is generally understood that any Tenant should utilize only those parking spaces immediately adjacent to that Tenant's specific Leased Premises. Proper use of the common parking facilities is deemed to be that use which is occasioned by the normal in and out traffic required by the Tenant, in the normal course of the Tenant's business operations. h. Vehicles that are abandoned, disabled, have expired registration stickers, obstructing any means of ingress or egress to any Leased Premises, or in any way a general nuisance or hazard are subject to removal, without notice by Landlord's designated wrecker and towing service. All cost associated with such removal shall be at the Tenant's/Vehicle Owner's expense. i. Tenant shall not use the building, Leased Premises, or parking facilities for housing, lodging or sleeping purposes without the express consent of Landlord in writing. 19. No animals are allowed in, around, or on the Leased Premises. 20. Tenant shall not conduct or permit to be conducted any sale by auction on the Leased Premises. 21. Landlord shall have the right to control landscaping and approve the placing of signs and the size and quality of the same. 22. Tenant shall not block or obstruct any of the entries, passages, doors, hallways, or stairways of building or parking area, or place, empty, or throw any rubbish, litter, trash, or material of any nature into such areas, or permit such areas to be used at any time except for ingress and egress of Tenants. 23. Landlord will not be responsible for lost or stolen personal property, equipment, money, or any article taken from the Leased Premises, building or parking facilities regardless of how or when loss occurs. 24. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be placed therein, and the expense of any breakage, stoppage, or damage resulting from a violation of the provision shall be borne by Tenant. 25. Any additional keys required by Tenant during the term of this lease shall be requested from Landlord and shall be paid for by Tenant upon delivery of keys to premises. In the event new locks are requested by Tenant, then all costs associated with such request (including hardware, installation and keys) shall be paid by Tenant. g:\wpdocs\lease\elex.pt 19 EXHIBIT "D" Renewal Option Provided that at the end of the primary term of this Lease, Tenant not being in default of any term, condition or covenant contained in this Lease, Tenant (but not any assignee or sublessee) shall have the right and option to renew this Lease by written notice to Landlord (by registered mail, return receipt requested) no later than one hundred eighty (180) days prior to the expiration of the primary term, for the additional term of sixty (60) months, under the same terms, conditions and covenants contained herein except: 1. Tenant shall have no further renewal options unless expressly granted by Landlord in writing; and 2. The Base Rental for the Renewal term shall be equal to prevailing rental rates for properties of equivalent quality, size, utility and location. g:\wpdocs\lease\elex.pt 20 Exhibit "E" This instrument is included in and made a part of that certain lease agreement between PROPERTY RESERVE, INC., as Landlord, and ELEXSYS INTERNATIONAL, INC., as Tenant for commercial premises located in the Jupiter Resource Center and bearing the address of 2609 Technology Drive, Plano, Texas 75074 ("the Lease"). It is further agreed between Landlord and Tenant as follows: 1. As further security for Tenant's timely performance of all obligations under the Lease, Tenant agrees to deposit with Landlord the sum of One Hundred Fifty Thousand Dollars ($150,000.00) with the execution of the Lease. This special security deposit is in addition to the security deposit also posted with Landlord by Tenant in the amount of $13,352.00 pursuant to the provisions of paragraph 4.00 of the Lease. 2. Assuming that no default by Tenant has occurred during the first (1st) twelve (12) months of the Lease, Landlord agrees to repay to Tenant within ten (10) days of the expiration of the twelfth (12th) month of the Lease the principal sum of Seventy-Five Thousand Dollars ($75,000.00) plus six percent (6%) interest per annum accruing from the date that the special security deposit is tendered to Landlord until the Seventy-Five Thousand Dollars ($75,000.00) is repaid to Tenant. 3. Assuming that no default by Tenant has occurred during the second (2nd) twelve (12) months of the Lease, Landlord agrees to repay to Tenant within ten (10) days of the expiration of the twenty-fourth (24th) month of the Lease the remaining Seventy-Five Thousand Dollars ($75,000.00) of the special security deposit plus six percent (6%) interest per annum accruing from the date that the special security deposit is tendered to Landlord until the remaining balance of Seventy-Five Thousand Dollars ($75,000.00) is repaid to Tenant. 4. In the event that Tenant should be in default of any monetary obligation under the Lease, Landlord shall have the right, but not the obligation, to draw against the special security deposit without notice to Tenant in an amount necessary to cure Tenant's default, in which case Landlord shall make written demand on Tenant to replenish the special security deposit in the amount drawn by Landlord to cure Tenant's default, and if Tenant fails to replenish the special deposit within fifteen (15) days, Tenant shall be in default of the Lease. 5. In the event that Tenant should default during the first twelve (12) months of the Lease, whether cured or not at a later date, (a) Tenant shall forfeit all right to interest on the initial Seventy-Five Thousand Dollars ($75,000.00) to be returned at the end of the twelfth (12th) month had there been no default, and (b) Landlord shall be permitted to retain the initial Seventy-Five Thousand Dollars ($75,000.00) through the twenty-fourth (24th) month of the Lease, interest free. 6. In the event that Tenant should default during the second twelve (12) months of the Lease, whether cured or not at a later date, (a) Tenant shall forfeit all right to interest on the second Seventy-Five Thousand Dollars ($75,000.00) to be returned at the end of the twenty-fourth (24th) month had there been no default, and (b) Landlord shall be permitted to retain the second Seventy-Five Thousand Dollars ($75,000.00) through the thirty-sixth (36th) month of the Lease, interest free. g:\wpdocs\lease\elex.pt 21 7. In the event that (a) Tenant should vacate and abandon the premises of the Lease, or (b) Tenant should cease to occupy the premises of the Lease as a result of lawful remedial action by the Landlord in response to any default by Tenant, Landlord shall have the right to apply the remaining balance of the special security deposit, including accrued interest, against (i) all unpaid rent or other monetary obligations accruing under the Lease without payment, (ii) all unamortized tenant improvements paid by Landlord, (iii) all unamortized lease commissions paid by Landlord, and (iv) any other damages, of whatever kind or character, which Landlord may sustain as a result of Tenant's default under the Lease. 8. All remedies granted to Landlord in this Exhibit E, relative to the special security deposit, shall be cumulative and in addition to all other remedies available to Landlord pursuant to the Lease and under Texas law in the event of any default by Tenant under the Lease. 9. In the event that Landlord should default on its obligations as expressly provided in the lease, which default has the effect of negating Tenants continued use of the leased premises per the terms of the lease, Landlord shall be obligated to repay to Tenant the outstanding principal balance of the special security deposit plus accrued interest if Landlord fails to cure the default within thirty (30) days of written notice from Tenant of any alleged default by Landlord. g:\wpdocs\lease\elex.pt 22 EX-10.3 3 ASSET PURCHASE AGREEMENT AGREEMENT FOR SALE OF A BUSINESS Date: 19 Parties: 1 `The Vendor': TECHNET ELECTRONICS LIMITED (registered no 1580268) whose registered office is at 15 Coningsby Road, Bretton, Peterborough PE3 8SB. 2 `The Purchaser': ELEXSYS INTERNATIONAL (EUROPE) LIMITED (registered no 3003482) whose registered office is at 15 Coningsby Road, Bretton, Peterborough PE3 8SB. Operative provisions: 1 Interpretation 1.1 In this agreement including the Schedules: 1.1.1 the following words and expressions have the following meanings, unless they are inconsistent with the context: `ASSETS' means the property, assets and rights of the Business to be purchased by the Purchaser as described in clause 2.1. `BANK LOAN' means the loan made to the Vendor by Midland Bank Plc. `BANK GUARANTEES' means the Guarantee provided by Peter Dedman to Midland Bank Plc dated 25th November 1988 and the Guarantee provided by 3i Group plc dated 20th February 1995. `BANK OVERDRAFT' means the overdraft provided to the Vendor by Midland Bank Plc. `BOOK DEBTS' means the trade debts owed to the Vendor at the Effective Date in connection with the Business. `BUSINESS' means the business of Printed Circuit Board Manufacturers carried on by the Vendor at the Effective Date. `CASH FLOAT' means any cash balances held at the Effective Date for the purpose of reimbursing out-of-pocket expenses in connection with the Business. `CONTRACTS' means all the current contracts and engagements of the Vendor but excluding contracts with E000761\1\001SALE.DAGT 1 employees. `CREDITORS' means the aggregate amount owed by the Vendor in connection with the Business to or in respect of trade creditors and accrued charges as recorded in the books of account of the Business at the Effective Date but not including liabilities for value added tax or taxation on profits or chargeable gains. `EFFECTIVE DATE' means the close of business on 27th April 1995. `EMPLOYEES' means the persons who, at the Effective Date, were employed by the Vendor for the purposes of the Business and whose details are set out in Schedule 2. `FIXED ASSETS' means all plant, machinery, tools, equipment, vehicles and other chattels on the Leasehold Properties or otherwise owned by the Vendor at the Effective Date for the purpose of the Business as the same are listed in Schedule 3. `GOODWILL' means the goodwill of the Vendor in relation to the Business, together with the exclusive right for the Purchaser or its assignee to represent itself as carrying on the Business in succession to the Vendor, and all trade names associated with the Business. `INDUSTRIAL PROPERTY RIGHTS' means all industrial and intellectual property rights of the Vendor including, without limitation, the patents, trade marks, registered designs and copyrights in any part of the world and the copyright in all drawings, plans, specifications, designs and computer software owned by the Vendor and used in or for the purposes of the Business and all know-how and confidential information so owned and used. `LEASEHOLD PROPERTIES' means the leasehold premises owned by the Vendor as listed in Part 1 of Schedule 1. `LEASES' means the leases or underleases under which the Leasehold Properties are held. `LIABILITIES' means the liabilities of the Vendor (other than the Creditors) outstanding at the Effective Date but for the avoidance of doubt liabilities shall not be deemed to include the cost of liquidation of the Vendor. `PLANNING ACTS' means the Town and Country Planning Acts for the time being in force. E000761\1\001SALE.DAGT 2 `REGULATIONS' means the Transfer of Undertakings (Protection of Employment) Regulations 1981. `STOCKS' means the stocks, including raw materials, work in progress and finished goods, owned by the Vendor at the Effective Date for the purposes of or in connection with the Business, including items which, although subject to reservation of title by the sellers, are under the control of the Vendor. `SUBSIDIARY' means a subsidiary as defined in the Companies Act 1985 s 736. `3i LOAN' means the loan of (pound)249,788 made by 3i Group plc to the Vendor pursuant to an investment offer dated 27th July 1994 from 3i Group plc to the Vendor together with all interest and other sums payable in respect thereof 1.1.2 all references to a statutory provision shall be construed as including references to: (a) any statutory modification, consolidation or re- enactment (whether before or after today's date) for the time being in force; (b) all statutory instruments or orders made pursuant to it; (c) any statutory provisions of which it is a consolidation, re-enactment or modification; 1.1.3 except where the context otherwise requires, words denoting the singular include the plural and vice versa; words denoting any gender include all genders; words denoting persons include firms and corporations and vice versa; 1.1.4 unless otherwise stated, a reference to a clause, sub-clause or Schedule is a reference to a clause or a sub-clause of, or a Schedule to, this agreement; 1.1.5 clause headings are for ease of reference only and do not affect the construction of this agreement. 2 Agreement for sale 2.1 Subject to the terms and conditions of this agreement, the Vendor shall sell to the Purchaser which shall purchase as at the Effective Date such right title and interest as the Vendor may have in the following so far as the Vendor is entitled to sell the same:- 2.1.1 the Business as a going concern; and E000761\1\001SALE.DAGT 3 2.1.2 all the property, assets and rights of the Vendor used in the conduct of the Business including, but without limitation: (a) the Goodwill; (b) the Leasehold Properties; (c) the Fixed Assets; (d) the Stocks; (e) the benefit (but subject to the burden) of the Contracts; (f) the Industrial Property Rights; (g) the Cash Float; and (h) the Book Debts 2.2 The provisions of Part 2 of Schedule 1 shall more particularly apply in relation to the sale of the Leasehold Properties. 3 Purchase consideration 3.1 The consideration for the sale by the Vendor of the Business and the Assets shall be (pound)348,000 payable in cash upon completion of the purchase in accordance with clause 4 and shall be apportioned in accordance with the proforma balance sheet as at the Effective Date. 3.2 The consideration referred to in clause 3.1 shall be exclusive of any value added tax. 4 Completion 4.1 The sale and purchase of the Assets shall be completed immediately upon exchange of this agreement when all the matters set out in this clause 4 shall be effected. 4.2 The Vendor shall deliver to the Purchaser, at the principal office of the Business, such of the Assets as are capable of being transferred by delivery. 4.3 The Vendor shall cause to be delivered or (if so requested by the Purchaser) made available to the Purchaser: 4.3.1 all its books of account, payroll records, income records, stock and other records, information relating to customers and suppliers, relevant computer programmes and other books and documents which relate E000761\1\001SALE.DAGT 4 to the Business (other than minute books relating to directors' and shareholders' meetings and statutory books); 4.3.2 all its designs and drawings, plans, instructional and promotional material, sales publications, advertising materials, terms and conditions of sale and other technical material and sales matter which relate to the Business, together with any plates, blocks, negatives and similar material relating to them; 4.3.3 all records of National Insurance and PAYE relating to all the Employees duly completed and up to date; 4.3.4 the value added tax records referred to in clause 8.2; 4.4 Upon completion of the matters referred to above the Purchaser shall deliver to the Vendor: 4.4.1 A banker's draft in respect of the part of the purchase consideration specified in clause 3.1. 4.4.2 Written confirmation in an agreed form from Midland Bank Plc that it has discharged:- (a) the Vendor from any liability whatsoever to the Bank including (but without limiting the generality of the foregoing) in respect of the Bank Loan and the Bank Overdraft; (b) Peter Dedman and 3i Group plc from their respective liabilities in respect of the Bank Guarantees. 4.5 Each of the Purchaser and the Vendor shall execute a deed of novation and release in the agreed form whereby the 3i Loan is novated to the Purchaser and the Vendor is discharged from all liabilities in respect of the 3i Loan. 4.6 The Purchaser shall not be obliged to complete the purchase of any of the Assets unless the purchase of all the Assets is completed in accordance with this agreement. 4.7 The Purchaser may in its absolute discretion waive any requirement contained in clause 4.2 or 4.3. 4.8 If any or all of the transactions set out in clauses 4.2 and 4.3 do not take place as provided, the Purchaser may promptly rescind this agreement without prejudice to any other remedy it may have. 4.9 If any or all of the transactions set out in clauses 4.4 and 4.5 do not take place as provided, the Vendor may promptly rescind this agreement without prejudice to any other remedy it may have. E000761\1\001SALE.DAGT 5 5 Creditors and liabilities 5.1 The Purchaser shall discharge in accordance with existing credit terms the Creditors and Liabilities and (without prejudice to the generality of the foregoing) shall be responsible for all debts payable by and claims outstanding against the Vendor at the Effective Date including all wages, sums payable under taxation statutes, rent and other expenses. 5.2 In addition to and without prejudice to the generality of clause 5.1 the Purchaser shall be liable for claims by third parties in respect of any service supplied by the Vendor or any act or omission of the Vendor prior to the Effective Date or arising from defective products or parts of products manufactured by the Vendor. 5.3 The Purchaser shall indemnify on demand and keep fully indemnified the Vendor against all claims, demands, expenses, proceedings, liabilities, penalties and costs whatsoever arising in relation to the Creditors, the Liabilities, and all other liabilities (if any) of the Vendor outstanding at the Effective Date. 5.4 The Purchaser shall perform the obligations of the Vendor to provide after-sales service or to meet warranty claims of customers arising in the normal course of the Business as a result of transactions carried out by the Vendor prior to the Effective Date. 6 Contracts 6.1 The Purchaser shall perform and discharge the outstanding obligations and liabilities of the Vendor under the Contracts. 7 Employees 7.1 The Purchaser shall indemnify the Vendor against any order to pay compensation made pursuant to the Regulations to any person. 7.2 All salaries and other emoluments including holiday pay tax and national insurance payments and contributions to retirement benefit schemes relating to the Employees shall be borne by the Purchaser and the Purchaser shall indemnify the Vendor in relation to any claim in respect thereof. 7.3 The Employees employment with the Purchaser shall be on terms and conditions no less favourable than those currently enjoyed by them and the Purchaser shall indemnify the Vendor in respect of any claim by any of the Employees in respect of redundancy or wrongful and unfair dismissal. 8 Value added tax E000761\1\001SALE.DAGT 6 8.1 The parties shall use all reasonable endeavours to procure that the sale of the Business is deemed to be a transfer of a business as a going concern for the purposes of the Value Added Tax Act 1994 s 49 and Schedule 4 paragraph 8(1). 8.2 In the event of value added tax being assessed subsequently on the Vendor as a result of the sale of the Business and the Assets pursuant to this agreement the Purchaser shall forthwith against receipt of a value added tax invoice pay to the Vendor such amount of value added tax (and in addition any penalties or interest) as is assessed as aforesaid and the Purchaser shall indemnify on demand and keep fully indemnified the Vendor from and against all actions, proceedings, costs, claims, demands and expenses in respect of the same. 8.3 The Vendor shall forthwith deliver to the Purchaser all the records of the Business for value added tax purposes which are required by the Value Added Tax Act 1994 s 49(1)(b) to be preserved by the Purchaser. 8.4 The Purchaser shall for a period of not less than 6 years from the Effective Date preserve the records delivered to it by the Vendor and, upon reasonable notice during normal business hours, make them available to the Vendor or its agents. 9 Assignment of Contracts 9.1 Insofar as the Assets comprise the benefit of contracts which cannot effectively be assigned to the Purchaser without the consent of a third party or except by an agreement of novation: 9.1.1 The Purchaser shall use all reasonable endeavours to obtain consent or to procure a novation; 9.1.2 unless and until consent is obtained or the contracts are novated the Purchaser shall, for its own benefit and to the extent that the contracts permit, perform on behalf of the Vendor (but at the Purchaser's expense) all the obligations of the Vendor arising after the Effective Date and indemnify the Vendor against all costs, proceedings, claims, demands and expenses which may be incurred by the Vendor as a result of any act, neglect, default or omission on the part of the Purchaser to perform or comply with any such obligation of the Vendor. 10 Warranties and Exclusions 10.1 The Purchaser acknowledges and warrants to the Vendor that it is entering into this agreement having satisfied itself on all matters relating thereto and having made such inspection of the Assets as it thinks fit and having made such enquiries and investigations into the nature and extent of the Creditors and the Liabilities as it thinks fit and on the basis of a purchase E000761\1\001SALE.DAGT 7 of the Assets in their present state and condition and not in reliance on any statements warranties or representations which may have been made by the Vendor or by any person acting or purporting to act on behalf of it. 10.2 Save as provided in section 2(1) of the Unfair Contract Terms Act 1977, all other representations warranties and conditions express or implied statutory or otherwise in respect of any of the Assets, the Creditors, the Liabilities and the Business are expressly excluded (including, without limitation, warranties and conditions as to ownership, merchantable quality, fitness for purpose and description) and the Assets and the Business are sold in the condition in which they are at the Effective Date. 10.3 Save only as provided by the provisions of section 2(1) of the Unfair Contract Terms Act 1977, the Vendor shall not be liable for any loss damage expenses or injury of any kind whatsoever, consequential or otherwise, arising out of or due to or caused by any defect or deficiency of any sort in any of the Assets or in the Business. 10.4 The parties acknowledge for the avoidance of doubt that if it shall be found that the Vendor does not have title or unencumbered title to any or all of the Assets this shall not be a ground or grounds for rescinding avoiding or varying any or all of the provisions hereof and the Purchaser shall not be entitled to any refund of the consideration paid by the Purchaser in whole or in part or any compensation or damages in respect of the same. 10.5 In view of the obligations of any vendor of any vehicle under the Road Traffic Act 1972 the Purchaser undertakes to the Vendor that before any of the motor vehicles comprised in the Assets are allowed onto a public highway the Purchaser will carry out all appropriate checks on such vehicles and (if necessary) procure that the necessary repairs are made to ensure that the same are in a roadworthy condition. The Purchaser further agrees to indemnify on demand and keep fully indemnified the Vendor without set-off counterclaim or any other deduction of any nature from and against any claims costs or expenses which it or they may incur as a result of the failure by the Purchaser to carry out its obligations pursuant to this clause. 11 Costs 11.1 All expenses incurred by or on behalf of the parties, including all fees of agents, solicitors, accountants employed by either of the parties in connection with the negotiation, preparation and execution of this agreement shall be borne solely by the party which incurred them. 12 Communications 12.1 All communications between the parties with respect to this E000761\1\001SALE.DAGT 8 agreement shall be delivered by hand or sent by first-class post to the registered office of the addressee. 12.2 Communications shall be deemed to have been received: 12.2.1 if sent by first-class post: 3 business days after posting exclusive of the day of posting; 12.2.2 if delivered by hand: on the day of delivery; 12.3 Communications addressed to the Vendor shall be marked for the attention of Peter Dedman. Communications addressed to the Purchaser shall be marked for the attention of Marianne Fitzjohn. 12.4 In proving service: 12.4.1 by delivery by hand: it shall be necessary only to produce a receipt for the communication signed by or on behalf of the addressee; 12.4.2 by post: it shall be necessary only to prove that the communication was contained in an envelope which was duly addressed and posted in accordance with this clause; 13 Entire agreement and schedules 13.1 This agreement and the Schedules shall constitute the entire agreement and understanding between the parties with respect to all matters which are referred to. 13.2 All the Schedules form part of this agreement. 13.3 This agreement shall be binding upon each party's successors and assigns. 14 Invalidity 14.1 If any term or provision in this agreement shall in whole or in part be held to any extent to be illegal or unenforceable under any enactment or rule of law, that term or provision or part shall to that extent be deemed not to form part of this agreement and the enforceability of the remainder of this agreement shall not be affected. 15 Proper law 15.1 The construction, validity and performance of this agreement shall be governed by the laws of England. E000761\1\001SALE.DAGT 9 SCHEDULE 1 Leasehold properties
Part 1: Leasehold Properties and details of the Leases Date Parties Property 12th April 1994 (1) The Equitable Life Assurance Unit 15 Merlin Business Park, Society and (2) The Vendor Coningsby Road, Bretton, Peterborough 12th April 1994 (1) The Equitable Life Assurance Unit 16 Merlin Business Park, Society and (2) The Vendor Coningsby Road, Bretton, Peterborough
Part 2: Provisions relating to the leasehold properties 1 The sale of the Leasehold Properties is for the unexpired residue of each of the terms of the Leases and is at the rents reserved and subject to the covenants on the part of the tenants and the conditions which they contain. 2 Copies of the Leases have been supplied to the Purchaser, which shall be deemed to purchase with full knowledge of their contents and shall raise no requisition, enquiry or objection in relation to them. 3 The assignment of each Lease shall be in the agreed form and shall be in consideration of a covenant on the part of the Purchaser, as from the Effective Date, to pay the rent reserved by that Lease and to observe and perform the covenants on the part of the tenant and the conditions contained in that Lease and to indemnify the Vendor against all claims, demands, proceedings, damages, costs and expenses arising out of or incidental to their breach, non-observance or non-performance. E000761\1\001SALE.DAGT 10 SIGNED by ) for and on behalf of the ) Vendor ) SIGNED by ) for and on behalf of the ) Purchaser ) E000761\1\001SALE.DAGT 26 EX-27 4 FDS SECOND QUARTER
5 1000 6-MOS SEP-30-1995 APR-01-1995 325 0 12012 455 6721 19305 66153 49483 36956 15031 12381 8808 0 0 735 36956 46160 46160 41424 41424 4515 0 841 (620) 0 (620) 0 1833 0 1213 .14 .13
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