-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pu4Np4GDvXPz5HE41L6QIE7F5QQcRWv6k0AENTYI9yJ6nakh7UXvn7JPIp+Ikvh9 FnIfc+uQaoFTwusrPTHfXA== 0000950124-96-005075.txt : 19961118 0000950124-96-005075.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950124-96-005075 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: RANDERS GROUP INC CENTRAL INDEX KEY: 0000830104 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 382788025 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-11039 FILM NUMBER: 96665319 BUSINESS ADDRESS: STREET 1: 570 SEMINOLE RD CITY: MUSKEGON STATE: MI ZIP: 49444 BUSINESS PHONE: 616-733-00 MAIL ADDRESS: STREET 1: 388 GREENWICH ST. 22ND FL CITY: NEW YORK STATE: NY ZIP: 10013 10QSB 1 FORM 10-QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB ---------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------ ----- ----------------------------------------------------------------- Commission file number 0-18095. THE RANDERS GROUP INCORPORATED ---------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) DELAWARE 38-2788025 ------------------------------- ----------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 570 Seminole Road, Norton Shores, Michigan 49444 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (616) 733-0036 ------------------------------------------ (Issuer's Telephone Number) - ------------------------------------------------------------------------------ Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of Common shares, par value $.0001, outstanding at October 31, 1996: 14,115,682 2 THE RANDERS GROUP INCORPORATED FORM 10-QSB QUARTERLY REPORT TABLE OF CONTENTS
Page ---- Facing Sheet....................................................... 1 TABLE OF CONTENTS.................................................. 2 PART I Financial Information ITEM 1 Financial Statements Condensed Consolidated Balance Sheets (Unaudited) - September 30, 1996 and December 31, 1995............. 3 Condensed Consolidated Statements of Operations (Unaudited) - Three months and nine months ended September 30, 1996 and 1995.......................... 5 Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 30, 1996 and 1995............................................. 6 Notes to Condensed Consolidated Financial Statements. 8 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 13 PART II Other Information........................................ 18 SIGNATURES......................................................... 19 EXHIBITS Detroit Office Lease.......................................... 20 Addendum to Detroit Office Lease.............................. 57 Statement Regarding Computation of Earnings (Loss) Per Share.. 60 Financial Date Schedule....................................... 61
-2- 3 THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, ASSETS 1996 1995 ------ ------------- ------------ CURRENT: Cash and cash equivalents $ 645,012 $ 409,087 Accounts receivable, less allowances of $81,000 and $45,000 for possible losses 2,747,936 2,499,199 Prepaid expenses and other 81,720 59,847 Future income tax benefits 90,000 62,000 ---------- ---------- TOTAL CURRENT ASSETS 3,564,668 3,030,133 ---------- ---------- NET PROPERTY AND EQUIPMENT 2,605,864 2,617,919 ---------- ---------- OTHER ASSETS: Notes and accounts receivable - affiliate 1,180,739 1,061,033 Real estate held for resale 89,400 237,853 Goodwill, less accumulated amortization of $106,299 and $97,092 138,218 147,425 Miscellaneous 13,253 20,623 ---------- --------- TOTAL OTHER ASSETS 1,421,610 1,466,934 ---------- ---------- $7,592,142 $7,114,986 ========== ==========
See accompanying notes to condensed consolidated financial statements. -3- 4 THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
September 30, December 31, 1996 1995 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Note payable - bank $ 854,000 $1,339,000 Accounts payable 783,608 680,332 Billings in excess of costs and estimated earnings on contracts in progress 197,000 54,000 Accrued compensation 229,861 162,113 Accrued income taxes 21,192 28,975 Other accrued expenses 139,516 37,409 Current maturities of long-term debt 96,672 124,113 --------- ---------- TOTAL CURRENT LIABILITIES 2,321,849 2,425,942 LONG-TERM DEBT, less current maturities 993,805 1,084,220 ---------- --------- TOTAL LIABILITIES 3,315,654 3,510,162 ---------- ---------- STOCKHOLDERS' EQUITY: Common stock, $.0001 par - shares authorized 30,000,000; issued 14,115,682 1,412 1,412 Additional paid-in capital 1,536,439 1,536,439 Retained earnings 2,738,637 2,066,973 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 4,276,488 3,604,824 ---------- ---------- $7,592,142 $7,114,986 ========== ==========
See accompanying notes to condensed consolidated financial statements. -4- 5 THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- REVENUES: Construction $ 676,565 $ 351,781 $1,046,688 $2,118,984 Service/consulting 2,283,128 1,608,367 7,407,830 4,897,619 Rental 75,785 80,282 237,362 235,106 --------- --------- --------- --------- Total Revenues 3,035,478 2,040,430 8,691,880 7,251,709 --------- --------- --------- --------- COSTS AND EXPENSES: Construction costs 556,520 329,994 931,457 1,989,513 Costs of services/consulting 1,750,429 1,085,804 5,131,875 3,651,369 Rental costs 55,937 59,308 166,076 169,590 Selling, general and administrative expenses 426,183 458,910 1,335,909 1,347,294 --------- --------- --------- --------- Total Costs and Expenses 2,789,069 1,934,016 7,565,317 7,157,766 --------- --------- --------- --------- Operating Income 246,409 106,414 1,126,563 93,943 --------- --------- --------- --------- OTHER INCOME (EXPENSES): Interest expense (42,877) (60,397) (141,164) (175,960) Interest income 32,043 10,738 88,265 34,216 --------- --------- --------- --------- Other Income (Expenses) - Net (10,834) (49,659) (52,899) (141,744) --------- --------- --------- --------- Income (Loss) Before Taxes on Income 235,575 56,755 1,073,664 (47,801) INCOME TAXES (REDUCTION) 92,000 20,000 402,000 (13,000) --------- -------- --------- --------- NET INCOME (LOSS) $ 143,575 $ 36,755 $ 671,664 $ (34,801) ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE $ .01 $ 0.00 $ .05 $ (0.00) ========== ========== ========== ========== AVERAGE NUMBER OF COMMON AND DILUTIVE COMMON EQUIVALENT SHARES OUTSTANDING 14,115,682 14,115,682 14,115,682 14,115,682 ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. -5- 6 THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, -------------------------- 1996 1995 ---------- ---------- CASH FLOWS FROM (FOR) OPERATIONS: Cash received from customers $8,407,143 $ 7,524,860 Cash paid to suppliers and employees (6,931,198) (7,694,100) Interest received 21,526 20,763 Interest paid (141,164) (175,960) Income taxes paid (437,783) (4,501) ---------- ---------- Net Cash From (For) Operations 918,524 (328,938) ---------- ---------- CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: Capital expenditures (175,229) (181,757) Advances to affiliate (83,767) - Sale of real estate 148,453 - ---------- ----------- Net Cash From (For) Investing Activities (110,543) (181,757) ---------- ----------- CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: Net borrowings (payments) on line of credit (485,000) 217,000 Principal payments on loans (117,856) (106,755) Payments received on note from affiliate 30,800 14,400 ---------- ---------- Net Cash From (For) Financing Activities (572,056) 124,645 ---------- ---------- NET INCREASE (DECREASE) IN CASH 235,925 (386,050) Cash and cash equivalents, at beginning of period 409,087 776,430 ---------- ---------- Cash and cash equivalents, at end of period $ 645,012 $ 390,380 ========== ==========
See accompanying notes to condensed consolidated financial statements. -6- 7 THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)
Nine Months Ended September 30, ------------------------- 1996 1995 ---------- ---------- RECONCILIATION OF NET INCOME (LOSS) TO NET CASH FROM (FOR) OPERATIONS: Net income (loss) $ 671,664 $ (34,801) Depreciation 187,284 140,091 Amortization 9,207 (49,720) Provision for (reduction in) allowance on accounts receivable 36,000 (53,000) Changes in operating assets and liabilities: Accounts and notes receivable (351,476) 323,698 Prepaid expenses and other (42,503) 9,227 Accounts payable and billings in excess of costs and estimated earnings on contracts in progress 246,276 (611,736) Accrued expenses 162,072 (52,697) -------- ---------- NET CASH FROM (FOR) OPERATIONS $ 918,524 $ (328,938) ======== =========
See accompanying notes to condensed consolidated financial statements. -7- 8 THE RANDERS GROUP INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION The Randers Group Incorporated and subsidiaries ("the Company") provide consulting, design, project management, general contracting, and development services to industrial and commercial clients throughout the United States. The Company considers such operations to constitute one business segment. The condensed consolidated financial statements include the accounts of The Randers Group Incorporated and all of its subsidiaries. On consolidation all material intercompany accounts and transactions are eliminated. The financial information included herein as of any date other than December 31, is unauditied; however, such information reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. Financial information as of December 31, has been taken from the audited financial statements of the Company, however, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these condensed consolidated financial statements and notes should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 1995. A portion of the Company's business is derived from long-term contracts, the income from which is recognized on the percentage-of-completion method. Results of operations for any quarter may include revisions to estimated earnings for such contracts that were recorded in prior periods and these revisions may again be adjusted in subsequent quarters as further information becomes available or the contracts are completed. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. -8- 9 THE RANDERS GROUP INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 - PROPERTY AND EQUIPMENT Property and equipment used in the construction and service/ consulting operations consist of the following:
September 30, December 31, 1996 1995 ------------ ------------ Cost $ 2,239,103 $ 2,069,408 Less accumulated depreciation 1,072,999 928,076 ------------ ------------ Net $ 1,166,104 $ 1,141,332 ============ ============
Property and equipment used in rental operations consist of the following: Cost $ 1,739,619 $ 1,734,085 Less accumulated depreciation 299,859 257,498 ------------ ------------ Net $ 1,439,760 $ 1,476,587 ============ ============ Net Property and Equipment Total $ 2,605,864 $ 2,617,919 ============ ============
NOTE 3 - REAL ESTATE HELD FOR RESALE AND NOTES AND ACCOUNTS RECEIVABLE - AFFILIATE The $89,400 of real estate held for resale at September 30, 1996 represents one of two condominium units that were turned over to the Company as settlement for advances made to partners of First Venture Associates Limited Partnership (FVALP). FVALP is an entity owned by four of the Company's officers/directors. The carrying value of the asset held for sale approximates the estimated fair market value, less cost to sell, based on comparable properties. The estimate of the fair market value of the assets held for sale is dependent on current market conditions which could change in the near term. The amounts the Company could ultimately realize on the sale of the condominium could differ from the amount estimated. It is management's belief that the sale of the condominium unit will not result in any material adverse impact to the Company's financial statements. The Company sold one of the condominium units during the second quarter of 1996 at its book value. -9- 10 THE RANDERS GROUP INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Notes and accounts receivable from FVALP consist of the following:
September 30, December 31, 1996 1995 ------------ ------------ Notes receivable $ 405,111 $ 435,911 Accrued interest receivable 69,935 3,196 Accounts receivable 705,693 621,926 ------------ ------------ $ 1,180,739 $ 1,061,033 ============ ============
The notes receivable bear interest at the prime rate (8.25% at September 30, 1996), are comprised of $227,685 representing the remaining balance on a note receivable the Company accepted when it sold certain assets to FVALP prior to 1993 and a note receivable of $177,426 representing prior accrued interest receivable on a note due from FVALP. The $705,693 accounts receivable due from FVALP resulted from services provided and advances made to FVALP for the joint development of a condominium project. Based on cash projections, the condominium project is expected to provide sufficient cash flows to repay its borrowings from a bank which the Company has guaranteed, but not the entire amounts due to the Company. No impairment has been recognized for the projected shortfall on the amounts receivables, as the partners of FVALP have collateralized the receivables with 1,422,000 shares of the Company's common stock that are collectively owned by the partners of FVALP and FVALP. These shares are estimated to have sufficient market value to cover any remaining balances due from FVALP after the sale of the condominium project. Management has not reclassified any portion of the amounts due from FVALP as a contra to stockholders' equity as it believes that the Company can receive cash or other assets in full satisfaction of the amounts owed to it by FVALP. The Company's accounting for and classification of these amounts is based on sensitive estimates used to derive FVALP's projected construction costs on the condominium project, the time the condominiums will be held prior to sale, interest rates during these periods, the ultimate net sale price that will be received on the sale of the condominium project, the market value of the Company's common stock that was provided as collateral and the steps that will be taken to satisfy the receivables. -10- 11 THE RANDERS GROUP INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The amounts FVALP ultimately realizes on the sale of the condominium project and the value of the collateral could differ from the amounts assumed in arriving at the carrying value and classification of the related receivables. It is management's belief that the sale of the condominium project and the ultimate settlement of the receivables from FVALP will not result in any material adverse impact to the Company's financial statements. Other than interest earned on the notes receivable from FVALP, the Company has deferred recognizing revenues, costs, and profits associated with transactions with FVALP until the Company has been reimbursed for all costs incurred. Amounts collected from FVALP are treated as a reduction of the accounts and notes receivable from FVALP. NOTE 4 - NOTE PAYABLE - BANK The Randers Group Incorporated has a line of credit which provides for advances up to $1,500,000. The line bears interest at the prime rate. The prime rate was 8.5% at December 31, 1995 and 8.25% at September 30, 1996. The line of credit is collateralized by all the assets of the Company. The loan agreement further provides that the Company is to maintain net worth of at least $1,500,000. Unrestricted equity was $2,104,824 at December 31, 1995 and $2,776,488 at September 30, 1996. NOTE 5 - CONTINGENCIES INSURANCE COVERAGE Due to the limited availability and high cost of professional liability insurance covering services related to the chemical industry, one of the Company's subsidiaries does not maintain such insurance. Management is not aware of any uninsured claims or potential claims which may be asserted against the Company. Although the Company has never incurred a significant liability because of work performed, there can be no assurances that the Company will not incur such a liability in the future. -11- 12 THE RANDERS GROUP INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GUARANTEE The Company has guaranteed the payment of a $475,000 line of credit by a bank to First Venture Associates Limited Partnership (FVALP), an affiliated company. There was $456,625 outstanding on the line at December 31, 1995 and September 30, 1996. The loan relates to the joint development of a condominium project by FVALP and the Company. NOTE 6 - NET INCOME LOSS PER SHARE Net income (loss) per share is computed on the basis of the weighted average number of common and dilutive common equivalent shares outstanding during the period. -12- 13 ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Company's construction and service/consulting operations normally do not require a significant investment in property and equipment or other long-term assets. Short-term needs for cash may develop as the service/consulting operations expands and cash is consumed by operations prior to the collection of the related revenue. Construction operations may provide temporary cash resources as amounts payable to subcontractors and suppliers are normally not due until after the related receivable from the client is collected. The Company's rental operations have required a significant investment in real estate. These operations have been primarily financed by long-term debt. The Company's September 30, 1996 balance sheet includes various amounts related to the Company's activities with First Venture Associates Limited Partnership (FVALP), an entity owned by four of the Company's officers/directors. Such amounts include $89,400 of real estate held for sale, notes receivable and accrued interest receivable from FVALP of $405,111 and $69,935, respectively, and accounts receivable from FVALP of $705,693. In addition, the Company has guaranteed FVALP's borrowings under its line of credit. Such borrowings amounted to $456,625 at September 30, 1996. The $89,400 of real estate held for sale represents one of two condominium units that were turned over to the Company as settlement for advances made to partners of FVALP. The carrying value of the asset held for sale approximates the estimated fair market value less costs to sell based on comparable properties. The estimate of the fair market value of the asset held for sale is dependent on current market conditions which could change in the near term. The amount the Company may ultimately realize on the sale of the condominiums could differ from the amounts estimated. It is management's belief that the sale of the condominium unit will not result in any material adverse impact to the Company's financial statements. The Company sold a similar condominium unit during the second quarter of 1996 at its book value. The $405,111 notes receivable balance is comprised of $227,685 representing the remaining balance on a note receivable the Company accepted when it sold certain assets to FVALP prior to 1993 and a note receivable of $177,426 representing prior accrued interest receivable on a note due from FVALP. The $705,693 accounts receivable due from FVALP resulted from services provided and advances made to FVALP for the joint development of a condominium project. Based on cash projections, the condominium project is expected to provide sufficient cash flows to repay its borrowings from a bank which the Company has -13- 14 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) guaranteed, but not the entire amounts due to the Company. No impairment has been recognized for the projected shortfall on the amounts receivables, as the partners of FVALP have collateralized the receivables with 1,422,000 shares of the Company's common stock that are collectively owned by the partners of FVALP and FVALP. These shares are estimated to have sufficient market value to cover any remaining balances due from FVALP after the sale of the condominium project. Management has not reclassified any portion of the amounts due from FVALP as a contra to stockholders' equity as it believes that the Company can receive cash or other assets in full satisfaction of the amounts owed to it by FVALP. The Company's accounting for and classification of these amounts is based on sensitive estimates used to derive FVALP's projected construction costs on the condominium project, the time the condominiums will be held prior to sale, interest rates during these periods, the ultimate net sale price that will be received on the sale of the condominium project, the market value of the Company's common stock that was provided as collateral and the steps that will be taken to satisfy the receivables. The amounts FVALP ultimately realizes on the sale of the condominium project and the value of the collateral could differ from the amounts assumed in arriving at the carrying value and classification of the related receivables. It is management's belief that the sale of the condominium project and the ultimate settlement of the receivables from FVALP will not result in any material adverse impact to the Company's financial statements. * * * * * * * * * * * * * * * * The following table sets forth information related to the Company's liquidity as of the dates indicated:
September 30, December 31, 1996 1995 ------------ ------------ Cash and cash equivalent $ 645,012 $ 409,087 Working capital $ 1,242,819 $ 604,191 Ratio of current assets to current liabilities 1.54 to 1 1.25 to 1 Funds available under the line of credit $ 646,000 $ 161,000
The Company's cash position of $645,012 at September 30, 1996 reflects an increase of $235,925 from December 31, 1995. -14- 15 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operations for the first nine months of 1996 resulted in a $919,000 increase in cash. A net profit of $672,000 combined with non-cash expenses of $233,000 and a $408,000 increase in accounts payable and billings in excess of costs and estimated earnings on contracts in progress and accrued expenses was more than sufficient to offset a $394,000 increase in accounts and notes receivable and prepaid expenses. An additional $148,000 of cash came from the sale of a condominium unit owned by the Company and $31,000 cash was collected on a note receivable from an affiliate. During the period the $175,000 of cash was invested in new equipment, $603,000 was used to reduce debt, and $84,000 was advanced to an affiliate. The forgoing resulted in a $236,000 increase in cash during the first nine months of 1996. In June 1995, the Company opened an office in Springfield, Massachusetts. The Company has not incurred any major commitments for capital expenditures related to the new office, however, cash has been consumed during the initial operations as funds were converted into accounts receivable. As of September 30, 1996, there were five people employed in the Springfield office while a significant portion of the work generated from that location was still being done in other offices. Also during June, 1995, the Company announced that it had formed a new subsidiary, Viridian Technology, Inc., to design and manufacture modular process equipment systems for the chemical and process related industries. The new business, which is now beginning to process orders, is not expected to require a significant cash investment as the Company plans to sell the systems on a basis requiring progress payments which approximate out-of-pocket costs and that, at least initially, the manufacturing of the systems will be sub-contracted to others. Management does not expect that Viridian will have a material impact on revenues or profits in the near future. * * * * * * * * * Management is not aware of any known trends, demands, commitments, events, or uncertainties, other than the following, which will result in the Company's liquidity increasing or decreasing in any material way. -15- 16 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company has a line of credit with a bank which provides for advance up to $1,500,000. At September 30, 1996, the Company had outstanding borrowings of $854,000 on the line. Management expects that the line of credit, which expires March 31, 1997, will be renewed under similar terms and conditions. In January 1998, the Company will be required to pay the remaining balance on a mortgage note. It is estimated that the balance will be $970,000 at that time. To satisfy the debt requirement, the Company anticipates that a new source of long-term financing will be secured or the current agreement will be extended. The Company does not have any material commitment for capital expenditures which are outside the ordinary course of business. However, an affiliated company is expected to borrow an additional $18,000 from a bank for further development of a condominium project. The additional borrowings by the affiliate will increase the Company's guarantee of its debt to $475,000. If the affiliate receives sales commitments for the planned units, the Company may provide additional short-term financing to the affiliate in order to complete construction of those units. Management does not contemplate or expect any change in capital resources of the Company, including any material changes in the mix or relative cost of such capital resources or any changes between debt and equity except as discussed. Accordingly, management expects that other future cash flow needs will be provided primarily from operations. Results of Operations The following table sets forth, for the periods indicated, the percentage of which certain items in the Company's Condensed Consolidated Statements of Operations bear to revenues:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1996 1995 1996 1995 ------- ------- ------ ------ Revenues 100.0% 100.0% 100.0% 100.0% Gross Profit 22.2% 27.7% 28.3% 19.9% Selling , Administrative and General Expenses 14.1% 22.5% 15.4% 18.6% Other Income (Expenses) (.4%) (2.4%) (.6%) (2.0%) Income Taxes (Reduction) 3.0% 1.0% 4.6% (.2%) Net Income (Loss) 4.7% 1.8% 7.7% (.5%)
-16- 17 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30, 1995 Revenues for the first nine months of 1996 were $8,692,000 compared to $7,252,000 for the same period in 1995. Construction revenues decreased $1,072,000 (50.6%) while revenues from service/consulting fees increased $2,510,000 (51.3%). Construction revenues continued to experience a decline as construction revenues from the Company's traditional client base remains low. Management believes however, that the Company's expanded client base for service/consulting services will help return construction revenues to their prior levels. The increase in service/consulting revenues results from expansion of the Company's client base and from additional work from its existing clients. The Company reported an operating profit of $1,127,000 during the first nine months of 1996 compared to an operating profit of $94,000 during the same period of 1995. Construction operations reported a gross profit of $115,000 (11.0%) compared to a gross profit of $129,000 (6.1%) for 1995. The increase in gross profit percentage for the first nine months of 1996 resulted from cost savings on a major project which were realized during the third quarter of 1996 and the fact that the gross profit percentage in 1995 was lower than normally expected as the Company had taken on two large non-industrial projects at lower gross profit margins in an attempt to gain entry into the Chicago market. Gross profit from service/consulting fees was $2,276,000 (30.7%) for the first six months of 1996 compared to $1,246,000 (25.4%) in 1995. The increase in the gross profit percentage resulted primarily from increased staff utilization related to the increased volume of work. Selling, general and administrative expenses were $1,336,000 for the first nine months of 1996, compared to $1,347,000 for the first nine months of 1995, a decrease of $11,000 (.8%). The small decrease in selling, general and administrative cost results from a decrease in administrative salaries and wages which was offset by increases in operating supplies, taxes, insurances, etc. which fluctuate with revenue. Such costs were 15.4% of revenue in 1996 compared to 18.6% of revenue in 1995. Net interest expense was $53,000 for the first nine months of 1996 compared to net interest expense of $142,000 in 1995. Approximately 70% of the decrease in interest expense results from an decrease in net borrowing, while the other 30% relates to a decrease in interest rates. -17- 18 PART II - OTHER INFORMATION Items 1-5 Not applicable. Item 6 6(a) Exhibits: #10(a) Office Lease, dated August 12, 1996, between Randers Engineering, Inc., tenant, and R. L. Kuss, Trustee, landlord, regarding 5,000 square feet of space located at 21333 Haggerty Road, Novi, Michigan. #10(b) Addendum to Lease, dated Octoboer 7, 1996, regarding 5,000 square feet of space located at 21333 Haggerty Road, Novi, Michigan. #11 Statement regarding Computation of Earnings Per Share (Part I Exhibit) #27 Financial Data Schedule (Part I Exhibit). 6(b) Reports on Form 8-K: None. -18- 19 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. THE RANDERS GROUP INCORPORATED Date: November 13, 1996 /s/ Thomas R. Eurich --------------------------------------- Thomas R. Eurich, President Date: November 13, 1996 /s/ Michael J. Krivitzky --------------------------------------- Michael J. Krivitzky Senior Vice President and Treasurer Date: November 13, 1996 /s/ David A. Wiegerink --------------------------------------- David A. Wiegerink, Vice President Finance and Administration Principal Accounting Officer -19- 20 EXHIBIT INDEX SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ EXHIBIT 10(a) Office Lease, dated August 12, 1996, between Randers Engineering, Inc., tenant, and R. L. Kuss, Trustee, landlord, regarding 5,000 square feet of space located at 21333 Haggerty Road, Novi, Michigan. EXHIBIT 10(b) Addendum to Lease, dated October 7, 1996, regarding 5,000 square feet of space located at 21333 Haggerty Road, Novi, Michigan EXHIBIT 11 Statement regarding Computation of Earnings Per Share (Part I Exhibit) EXHIBIT 27 Financial Data Schedule (Part I Exhibit). EX-10.A 2 OFFICE LEASE 1 EXHIBIT 10(a) THE RANDERS GROUP INCORPORATED EXHIBIT 6(a)-10 LEASE This Lease is entered into August 12, 1996, between R. L. Kuss, Trustee under Agreement dated April 1, 1965 ("Landlord"), and Randers Engineering, Inc., a Michigan corporation ("Tenant"). ARTICLE ONE DEFINITIONS, SCHEDULES AND ADDENDA 1.1 DEFINITIONS: a. LEASED PREMISES shall mean the usable area occupied by the Tenant in the Building, as described in Schedule 1 and shall be known as Suite 150. b. BUILDING shall mean the office building located at 21333 Haggerty Road, Novi, Oakland County, Michigan 48375. c. TENANT'S SQUARE FOOTAGE shall mean 5,000 usable square feet subject to final measurement. The term "usable" shall be synonymous with "rentable" in this document. d. LEASE COMMENCEMENT DATE shall mean November 1, 1996; LEASE EXPIRATION DATE shall mean October 31, 2001; LEASE TERM shall mean the period between Lease Commencement Date and Lease Expiration Date. e. BASE RENT shall mean the agreed upon rent per square foot per year, in accordance with Schedule 8 to this Lease, applied against the Tenant's square footage (Leased Premises) and payable in twelve (12) equal monthly payments. f. DEPOSIT shall mean $0.00; PREPAID RENT shall mean $0.00, of which $0.00 represents the first monthly installment of Base Rent due November 1, 1996. g. PERMITTED PURPOSE shall mean use of the Leased Premises for clerical and administrative purposes, and all other purposes permitted under the Rules and Regulations attached hereto as Schedule 2. h. AUTHORIZED NUMBER OF PARKING SPACES shall mean 33 employee parking spaces. Additional parking spaces may, at the sole discretion of the Lessor, be provided if available and if required by Tenant. i. MANAGING AGENT shall mean Thomas P. Loftis, c/o Midland Properties, Inc., whose address is 2525 North Limestone Street, Suite 101, Springfield, Ohio 45503. -20- 2 j. LANDLORD'S MAILING ADDRESS: Richard L. Kuss, Trustee U/A dated April 1, 1965, c/o Thomas P. Loftis, c/o Midland Properties, Inc., 2525 North Limestone Street, Suite 101, Springfield, Ohio 45503. k. TENANT'S MAILING ADDRESS: Randers Engineering, Inc., 570 Seminole Road, Muskegon, Michigan 49444, Attention: Thomas Eurich, with a copy to Randers Engineering, Inc., 21333 Haggerty Road, Suite _____, Novi, Michigan 48375. 1.2 SCHEDULES AND ADDENDA: The schedules and addenda listed below are incorporated into this Lease by reference unless lined out. The terms of schedules, exhibits and typewritten addenda, if any, attached or added hereto shall control over any inconsistent provisions in the paragraphs of this Lease. a. SCHEDULE 1: Description of Premises and Floor Plan b. SCHEDULE 2: Rules and Regulations c. SCHEDULE 3: Utility Services d. SCHEDULE 4: Maintenance Services e. SCHEDULE 5: Parking f. SCHEDULE 6: Work Letter Agreement g. SCHEDULE 7: Certificate of Acceptance h. SCHEDULE 8: Schedule of Rental Payments - Base Rent/Tenant Utilities/Operating Expenses ARTICLE TWO PREMISES 2.1 LEASE OF PREMISES: In consideration of the Rent and the provisions of this Lease, Landlord leases to Tenant and Tenant accepts from Landlord the Leased Premises. 2.2 PRIOR OCCUPANCY: Tenant shall not occupy the Leased Premises prior to Lease Commencement Date except with the express prior written consent of Landlord. The Lease Commencement Date is November 1, 1996, and the first installment of Base Rent is due November 1, 1996. If Tenant shall occupy the Leased Premises prior to Lease Commencement Date, all covenants and conditions of this Lease shall be binding on the parties commencing at such prior occupancy. 2.3 RIGHT OF FIRST REFUSAL: During the term of this Lease, Tenant shall be granted the right of first refusal on floor space contiguous to the Leased Premises at the then prevailing market rate for similar office space in the Farmington Hills/Livonia/Novi, Michigan area, and under the same terms and conditions as otherwise specified in this Lease. In order to exercise its right of first refusal, Tenant agrees to exercise its right within seven (7) days following receipt of written notice from Landlord of its intention to lease said contiguous floor space. -21- 3 2.4 RENEWAL OPTION: Tenant shall have the right to extend the term of this Lease for one (1) additional five (5) year term. Tenant shall exercise its option by giving to Landlord written notice of said exercise not later than eight (8) months prior to the last day of the initial lease term. All provisions of this Lease shall continue to apply during the Renewal Term except that the rental rate shall be as follows: The rental rate, during said renewal option period, shall be based on the then prevailing market rate for similar office space in the Farmington Hills/Livonia/Novi, Michigan area. 2.5 EARLY TERMINATION OPTION: Tenant shall have the right to terminate this Lease after the end of the third (3rd) year of the lease term by giving to Landlord its written notice of intention to terminate, accompanied by a payment to Landlord for all unamortized Tenant improvements, and for all unamortized real estate commissions paid, under the initial lease term (amortization based on a five (5) year term). Tenant's notice to terminate must be given to Landlord at least eight (8) months prior to the effective date of termination. ARTICLE THREE PAYMENT OF RENT AND TAXES 3.1 RENT: Tenant shall pay each monthly installment of Base Rent in advance on the first calendar day of each month. Monthly installments for any fractional calendar month, at the beginning or end of the Lease Term, shall be prorated based on the number of days in such month. Base Rent, together with all other amounts payable by Tenant to Landlord under this Lease, including, without limitation, any late charges and interest due Landlord for Rent not paid when due, shall be sometimes referred to collectively as "Rent." Tenant shall pay all Rent, without deduction or set-off, to Landlord or Managing Agent at a place specified by Landlord. Rent not paid within ten (10) days of its due date and within five (5) days of Tenant's receipt of written notice from Landlord of the failure to pay rent, shall bear interest until paid, at the annualized rate of three percent (3%) in excess of the prime rate of interest published in the Money Rates table of The Wall Street Journal, as the same may be adjusted from time to time. Tenant shall also pay a late charge of $50.00 with each late payment of rent not received within five (5) business days of its due date. 3.2 TAXES: Landlord shall pay all general real estate taxes and any special assessments levied against the Building. -22- 4 ARTICLE FOUR IMPROVEMENTS BY LANDLORD 4.1 CONSTRUCTION CONDITIONS: Landlord shall construct the improvements described in the Construction Documents approved and signed by Landlord and Tenant and made a part of the work letter attached hereto as SCHEDULE 6 (the "Improvements"). The expenses to be incurred as between Landlord and Tenant for construction of the Improvements are specified in SCHEDULE 6. If any act, omission or change requested or caused by Tenant increases the cost of work or materials or the time required for completion of construction, Tenant shall reimburse Landlord for such increase in cost at the time the increased cost is incurred and shall reimburse Landlord for any loss in Rent at the time the Rent would have become due. 4.2 COMMENCEMENT OF POSSESSION: The Lease Commencement Date shall be November 1, 1996, pursuant to Article One Section 1.1d. The parties acknowledge and agree that Landlord shall be responsible for completing Tenant's work. ARTICLE FIVE BUILDING SERVICES 5.1 BUILDING SERVICES: Landlord shall furnish: a. Utility Services: The utility services listed on SCHEDULE 3 ("Utility Services"). b. Maintenance Services: Maintenance of all common and exterior areas including lighting, landscaping, cleaning, painting, maintenance and repair of the exterior of the Building and its structural portions and roof and exterior windows, including all of the services listed on SCHEDULE 4 ("Maintenance Services"). c. Parking: Parking under the terms and conditions described in SCHEDULE 5 ("Parking") and paragraph 1.1(h) of this Lease. Utility Services, Maintenance Services and Parking described above shall be collectively referred to as "Project Services." 5.2 INTERRUPTION OF SERVICES: Landlord does not warrant that any of the Building Services will be free from interruption. Any Building Service may be suspended by reason of accident or of necessary repairs, alterations or improvements, or by strikes or lockouts, or by reason of operation of law, or causes beyond the reasonable control of Landlord. Subject to possible rent abatement as may be provided pursuant to the conditions described in ARTICLE EIGHT, any such interruption or discontinuance of such Building Services shall never be deemed a disturbance of Tenant's use and possession of the Leased Premises, or render Landlord liable to Tenant for damages by abatement of rent or otherwise, or relieve Tenant from performance of Tenant's obligations under this Lease. However, Landlord shall use its best efforts to cause the Building Services to be restored promptly. -23- 5 ARTICLE SIX TENANT'S COVENANTS 6.1 USE OF LEASED PREMISES: Tenant agrees to: a. Permitted Usage: Continuously use the Leased Premises for the Permitted Purpose only and for no other purpose. b. Compliance with Laws: Only as it relates to Tenant's use and future alterations of the Leased Premises by Tenant, comply with the provisions of all applicable recorded covenants, conditions and restrictions and all applicable building, zoning, fire and other governmental laws, ordinances, regulations or rules as the same are applicable to the Leased Premises. Landlord will, if requested to do so, provide to Tenant a copy of all recorded covenants, conditions and restrictions affecting the Leased Premises. c. Nuisances or Waste: Not do or permit anything to be done in or about the Leased Premises, or bring or keep anything in the Leased Premises that may increase Landlord's fire and extended coverage insurance premium, damage the Building, constitute waste, or be a nuisance, public or private, or menace or other disturbance to tenants of adjoining premises or anyone else, or use or store any toxic chemicals, wastes, elements or substances in the Leased Premises. d. Alterations and Improvements: Make no substantial alterations or improvements to the Leased Premises without the prior written approval of Landlord not to be unreasonably withheld. Any such alterations or improvements by Tenant shall be done in a good and workmanlike manner, at Tenant's expense, by a licensed contractor approved by Landlord and in conformity with plans and specifications approved by Landlord. e. Liens: Keep the Leased Premises, the Building and the Project free from liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant. If, at any time, a lien or encumbrance is filed against the Leased Premises, the Building or the Project as a result of Tenant's work, materials or obligations, Tenant shall promptly discharge such lien or encumbrance. If such lien or encumbrance has not been removed within sixty (60) days from the date it is filed, Tenant agrees to deposit with Landlord cash or a bond in an amount equal to 150% of the amount of the lien, to be held by Landlord as security for the lien being discharged, however, if Landlord is, at the time of the filing of the lien, involved in any negotiations that require a clear title to the property, Tenant agrees to immediately deposit with Landlord cash or bond as provided above. f. Rules and Regulations: Observe, perform and abide by all the reasonable rules and regulations promulgated by Landlord from time to time as said rules and regulations are applied equally to other tenants of the Building. SCHEDULE 2 sets forth Landlord's rules and regulations in effect on the date hereof. -24- 6 g. Signage: Obtain the prior approval of the Landlord and Landlord's mortgagee, if any, before placing any sign or symbol in doors or windows or elsewhere in or about the Leased Premises, or upon any other part of the Building, or Project including building directories. Any signs or symbols which have been placed without Landlord's approval may be removed by Landlord. Upon expiration or termination of this Lease, all signs installed by Tenant shall be removed and any damage resulting therefrom shall be promptly repaired, or such removal and repair may be done by Landlord and the cost charged to Tenant as Rent. Tenant shall be entitled to customary recognition in the Building's directory and suite signage, and to recognition on the exterior mounted building signage. The signage tenant directory shall be installed by Landlord prior to commencement of the Lease Term. 6.2 INSURANCE: Landlord shall, at its own expense, procure and maintain comprehensive general liability insurance and fire and extended casualty insurance in appropriate amounts. Tenant shall, at its own expense, procure and maintain during the Lease Term comprehensive general liability insurance with respect to the Leased Premises and Tenant's activities in the Leased Premises and in the Building and the Project, providing bodily injury, broad form property damage with a maximum $1,000.00 deductible, as follows: a. $1,000,000.00 with respect to bodily injury or death to any one person; b. $5,000,000.00 with respect to bodily injury or death arising out of any one occurrence; c. $1,000,000.00 with respect to property damage or other loss arising out of any one occurrence; d. Fire and extended casualty insurance covering Tenant's trade fixtures, merchandise and other personal property in an amount not less than 100% of their actual replacement cost; and e. Workers' compensation insurance in at least the statutory amounts. Nothing in this paragraph 6.2 shall prevent Tenant from either providing a self-insured retention of $5,000,000.00 per occurrence covering the risks and exposures set forth in Sections a. through c. hereof or from obtaining insurance of the kind and in the amounts provided for under this paragraph under a blanket insurance policy covering other properties as well as the Leased Premises, provided, however, that any such policy of blanket insurance (i) shall specify the amounts of the total insurance allocated to the Leased Premises, which amounts shall not be less than the amounts required by sections a. through c. hereof., and (ii) such amounts so specified shall be sufficient to prevent any one of the assureds from becoming a coinsurer within the terms of the applicable policy, and (iii) shall, -25- 7 as to the Leased Premises, otherwise comply as to endorsements and coverage with the provisions of this paragraph. Tenant's insurance shall be issued by an insurer reasonably acceptable to and approved by Landlord. Landlord and Landlord's mortgagee, if any, shall be named as "additional insureds" under Tenant's insurance, and such Tenant's insurance shall be primary and non-contributing with Landlord's insurance. Tenant's insurance policies shall contain endorsements requiring thirty (30) days' notice to Landlord and Landlord's mortgagee, if any, prior to any cancellation, lapse or nonrenewal or any reduction in amount of coverage. Tenant shall deliver to Landlord as a condition to its taking occupancy of the Leased Premises a certificate or certificates evidencing such insurance. 6.3 REPAIRS: Subject to Landlord's Maintenance Services obligations as described in ARTICLE 5.1b and in Schedule 4, Tenant agrees to maintain the interior of the Leased Premises in a neat, clean and sanitary condition. If Tenant fails to maintain or keep the Leased Premises in good repair and such failure continues for five (5) business days after written notice from Landlord or if such failure results in a nuisance or health or safety risk, Landlord may perform any such required maintenance and repairs and the cost thereof shall be payable by Tenant as Rent within thirty (30) days of receipt of an invoice from Landlord. Tenant shall also pay to Landlord the costs of any repair to the Building or Project necessitated by any act or neglect of Tenant. 6.4 ASSIGNMENT AND SUBLETTING: Tenant shall not assign, mortgage, pledge or encumber this Lease, or permit all or any part of the Leased Premises to be subleased to another, without the prior written consent of Landlord. Landlord agrees that it will not unreasonably withhold its consent to Tenant's assigning this Lease or subletting the Leased Premises. Tenant may, without the Landlord's consent, assign this Lease to any parent, affiliate and/or any successor, provided Tenant remains at all times primarily liable for all obligations under the Lease. Except as it relates to Tenant's assignment or subletting as noted above to the parent, affiliate or successor, Tenant hereby agrees that Landlord shall be deemed to be reasonable in withholding its consent if Tenant is in default under any of the substantial terms, covenants, conditions, provisions and agreements of this Lease past any period of cure provided for herein at the time of request for consent or on the effective date of such subletting or assigning, or if the proposed subtenant or assignee is, in Landlord's good faith judgment, incompatible with other tenants in the Building, or seeks to use the Leased Premises for a use not consistent with other uses in the Building. Upon the Landlord's request, Tenant shall submit to Landlord the name of a proposed assignee or subtenant, the terms of the proposed assignment or subletting, the nature of the proposed -26- 8 subtenant's business and such information as to the assignee's or subtenant's general reputation as Landlord may reasonably require. No subletting or assignment, even with the consent of the Landlord, shall relieve Tenant of its obligation to pay the Rent and to perform all of the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment, subletting or other transfer. Consent to one assignment, subletting or other transfer shall not be deemed to constitute consent to any subsequent assignment, subletting or other transfer. 6.5 ESTOPPEL CERTIFICATE: From time to time and within thirty (30) days after Tenant's receipt of a written request by Landlord, Tenant shall execute and deliver a certificate supplied by Landlord to any proposed lender or purchaser, or to Landlord, certifying with any appropriate exceptions, (i) that this Lease is in full force and effect without modification, (ii) the amount, if any, of Prepaid Rent and Deposit paid by Tenant to Landlord, (iii) the nature and kind of concessions, rental or otherwise, if any, which Tenant has received or is entitled to receive, (iv) that Landlord has performed all of its obligations due to be performed under this Lease and that there are no defenses, counterclaims, deductions or offsets outstanding or other excuses for Tenant's performance under this Lease, or any exceptions to same, and (v) any other fact reasonably requested by Landlord or such proposed lender or purchaser. 6.6 BROKERAGE COMMISSIONS: Tenant represents to the Landlord that no broker or agent represented Tenant other than the Tenant's broker, Cushman & Wakefield of Michigan, Inc., and Tenant agrees to defend and indemnify Landlord against any loss, expense or liability incurred by Landlord as a result of a claim by any other broker or finder with regard to its representation of Tenant in connection with this Lease or its negotiation. Landlord agrees to defend and indemnify Tenant against any loss, expense or liability incurred by Tenant as a result of a claim by any other broker or finder in connection with this Lease or its negotiation. ARTICLE SEVEN LANDLORD'S RESERVED RIGHTS 7.1 ADDITIONAL RIGHTS RESERVED TO LANDLORD: Without notice and without liability to Tenant or without effecting an eviction or disturbance of Tenant's use or possession, Landlord shall have the right to (i) grant utility easements or other easements in, or replat, subdivide or make other changes in the legal status of the land underlying the Building or the Project as Landlord shall deem appropriate in its sole discretion, provided such changes do not substantially interfere with Tenant's use of the Leased Premises for the Permitted Purpose; (ii) enter the Leased Premises at reasonable times and after reasonable notice to the Tenant (twenty-four (24) -27- 9 hours' notice required), and at any time in the event of an emergency to inspect or repair the Leased Premises or the Building and to perform any acts related to the safety, protection, reletting, sale or improvement of the Leased Premises or the Building; (iii) change the name or street address of the Building; (iv) install and maintain signs on and in the Building, subject to Tenant's right to review and approve structural changes to be made to exterior wall-mounted building sign; and (v) make such reasonable rules and regulations as, in the sole judgment of Landlord, may be needed from time to time for the safety of the tenants, the care and cleanliness of the Leased Premises, the Building and the preservation of good order therein, which rules and regulations shall be applied equally to all tenants of the Building. ARTICLE EIGHT CASUALTY AND UNTENANTABILITY 8.1 CASUALTY AND UNTENANTABILITY: If the Building is made substantially untenantable or if Tenant's use and occupancy of the Leased Premises are substantially interfered with due to damage to the common areas of the Building or the Leased Premises are made wholly or partially untenantable by fire or other casualty, (i) Landlord may, by notice to Tenant within sixty (60) days after the damage, terminate this Lease, or (ii) Tenant may, by notice to Landlord within sixty (60) days after the damage, terminate this Lease, provided, however, that Landlord shall be provided a reasonable opportunity within such sixty-day period to restore the Leased Premises to the conditions specified in Schedule 1 and Tenant's working drawings. Such termination shall become effective as of the date of such casualty. If the Leased Premises are made partially or wholly untenantable by fire or other casualty and this Lease is not terminated as provided above, Landlord shall restore within 150 days of the date of such casualty the Leased Premises to the condition specified in Schedule 1 and Tenant's working drawings. If this Lease is not terminated as provided above, and Landlord fails within 150 days from the date of such casualty to restore the damaged common areas thereby eliminating substantial interference with Tenant's use and occupancy of the Leased Premises, or fails to restore the Leased Premises to the condition specified in Schedule 1 and Tenant's working drawings, Tenant may terminate this Lease as of the end of such 150-day period, such termination being effective as of the date of such casualty. In the event of termination of this Lease pursuant to this ARTICLE EIGHT, Rent shall be prorated on a per diem basis and paid to the date of the casualty, unless the Leased Premises shall be tenantable, in which case Rent shall be payable to the date of the lease termination. If the Leased Premises are untenantable and this Lease is not terminated, Rent and Tenant's other obligations hereunder shall abate on a per diem basis from the date of the casualty until the Leased -28- 10 Premises are ready for occupancy by Tenant. If part of the Leased Premises are untenantable, Rent and Tenant's other obligations hereunder shall be prorated on a per diem basis and apportioned in accordance with the part of the Leased Premises which is usable by Tenant until the damaged part is ready for Tenant's occupancy. ARTICLE NINE CONDEMNATION 9.1 CONDEMNATION: If all or any part of the Leased Premises shall be taken under power of eminent domain or sold under imminent threat to any public authority or private entity having such power, this Lease shall terminate as to the part of the Leased Premises so taken or sold, effective as of the date title transfers or possession is required to be delivered to such authority, whichever occurs earlier. In such event, Base Rent shall abate in the ratio that the portion of Tenant's Square Footage taken or sold bears to Tenant's Square Footage. If a partial taking or sale of the Leased Premises, the Building or the Project (i) substantially reduces Tenant's Square Footage resulting in a substantial inability of Tenant to use the Leased Premises for the Permitted Purpose, or (ii) renders the Building or the Project commercially unviable to Landlord in Landlord's sole opinion, either Tenant in the case of (i), or Landlord in the case of (ii), may terminate this Lease by notice to the other party within thirty (30) days after the terminating party receives written notice of the portion to be taken or sold. Such termination shall be effective 180 days after notice thereof, or when the portion is taken or sold, whichever is sooner. All condemnation awards and similar payments shall be paid and belong to Landlord, except any amounts awarded or paid specifically to Tenant for removal and reinstallation of Tenant's trade fixtures, personal property, Tenant's moving costs, or other amounts to which Tenant may be entitled as long as they do not prejudice Landlord or reduce Landlord's award. ARTICLE TEN LIABILITY OF PARTIES 10.1 INDEMNIFICATION AGAINST LANDLORD'S LIABILITY: Tenant agrees to hold Landlord harmless and indemnified against claims and liability for injuries to all persons and for damage to or loss of property occurring in or about the Leased Premises, to the extent of Tenant's responsibility for any act of negligence or default under this Lease by Tenant, its contractors, agents, employees, licensees and invitees. 10.2 INDEMNIFICATION AGAINST TENANT'S LIABILITY: Landlord agrees to hold Tenant harmless and indemnified against claims and liability for injuries to all persons and for damage to or loss of property occurring in or about the Leased Premises, due to any act or negligence or default under this Lease by Landlord, its contractors, agents, employees, licensees and invitees. -29- 11 10.3 WAIVER OF SUBROGATION: Tenant and Landlord release each other and waive any right of recovery against each other for loss or damage to the waiving party or its respective property, which occurs in or about the Leased Premises, whether due to the negligence of either party, their agents, employees, officers, contractors, licensees, invitees or otherwise, to the extent that such loss or damage is insurable against under the terms of standard fire and extended coverage insurance policies. Tenant and Landlord agree that all policies of insurance obtained by either of them in connection with the Leased Premises shall contain appropriate waiver of subrogation clauses. 10.4 LIMITATION OF LANDLORD'S LIABILITY: The obligations of Landlord under this Lease do not constitute personal obligations of the individual partners, shareholders, directors, officers, employees or agents of Landlord, and Tenant shall look solely to Landlord's insurance or interest in the Building and to no other assets of Landlord for satisfaction of any liability in respect of this Lease. Tenant will not seek recourse against the individual partners, shareholders, directors, officers, employees or agents of Landlord or any of their personal assets for such satisfaction. Notwithstanding any other provisions contained herein, Landlord shall not be liable to Tenant, its contractors, agents or employees for any consequential damages or damages for loss of profits. 10.5 LIMITATION OF TENANT'S LIABILITY: The obligations of Tenant under this Lease do not constitute personal obligations of the individual partners, shareholders, directors, officers, employees, or agents of Tenant. Landlord will not seek recourse against the individual partners, shareholders, directors, officers, employees, or agents of Tenant or any of their personal assets for such satisfaction. Notwithstanding any other provisions contained herein, Tenant shall not be liable to Landlord, its contractors, agents or employees for any consequential damages or damages for loss of profits. ARTICLE ELEVEN TENANT'S DEFAULT AND LANDLORD'S REMEDIES 11.1 TENANT'S DEFAULT: It shall be an "Event of Default" if Tenant shall (i) fail to pay any monthly installment of Base Rent, or any other sum payable hereunder within ten (10) days after such payment is due and payable; or (ii) violate or fail to perform any of the other conditions, covenants or agreements herein made by Tenant, and such violation or failure shall continue for fifteen (15) days after written notice thereof to Tenant by Landlord. 11.2 REMEDIES OF LANDLORD: If an Event of Default occurs, Landlord may, at its option, within five (5) days after written notice from Landlord, exercise all legal remedies available to Landlord under applicable Michigan law. -30- 12 ARTICLE TWELVE TERMINATION 12.1 SURRENDER OF LEASED PREMISES: On expiration of this Lease, if no Event of Default exists, Tenant shall surrender the Leased Premises in the same condition as when the Lease Term commenced, ordinary wear and tear and casualty damage excepted. Except for furnishings, trade fixtures and other personal property installed at Tenant's expense, all alterations, additions or improvements, whether temporary or permanent in character, made in or upon the Leased Premises, either by Landlord or Tenant, shall be Landlord's property and at the expiration or earlier termination of the term shall remain on the Leased Premises without compensation to Tenant, except if requested by Landlord at the time they are made, Tenant, at its expense and without delay, shall remove any alterations, additions or improvements made to the Leased Premises by Tenant designated by Landlord to be removed, and repair any damage to the Leased Premises or the Building caused by such removal, provided, however, that Tenant shall not be required to remove improvements to the Leased Premises which have previously been approved by Landlord. If Tenant fails to repair the Leased Premises, Landlord may complete such repairs and Tenant shall reimburse Landlord for such repair and restoration. Landlord shall have the option to require Tenant to remove all its personal property. If Tenant fails to remove such property as required under this Lease, Landlord may dispose of such property in its sole discretion without any liability to Tenant, and further may charge the reasonable cost of any such disposition to Tenant. 12.2 HOLD OVER TENANCY: If Tenant shall hold over after the Lease expiration Date, Tenant may be deemed, at Landlord's option, to occupy the Leased Premises as a tenant from month to month, which tenancy may be terminated by one month's written notice. During such tenancy, Tenant agrees to pay to Landlord, monthly in advance, an amount equal to 150% of all Rent which would become due (based on Base Rent payable for the last month of the Lease Term, together with all other amounts payable by Tenant to Landlord under this Lease), and to be bound by all of the terms, covenants and conditions herein specified. If Landlord relets the Leased Premises or any portion thereof to a new tenant and the term of such new lease commences during the period for which Tenant holds over, Landlord shall be entitled to recover from Tenant all reasonable costs and expenses, attorney's fees, damages or loss of profits incurred by Landlord as a result of Tenant's failure to deliver possession of the Leased Premises to Landlord when required under this Lease. ARTICLE THIRTEEN ENVIRONMENTAL REPRESENTATIONS 13.1 DEFINITIONS: The phrase "Environmental Condition" shall mean any adverse condition relating to any Hazardous Materials (as defined below) or the environment, including surface water, groundwater, drinking water supply, land, surface or subsurface strata or the ambient air and includes air, land and water pollutants, noise, -31- 13 vibration, light and odors. As used herein, "Hazardous Materials" means any chemical, substance, material, controlled substance, object, condition, waste, living organism or combination thereof which is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potential harmful properties or effects, including, without limitation, petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes, living organisms or combinations thereof which are now or become in the future listed, defined or regulated in any manner by an environmental law based upon, directly or indirectly, such properties or effects. As used herein, "Environmental Laws" means any and all federal, state or local environmental, health and/or safety-related laws, regulations, standards, decisions of courts, ordinances, rules, codes, orders, decrees, directives, guidelines, permits or permit conditions, currently existing and as amended, enacted, issued or adopted in the future which are or become applicable to Lessee, the premises or the building. Lessee and Lessee's parties shall comply with all environmental laws and promptly notify Lessor of the violation of any environmental law or presence of any hazardous materials, other than office and janitorial supplies as permitted above, on the premises. 13.2 LANDLORD'S REPRESENTATIONS: Landlord hereby represents that, to the best of its knowledge, no Environmental Condition (as defined above) presently exists or has existed prior to the commencement date of this Lease in the Building. 13.3 TENANT'S REPRESENTATIONS: Tenant hereby represents to the Landlord that, to the best of its knowledge, Tenant's use of the Leased Premises will not result in or create an Environmental Condition on, under or within the Building. 13.4 INDEMNIFICATION OF PARTIES: Tenant shall indemnify, protect, defend and hold harmless Landlord and its partners, directors, officers, employees, shareholders, lenders, agents, contractors and their successors and assigns from and against any and all claims, judgments, causes of action, damages, penalties, fines, taxes, costs, liabilities, losses or expenses arising at any time during or after the term of this Lease as a result of an Environmental Condition caused by Tenant or as a result of any breach of the Tenant representations contained in this Lease. Landlord shall indemnify, protect, defend and hold harmless Tenant and its partners, directors, officers, employees, shareholders, lenders, agents, contractors and their successors and assigns from and against any and all claims, judgments, causes of action, damages, penalties, fines, taxes, costs, liabilities, losses or expenses arising at any time during or after the term of this Lease as a result of an Environmental Condition not caused by Tenant or as a result of any breach of the Landlord representations contained in this Lease. -32- 14 ARTICLE FOURTEEN MISCELLANEOUS 14.1 QUIET ENJOYMENT: If and so long as Tenant pays all Rent and keeps and substantially performs each and every term, covenant and condition herein contained on the part of Tenant to be kept and performed, Tenant shall quietly enjoy the Leased Premises without hindrance by Landlord. 14.2 ACCORD AND SATISFACTION: No receipt and retention by Landlord of any payment tendered by Tenant in connection with this Lease shall constitute an accord and satisfaction, or a compromise or other settlement, notwithstanding any accompanying statement, instruction or other assertion to the contrary unless Landlord expressly agrees to an accord and satisfaction, or a compromise or other settlement, in a separate writing duly executed by Landlord. Landlord will be entitled to treat any such payments as being received on account of any item or items of Rent, interest, expense or damage due in connection herewith, in such amounts and in such order as Landlord may determine at its sole option. 14.3 SEVERABILITY: The parties intend this Lease to be legally valid and enforceable in accordance with all of its terms to the fullest extent permitted by applicable law. If any term hereof shall be invalid or unenforceable, the parties agree that such term shall be stricken from this Lease to the extent unenforceable, the same as if it never had been contained herein. Such invalidity or unenforceability shall not extend to any other term of this Lease, and the remaining terms hereof shall continue in effect to the fullest extent permitted by law, the same as if such stricken term never had been contained herein. -33- 15 14.4 SUBORDINATION AND ATTORNMENT: The rights of Tenant under this Lease are and shall be subordinate to the lien of any first mortgage or first deed of trust, now or hereafter in force against the Building, and to all advances made or hereafter to be made thereunder ("Superior Instruments"). If requested in writing by Landlord or any first mortgagee of Landlord, Tenant agrees to execute a reasonable subordination agreement required to further effect the provisions of this paragraph. In the event of any transfer in lieu of foreclosure or termination of a lease in which Landlord is lessee or the foreclosure of any Superior Instrument, or sale of the Property pursuant to any Superior Instrument, Tenant shall attorn to such purchaser, transferee or lessor and recognize such party as landlord under this Lease, provided such party acquires and accepts the Leased Premises subject to this Lease and agrees to non-disturbance during the remaining and extended term of this Lease. The agreement of Tenant to attorn contained in the immediately preceding sentence shall survive any such foreclosure sale or transfer. 14.5 APPLICABLE LAW: This Lease shall be construed according to the laws of the State of Michigan. 14.6 BINDING EFFECT; GENDER: This Lease shall be binding upon and inure to the benefit of the parties and their successors and assigns. It is understood and agreed that the terms "Landlord" and "Tenant" and verbs and pronouns in the singular number are uniformly used throughout this Lease regardless of gender, number or fact of incorporation of the parties hereto. 14.7 TIME: Except as otherwise may be provided in this Lease, time is of the essence of this Lease. 14.8 ENTIRE AGREEMENT: This Lease and the schedules and addenda attached set forth all the covenants, promises, agreements, representations, conditions, statements and understandings between Landlord and Tenant concerning the Leased Premises and the Building and the Project, and there are no representations, either oral or written between them other than those in this Lease. This Lease shall not be amended or modified except in writing signed by both parties. Failure to exercise any right in one or more instances shall not be construed as a waiver of the right to strict performance or as an amendment to this Lease. 14.9 NOTICES: All notices pursuant to this Lease shall be in writing and shall be effective when mailed by certified mail or delivered (i) to Landlord or Tenant at the addresses designated in Article 1.1 with a copy to the Managing Agent of the Leased Premises, or (ii) to such other addresses as may hereafter be designated by either party by written notice. -34- 16 SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY TENANT DOES NOT CONSTITUTE A RESERVATION OF OR OPTION FOR LEASE, AND IT IS NOT EFFECTIVE AS A LEASE OR OTHERWISE UNTIL EXECUTION AND DELIVERY BY BOTH LANDLORD AND TENANT. This Lease is executed as of the date first written above. WITNESS: LANDLORD:_____________________ ________________________________ RICHARD L. KUSS, TRUSTEE UNDER AGREEMENT DATED APRIL 1, 1965 ________________________________ By____________________________ Authorized Signatory WITNESS: TENANT: ________________________________ RANDERS ENGINEERING, INC. ________________________________ By ___________________________ Its __________________________ -35- 17 ACKNOWLEDGMENTS STATE OF OHIO : ss. COUNTY OF CLARK: The signing of the above Lease was acknowledged before me this 12th day of August, 1996, by Richard L. Kuss, Trustee Under Agreement dated April 1, 1965. ______________________________ Notary Public STATE OF MICHIGAN : ss. COUNTY OF Muskegon : The signing of the above Lease was acknowledged before me this 9th day of August, 1996, by Thomas R. Eurich, as President of Randers Engineering, Inc., a Michigan corporation. ______________________________ Notary Public This Instrument Prepared by: Walter A. Wildman Martin, Browne, Hull & Harper One South Limestone Street, 8th Floor P. O. Box 1488 Springfield, Ohio 45501 Telephone (513) 324-5541 Telecopier (513) 325-5432 -36- 18 SCHEDULE 1 DESCRIPTION OF THE PREMISES AND FLOOR PLAN -37- 19 SCHEDULE 2 RULES AND REGULATIONS 1. The sidewalks, entrances, halls, corridors, elevators and stairways of the Building, excluding the second floor elevator lobby, shall not be obstructed or used as a waiting or lounging place by Tenants, and their agents, servants, employees, invitees, licensees and visitors. All entrance doors leading from any Leased Premises to the hallways are to be kept closed at all times, subject to City of Novi, Michigan code. 2. Landlord reserves the right to refuse admittance to the Building between the hours of 7:00 p.m. and 7:00 a.m. Monday through Saturday, and from 2:00 p.m. Saturday to 7:00 a.m. Monday to any person not producing both a key or card to the Leased Premises and/or a pass issued by Landlord. In case of invasion, riot, public excitement or other commotion, Landlord also reserves the right to prevent access to the Building during the continuance of same. Landlord shall in no case be liable for damages for the admission or exclusion of any person to or from the Building. 3. Landlord will furnish each Tenant with thirty-three (33) keys or cards to each door lock on the Leased Premises, and Landlord may make a reasonable charge for any additional keys requested by any Tenant. No Tenant shall have any keys or cards made for the Leased Premises; nor shall any Tenant alter any lock, or install new or additional locks or bolts, on any door without the prior written approval of Landlord. In the event of such alteration for installation approval by Landlord, the Tenant making such alteration shall supply Landlord with a key or card for any such lock or bolt. Each Tenant, upon the expiration or termination of its tenancy, shall deliver to Landlord all keys or cards in any such Tenant's possession for all locks and bolts in the Building. 4. In order that the Building may be kept in a state of cleanliness, each Tenant shall during the term of each respective lease, permit Landlord's employees (or Landlord's agent's employees) to take care of and clean the Leased Premises and Tenants shall not employ any person(s) other than Landlord's employees (or Landlord's agent's employees) for such purpose. No Tenant shall cause any unnecessary labor by reason of such Tenant's carelessness or indifference in the preservation of good order and cleanliness of the Leased Premises. Tenants will see that (i) the windows are closed, (ii) the doors are securely locked, and (iii) all water faucets and other utilities are shut off (so as to prevent waste or damage) each day before leaving the Leased Premises. In the event Tenant must dispose of crates, boxes, etc. which will not fit into office waste paper baskets, it will be the responsibility of Tenant to dispose of same. In no event shall Tenant set such items in the public hallways or other areas of the Building, excepting Tenant's own Leased Premises, for disposal. -38- 20 5. Landlord reserves the right to prescribe the date, time, method and conditions that any personal property, equipment, trade fixtures, merchandise and other similar items shall be delivered to or removed from the Building. No iron safe or other heavy or bulky object shall be delivered to or removed from the Building, except by experienced safe men, movers or riggers approved in writing by Landlord. All damage done to the Building by the delivery or removal of such items, or by reason of their presence in the Building, shall be paid to Landlord, within thirty (30) days of presentation of invoice, by the Tenant by, through, or under whom such damage was done. There shall not be used in any space, or in the public halls of the Building, either by Tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires. 6. The walls, partitions, skylights, windows, doors and transoms that reflect or admit light into passageways or into any other part of the Building shall not be covered or obstructed by any of the Tenants. 7. The toilet rooms, toilets, urinals, wash bowls and water apparatus shall not be used for any purpose other than for those for which they were constructed or installed, and no sweepings, rubbish, chemicals, or other unsuitable substances shall be thrown or placed therein. The expense of any breakage, stoppage or damage resulting from violation(s) of this rule shall be borne by the Tenant by whom, or by whose agents, employees, invitees, licensees or visitors, such breakage, stoppage or damages shall have been caused. 8. No sign, name, placard, advertisement or notice visible from the exterior of any Leased Premises, shall be inscribed, painted or affixed by any Tenant on any part of the Building without the prior written approval of Landlord, which approval shall not be unreasonably withheld. All signs or letterings on doors, or otherwise, approved by Landlord shall be inscribed, painted or affixed at the sole cost and expense of the Tenant, by a person approved by Landlord. A directory containing the names of all Tenants of the Building shall be provided by Landlord at an appropriate place on the first floor of the Building. 9. No signalling, telegraphic or telephonic instruments or devices, or other wires, instruments or devices, shall be installed in connection with any Leased Premises without the prior written approval of Landlord, said approval shall not be unreasonably withheld. Such installations, and the boring or cutting for wires, shall be made at the sole cost and expense of the Tenant and under control and direction of Landlord. Landlord retains, in all cases, the right to require (i) the installation and use of such electrical protecting devices that prevent the transmission of excessive currents of electricity into or through the Building, (ii) the changing of wires and of their installation and arrangement underground or otherwise as Landlord may direct, and (iii) compliance on the part of all using or seeking access to such wires with such rules as Landlord may establish relating thereto. All such wires used by Tenants must be clearly -39- 21 tagged at the distribution boards and junction boxes and elsewhere in the Building, with (i) the number of the Leased Premises to which said wires lead, (ii) the purpose for which said wires are used, and (iii) the name of the company operating same. Landlord will permit the installation of computer lines and telephone links by Tenant without its prior written approval. 10. Tenant, their agents, servants or employees, shall not (a) go on the roof of the Building; (b) use any additional method of heating or air conditioning the Leased Premises that has not previously been approved by Landlord; (c) sweep or throw any dirt or other substance from the Leased Premises into any of the halls, corridors, elevators, or stairways of the Building; (d) bring in or keep in or about the Leased Premises any vehicles or animals of any kind; (e) install any radio or television antennae or any other device or item on the roof, exterior walls, windows or windowsills of the Building; (f) place objects against glass partitions, doors or windows which would be unsightly from the interior or exterior of the Building; (g) use any Leased Premises (i) for lodging or sleeping, (ii) for cooking (except that the use by any tenant of Underwriter's Laboratory equipment for brewing coffee, tea and similar beverages, including a refrigerator, or the use of a microwave oven or similar kitchen appliance for Tenant's own use, shall be permitted, provided that such use is in compliance with law), (iii) for any manufacturing, storage or sale of merchandise or property of any kind; (h) cause or permit unusual or objectionable odor to be produced or permeate from the Leased Premises, including, without limitation, duplicating or printing equipment fumes. Tenant, its agents, servants and employees, invitees, licensees, or visitors shall not permit the operation of any musical or sound producing instruments or device which may be heard outside the Leased Premises or Building, or which may emit electrical waves which will impair radio or television broadcast or reception from or into the Building. 11. Tenants shall not store or use in any Leased Premises any (a) ether, naptha, phosphorus, benzol, gasoline, benzine, petroleum, crude or refined earth or coal oils, flashlight powder, kerosene or camphene, (b) any other flammable, combustible, explosive or illuminating fluid, gas or material of any kind, and (c) any other fluid, gas or material of any kind having an offensive odor, without the prior written consent of Landlord. 12. No canvassing, soliciting, distribution of hand bills or other written material, or peddling shall be permitted in the Building, and Tenants shall cooperate with Landlord in prevention and elimination of same. 13. Tenant shall give Landlord prompt notice of all accidents to or defects in air conditioning equipment, plumbing, electrical facilities or any part or appurtenances of Leased Premises. -40- 22 14. If, because of certain actions by the Tenant, the Leased Premises becomes infested with vermin, the Tenant, at its sole cost and expense, shall cause its premises to be exterminated from time to time to the satisfaction of the Landlord and shall employ such exterminators as shall be approved by Landlord. If the infestation occurs through no fault of the Tenant, the Landlord shall be responsible to exterminate the Leased Premises at Landlord's expense. 15. No curtains, blinds, shades, screens, awnings or other coverings or projections of any nature shall be attached to or hung in, or used in connection with any door, window or wall of the premises of the Building without the prior written consent of Landlord. 16. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord's opinion, tends to impair the reputation of Landlord or of the Building, or its desirability as an office building for existing or prospective Tenants who require the highest standards of integrity and respectability, and upon written notice from Landlord, Tenant shall refrain from or discontinue such advertising. 17. Whenever the word "Tenant" occurs, it is understood and agreed that it shall also mean Tenant's associates, employees, agents and any other person entering the Building or the Leased Premises under the express or implied invitation of Tenant. Tenant shall cooperate with Landlord to assure compliance by all such parties with rules and regulations. 18. Landlord reserves the right to make reasonable amendments, modifications and additions to the rules and regulations heretofore set forth, and to make additional reasonable rules and regulations, as in Landlord's sole judgment may from time to time be needed for the safety, care, cleanliness and preservation of good order of the Building. -41- 23 SCHEDULE 3 UTILITY SERVICES The Landlord shall provide, as part of Operating Costs, except as otherwise provided, the following services: 1. Air conditioning and heat for normal general office purposes only, to provide in Landlord's judgment consistent with other comparable Class A buildings, comfortable occupancy Monday through Friday from 7:00 a.m. to 6:00 p.m., and Saturday from 8:00 a.m. to 2:00 p.m., Sundays and holidays excepted. Tenant agrees not to use any apparatus or device, in or upon or about the Leased Premises, and Tenant further agrees not to connect any apparatus or device with the conduits or pipes, or other means by which such services are supplied, for the purpose of using additional or unusual amounts of such services, without written consent of Landlord. Should Tenant request the use of these services at other than operating hours listed above, Landlord reserves the right to charge for such services at the hourly rate of $55.00. The charge shall be payable as additional rental. Should Tenant fail to make payment within thirty (30) days after demand for same, such excess charge constitutes a breach of the obligation to pay rent under this Lease and shall entitle Landlord to the rights hereinafter granted for such breach. 2. Water for drinking, lavatory and toilet purposes from the regular Building supply (at the prevailing temperature) through fixtures installed by Landlord, (or by Tenant with Landlord's written consent). 3. Landlord agrees to provide operational systems in the Building as follows: adequate heating and cooling systems; adequate plumbing fixtures and hot and cold water distribution systems; an adequate electrical distribution system; two (2) operational passenger elevators; appropriate lighting equipment, and to maintain same in a safe, efficient and appropriate manner. -42- 24 SCHEDULE 4 MAINTENANCE SERVICES 1. Subject to the terms of the Lease, Landlord shall supply public restroom supplies, common area lamp replacement (exclusive of lamp and ballast replacement in the Leased Premises which shall be at Tenant's sole cost), window washing with reasonable frequency, and janitor services to the common areas and leased premises during the time and in the manner that such janitor services are customarily furnished in general Class A office buildings in the area. 2. Landlord agrees to maintain the exterior and interior of the Leased Premises to include lawn and shrub care, snow removal, maintenance of the structure, roof, mechanical and electrical equipment, architectural finish, including windows, fire sprinklers, HVAC, lighting, elevators and plumbing and so on, excluding only those items specifically excepted elsewhere in this Lease. 3. Specifications for the above services are attached hereto as follows: (A) Schedule 4A - HVAC Maintenance Specifications (B) Schedule 4B - Landscaping Specifications (C) Schedule 4C - Snow Removal and Ice Control (D) Schedule 4D - Janitorial Specifications 4. Notwithstanding the foregoing, in no event shall Landlord be responsible for Building Systems improperly installed by Tenant or Tenant's contractors. -43- 25 SCHEDULE 4A HVAC - MAINTENANCE SPECIFICATIONS A. Regularly inspect the operation and condition of the equipment according to the specifications below. B. Furnish all cleaning material, belts, filters and lubrication. C. Test equipment, inspect heat exchangers, evaporators and condensers to assure efficient and safe operation. D. Make the required adjustments and repairs to provide satisfactory operation of all safety controls and operating controls. Specifications include cleaning, maintenance, repair and inspection of the following: 1. COOLING: Change all filters, check for adequate refrigerant charge, check for refrigerant leaks, check condenser coil and clean, check condenser fan blades for tightness, check voltage of unit under full load, check condensate drain and lines, check lower belt, lubricate all bearings, check all safety controls, check contractor contacts, check thermostat and calibrate, check cooling/heating dampers, inspect evaporator coil, check oil level in compressor, check entire unit operation, check suction and discharge pressures. 2. HEATING: Change all filters, check all burners, check blower belt, check blower motor amperage and lubricate, test for gas leaks in furnace, test and adjust pressure regulator, lubricate all necessary parts, clean and adjust pilot assembly, clean and adjust all controls, check operation of safety controls, clean and adjust thermostat, adjust burner for efficiency, inspect all furnace wiring, inspect heat exchanger, check cooling/heating dampers, inspect coil for cleanliness. -44- 26 SCHEDULE 4B LANDSCAPING SPECIFICATIONS Lawn Areas: - Lawn area to be mowed and trimmed once a week (weather permitting) - Concrete and asphalt surfaces will be kept clean after mowing. - All walks and curbs will be edged on a monthly basis. - Fall clean up is to be included. Gardening: - Existing beds to be sprayed as required to control weeds. - Ornamental trees and shrubs to be pruned and trimmed on an "as needed" basis. - Decision on as needed and required items to be determined by property manager, landscaping contractor or both. -45- 27 SCHEDULE 4C SNOW REMOVAL & ICE CONTROL SPECIFICATIONS SNOW REMOVAL SERVICE - Plowing with trucks to begin at 1-1/2 inches (one and one- half inches). - Parking lots and drives to be plowed. - Walkways, sidewalks and porches to be shoveled. - Salting and ice control. - Hauling snow if needed. 1. Snow removal will occur on all sidewalks for accumulations of snow from one and one-half (1-1/2) inches. 2. Measurement of snowfall or accumulation will be determined by measuring the depth of snow on the site. If any disputes arise regarding the amount of snowfall or accumulation of snow at any given time, the dispute will be resolved by referring to the U.S. Weather Bureau for records for the Detroit metropolitan area. 3. Salting or ice control service to be performed when contractor feels it necessary to prevent icy or slippery conditions. -46- 28 SCHEDULE 4D - PAGE 1 JANITORIAL SPECIFICATIONS Suite Areas and Kitchen Area Daily - Vacuum all carpeting. - Dust desk tops that are cleared of work papers. - Empty all waste baskets and place rubbish in disposal area. - Empty and damp wipe all ashtrays. - Spot clean entrance doors and side lights. Weekly - Dust wipe and disinfect all telephones. - Dust or whisk broom all furniture. - Dust window ledges. - Dust tops of file cabinets, ledges and base boards. Monthly - Dust all window blinds. - Dust ceiling and walls; special attention given to cobwebs. Elevators Daily - Vacuum carpet and clean tracks. - Clean and polish brass or bright surfaces. - Damp wipe interior and spot clean marks. - Damp wipe elevator cab exterior doors. - Spot clean carpet as necessary. Weekly - Vacuum ceiling grille work. - Polish elevator door tracks. Lobbies and Hallways Daily - Vacuum all carpeted areas. - Clean and disinfect all drinking fountains. - Spot clean entrance doors - glass and side lights - inside and out. - Dust and spot wash all walls as necessary. - Vacuum all vestibule floor strips. - Sweep all stairwells. - Damp mop all tile flooring. - Polish all bright door hardware, hand rails, etc. - Dust and damp wipe all doors, walls, and other dust-catching surfaces as necessary. -47- 29 SCHEDULE 4D - PAGE 2 JANITORIAL SPECIFICATIONS Weekly - Dust all walls and ceilings - special attention to cobwebs. - Damp mop all stairwells and high dust. - Clean mirrors as needed: minimum once per week. - Vacuum vestibule strip wells. General - Police dumpster area. - Wipe down all doors. - Window washing - exterior done twice per year, interior windows done on an as required basis. Rest Rooms Daily - Wet mop floors using a disinfectant. - Dust and spot wash all partitions and walls. - Clean and sanitize toilets (including both sides of seats), urinal and sinks. - Clean and refill all sanitary napkin dispensers, toilet tissue, soap and hand towels from owner's stock. - Polish all brass and chrome hardware. - Empty all waste receptacles. - Clean mirrors and sinks. Weekly - Damp wipe all walls and partitions. - Pour disinfectant down drains. - High dusting - special attention to cobwebs. -48- 30 SCHEDULE 5 PARKING Landlord hereby grants to Tenant a license to the use during the term of this Lease the spaces described in Article 1.1h. Said parking spaces shall be made available to Tenant on an unallocated basis and Tenant agrees to comply with such reasonable rules and regulations as may be made by Landlord from time to time in order to insure the proper operation of the parking facilities. Tenant agrees not to overburden the parking facilities and agrees to cooperate with Landlord and other Tenants in the use of parking facilities. Landlord reserves the right in its sole discretion to determine whether parking facilities are becoming crowded, and in such event, to allocate specific parking spaces among Tenant and other Tenants or to take such other steps necessary to correct such condition, and if Tenant, its agents, officers, employees, contractors, licensees or invitees are deemed by Landlord to be contributing to such condition, Landlord may, in its sole discretion, and upon giving thirty (30) days notice to Tenant, change the location and nature of the parking spaces available to Tenant, provided that after such change, there shall be available to Tenant approximately the same number of spaces as available before such change. -49- 31 SCHEDULE 6 21333 Haggerty Road Office Building Novi, Michigan Date: _____________________________ WORK LETTER AGREEMENT Randers Engineering, Inc. _________________________ _________________________ _________________________ Re: Suite ____________________________________________ 21333 Haggerty Road Office Building Gentlemen: You (referred to as "Tenant"), and we (referred to as "Landlord") are executing, simultaneous with this work letter agreement, a written lease (the "Lease") pertaining to the space referred to above (the "Leased Premises"). This work letter agreement is attached to the Lease as Schedule 6 and made a part of the Lease. To induce Tenant and Landlord, each, to enter into the Lease (which is hereby incorporated by reference to the extent that the provisions of this work letter agreement may apply thereto) and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant mutually agree as follows: 1. Definitions. The terms defined in this paragraph, for purposes of this work letter agreement, shall have the meanings specified herein, and, in addition to the terms defined herein, terms defined in the Lease shall, for the purposes of this work letter agreement, have the meanings specified therein. 1.01 "Base Tenant Improvements" means the Building Standard items which are supplied, installed and finished by Landlord and such other items shown on the Construction Documents, according to Building Standard specifications and the Construction Documents and which shall be paid for by Landlord as provided for in paragraph 2.01 below. Landlord agrees to provide up to a maximum of $18.25 per usable square foot of leased area toward the cost of Base Tenant Improvements. The cost of the first $15.25 per square foot of construction costs have been incorporated into the base rent shown on Schedule 8 of the Lease. The remaining $3.00 of construction costs, if required, shall be provided by Landlord and the lease rental rate schedule shall be -50- 32 amended to reflect this additional expenditure in accordance with the "Additional Rent" paragraph of Schedule 8. 1.02 "Building Standard" means the quantity and quality of materials, finishing and workmanship specified by Landlord for the Building. 1.03 "Construction Documents" means Exhibit 1 which is attached hereto and made a part hereof, and have been approved. 1.04 "Extraordinary Tenant Improvements" means any work Tenant requests Landlord to do in connection with the Leased Premises, other than Base Tenant Improvements, after the Construction Documents have been approved and signed by both Landlord and Tenant. All construction costs in excess of $18.25 per usable square foot shall be deemed as Extraordinary Tenant Improvements. 1.05 "Leasehold Improvements" means the aggregate of Base Tenant Improvements and Extraordinary Tenant Improvements. 1.06 "Substantial Completion" means that the Leasehold Improvements have been substantially completed according to the Construction Documents, except for items which will not materially affect the use of the Leased Premises or which customarily are deemed to be "punchlist work," and Landlord has obtained either a temporary or final certificate of occupancy for the Leased Premises. 2. Construction Documents; Payments. 2.01 The parties have approved and executed Construction Documents for the Leased Premises, a copy of which is attached hereto as Exhibit 1. Landlord shall be solely responsible at Landlord's cost to buildout the Base Tenant Improvements. Tenant shall be solely responsible at Tenant's expense for any Extraordinary Tenant Improvements. 3. Leasehold Improvements. 3.01 The following provisions shall apply to the construction of the Leasehold Improvements: (a) All work involved in the completion of the Leasehold Improvements shall be carried out by Landlord and its agents and contractors under the sole direction of Landlord. Tenant shall cooperate with Landlord and its agents and contractors to promote the efficient and expeditious completion of the Leasehold Improvements; and (b) Landlord agrees to construct the Leasehold Improvements in accordance with the Construction Documents, provided Tenant has complied with all the applicable provisions of this work letter agreement and the Lease. -51- 33 3.02 If there are any changes in the Leasehold Improvements requested by, or on behalf of, Tenant from the work as reflected in the approved Construction Documents, each such change must receive the prior written approval of Landlord, and Tenant shall bear the cost of all such changes. 3.03 Landlord shall have no obligation to commence construction of any work in the Leased Premises until Landlord has submitted and Tenant has approved and signed the Construction Documents. 3.04 Tenant shall be responsible for the installation of all security, voice, data and telephone cabling and any costs in excess of the Estimate provided in paragraph 2.01 above. In the event that Landlord shall fail, for any cause, to complete the Leasehold Improvements on or before November 1, 1996, Landlord shall not be subject to any liability therefor nor shall such failure affect the validity of the Lease and Tenant's obligations thereunder. 4. Lease Commencement Date. 4.01 Landlord shall notify Tenant when Substantial Completion has been achieved, and thereafter the Lease Commencement Date shall be established as set forth in the Lease. Notwithstanding anything to the contrary contained in the Lease or this work letter agreement, the Lease Commencement Date shall not be extended for any delay in Substantial Completion to the extent that such delay is caused in whole or in part by any act or omission attributable to Tenant, including without limitation: (a) Tenant's request for any Extraordinary Tenant Improvements; (b) Tenant's failure to furnish promptly information concerning Tenant's requirements pertaining to construction of the Leasehold Improvements or any other information requested by the Landlord's architect as necessary or useful to prepare the initial drawings, plans and specifications which are to comprise the Construction Documents; (c) Tenant's failure to approve and promptly sign the Construction Documents; and (d) Tenant's request for any changes in the Leasehold Improvements from the work as reflected in the Construction Documents, if Tenant has initiated such changes. -52- 34 4.02 In any event, Rent payable under the Lease shall not abate by reason of any delay, expense or other burden arising out of or incurred in connection with the design or construction of the Leasehold Improvements to the extent that such delay, expense or other burden is caused in whole or in part by any act or omission attributable to Tenant (including, without limitation, the acts and omissions referred to in subparagraphs (a) through (d) of paragraph 4.01 above). 5. Tenant's Access to Leased Premises. 5.01 Landlord, in its sole discretion, may permit Tenant and Tenant's agents or independent contractors to enter the Leased Premises prior to the scheduled Lease Commencement Date in order that Tenant may do other work as may be required by Tenant to make the Leased Premises ready for Tenant's use and occupancy. Such permission must be in writing prior to entry. If Landlord permits such prior entry, then such license shall be subject to the condition that Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers, and invitees shall work in harmony and not interfere with Landlord and its agents and contractors in doing its work in the Leased Premises or the Building or with other tenants and occupants of the Building or the Project. If at any time such entry shall cause or threaten to cause disharmony or interference, Landlord, in its sole discretion, shall have the right to withdraw and cancel such license upon notice to Tenant. Tenant agrees that any such entry into the Leased Premises shall be deemed to be under all of the terms, covenants, conditions and provisions of the Lease, except as to the covenant to pay periodic Rent. Tenant further agrees that, to the extent permitted by law, Landlord and its principals shall not be liable in any way for any injury or death to any person or persons, loss or damage to any of the Leasehold Improvements or installations made in the Leased Premises or loss or damage to property placed therein or there about, the same being at Tenant's sole risk. 5.02 In addition to any other conditions or limitations on such license to enter the Leased Premises prior to the Lease Commencement Date, Tenant expressly agrees that none of its agents, contractors, workmen, mechanics, suppliers or invitees shall enter the Leased Premises prior to the Lease Commencement Date unless and until each of them shall furnish Landlord with satisfactory evidence of insurance coverage, financial responsibility and appropriate written releases of mechanics' or materialmen's lien claims. 6. Miscellaneous Provisions. Landlord and Tenant further agree as follows: 6.01 Except as herein expressly set forth with respect to the Leasehold Improvements, Landlord has no agreement with Tenant and has no obligation to do any work with respect to the Leased -53- 35 Premises. Any other work in the Leased Premises which may be permitted by Landlord pursuant to the terms and conditions of the Lease, including any alterations or improvements as contemplated by paragraph 11 of the Lease, shall be done at Tenant's sole cost and expense and in accordance with the terms and conditions of the Lease. 6.02 This work letter agreement shall not be deemed applicable to: (a) any additional space added to the original Leased Premises at any time, whether by the exercise of any options under the Lease or otherwise, or (b) any portion of the original Leased Premises or any additions thereto in the event of a renewal or extension of the original Lease Term, whether by the exercise of any options under the Lease or any amendment or supplement thereto. The construction of any additions or improvements to the Leased Premises not contemplated by this work letter agreement shall be effected pursuant to a separate work letter agreement, in the form then being used by Landlord and specifically addressed to the allocation of costs relating to such construction. 6.03 Any person signing this work letter agreement on behalf of Tenant warrants and represents he has authority to do so. 6.04 This work letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 6.05 Anything in the Lease to the contrary notwithstanding, notices and other items to be delivered pursuant to this work letter agreement shall be effective upon receipt of same by the party to whom such notice or item is directed. If the foregoing correctly sets forth our understanding, kindly acknowledge your approval in the space provided below for that purpose and return to us two (2) signed counterparts of this work letter agreement. Very truly yours, By --------------------------- Authorized Signatory By --------------------------- Authorized Signatory AGREED TO AND ACCEPTED this 9th day of August ,1996. Randers Engineering, Inc. ------------------------------ a Michigan corporation By Thomas R. Eurich -------------------------- Its President -------------------------- -54- 36 SCHEDULE 7 CERTIFICATE OF ACCEPTANCE TENANT ________________________________________________________ LOCATION ________________________________________________________ This letter is to certify that based on a visual inspection: 1. The above-referenced space has been accepted by the Tenant for possession. 2. The subject space is substantially complete in accordance with the plans and specifications used in constructing the demised premises. 3. The subject space can now be used for intended purposes. The execution of this certificate shall not relieve the Landlord of its obligation to expeditiously complete all work in which the Tenant is entitled under the terms of its lease with the Landlord. Neither this certificate, nor Tenant's occupancy of the premises, shall be construed to relieve the Landlord of its responsibility to remedy, correct, replace, reconstruct or repair any deviation, deficiency or defect in the work or in the materials or equipment furnished by the Landlord, without cost to Tenant, if a claim with respect thereto is made by Tenant. Commencement Date ______________________________________, 19____. Expiration Date ________________________________________, 19____. Executed this _______ day of____________________________, 19____. TENANT: ______________________________ By:___________________________ Authorized Signature -55- 37 SCHEDULE 8 SCHEDULE OF RENTAL PAYMENTS BASE RENT SCHEDULE
Rental Rate ----------- Lease Year Per Sq. Ft. Annual Rent Monthly Rent - ---------- ----------- ----------- ------------ Year 1 $18.00 $90,000.00 $7,500.00 Year 2 $18.36 $91,800.00 $7,650.00 Year 3 $18.91 $94,550.00 $7,879.17 Year 4 $19.67 $98,350.00 $8,195.83 Year 5 $20.45 $102,250.00 $8,520.83
Additional Rent The Base Rent Schedule set forth above is based upon a Tenant Improvement Allowance of $15.25 per usable square foot under this Lease ($76,250.00 total). Landlord agrees to provide up to $18.25 per usable square foot ($91,250.00 total) as a Tenant Improvement Allowance, provided, however, that the Base Rent set forth above will be adjusted to allow Landlord to recover the additional $3.00 Tenant Improvement Allowance (or any part thereof) over the initial term of the Lease, plus interest at the rate of ten percent (10%) per annum on said increased amount. The Landlord and Tenant agree to execute an addendum to this Lease to reflect the change in Base Rent, if any, at such time as the cost of the Tenant Improvements is known and the rental adjustment calculation can be made. Tenant Electricity Charges Electricity charges have been incorporated into the Base Rent Schedule. Electricity for extraordinary computer usage or other special uses requiring excessive electrical power shall be separately metered and paid for by the Tenant. Operating Expenses All operating expenses and taxes are the obligation of the Landlord except for Tenant's electricity as noted above. -56- EX-10.B 3 ADDENDUM TO LEASE 1 EXHIBIT 10(b) ADDENDUM TO LEASE This is an Addendum entered into this 7 day of October, 1996, to a certain Lease between R.L. Kuss, Trustee under Agreement dated April 1, 1965 ("Landlord"), and Randers Engineering, Inc., a Michigan corporation ("Tenant"), dated August 12, 1996 (the "Lease"). This Addendum is entered into in accordance with the "Additional Rent" provisions of Schedule 8 of the lease, reference to which is hereby made. 1. Paragraph 1.1.c. of Article One of the Lease is hereby amended to read as follows: "TENANT'S SQUARE FOOTAGE shall mean 5,263 usable square feet subject of final measurement. The term "usable" shall be synonymous with "rentable" in this document. 2. Final costs of Leasehold Improvements (as defined in paragraph 1.05 of Schedule 6 of the Lease) have been determined to be $23.23 per square foot, or $7.98 in excess of the Base Tenant Improvements as defined in paragraph 1.01 of Schedule 6 of the Lease. Therefore, in accordance with the Additional Rent provisions of Schedule 8 of the Lease, the schedule of rental payments as set forth in Schedule 8 is hereby amended to read as follows: -57- 2 SCHEDULE 8 SCHEDULE OF RENTAL PAYMENTS BASE RENT SCHEDULE
Additional Revised Original Tenant Rental Rental Improvement Rate Per Annual Monthly Year Rate Amortization Sq. Ft. Rent Rent - ---- --------- ------------ -------- ------------- ----------- 1 $18.00 $2.03 $20.03 $105,417.89 $8,784.82 2 18.36 2.03 20.39 107,312.57 8,942.71 3 18.91 2.03 20.94 110,207.22 9,183.94 4 19.67 2.03 21.70 114,207.10 9,517.26 5 20.45 2.03 22.48 118,312.24 9,859.35
3. The remaining terms and conditions of the Lease shall remain unaltered except as otherwise set forth above. This Addendum is executed as of the date first written above. WITNESS: LANDLORD: __________________________________ RICHARD L. KUSS, TRUSTEE UNDER AGREEMENT DATED APRIL 1, 1965 __________________________________ BY____________________________ Trustee Signatory WITNESS: TENANT: __________________________________ RANDERS ENGINEERING, INC. __________________________________ BY____________________________ ITS___________________________ -58- 3 ACKNOWLEDGEMENTS STATE OF OHIO : ss. COUNTY OF CLARK: The signing of the above Addendum to Lease was acknowedged before me this _____ day of ________________, 1996, by Richard L. Kuss, Trustee under Agreement dated April 1, 1965. ____________________________ Notary Public STATE OF MICHIGAN : ss. COUNTY OF _________ : The signing of the above Addendum to Lease was acknowledged before me this ______ day of _________________, 1996, by Thomas R. Eurich, as President of Randers Engineering, Inc., a Michigan corporation. ____________________________ Notary Public This Instrument Prepared by: Walter A. Wildman Martin, Browne, Hull & Harper One South Limestone Street, 8th Floor P.O. Box 1488 Springfield, Ohio 45501 Telephone (513) 324-5541 Telecopier (513) 325-5432 -59- EX-11 4 COMPUTATION OF EARNINGS 1 EXHIBIT 11 THE RANDERS GROUP INCORPORATED EXHIBIT 6(a)-1 Statement Regarding Computation of Earnings (Loss) Per Share Primary Earnings Per Share Net income per share is computed on the basis of the weighted average number of common and dilutive common equivalent shares outstanding during each period. The number of shares used in computing net income per share for each of the periods included herein are as follows:
Weighted Average Weighted Average Number of Dilutive Number of Common Common Equivalent Shares Outstanding Shares Outstanding Total ------------------ ------------------ -------------- Three Months Ended September 30, 1996 14,115,682 -- 14,115,682 September 30, 1995 14,115,682 -- 14,115,682 Nine Months Ended September 30, 1996 14,115,682 -- 14,115,682 September 30, 1995 14,115,682 -- 14,115,682
Common equivalent shares, calculated using the treasury stock method, including shares issuable under the Company's stock option plan. Common equivalent shares are not used in computing net income (loss) per share as they would be antidilutive when a loss exists or because they are not considered dilutive as the effect on earnings per share data would be less than three percent. -60- EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statement of The Randers Group Incorporated for the nine months ended September 30, 1996, and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 645,012 0 2,828,936 81,000 0 3,564,668 3,978,722 1,372,858 7,592,142 2,321,849 0 0 0 1,412 4,275,076 7,592,142 1,046,688 8,691,880 931,457 6,229,408 1,335,909 0 141,164 1,073,664 402,000 671,664 0 0 0 671,664 .05 .05
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