-----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, AQdtninzrUUUbqk98UFVype3JBvBQkOm3Hnj9+ZaMMhltI82UQL0eZ8/TMJE6DIw ejkN9kxq5MYlp0W7zdeB7w== 0000950116-03-004541.txt : 20031114 0000950116-03-004541.hdr.sgml : 20031114 20031114164651 ACCESSION NUMBER: 0000950116-03-004541 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000096988 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 221825970 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07708 FILM NUMBER: 031005385 BUSINESS ADDRESS: STREET 1: 2828 CHARTER RD STE 101 CITY: PHILADELPHIA STATE: PA ZIP: 19154 BUSINESS PHONE: 2156766900 MAIL ADDRESS: STREET 1: 2828 CHARTER RD CITY: PHILADELPHIA STATE: PA ZIP: 19154 FORMER COMPANY: FORMER CONFORMED NAME: TELESCIENCES INC DATE OF NAME CHANGE: 19880201 10-Q 1 ten-q.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to_______ Commission file number 1-7708 MARLTON TECHNOLOGIES, INC. ----------------------------------------------- (Exact name of issuer as specified in its charter)
Pennsylvania 22-1825970 - ----------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 2828 Charter Road Philadelphia PA 19154 - ----------------------------------------------------------------------------------------------------- (Address of principal executive offices) City State Zip
Issuer's telephone number (215) 676-6900 -------------- Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------------------- ------------------- Check whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X ---------------------- ------------------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court Yes No ---------------------- ------------------- APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common stock as of the last practicable date: 12,845,096 Item 1. FINANCIAL STATEMENTS MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except share data)
September 30, December 31, ASSETS 2003 2002 ------ ------ Current: Cash and cash equivalents $ 315 $ 880 Accounts receivable, net of allowance of $333 and $309, respectively 6,991 8,083 Inventory 6,366 5,723 Prepaids and other current assets 1,669 1,042 -------- -------- Total current assets 15,341 15,728 Investment in affiliates 279 259 Property and equipment, net of accumulated depreciation of $10,195 and $9,168, respectively 3,707 3,929 Rental assets, net of accumulated depreciation of $3,490 and $3,200, respectively 2,782 2,535 Goodwill 2,714 2,714 Other assets, net of accumulated amortization of $1,518 and $1,349, respectively 489 211 Notes receivable 154 233 -------- -------- Total assets $ 25,466 $ 25,609 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 5,603 $ 128 Accounts payable 4,894 4,509 Accrued expenses and other 6,485 7,630 -------- -------- Total current liabilities 16,982 12,267 -------- -------- Long-term debt, net of current portion 271 4,000 -------- -------- Total liabilities $ 17,253 $ 16,267 Commitments and contingencies -- -- Minority interest 76 -- Stockholders/ equity: Preferred stock, no par value - shares authorized 10,000,000; no shares issued or outstanding -- -- Common stock, no par value - shares authorized 50,000,000; 12,993,499 issued at September 30, 2003 and at December 31, 2002 -- -- Stock warrants 742 742 Additional paid-in capital 32,951 32,951 Accumulated deficit (25,409) (24,204) -------- -------- 8,284 9,489 Less cost of 148,403 treasury shares at September 30, 2003 and at December 31, 2002 (147) (147) -------- -------- Total stockholders' equity 8,137 9,342 -------- -------- Total liabilities and stockholders' equity $ 25,466 $ 25,609 ======== ========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 2 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except per share data)
For the three months ended For the nine months ended September 30, September 30, September 30, September 30, 2003 2002 2003 2002 -------- -------- -------- -------- Sales $ 12,626 $ 15,204 $ 49,946 $ 53,419 Cost of sales 10,400 12,576 38,711 42,299 -------- -------- -------- -------- Gross profit 2,226 2,628 11,235 11,120 Selling expenses 1,818 1,814 6,353 6,192 Administrative and general expenses 1,627 1,395 5,288 5,115 Restructuring and other expenses 1,114 - 1,114 - -------- -------- -------- -------- Operating loss (2,333) (581) (1,520) (187) Other income (expense): Interest income and other income 3 1 12 38 Interest expense (58) (124) (169) (346) Income from investments in affiliates 20 - 20 (1,156) Minority interest 19 - 19 - -------- -------- -------- -------- Loss before income taxes and change in accounting principle (2,349) (704) (1,638) (1,651) Provision for (benefit from) income taxes (433) (239) (433) 52 -------- -------- -------- -------- Net loss before change in accounting principle (1,916) (465) (1,205) (1,703) Cumulative effect of change in accounting principle, net of tax benefit - - - (12,385) -------- -------- -------- -------- Net loss $ (1,916) $ (465) $ (1,205) $(14,088) ======== ======== ======== ======== Loss per common share before change in accounting principle: Basic $ (0.15) $ (0.04) $ (0.09) $ (0.13) ======== ======== ======== ======== Diluted $ (0.14) $ (0.04) $ (0.09) $ (0.13) ======== ======== ======== ======== Loss per common share after change in accounting principle: Basic $ (0.15) $ (0.04) $ (0.09) $ (1.08) ======== ======== ======== ======== Diluted $ (0.14) $ (0.04) $ (0.09) $ (1.08) ======== ======== ======== ========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 3 MARLTON TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the nine months ended September 30, 2003 2002 -------- --------- Cash flows from operating activities: Net loss $ (1,205) $ (14,088) Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 1,486 1,614 (Income) loss from investment in affiliates (20) 1,156 Cumulative effect of change in accounting principle - 12,385 Non-cash compensation and other operating items - 191 Change in assets and liabilities, net of businesses acquired: Receivables, net 1,092 206 Inventories (643) 1,471 Prepaid and other assets (627) (132) Notes and other receivables (240) 383 Accounts payable, accrued expenses and other (760) (551) -------- --------- Net cash provided by operating activities (917) 2,635 -------- --------- Cash flows from investing activities: Capital expenditures (620) (985) Acquistion of business, net of cash acquired (384) - -------- --------- Net cash used in investing activities (1,004) (985) -------- --------- Cash flows from financing activities: Principal (payments for) proceeds from revolving credit facility 1,500 (2,000) Payments for loan origination fees (50) (50) Payments for promissory note (113) (113) Acquisition of minority interest 19 - -------- --------- Net cash (used in) provided by financing activities 1,356 (2,163) -------- --------- Decrease in cash and cash equivalents (565) (513) Cash and cash equivalents - beginning of period 880 1,233 -------- --------- Cash and cash equivalents - end of period $ 315 $ 720 ======== =========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 4 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION: The consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The financial statements reflect all adjustments (of a normal and recurring nature), which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the quarter are not necessarily indicative of the results that may be expected for the full year or for future periods. These financial statements should be read in conjunction with the Annual Report to Shareholders and Form 10-K for the year ended December 31, 2002. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates. 2. ACQUISITION AND RESTRUCTURING COSTS: On August 1, 2003, a Company subsidiary acquired the assets of Exhibit Crafts, Inc., a Los Angeles, CA area manufacturer of trade show exhibits and a 20% interest in International Exposition Services, Inc., (IES), a trade show shipping and installation provider. The initial purchase price was $694,000, including the assumption of certain liabilities totaling $310,000. In addition, the sellers received 20% of the subsidiary's common stock. The purchase price approximated the fair value of the net assets acquired. In addition, the asset purchase agreement provides for contingent payments of up to $750,000 based on operating performance in 2004, 2005 and 2006. The Company relocated its San Diego area manufacturing facility to the newly acquired Los Angeles, CA area facility during the third quarter of 2003. Costs incurred in connection with this relocation and consolidation were approximately $1.1 million, which included relocation and employee termination expenses and the Company recorded a charge for a portion of the remaining lease obligation related to the vacated San Diego area facility. 3. MAJOR CUSTOMERS: During the third quarter and first nine months of 2003, one customer accounted for 24% and 18%, respectively, of the Company's total net sales. During the third quarter and first nine months of 2002, this customer accounted for 30% and 24%, respectively, of the Company's total net sales. 4. DEBT: As of September 30, 2003, the Company was not in compliance with the minimum tangible net worth and fixed charge coverage ratio covenants under its Second Amended and Restated Revolving Credit and Security Agreement dated as of May 16, 2002 with Wachovia Bank, NA, as amended on March 11, 2003. At September 30, 2003, $5.5 million was outstanding under this $8 million revolving credit facility. Wachovia Bank has waived this financial covenant non-compliance as of September 30, 2003 under the facility agreements. The Company has received and accepted a commitment letter from another financial institution for a three year $12 million revolving credit facility, with a closing required by January 14, 2004. While there can be no assurance that this new commitment will result in a replacement revolving credit facility, the Company is working diligently to accomplish this replacement financing. 5 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIL STATEMENTS (UNAUDITED) 5. PER SHARE DATA: The following table sets forth the computation of basic and diluted net income per common share (in thousands except per share data):
Three months ended Nine months ended -------------------------- ----------------------- September September September September 30, 2003 30, 2002 30, 2003 30, 2002 --------- --------- --------- --------- Net loss before change in accounting principle $(1,916) $(465) $(1,205) $ (1,703) ======= ===== ======= ======== Net loss after change in accounting principle $(1,916) $(465) $(1,205) $(14,088) ======= ===== ======= ======== Weighted average common shares outstanding used to compute basic net income per common share 12,845 12,988 12,845 12,988 Additional common shares to be issued assuming the exercise of stock options, net of shares assumed reacquired 1,163 -- 1,163 -- ------- ------ ------ ------ Total shares used to compute diluted net income per common share 14,008 12,988 14,008 12,988 ======= ====== ====== ====== Before change in accounting principle: Basic net loss per share $(.15) $(.04) $(.09) $(.13) ===== ===== ===== ===== Diluted net loss per share $(.14) $(.04) $(.09) $(.13) ===== ===== ===== ===== After change in accounting principle: Basic net loss per share $(.15) $(.04) $(.09) $(1.08) ===== ===== ===== ====== Diluted net loss per share $(.14) $(.04) $(.09) $(1.08) ===== ===== ===== ======
Excluded in the computation of diluted income per common share were options and warrants to purchase 336,000 and 7,400,000 shares of common stock, which were outstanding at September 30, 2003 and 2002, respectively, because the option and warrant exercise prices were greater than the market price of the common shares. 6. INVENTORIES: Inventories, as of the respective dates, consists of the following (in thousands): September 30, 2003 December 31, 2002 ------------------ ----------------- Raw materials $ 682 $ 373 Work in process 3,652 4,400 Finished goods 2,032 950 ------ ------ $6,366 $5,723 ====== ====== 7. INVESTMENTS IN AFFILIATES: The Company recorded an impairment loss of $1.2 million for its investment in a portable trade show exhibit manufacturer in the first quarter of 2002. No income tax benefit was recorded in connection with this capital loss. 6 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIL STATEMENTS (UNAUDITED) During the first quarter of 2002 the Company also recorded a valuation allowance of $191,000 against a deferred tax asset associated with a capital loss, which resulted from the write-off of an investment in an affiliate located in the United Kingdom. Management has concluded that the Company will most likely not generate capital gains in the next two years that would be sufficient to realize the tax benefit from this capital loss. 8. CHANGE IN ACCOUNTING PRINCIPLE (ADOPTION OF SFAS NO. 142): Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which eliminates amortization of these assets and requires annual testing for impairment. The Company's reporting units for purposes of applying the provisions of SFAS 142 are the DMS Store Fixtures business ("DMS") and the Sparks Exhibits & Environments businesses ("Sparks"). SFAS 142 requires a comparison of the reporting unit's fair value, which is determined based on discounted cash flows, to its carrying value to determine potential impairment. If the fair value is less than the carrying value, an impairment loss is recognized. The Company recorded an impairment loss of $12.4 million in the first quarter of 2002 in connection with the adoption of SFAS 142. 9. RECENTLY ISSUED ACCOUNTING STANDARDS: In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations (see Note 2). In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46") FIN 46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The initial recognition provisions of FIN 46 are applicable immediately to new variable interests in variable interest entities created after January 31, 2003. For a variable interest in a variable interest entity created before February 1, 2003, the initial recognition provisions of FIN 46 are to be implemented no later than the beginning of the first interim or annual reporting period beginning after December 15, 2003. The Company will continue to evaluate the impact of FIN 46 on its financial statements. In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 addresses the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The Company will continue to evaluate the impact of SFAS 150 on its financial statements. 10. TERMINATED MERGER AGREEMENT: The Company and Redwood Acquisition Corp.("Redwood") entered into a merger agreement in February 2003 pursuant to which all of the outstanding shares of common stock of the Company (other than the shares held by approximately eight shareholders) would be converted into the right to receive $0.30 per share. On June 19, 2003, the Company's Board of Directors approved a termination proposal submitted by Redwood, which terminated the proposed merger agreement with Redwood. Costs of approximately $250,000 incurred in connection with this proposed merger agreement were charged to administrative and general expenses in the second and third quarters of 2003. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three and nine month periods ended September 30, 2003 and 2002. Sales
Three Months Ended (In thousands) September 30, September 30, 2003 2002 % Inc./(Dec.) ------------- ------------- ------------- Trade show exhibits group $ 5,263 $ 6,575 (20)% Permanent and scenic displays group 7,363 8,629 (15) ------- ------- --- Total sales $12,626 $15,204 (17)% ======= ======= === Nine Months Ended (In thousands) September 30, September 30, 2003 2002 % Inc./(Dec.) ------------- ------------- ------------- Trade show exhibits group $30,964 $31,914 (3)% Permanent and scenic displays group 18,982 21,505 (12) ------- ------- --- Total sales $49,946 $53,419 (7)% ======= ======= ===
Total net sales of $12.6 million for the third quarter of 2003 decreased 17% below the third quarter of 2002, and total net sales of $49.9 million for the first nine months of 2003 decreased 7% from the same prior year period. The third quarter decrease was attributable to lower sales of trade show exhibits, which decreased 20%, and lower sales of permanent and scenic displays (store fixtures and permanent museum exhibits), which decreased 15%. Lower sales of trade show exhibits and related services were primarily due to reductions in certain customers' trade show marketing budgets, which led to cancelled participation in trade shows that these customers attended in the past. These marketing budget reductions also resulted in lower new trade show exhibit construction. The sales decreases for permanent and scenic displays were largely due to lower sales of store fixtures. Gross Profit Gross profit, as a percentage of net sales, increased to 17.6% and 22.5% for the third quarter and first nine months of 2003, respectively, from 17.3% and 20.8% in the corresponding 2002 periods. These improvements were due, in large part, to higher gross profit margins generated from sales of store fixtures as well as to cost reduction and profit improvement initiatives implemented in the second half of 2002. Management continues to pursue cost reduction initiatives, including operational improvements and staff reductions, to offset the impact of lower sales volume. Selling Expenses Selling expenses increased to 14.4% and 12.7% of net sales in the third quarter and first nine months of 2003, respectively, from 11.9% and 11.6% in the comparable periods of 2002. These increases were principally attributable to the unfavorable impact of lower sales volume as compared with certain fixed selling expenses such as sales office and salary expenses. Management has taken further staff and cost reduction steps in response to the lower sales volume in the fourth quarter of 2003. 8 Administrative and general expenses Administrative and general expenses increased to $1.6 million and $5.3 million in the third quarter and first nine months of 2003, respectively, from $1.4 million and $5.1 million in the same periods of 2002. The third quarter increase was attributable to several factors, including higher business insurance costs, integration costs to consolidate the Company's West Coast operations and higher telecommunications costs. The increase for the first nine months of 2003 was largely due to these third quarter factors as well as to costs incurred in connection with the terminated merger transaction (See Note 9.). In the fourth quarter of 2003, management has implemented executive compensation reductions, staff reductions and further cost cutting initiatives in response to the lower sales volume. Acquisition and restructuring costs On August 1, 2003, a Company subsidiary acquired the assets of Exhibit Crafts, Inc., a Los Angeles, CA area manufacturer of trade show exhibits and a 20% interest in International Exposition Services, Inc., (IES), a trade show shipping and installation provider. The initial purchase price was $694,000, including the assumption of certain liabilities totaling $310,000. In addition, the sellers received 20% of the subsidiary's common stock. The purchase price approximated the fair value of the net assets acquired. In addition, the asset purchase agreement provides for contingent payments of up to $750,000 based on operating performance in 2004, 2005 and 2006. The Company relocated its San Diego area manufacturing facility to the Los Angeles, CA area facility during the third quarter of 2003. Costs incurred in connection with this relocation and consolidation were approximately $1.1 million, which included relocation and employee termination expenses and the Company recorded a charge for a portion of the remaining lease obligation related to the vacated San Diego area facility. Operating profit (loss) An operating loss of $2.3 million was incurred in the third quarter of 2003 as compared with an operating loss of $0.6 million in the third quarter of 2002. For the first nine months of 2003 the operating loss increased to $1.5 million from $0.2 million in the same prior year period. The increase in operating losses was primarily due to lower sales and the restructuring charge recognized in the third quarter of 2003. Other income/(expense) A loss of $1.2 million from investments in affiliates was recorded in the first quarter of 2002 to write down the Company's investment in a portable trade show exhibit manufacturer. Benefit from income taxes In the third quarter of 2003, the Company recognized the benefit of an expected income tax refund for $0.4 million related to a net operating loss carry back. In the fourth quarter of 2002, the Company established a valuation allowance for deferred income tax assets. As a result, the Company did not record an income tax benefit from the current period pre-tax loss. The Company established a valuation allowance for the income tax benefit from the $1.2 million write down of investments in affiliates recorded in the first quarter of 2002 because this capital loss is not expected to be offset by capital gains within the required statutory period. The provision for income taxes recorded in the first quarter of 2002 also included a valuation allowance of $191,000 related to a 1999 capital loss incurred in connection with the Company's investment in a United Kingdom affiliate. 9 Cumulative effect of change in accounting principle Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which eliminates amortization of these assets and requires annual testing for impairment. The Company's reporting units for purposes of applying the provisions of SFAS 142 are the DMS Store Fixtures business ("DMS") and the Sparks Exhibits & Environments businesses ("Sparks"). SFAS 142 requires a comparison of the reporting unit's fair value, which is determined based on discounted cash flows, to its carrying value to determine potential impairment. If the fair value is less than the carrying value, an impairment loss is recognized. The Company recorded an impairment loss of $12.4 million in the first quarter of 2002 in connection with the adoption of SFAS 142. Backlog The Company's backlog of orders was approximately $16 million at September 30, 2003 and $17 million at September 30, 2002. LIQUIDITY AND CAPITAL RESOURCES The Company had borrowings of $5.5 million at September 30, 2003 from its revolving credit facility, which expires May 16, 2004. These borrowings were classified as the current portion of long term, which caused the Company's total liabilities of $17.3 million to exceed its current assets of $15.3 million at the end of the third quarter of 2003. As of September 30, 2003, the Company was not in compliance with the minimum tangible net worth and fixed charge coverage ratio covenants under its Second Amended and Restated Revolving Credit and Security Agreement dated as of May 16, 2002 with Wachovia Bank, NA, as amended on March 11, 2003. At September 30, 2003, $5.5 million was outstanding under this $8 million revolving credit facility. Wachovia Bank has waived this financial covenant non-compliance as of September 30, 2003 under the facility agreements. The Company has received and accepted a commitment letter from another financial institution for a three year $12 million revolving credit facility, with a closing required by January 14, 2004. While there can be no assurance that this new commitment will result in a replacement revolving credit facility, the Company is working diligently to accomplish this replacement financing. The Company has lease commitments for several facilities under non-cancelable operating leases. Timing of future lease commitments as well as maturities of long-term debt is as follows:
(In thousands) 2003 2004 2005 2006 2007 After 2007 ---- ---- ---- ---- ---- ---------- Lease commitments $640 $2,507 $2,462 $1,914 $1,165 $1,060 Debt maturities 86 5,589 89 78 32 --
The Company leases a facility from a partnership controlled by two shareholders of the Company. This lease, which expires on May 14, 2019, requires minimum annual rent of $771,000 at a fixed rate for the first 10 years, and the Company is responsible for taxes, insurance and other operating expenses. The Company has the option to terminate this lease in 2009 subject to the landlord's ability to relet or sell the premises at minimum specified values. 10 OUTLOOK The Company expects sales to decrease in the remainder of 2003 and in 2004 from 2002 levels. The Company's trade show exhibit client base of Fortune 1000 companies is expected to closely manage their marketing expense budgets, which would inhibit trade show exhibit sales and profit margins. The Company continues to pursue new sales opportunities while implementing cost reduction initiatives, including executive compensation reductions and staff reductions, to mitigate the impact of lower sales volume. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations (see Note 2). In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46") FIN 46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The initial recognition provisions of FIN 46 are applicable immediately to new variable interests in variable interest entities created after January 31, 2003. For a variable interest in a variable interest entity created before February 1, 2003, the initial recognition provisions of FIN 46 are to be implemented no later than the beginning of the first interim or annual reporting period beginning after December 15, 2003. The Company will continue to evaluate the impact of FIN 46 on its financial statements. In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 addresses the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The Company will continue to evaluate the impact of SFAS 150 on its financial statements. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. When used in this report, the words "intends," "believes," "plans," "expects," "anticipates," "probable," "could" and similar words are used to identify these forward looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause the Company's actual results to differ materially from those included in such forward-looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: the Company's ability to identify and enter new markets, to maintain and expand existing business; continued availability of financing to provide additional sources of funding for capital expenditures, working capital and investments; the effects of competition on products and pricing; growth and acceptance of new product lines through the Company's sales and marketing programs; changes in material and labor prices from suppliers; changes in customers' financial condition; the Company's ability to attract and retain competent employees; the Company's ability to add and retain customers; changes in sales mix; the Company's ability to integrate and upgrade technology; uncertainties regarding accidents or litigation which may arise; the financial impact of facilities consolidations; the Company's ability to sublet or terminate leases for vacated facilities; uncertainties about the threat of future terrorist attacks on business travel and related trade show attendance; and the effects of, and changes in the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations as well as fluctuations in interest rates, both on a national and international basis. 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility bears a floating rate of interest, based on LIBOR rates, plus an applicable spread. Fluctuations in foreign currency exchange rates do not significantly affect the Company's financial position and results of operations. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures The Company established a Disclosure Committee chaired by the Company's Chief Financial Officer and comprised of managers representing the Company's major areas, including financial reporting and control, sales, operations and information technology. This Committee carried out an evaluation of the effectiveness and operation of the Company's disclosure controls and procedures, and established ongoing procedures to monitor and evaluate these controls and procedures in the future. Based upon that evaluation, within the 90 days prior to the date of this report, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls There were no significant changes in the Company's internal controls or in other factors that would significantly affect these controls subsequent to the date of their evaluation. 12 PART II - OTHER INFORMATION Responses to Items 1, 2, 3, 4 and 5 are omitted since these items are either inapplicable or the response thereto would be negative. 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit Page ------------ (2)(a) Agreement and Plan of Merger By and Between Redwood Acquisition Corp. and the Company dated as of February 20, 2003 (Incorporated by reference to the Company's February 26, 2003 Preliminary Proxy Statement, filed with the Commission). (2)(b) Agreement and Plan of Merger of the Company (Incorporated by reference to the Company's Proxy Statement dated September 27, 2001, filed with the Commission). (3)(i) Articles of Incorporation of the Company (Incorporated by reference to the Company's Proxy Statement dated September 27, 2001, filed with the Commission). 3(ii) Amended and Restated By-laws of the Company (Incorporated by reference to Exhibit 3(ii)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, filed with the Commission). 10(a) Amended and Restated Employment Agreement dated November 20, 2001 between the Company and Robert B. Ginsburg (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10(b) Employment Agreement dated 11/20/01 between the Company and Jeffrey K. Harrow (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10(c) Employment Agreement dated 11/20/01 between the Company and Scott Tarte (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10(d) Subscription Agreement dated 8/23/01 among Scott Tarte, Jeffrey K. Harrow and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). 10(e) Subscription Agreement dated 8/23/01 among Robert B. Ginsburg, Alan I. Goldberg and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). 10(f) Form of Warrants issued by the Company to Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg and Alan I. Goldberg on 11/20/01 (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). Schedule of grants (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission). 10(g) Stockholders' Agreement date 11/20/01 among Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).
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10(h) Registration Rights Agreement dated 11/20/01 among Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg, Alan I. Goldberg and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). 10(i) Amended Agreement of Employment, dated December 11, 1992, between the Company and Alan I. Goldberg (Incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, filed with the Commission).* 10(j) Letter Agreement dated January 2, 1998 to Amended Employment Agreement with Alan I. Goldberg (Incorporated by reference to Exhibit 7(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with the Commission).* 10(k) Letter Agreement dated 11/20/01 to Amended Employment Agreement with Alan I. Goldberg. (Incorporated by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10(l) Employment Agreement dated November 24, 1999 with Stephen P. Rolf (Incorporated by reference to Exhibit 10(l) to the Company Annual Report of Form 10-K for the year ended December 31, 1999, filed with the Commission).* 10(m) Option Agreement dated January 10, 2000 with Stephen P. Rolf (Incorporated by reference to Exhibit 10(x) to the Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the Commission).* 10(n) Option Cancellation Agreement dated November 20, 2001 among Robert B. Ginsburg, Alan I. Goldberg and the Company (Incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10(o) Option Agreements with Outside Directors (Incorporated by reference to Company Proxy Statement dated April 30, 1999, filed with the Commission).* 10(p) Option Agreements dated August 7, 2000 with Outside Directors (Incorporated by reference to Exhibit 10(x) to the Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the Commission).* 10(q) Option Agreements dated March 1, 2002 with Outside Directors (Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10(r) 2000 Equity Incentive Plan (Incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10(s) 2001 Equity Incentive Plan (Incorporated by reference to Exhibit 10(ee) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, filed with the Commission).*
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10(t) Lease for Premises located at 2828 Charter Road, Philadelphia, PA dated May 14, 1999 (Incorporated by reference to Exhibit 10(f) to the Company Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission). 10(u) Amendment to Lease 2828 Charter Road, Philadelphia, PA dated February 25, 2000 (Incorporated by reference to Exhibit 10(g) to the Company Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission). 10(v) Lease for Premises located at 8125 Troon Circle, Austell, GA 30001 (Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, filed with the Commission). 10(w) Lease Agreement dated June 29, 1998 between Gillespie Field Partners, LLC and Sparks Exhibits, Ltd. (Incorporated by reference to Exhibit 7(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, filed with the Commission). 10(x) Second Amended and Restated Revolving Credit and Security Agreement dated as of May 16, 2002 with Wachovia Bank, NA, (Incorporated by reference to Exhibit 10(bb) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the Commission). 10(y) Amendment to Second Amended and Restated Revolving Credit and Security Agreement dated March 11, 2003 with Wachovia Bank, NA (Incorporated by reference to the Company's Annual Report on Form10-K for the year ended December 31, 2002, filed with the Commission). 10(z) Option Agreement dated June 3, 2002 with Robert B. Ginsburg (Incorporated by reference to Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the Commission).* 10(aa) Option Agreement dated June 3, 2002 with Alan I. Goldberg (Incorporated by reference to Exhibit 10(dd) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the Commission).* 10(bb) Option Agreement dated October 23, 2002 with Washburn Oberwager (Incorporated by reference to Exhibit 10ee) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, filed with the Commission).* 10(cc) Fourth Amendment to Lease Agreement dated September 11, 2003 for premises located at 8125 Troon Circle, Austell, GA 30001. 19 --------------- 10(dd) Sublease Agreement with Bradco International for premises located at 2025 Gillespie Way, El Cajon, CA 92020. 26 --------------- 10(ee) First Amendment to Lease Agreement dated October 31, 2003 for premises located at 2025 Gillespie Way, El Cajon, CA 92020. 38 --------------- 10(ff) Lease Agreement, First and Second Amendments for premises located at Building J, 10232 Palm Drive, Santa Fe Springs, CA 90670. 44 ---------------
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10(gg) Lease Agreement, First and Second Amendments for premises located at Building G, Heritage Springs Business Park, Santa Fe Springs. 50 --------------- 21 Subsidiaries of the Company (Incorporated by reference to Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Commission). 31 Section 1350 Certification 55 --------------- 32(a) Rule 13A - 14(a) / 15d - 14(a) Certifications, Chief Executive Officer 56 --------------- 32(b) Rule 13A - 14(a) / 15d - 14(a) Certifications, Chief Financial Officer 57 ---------------
*Management contract or compensatory plan or arrangement. (b) No reports on Form 8-K were filed during the quarter for which this report is filed. 17 SIGNATURES In accordance with 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. MARLTON TECHNOLOGIES, INC. /s/ Robert B. Ginsburg - ------------------------------------- Robert B. Ginsburg President and Chief Executive Officer /s/ Stephen P. Rolf - ----------------------- Stephen P. Rolf Chief Financial Officer Dated: November 14, 2003 18 EX-10 3 ex10-cc.txt EXHIBIT 10.CC Exhibit 10(cc) FOURTH AMENDMENT TO LEASE AGREEMENT THIS FOURTH AMENDMENT TO LEASE AGREEMENT (the "Fourth Amendment") is made and entered into as of the 11th day of September, 2003 (the "Effective Date"), by and between SOUTHEAST COMMERCIAL, LLC, a Delaware limited liability company ("Landlord"), and SPARKS EXHIBITS & ENVIRONMENTS, INC., a Georgia corporation ("Tenant"). W I T N E S S E T H: WHEREAS, Woodlands Joint Venture No. V534-3, as landlord, and Sparks Exhibits Inc., as tenant, entered into that certain Lease Agreement dated August 12, 1993, as amended by that certain First Amendment to Lease Agreement dated December 8, 1997, as further amended by that certain Second Amendment to Lease Agreement (the "Second Amendment") dated March 30, 2000, and as further amended by that certain Third Amendment to Lease (the "Third Amendment") dated July, ___, 2002 (as so amended, the "Lease") with respect to approximately 80,876 rentable square feet of space (the "8125 Space") located in Suite B of the building having an address of 8125 Troon Circle, Austell, Georgia 30168 (the "8125 Building") and located within that certain development known as Woodlands at Riverside (the "Project"), and approximately 17,200 rentable square feet of space (the "8055 Space") located in Suite A of the building having an address of 8055 Troon Circle, Austell, Georgia 30168 (the "8055 Building") and located within the Project (the 8125 Space and the 8055 Space are sometimes collectively referred to as the "Premises"); and WHEREAS, Landlord is the successor in interest to Woodlands Joint Venture No. V534-3, and is now the landlord under the Lease; and WHEREAS, Tenant is the successor in interest to Sparks Exhibits Inc., and is now the tenant under the Lease; and WHEREAS, Sparks Exhibits Corporation, a Pennsylvania corporation ("Guarantor"), guaranteed the full and timely performance by Tenant of all of the obligations and liabilities of Tenant under the Lease pursuant to that certain Guarantee of Lessee's Obligations attached to the Lease; and WHEREAS, Landlord has agreed to release Guarantor from its obligations and liabilities arising under the Lease from and after the Effective Date; and WHEREAS, Suite 8055 contains approximately 17,200 rentable square feet of space, provided, however, pursuant to the Third Amendment Tenant is paying base rental on Suite 8055 as if Suite 8055 contained 5,000 rentable square feet; and WHEREAS, Tenant's pro rata share of operating expenses and other expenses pursuant to the Lease for Suite 8055 is calculated based on 5,000 rentable square feet of space; and WHEREAS, the term of the Lease is scheduled to expire on September 30, 2003; and WHEREAS, the 8055 Space is one and the same as the "8055A Space", as defined in the Third Amendment and the 8055 Building is one and the same as the "8055A Building" as defined in the Third Amendment; and WHEREAS, Landlord and Tenant desire to enter into this Fourth Amendment for the purpose of evidencing their mutual understanding and agreement regarding the extension of the term of the Lease and certain other matters relating thereto as set forth hereinbelow. 19 NOW, THEREFORE, in consideration of the foregoing and the mutual premises and covenants contained herein and in the Lease, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Defined Terms. All terms used herein and denoted by their initial capitalization shall have the meanings set forth in the Lease unless set forth herein to the contrary. 2. Extension of Term. Effective immediately, Landlord and Tenant hereby extend the term of the Lease for the Premises for an additional forty-five (45) month period, commencing on October 1, 2003 (the "Extended Term Commencement Date"), and ending on June 30, 2007, unless sooner terminated in accordance with the terms of the Lease. That period commencing on the Extended Term Commencement Date and continuing to and through June 30, 2007, is herein sometimes referred to as the "Extended Term". Tenant leases the Premises during the Extended Term on the same terms and conditions presently set forth in the Lease, except as otherwise set forth herein to the contrary; provided, however, Tenant shall receive no concessions or allowances on account of extending the term of the Lease. 3. Base Rental. (a) From and after the Extended Term Commencement Date to and through the expiration of the Extended Term, Tenant shall pay to Landlord base rental ("Base Rental") for the 8125 Space, on the first day of each month without demand, counter-claim or set-off in accordance with the following schedule: Dates PSF Annual Rental Monthly Rental - ----- --- ------------- -------------- 10/01/03 - 12/31/03 $0.00 $0.00 $0.00 01/01/04 - 09/30/05 $2.65 $214,321.44 $17,860.12 10/01/05 - 09/30/06 $2.70 $218,365.20 $18,197.10 10/01/06 - 06/30/07 $2.75 $222,408.96 $18,534.08 (b) From and after the Extended Term Commencement Date to and through December 31, 2004, Tenant shall pay to Landlord Base Rental for the 8055 Space, as if the 8055 Space only contained 5,000 rentable square feet of space. Thereafter, Tenant shall pay to Landlord Base Rental for the 8055 Space based upon the actual square footage of the 8055 Space which is 17,200 rentable square feet of space. Tenant shall pay such Base Rent for the 8055 Space on the first day of each month without demand, counter-claim or set-off in accordance with the following schedule: Dates PSF Annual Rental Monthly Rental - ----- --- ------------- -------------- 10/01/03 - 12/31/04 $2.00 $10,000.00 $ 833.33 01/01/05 - 12/31/05 $2.00 $34,400.00 $2,866.67 01/01/06 - 12/31/06 $2.04 $35,088.00 $2,924.00 01/01/07 - 12/31/07 $2.08 $35,776.00 $2,981.33 4. Operating Expenses. (a) Notwithstanding anything to the contrary in the Lease, as amended hereby, effective as of the Extended Term Commencement, Section 3(e) of the Lease shall be of no further force and effect. Commencing on the Extended Term Commencement Date, Tenant shall pay Landlord in accordance with the terms and conditions set forth herein, throughout the Extended Term, as additional rental, Tenant's pro rata share of the amount by which the amount of operating expenses (as defined in Section 3(f) of the Lease) with respect to any given calendar year exceed $0.15 per square foot. Prior to or promptly after the beginning of each calendar year during the Extended Term, Landlord shall estimate the total amount of operating expenses to be paid by Tenant during such calendar year, and Tenant shall pay to Landlord one-twelfth (1/12) of such sum on the first day of each calendar month during each such calendar year, or part thereof, during the Extended Term. Within a reasonable time after the end of each calendar year, Landlord shall submit to Tenant a statement of the actual amount of operating expenses for such calendar year, and the actual amount owed by Tenant, and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year, or in the event of overpayment, Landlord shall either, at Landlord's option, credit the amount of such overpayment toward the next installment of operating expenses and/or Base Rental owed by Tenant or refund such overpayment to Tenant; provided, however, any overage due Tenant during the last year of the Extended Term shall be refunded to Tenant. The obligations in 20 the immediately preceding sentence shall survive the expiration or any earlier termination of the Lease. If Tenant does not notify Landlord of any objection to Landlord's year-end statement within thirty (30) days of Landlord's delivery thereof, Tenant shall be deemed to have accepted such statement as true and correct and shall be deemed to have waived any right to dispute the excess operating expenses due pursuant to that statement. If the Extended Term Commencement Date shall fall on other than the first day of the calendar year, and/or if the last day of the Extended Term shall fall on other than the last day of the calendar year, Tenant's proportionate share of the operating expenses for such calendar year shall be apportioned prorata. The obligation to pay such additional rental amounts shall survive the termination of the Lease, as amended hereby. For all purposes of the Lease, as amended hereby, the term "Pro Rata Share" shall mean (i) with respect to the 8125 Space, the ratio of the total floor area of the 8125 Space to the total floor area of the 8125 Building or the Project, as applicable (and consistent with historic practice of allocating operating expenses under the Lease), and (ii) with respect to the 8055 Space, the ratio of 17,200 square feet to the total area of the 8055 Building or the Project, as applicable (and consistent with historic practice of allocating operating expenses under the Lease). (b) For purposes of calculating Tenant's share of Landlord's operating expenses pursuant to Section 3 of the Lease, as amended hereby, Landlord and Tenant hereby agree that, commencing with the second full calendar year of the Extended Term, Landlord's operating expenses less Uncontrollable Costs shall be deemed not to increase by more than five percent (5.0%) (such percentage cap is herein referred to as the "Operating Expense Cap") from one calendar year to the next calendar year, regardless of any actual increases in operating expenses; provided, however, in the event that in any calendar year any such increase in operating expenses is in fact greater than the Operating Expense Cap (any such increase in excess of the Operating Expense Cap being hereinafter collectively referred to as the "Carryover Percentage"), Landlord shall have the right to add all of the Carryover Percentage (or such portion thereof as will not produce a total increase in operating expenses in excess of the Operating Expense Cap) to the increases in operating expenses occurring over any of the following years of the Extended Term in which such increases in operating expenses are less than the Operating Expense Cap, on a cumulative basis until all such Carryover Percentages have been used to increase operating expenses for purposes of calculating Tenant's share of Landlord's operating expenses payable pursuant to Section 3 of the Lease, as amended hereby. The foregoing provisions of this Section notwithstanding, real estate taxes and assessments, all utility costs and expenses, including, without limitation, those for electricity and other fuels and forms of power or energy, water charges, sewer and waste disposal, all costs to comply with legal requirements, and the cost of all casualty, liability and other insurance applicable to the Building and/or the Project and Landlord's personal property used in connection with the Building and/or the Project (all of the foregoing are herein collectively referred to as "Uncontrollable Costs") shall not be subject to any limitation or cap, and, accordingly, the total dollar increase in operating expenses, and Tenant's share of Landlord's operating expenses payable pursuant to Section 3 of the Lease, for any and each calendar year during the Extended Term shall be calculated without any limitation or cap on Uncontrollable Costs. 5. Condition of the Premises/Use of Premises. (a) Notwithstanding anything to the contrary contained or implied in this Fourth Amendment, Tenant agrees that it will accept possession of the Premises during the Extended Term in an "as is, where is" condition, and that no representations, warranties, or inducements, with respect to any condition of the Premises have been made by Landlord, or its designated representatives, to Tenant, or its designated representatives. In furtherance of the foregoing, Tenant hereby acknowledges that no promises to decorate, alter, repair or improve the Premises either before or after the execution of this Fourth Amendment have been made to Tenant, or its designated representatives, by Landlord, or its designated representatives. 21 (b) Notwithstanding anything to the contrary contained in the Lease, as amended hereby, Tenant shall use the 8055 Space for dry storage purposes only and for no other use. Tenant's use of the Premises shall be in compliance with any and all applicable laws, codes, rules, ordinances and regulations from any and all applicable governing authorities. 6. HVAC Maintenance. Notwithstanding anything to the contrary contained in the Lease or this Fourth Amendment, in the event the heating, ventilation and air conditioning ("HVAC") system serving the 8125 Space requires repair or replacement during the Extended Term, Tenant shall bear any and all costs associated with such maintenance and repair of the HVAC system up to a maximum amount of $1,000.00 per Occurrence (as defined below), and Landlord shall pay any and all costs associated with such maintenance and repair of the HVAC system in excess of $1,000.00 per Occurrence ("Excess HVAC Costs"). Notwithstanding the foregoing, Landlord shall have no obligation to pay for any repairs or maintenance of the HVAC system serving the 8125 Space in the event Tenant fails to properly maintain the HVAC system pursuant to a standard HVAC maintenance agreement with a licensed HVAC contractor, as required by the Lease. Further, Landlord makes no warranty and shall have no obligation to make any repairs or perform any maintenance on the HVAC system necessitated by the negligence or intentional misconduct of Tenant, or its officers, employees, agents, contractors, sublessees or invitees. "Occurrence" shall mean any one problem associated with the HVAC system in any sixty (60) consecutive day period during the Extended Term regardless of the number of visits by the HVAC contractor(s)/vender(s). 7. Termination Right for 8125 Space. Tenant shall have the one-time right to terminate the Lease, as amended hereby, as the same applies to the 8125 Space, effective as of the last day of the twenty-seventh (27th) full calendar month following the Extended Term Commencement Date (the "Effective Termination Date for the 8125 Space"), subject to the following terms and conditions: (a) Landlord shall have received from Tenant written notice delivered in accordance with the notice provisions of the Lease that Tenant has irrevocably exercised its right to terminate the Lease, as the same applies to the 8125 Space, at least one hundred eighty (180) days prior to the Effective Termination Date for the 8125 Space, time being of the essence. (b) In consideration of Landlord granting to Tenant the right to terminate the Lease, as amended hereby, as the same applies to the 8125 space, as described above, Tenant shall deliver to Landlord contemporaneously with Tenant's notice described in subsection (a) above, a certified check in an amount equal to Forty-One Thousand and 00/100ths Dollars ($41,000.00). (c) On or before the Effective Termination Date for the 8125 Space, as set forth above, Tenant shall have removed from the 8125 Space all its personal property which the Lease allows Tenant to remove, Tenant shall have removed all of its signage, and Tenant shall have peacefully surrendered the 8125 Space and the keys thereto to Landlord in the same condition as on the original commencement date of the Lease, only normal wear and tear excepted. (d) The Lease, as amended hereby, shall be in full force and effect as the same pertains to the 8125 Space on the date of the exercise of such termination option and the Effective Termination Date for the 8125 Space, and, further, there shall exist no bona fide material monetary default on the part of Tenant under the Lease, as amended hereby, beyond any applicable notice and cure period, on the date of the exercise of such termination option and on the Effective Termination Date for the 8125 Space. (e) If Tenant fails to exercise such termination option as provided in and in strict accordance with the terms of this Section 7, or if the conditions in subsections (a) through and including (d) above are not entirely satisfied, Tenant's option to terminate the Lease, as amended hereby, as the same applies to the 8125 Space, shall automatically terminate and be of no further force or effect, or if exercised, shall be void. 8. Tenant's Termination Right for 8055 Space. Tenant shall have the on-going right to terminate the Lease, as amended hereby, as the same applies to the 8055 Space, effective as of December 31st of each calendar year during the Extended Term commencing with December 31, 2004 (the specific December 31st on which the Lease as the same applies to the 8055 Space terminates shall be referred to as the "Effective Termination Date for the 8055 Space"), subject to the following terms and conditions: 22 (a) Landlord shall have received from Tenant written notice delivered in accordance with the notice provisions of the Lease that Tenant has irrevocably exercised its right to terminate the Lease, as the same applies to the 8055 Space, on or before the November 1st directly preceding the Effective Termination Date for the 8055 Space, time being of the essence. (b) On or before the Effective Termination Date for the 8055 Space, as set forth above, Tenant shall have removed from the 8055 Space all its personal property which the Lease allows Tenant to remove, Tenant shall have removed all of its signage, and Tenant shall have peacefully surrendered the 8055 Space and the keys thereto to Landlord in the same condition as on the date Tenant first occupied the 8055 Space, only normal wear and tear excepted. (c) The Lease, as amended hereby, shall be in full force and effect as the same pertains to the 8055 Space on the date of the exercise of such termination option and the Effective Termination Date for the 8055 Space, and, further, there shall exist no bona fide material monetary default on the part of Tenant under the Lease, as amended hereby, beyond any applicable notice and cure period, on the date of the exercise of such termination option and on the Effective Termination Date for the 8055 Space. (d) If Tenant fails to exercise such termination option as provided in and in strict accordance with the terms of this Section 8, or if the conditions in subsections (a) through and including (c) above are not entirely satisfied, Tenant's option to terminate the Lease, as amended hereby, as the same applies to the 8055 Space for a specific December 31st shall automatically terminate and be of no further force or effect, or if exercised, shall be void. 9. Landlord's Termination Right/Tenant's Right of First Refusal. Notwithstanding anything to the contrary contained in the Lease, as amended hereby, the parties acknowledge and agree that the 8055 Space contains a total of approximately 17,200 rentable square feet; provided, however, during the first fifteen (15) months of the Extended Term, Tenant is paying Base Rental on the 8055 Space as if the 8055 Space contained 5,000 rentable square feet. Notwithstanding anything to the contrary contained herein and in consideration of the reduced Base Rental for the 8055 Space and Tenant's termination right as set forth in Section 8 above, Tenant acknowledges that Landlord shall have the right to terminate the Lease as the same applies to the 8055 Space in accordance with the terms and conditions set forth herein. (a) During the Extended Term, Landlord shall have the right to market the 8055 Space to third parties upon terms and conditions acceptable to Landlord in Landlord's sole discretion. Additionally, Tenant acknowledges that, in accordance with the Third Amendment, Landlord has the right, upon reasonable prior oral or written notice to Tenant, to exhibit the 8055 Space to prospective tenants and that during the duration of the Extended Term Landlord has the right, but not the obligation, to market the 8055 Space to such prospects. (b) In the event Landlord obtains a written offer from a prospective tenant to lease all or any portion of the 8055 Space and Landlord desires to accept such offer, then Landlord shall promptly submit to Tenant in writing all of the terms and conditions of such proposed offer to lease (hereinafter referred to as the "Offer") and Tenant shall have the right and option to lease the 8055 Space upon the same monetary terms and conditions, including any offer of free rent and leasehold improvement allowances, and term length as embodied in the copy of such Offer submitted to Tenant by Landlord, but otherwise upon the same terms and conditions as the Lease, as amended hereby. Notwithstanding the foregoing, in the event Tenant accepts the terms of the Offer, Tenant's termination right for the 8055 Space as set forth in Section 8 above, shall automatically terminate and be of no further force and effect. (c) If Tenant shall elect to exercise its right to lease the 8055 Space, written notice of such election shall be given to Landlord within ten (10) days from the time that Tenant first received a copy of the Offer from Landlord (hereinafter referred to as the "Offer Period"). If Tenant does not accept the terms of the Offer within the Offer Period or Tenant waives its rights under the Offer (no notice is deemed to be a waiver of such right), then Landlord, at Landlord's option shall have the right to terminate the Lease, as amended hereby, as the same applies to the 8055 Space, upon thirty (30) days advance written notice to Tenant. 23 (d) In the event the Lease, as amended hereby, is terminated as the same pertains to the 8055 Space, in accordance with the terms of this Section 9, then on or before the actual termination date, Tenant shall remove from the 8055 Space all its personal property which the Lease allows Tenant to remove, Tenant shall remove all of its signage, and Tenant shall peacefully surrender the 8055 Space and the keys thereto to Landlord in the same condition as on the date Tenant first occupied the 8055 Space, only normal wear and tear excepted. (e) In the event Tenant accepts the terms of the Offer, Landlord and Tenant shall enter into a written agreement modifying and supplementing the Lease, as amended hereby, and specifying the appropriate terms and provisions relating to the terms and conditions of the Offer, including, without limitation, increasing, adjusting or augmenting rent. 10. Guaranty Release. As a material inducement for Tenant to enter into this Fourth Amendment, effective as of the Effective Date, Landlord releases Guarantor from any and all claims first arising under the Lease from and after the Effective Date. Guarantor shall be a third party beneficiary, entitled to enforce this provision. 11. Brokers. Tenant represents and warrants to Landlord that other than Carter & Associates, LLC ("Carter"), no broker, agent, commission salesperson, or other person, including, without limitation, New Southern Commercial Properties and/or New South Commercial Properties, Inc., has represented Tenant in the negotiations for and procurement of this Fourth Amendment and the extension of the term and that, other than Carter, no commissions, fees or compensation of any kind are due and payable in connection herewith to any broker, agent, commission salesperson or other person as a result of any act or agreement of Tenant, including without limitation New Southern Commercial Properties and/or New South Commercial Properties, Inc. Tenant agrees that, if any broker other than Carter makes a claim for a commission based upon the actions of Tenant, Tenant shall indemnify, defend and hold Landlord harmless from any such claim. Landlord shall pay Carter a commission pursuant to a separate written agreement. The parties hereto do hereby acknowledge and agree that Grubb & Ellis Company has acted as agent for Landlord and not for Tenant in this transaction and shall be paid a commission by Landlord in connection with this transaction pursuant to the terms of a separate written commission agreement. Landlord agrees that, if any other broker other than Grubb & Ellis Company makes a claim for a commission based upon the actions of Landlord, Landlord shall indemnify, defend and hold Tenant harmless from any such claim. 12. Notice Address. From and after the date of this Fourth Amendment, Tenant's notice address as set forth in Section 33 of the Lease is hereby deleted and replaced with the following: Sparks Exhibits & Environments, Inc. 8125 Troon Circle Suite D Austell, GA 30168 Attn: Timothy Oughton 13. Miscellaneous. This Fourth Amendment shall be governed by and construed in accordance with the laws of the State of Georgia, and shall be binding upon and inure to the benefit of the parties hereto and their respective successors, successors-in-title, representatives and permitted assigns. In the event of any inconsistency or conflict between the terms of this Fourth Amendment and of the Lease, the terms of this Fourth Amendment shall control. Time is of the essence of all of the terms of this Fourth Amendment. The signatory of Tenant represents to Landlord that he is duly authorized to execute and deliver this Fourth Amendment on behalf of Tenant. The Lease together with this Fourth Amendment constitutes and contains the sole and entire agreement of the parties hereto with respect to the subject matter hereof and no prior or contemporaneous oral or written representations or agreements between the parties and relating to the subject matter hereof shall have any legal effect. Effective immediately, and except for the options contained in Sections 7, 8 and 9 of this Fourth Amendment, any and all options, including without limitation, expansion options, renewal options, termination options, extension options, and rights of first refusal or negotiation, granted to Tenant pursuant to the Lease are null and void and of no further force or effect. Effective immediately, Landlord's option to relocate Tenant as set forth in Section 2 of the Second Amendment is hereby null and void and of no further force and effect. The submission of this Fourth Amendment for examination does not constitute an offer to enter into a contract and this Fourth Amendment shall be effective only upon execution hereof by Landlord and Tenant. Except as hereinabove provided, all other terms and conditions of the Lease shall remain unchanged and in full force and effect, and are hereby ratified and confirmed by the parties hereto. Tenant 24 hereby acknowledges and agrees that, as of the date hereof, the Lease is subject to no offsets, claims, counterclaims or defenses of any nature whatsoever. Landlord acknowledges and agrees that to its actual knowledge, without investigation or inquiry, Tenant is not in default under the Lease. References to the "knowledge" of Landlord contained in this Fourth Amendment shall refer only to the actual knowledge of the Designated Employee (as hereinafter defined) of Landlord, and shall not be construed, by imputation or otherwise, to refer to any other officer, agent, manager, representative or employee of Landlord or any affiliate thereof or to impose upon such Designated Employee any duty to investigate the matter to which such actual knowledge, or the absence thereof, pertains. As used herein, the term "Designated Employee" shall refer to Nancy Bryan, the current property manager of the Project. This Fourth Amendment may not be changed, modified, discharged or terminated orally in any manner other than by an agreement in writing signed by Landlord and Tenant or their respective heirs, representatives, successors and permitted assigns. If any clause or provision of this Fourth Amendment is illegal, invalid or unenforceable under present or future laws, the remainder of this Fourth Amendment shall not be affected thereby, and in lieu of each clause or provision of this Fourth Amendment which is illegal, invalid or unenforceable, there shall be added as a part of this Fourth Amendment a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable. IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment on the day and year first above written. LANDLORD: SOUTHEAST COMMERCIAL, LLC, a Delaware limited liability company By: AEW Capital Management, LP, Its Asset Manager and Advisor, By:_______________________________________ Name:_________________________________ Title:________________________________ Duly Authorized TENANT: SPARKS EXHIBITS AND ENVIRONMENTS INC., a Georgia corporation By:_______________________________________ Name:________________________________ Title:_______________________________ [CORPORATE SEAL] 25 EX-10 4 ex10-dd.txt EXHIBIT 10.DD Exhibit 10(dd) STANDARD SUBLEASE 1. Parties. This Sublease, dated, for reference purposes only, March 26, 2002, is made by and between Sparks Exhibits & Environments, Ltd., a California corporation ("Sublessor") and Bradco International, Ltd, a California corporation ("Sublessee"). 2. Premises. Sublessor hereby subleases to Sublessee and Sublessee hereby subleases from Sublessor for the term, at the rental, and upon all of the conditions set forth herein, that certain real property, including all improvements therein, and commonly known by the street address of 2025 Gillespie Way, Suite B, El Cajon, 92020 located in the County of San Diego , State of California and generally described as (describe briefly the nature of the property) Approximately 25,000 square foot warehouse suite located in an approximate 150,159 square foot building, as set forth on Exhibit "A"("Premises"). 3. Term. 3.1 Term. The term of this Sublease shall be for the period commencing on June 1, 2002 ("commencement date") and ending on June 18, 2006, as may be extended or unless sooner terminated pursuant to any provision hereof. 3.2 Delay in Commencement. Sublessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises by the commencement date. If, despite said efforts, Sublessor is unable to deliver possession as agreed, Sublessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Sublease. Sublessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises. If possession is not delivered within sixty days after the commencement date, Sublessee may, at its option, by notice in writing within ten days after the end of such sixty day period, cancel this Sublease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Sublessor within said ten day period, Sublessee's right to cancel shall terminate. If possessions not delivered within 120 days after the commencement date, this Sublease shall automatically terminate unless the Parties agree, in writing, to the contrary. 4. Rent. 4.1 Base Rent. Sublessee shall pay to Sublessor as Base Rent for the Premises equal monthly payments of $13,249.90, NNN in advance, on the First (1st) day of each month of the term hereof. Sublessee shall pay Sublessor upon the execution hereof Thirteen Thousand Two Hundred Forty Nine Dollars and Ninety Cents ($13,249.90) as Base Rent for June, 2002 Base Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the monthly installment, and thereafter as annually increased throughout the term hereof pursuant to paragraph 12.1 of the addendum attached hereto. 4.2 Rent Defined. All monetary obligations of Sublessee to Sublessor under the terms of this Sublease (except for the Security Deposit) are deemed to be rent ("Rent"). Rent shall be payable in lawful money of the United States to Sublessor at the address stated herein or to such other persons or at such other places as Sublessor may designate in writing. 5. Security Deposit. Sublessee shall deposit with Sublessor upon execution hereof $13,249.90 as security for Sublessee's faithful performance of Sublessee's obligations hereunder. If Sublessee fails to pay Rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Sublease, Sublessor may use, apply or retain all or any portion of said deposit for the payment of any Rent or other charge in default or for the payment of any other sum to which Sublessor may become obligated by reason of Sublessee's default, or to compensate Sublessor for any loss or damage which Sublessor may suffer thereby. If Sublessor so uses or applies all or any portion of said deposit, Sublessee shall within ten days after written demand therefore forward to Sublessor an amount sufficient to restore said Deposit to the full amount provided for herein and Sublessee's failure to do so shall be a material breach of this Sublease. Sublessor shall not be required to keep said Deposit separate from its general accounts. If Sublessee performs all of Sublessee's obligations hereunder, said Deposit, or so much thereof as has not therefore been applied by Sublessor, shall be returned, without payment of interest to Sublessee at the expiration of the term hereof, and after Sublessee has vacated the Premises. No trust relationship is created herein between Sublessor and Sublessee with respect to said Security Deposit. 26 6. Use. 6.1 Agreed Use. The Premises shall be used and occupied only for Warehouse and distribution of commercial doors and related products in compliance with applicable law, this Sublease and the Master Lease (as defined below), and for no other purpose. 6.2 Compliance. Sublessor makes no warranty that the improvements on the Premises comply with all applicable covenants or restrictions of record and applicable building codes, regulations and ordinances ("Applicable Requirements") in effect on the commencement date. No warranty is made to the use to which Sublessee will put the Premises or to any alterations or utility installations made or to be made by Sublessee. NOTE: Sublessee is responsible for determining whether or not the zoning is appropriate for its intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said applicable requirements, correction of that non-compliance shall be the obligation of Sublessee at its sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Sublease the construction of an addition to or an alteration of the Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Building ("Capital Expenditure"), Sublessor and Sublessee shall allocate the cost of such work as follows: (a) If such Capital Expenditures are required as a result of the specific and unique use of the Premises by Sublessee as compared with uses by tenants in general, Sublessee shall be fully responsible for the cost thereof provided, however, that if such Capital Expenditure is required during the last two years of this Sublease and the cost thereof exceeds six months' Base Rent, Sublessee may instead terminate this Sublease unless Sublessor notifies Sublessee in writing, within ten days after receipt of Sublessees's termination notice that Sublessor has elected to pay the difference between the actual cost thereof and the amount equal to six months' Base Rent. If the Parties elect termination, Sublessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Sublessor written notice specifying a termination date at least ninety days thereafter. Such termination date shall, however, in no event be earlier then the last day that Sublessee could legally utilize the Premises without commencing such Capital Expenditure. (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Sublessee (such as governmentally mandated seismic modifications, then Sublessor shall pay for said Capital Expenditure and the cost thereof shall be prorated between the Sublessor and Sublessee and Sublessee shall only be obligated to pay, each month during the remainder of the term of this Sublease, on the date on which Rent is due, an amount equal to the product of multiplying the cost of such Capital Expenditure by a fraction, the numerator of which is one, and the denominator of which is the number of months of the useful life of such Capital Expenditure as such useful life is specified pursuant to Federal income tax regulations or guidelines for depreciation thereof (including interest on the unamortized balance as is then commercially reasonable in the judgment of Sublessor's accountant), with Sublessee reserving the right to prepay its obligation at any time. Provided, however, that if such Capital Expenditure is required during the last two years of this Sublease or if Sublessor reasonably determines that it is not economically feasible to pay its share thereof, Sublessor shall have the option to terminate this Sublease upon ninety days prior written notice to Sublessee unless Sublessee notifies Sublessor, in writing, within ten days after receipt of Sublessor's termination notice that Sublessee will pay for such Capital Expenditure. If Sublessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Sublessee may advance such funds and deduct same, with interest, from Rent until Sublessor's share of such costs have been fully paid. If Sublessee is unable to finance Sublessor's share, or if the balance of the Rent due and payable for the remainder of this Sublease is not sufficient to fully reimburse Sublessee on an offset basis, Sublessee shall have the right to terminate this Sublease upon ten days written notice to Sublessor. (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Sublessee as a result of any act or omission of Sublessee or an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Sublessee shall be fully responsible for the cost thereof, and Sublessee shall not have any right to terminate this Sublease. 6.3 Acceptance of Premises and Lessee. Sublessee acknowledges that: (a) it has been advised by Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements), and their suitability for Sublessee's intended use, (b) Sublessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and 27 (c) neither Sublessor, Sublessor's agents, nor any Broker has made any oral or written representations or warranties with respect to said matters other than as set forth in this Sublease. In addition, Sublessor acknowledges that: (a) Broker has made no representations, promises or warranties concerning Sublessee's ability to honor the Sublease or suitability to occupy the Premises, and (b) it is Sublessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants. 7. Master Lease 7.1 Sublessor is the lessee of the Premises by virtue of a lease, hereinafter the "Master Lease", a copy of which is attached hereto marked Exhibit 1, wherein Gillespie Field Partners, LLC is the lessor, hereinafter the "Master Lessor" 7.2 This Sublease is and shall be at all times subject and subordinate to the Master Lease. 7.4 During the term of this Sublease and for all periods subsequent for obligations which have arisen prior to the termination of this Sublease, Sublessee does hereby expressly assume and agree to perform and comply with, for the benefit of Sublessor and Master Lessor, each and every obligation of Sublessor under the Master Lease to the extent applicable to or in connection with the Premises except for the following which are excluded therefrom: Sublessor's obligation to pay "Base Monthly Rental" (as defined in the Master Lease) to Master Lessor. Sublessor's obligation to pay common area maintenance expenses to Master Lessor pursuant to Article 11 of the Master Lease. 7.5 The obligations that Sublessee has assumed under paragraph 7.4 hereof are hereinafter referred to as the "Sublessee's Assumed Obligations". The obligations that Sublessee has not assumed under paragraph 7.4 hereof are hereinafter referred to as the "Sublessor's Remaining Obligations". 7.6 Sublessee shall hold Sublessor free and harmless from all liability, judgments, costs, damages, claims or demands, including reasonable attorneys fees, arising out of Sublessee's failure to comply with or perform Sublessee's Assumed Obligations. 7.7 Sublessor agrees to maintain the Master Lease during the entire term of this Sublease, subject, however, to any earlier termination of the Master Lease without the fault of the Sublessor. 7.8 Sublessor represents to Sublessee that to Sublessor's actual knowledge as of the date of this Sublease, the Master Lease is in full force and effect and that no default exists on the part of any Party to the Master Lease. 8. Assignment of Sublease and Default. 8.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor's interest in this Sublease, subject however to the provisions of Paragraph 8.2 hereof. 8.2 Master Lessor, by executing this document, agrees that until a Default shall occur in the performance of Sublessor's Obligations under the Master Lease, that Sublessor may receive, collect and enjoy the Rent accruing under this Sublease. However, if Sublessor shall Default in the performance of its obligations to Master Lessor then Master Lessor may, at its option, receive and collect, directly from Sublessee, all Rent owing and to be owed under this Sublease. Master Lessor shall not, by reason of this assignment of the Sublease nor by reason of the collection of the Rent from the Sublessee, be deemed liable to Sublessee for any failure of the Sublessor to perform and comply with Sublessor's Remaining Obligations. 28 8.3 Sublessor hereby irrevocably authorizes and directs Sublessee upon receipt of any written notice from the Master Lessor stating that a Default exists in the performance of Sublessor's obligations under the Master Lease, to pay to Master Lessor the Rent due and to become due under the Sublease. Sublessor agrees that Sublessee shall have the right to rely upon any such statement and request from Master Lessor, and that Sublessee shall pay such Rent to Master Lessor without any obligation or right to inquire as to whether such Default exists and notwithstanding any notice from or claim from Sublessor to the contrary and Sublessor shall have no right or claim against Sublessee for any such Rent so paid by Sublessee. 8.4 No changes or modifications shall be made to this Sublease without the consent of Master Lessor. 9. Consent of Master Lessor. 9.1 In the event that the Master Lease requires that Sublessor obtain the consent of Master Lessor to any subletting by Sublessor then, this Sublease shall not be effective unless, within ten days of the date hereof, Master Lessor signs this Sublease thereby giving its consent to this Subletting. 9.2 9.3 In the event that Master Lessor does give such consent then: (a) Such consent shall not release Sublessor of its obligations or alter the primary liability of Sublessor to pay the Rent and perform and comply with all of the obligations of Sublessor to be performed under the Master Lease. (b) The acceptance of Rent by Master Lessor from Sublessee or anyone else liable under the Master Lease shall not be deemed a waiver by Master Lessor of any provisions of the Master Lease. (c) The consent to this Sublease shall not constitute a consent to any subsequent subletting or assignment. (d) In the event of any Default of Sublessor under the Master Lease, Master Lessor may proceed directly against Sublessor, any guarantors or anyone else liable under the Master Lease or this Sublease without first exhausting Master Lessor's remedies against any other person or entity liable thereon to Master Lessor. (e) Master Lessor may consent to subsequent sublettings and assignments of the Master Lease or this Sublease or any amendments or modifications thereto without notifying Sublessor or anyone else liable under the Master Lease and without obtaining their consent and such action shall not relieve such persons from liability. (f) In the event that Sublessor shall Default in its obligations under the Master Lease, then Master Lessor, at its option and without being obligated to do so, may require Sublessee to attorn to Master Lessor in which event Master Lessor shall undertake the obligations of Sublessor under this Sublease from the time of the exercise of said option to termination of this Sublease but Master Lessor shall not be liable for any prepaid Rent nor any Security Deposit paid by Sublessee, nor shall Master Lessor be liable for any other Defaults of the Sublessor under the Sublease occurring prior to Master Lessor's exercise of said option. 9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at the end of this document shall constitute their consent to the terms of this Sublease. 9.5 Master Lessor acknowledges that, to the best of Master Lessor's knowledge, no Default presently exists under the Master Lease of obligations to be performed by Sublessor and that the Master Lease is in full force and effect. 9.6 In the event that Sublessor Defaults under its obligations to be performed under the Master Lease by Sublessor, Master Lessor agrees to deliver to Sublessee a copy of any such notice of default. Sublessee shall have the right to cure any Default of Sublessor described in any notice of default within ten days after service of such notice of default on Sublessee. If such Default is cured by Sublessee then Sublessee shall have the right of reimbursement and offset from and against Sublessor. 29 10. Brokers Fee. 10.1 Upon execution hereof by all parties, Sublessor shall pay to IPC Commercial Real Estate, Inc. a licensed real estate broker, ("Broker"), a fee as set forth in a separate agreement between Sublessor and Broker, or in the event there is no such separate agreement, the sum of $38,689 for brokerage services rendered by Broker to Sublessor in this transaction. 10.2 11. Attorney's Fees. If any party or the Broker named herein brings an action to enforce the terms hereof or to declare rights hereunder, the prevailing party in any such action, on trial and appeal, shall be entitled to his reasonable attorney's fees to be paid by the losing party as fixed by the Court. 12. Additional Provisions. [If there are no additional provisions, draw a line from this point to the next printed word after the space left here. If there are additional provisions place the same here. See Addendum Item Numbers 12.1 through 12.23 attached hereto and made a part hereof and the Exhibits attached hereto and made a part hereof. ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS SUBLEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE. WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED. SUBLESSOR: Executed at: Sparks Exhibits & Environments, Ltd. By ______________________________________________ SUBLESSEE: Bradco International, Ltd. By ______________________________________________ MASTER LESSOR: Executed at: Gillespie Field Partners, LLC By ______________________________________________ 30 ADDENDUM THIS IS AN ADDENDUM TO THAT CERTAIN STANDARD SUBLEASE DATED AS OF MARCH 26, 2002 ("SUBLEASE") BY AND BETWEEN SPARKS EXHIBITS & ENVIRONMENTS, LTD ("SUBLESSOR") AND BRADCO INTERNATIONAL, LTD ("SUBLESSEE") FOR PREMISES LOCATED AT 2025 GILLESPIE WAY, SUITE B, EL CAJON, CA 92020. THE TERMS HEREIN ARE INCORPORATED IN, AND MADE PART OF, THE SUBLEASE. 12.1 Base Rent Adjustments. Beginning on June 1, 2003, and on each anniversary of such date during the term of this Sublease (June 1, 2003, and each such anniversary being an "Adjustment Date"), the Base Rent applicable immediately prior to the Adjustment Date shall be increased by the greater of three percent (3%) or the percentage increase, if any, shown by the Consumer Price Index for all Urban Consumers, All Items (base year 1982-1984 = 100) for Los Angeles-Riverside-Orange County, California ("Index") published by the United States Department of Labor, Bureau of Labor Statistics, for the month immediately preceding the Adjustment Date as compared with the Index for the month immediately preceding June 1, 2002. Sublessor shall calculate the amount of this increase in Base Rent after the United States Department of Labor, Bureau of Labor Statistics, publishes the statistics on which the amount of the increase will be based. If the increase in Base Rent so derived for an Adjustment Date exceeds five percent (5%), then the applicable increase for that Adjustment Date shall be five percent (5%). Sublessor shall give written notice of the amount of the increase, multiplied by the number of installments of Base Rent due under the Sublease since the Adjustment Date. Sublessee shall pay this amount, together with the increased monthly Base Rent next coming due under the Sublease, and shall thereafter pay the monthly Base Rate due under the Sublease at the increased rate, which will constitute Base Rent, until Base Rent is again increased pursuant to this provision. Sublessor's failure to make the required calculations promptly shall not be considered a breach or default of Sublessor under this Sublease or waiver of Sublessor's right to increase Base Rent, nor shall it affect Sublessee's obligation to pay increased Base Rent. If the Index is changed so that the base year differs from that in effect on June 1, 2002, then the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the term of this Sublease, the governmental index or computation with which it is replaced shall be used to obtain substantially the same result as if the Index had not been discontinued or revised. As a concession to Sublessee and only if Sublessee does not become in default under this Sublease, Sublessor grants to Sublessee a total credit against Base Rent of Twenty-Nine Thousand Eight Hundred Twelve Dollars and Fifty Cents ($29,812.50) to be applied against the first five (5) calendar months of the term of this Sublease as follows: the amount of Six Thousand Six Hundred Twenty-Five Dollars ($6,625.00) will be credited toward each of calendar months June, July, August and September, 2002, such that the installment of Base Rent payable by Sublessee for each such calendar month will be equal to Six Thousand Six Hundred Twenty-Five Dollars ($6,625.00); the amount of Three Thousand Three Hundred Twelve Dollars and Fifty Cents ($3,312.50) will be credited toward calendar month October, 2002, such that the installment of Base Rent payable by Sublessee for such month will by Nine Thousand Nine Hundred Thirty-Seven Dollars and Fifty Cents ($9,937.50). 12.2 Expenses. From and after the mutual execution and delivery of this Sublease and continuing thereafter throughout the term of this Sublease, Sublessee shall pay Sublessee's Share (as defined below) of Common Area Expenses (as defined below) to Sublessor. Sublessee's Share of Common Area Expenses shall be payable by Sublessee within ten (10) days after each delivery by Sublessor to Sublessee of a statement of actual Common Area Expenses. However, at Sublessor's option, an amount may be estimated by Sublessor from time to time of Sublessee's Share of annual Common Area Expenses and the same shall be payable in monthly or quarterly installments, as Sublessor may designate from time to time, during each twelve (12) month period of the term of this Sublease, on the same day as the Base Rent is due under this Sublease. Following the expiration of each calendar year during the term of this Sublease, Sublessor shall deliver to Sublessee a statement showing Sublessee's Share of actual Common Area Expenses incurred during the preceding calendar year. If Sublessee's payments under this paragraph 12.2 during the preceding calendar year exceed Sublessee's Share of actual Common Area Expenses for such preceding year as indicated on such statement, Sublessor shall credit the amount of such overpayment against Sublessee's Share of Common Area Expenses next coming due. If Sublessee's payments under this paragraph 12.2 during the preceding calendar year were less than Sublessee's Share of actual Common Area Expenses for such preceding year as indicated on such statement, Sublessee shall pay to Sublessor the amount of the deficiency within five (5) days after delivery by Sublessor to Sublessee of such statement. The term "Sublessee's Share" means sixteen and twenty three one hundredths percent (16.23%). The term "Common Area Expenses" means all taxes which become payable by Sublessor to Master Lessor (including estimated amounts and actual amounts) pursuant to paragraphs 10.2 and 10.3 of the Master Lease and all charges, expenses and costs which become payable by Sublessor to Master Lessor (including estimated amounts and actual amounts) pursuant to Article 11 of the Master Lease, as well as those utility costs, maintenance and other costs under the Master Lease expressly stated thereunder as being payable by Sublessor in the manner set forth in paragraph 11.3 of Article 11 of the Master Lease. During the initial term of this Sublease (until June 18, 2006), Sublessee's Share of Common Area Expenses per year shall not exceed the aggregate of nine cents ($0.09) per square foot of the Premises per month within such year. 31 12.3 Utilities. Without limiting those obligations under the Master Lease assumed by Sublessee pursuant to the terms of this Sublease, Sublessee hereby agrees that Sublessee shall be solely responsible, at Sublessee's sole cost and expense, for the procurement and installation for the Premises of any and all telephone, telecommunication, gas, electric, sewer, water and all other utilities and utility services, and the cost and expense of all utility hookups, utility meters and utility facilities and lines for and/or servicing the Premises. Such obligation shall include, without limitation, the obligation, at Sublessee's sole cost and expense, to pay for all on-site and off-site water, sewer, electric, gas and other utility pipes, conduits, lines and connections for the Sublessee Improvements (as defined below). Sublessee agrees that Sublessor has no obligation to pay for, or cause the construction or installation of, any utility lines, hook-ups, meters or other utility facilities for, or in connection with the Premises. Sublessee shall make all arrangements for and pay for all water, sewer, gas, heat, light, power, telephone service, telecommunication service and any other service or utility provided to the Premises. 12.4 Sublessee Improvements. Sublessee agrees that it shall accept the Premises on an "as-is" basis. Sublessee has informed Sublessor that Sublessee desires to build, at Sublessee's sole cost and expense, within the Premises, approximately four thousand square feet (4,000 sq. ft.) of office space, a reception area and restrooms, and further shall relocate the demising wall within the Premises in accordance with Exhibit "A" attached hereto (collectively, the "Sublessee Improvements"). (a) Sublessor will permit Sublessee to construct the Sublessee Improvements subject however to Sublessee's satisfaction (as reasonably determined by Sublessor) of the following conditions: (i) Sublessee submits to Sublessor and Master Lessor reasonably detailed plans and specifications for the Sublessee Improvements; (ii) the plans and specifications for the Sublessee Improvements are pre-approved in writing by Sublessor, which approval shall not be unreasonably withheld; (iii) Master Lessor shall have pre-approved in writing the plans and specifications for the Sublessee Improvements; (iv) Sublessee has delivered to Sublessor written evidence of insurance acceptable to Sublessor (either certificates or certified copies of policies, as Sublessor may direct) evidencing that Sublessee has obtained all of the insurance required of Sublessee pursuant to the Sublease and the Master Lease, and such additional insurance as Sublessor may request (in Sublessor's commercially reasonable discretion) or Master Lessor may request to be obtained by Sublessee and/or its contractors; (v) Sublessee shall have obtained all licenses, permits and governmental approvals required by applicable law for Sublessee's construction of the Sublessee Improvements; (vi) Sublessee complies with all rules and regulations as may be imposed by Sublessor and/or Master Lessor in connection with such construction such as, without limitation, measures to be taken to mitigated interference with contiguous or adjacent occupants or tenants. Neither Master Lessor nor Sublessor shall have any obligations to pay for or construct any aspect of the Sublessee Improvement or to pay for or construct any facilities outside of the Premises. Sublessee shall be solely responsible for all such costs and expenses including, without limitation, costs and expenses relating to design, permitting, construction, installation, change orders, utilities lines, utility facilities, and any other aspect of the Sublessee Improvements. (b) All Sublessee Improvements shall be constructed in accordance with all applicable laws and building codes. All work must be performed by licensed and insured contractors pre-approved by Sublessor, which approval shall not be unreasonably withheld. Promptly following substantial completion of the Sublessee Improvements, Sublessee shall deliver to Sublessor as built plans for the Premises and the Sublessee Improvements and a certificate of occupancy for the Premises. Sublessee shall not violate any laws pertaining to occupancy of the Premises and shall not perform any activities, or occupy any portion of the Premises, in violation of applicable law. 32 (c) Sublessor has the right to require Sublessee to provide to Sublessor, and Master Lessor, if requested, at Sublessee's sole cost and expense, a lien and completion bond in an amount equal to one hundred and fifty percent (150%) of the estimated cost of the Sublessee Improvements, to protect Sublessor and Master Lessor against liability for mechanics' and materialmen's liens and to ensure completion of the Sublessee Improvements. Sublessee shall defend, indemnify and hold Sublessor and Master Lessor harmless from and against any and all claims, damages, suits, action, losses, costs and expenses including, without limitation, attorneys' fees and costs, arising from the Sublessee Improvements, the construction thereof, and any mechanics', materialmen's or other liens threatened or filed against the Premises or any other property interest of Sublessor or Master Lessor. Sublessee shall not suffer or permit any lien to be attached to or upon the Premises or any other portion of the Building or Property (as defined in the Master Lease) by reason of any act or omission of Sublessee or any work or materials provided to or for Sublessee or the Premises. If any such lien is filed against the Premises or any other portion of the Property (as defined under the Master Lease), then Sublessee shall, at its sole cost and expense, cause such lien to be released in full within ten (10) days following the date of filing thereof. Sublessee's construction of the Sublessee Improvements are further subject to any additional restrictions and conditions with respect to alterations or improvements under the terms of this Sublease and the Master Lease. All further alterations or improvements at any time proposed for the Premises shall also be subject to the restrictions and conditions imposed under this Sublease and the Master Lease. 12.5 Early Entry. Provided that the conditions set forth in clauses (i) through (vi) of paragraph 12.4(a) above have been, and continue to be, satisfied in Sublessor's reasonable determination, and provided that the subtenant occupying the Premises as of the date of this Sublease ("Existing Subtenant") vacates the entire Premises and surrenders possession thereof to Sublessor prior to May 1, 2002, then Sublessor will allow Sublessee to enter upon the Premises between May 1, 2002 and May 31, 2002 for the sole and exclusive purpose of constructing the Sublessee Improvements. Sublessee acknowledges that the balance of the Existing Subtenant's leasehold for the Premises is not scheduled to expire until April 30, 2002. If the Existing Subtenant vacates the entire Premises and surrenders possession thereof to Sublessor during the month of April, 2002, then, Sublessor will thereafter deliver written notice thereof to Sublessee. Provided that the other conditions to early entry described above have been, and continue to be, satisfied in Sublessor's reasonable determination, then, Sublessee may enter upon the Premises on the date specified in Sublessor's notice and thereafter up through and including May 31, 2002 for the sole and exclusive purpose of constructing the Sublessee Improvements. During any such period of early entry, Sublessee shall comply with (and be bound by) all terms and provisions of this Sublease. 12.6 Options to Extend. Sublessee acknowledges that Sublessor has two (2) options to extend the term of the Master Lease, each option for a two (2) year extension term. Sublessor may elect to exercise or not exercise such options in Sublessee's sole and absolute discretion. If Sublessor elects to exercise an extension option under the Master Lease, then, Sublessee shall have the right to elect to extend the Sublease for the corresponding two (2) year extension, subject, however, to the following terms and conditions. Sublessee's right to exercise any such option is subject to the timely payment by Sublessee of all monetary amounts due to Sublessor under this Sublease. If Sublessee fails to pay when due any sums owing to Sublessor pursuant to this Sublease more than three (3) times during the initial term of this Sublease, or more than once during the period of any extension of the initial term of the Sublease, all rights and options of Sublessee to extend the term of the Sublease shall automatically terminate. Sublessee shall exercise each option (if the right to such option comes into existence) by delivery of written notice thereof to Sublessor within ten (10) business days following Sublessor's delivery of written notice of Lessor's election to exercise an option to extend the term of the Master Lease. Sublessee does not deliver such exercise notice to Sublessor within such ten (10) business day period, Sublessee shall be deemed to have elected not to exercise such option, and all options rights of Sublessee to extend to term of the Sublease shall automatically terminate. If Sublessee timely exercises an option right hereunder provided herein, the terms and conditions of this Sublease shall continue to apply for the corresponding extension term; provided, however, that Base Rent payable by Sublessee for the corresponding extension term shall be equal to the fair market rent (as defined below) for the Premises for such extension term as of the commencement of the extended term. However, in no event shall Base Rent for the first year of any such extended term be less than one hundred three percent (103%) of the Base Rent applicable during the year immediately preceding the extended term. Further, Base Rent for the second year of each extended term shall be increased by the greater of three percent (3%) or the percentage increase in the Consumer Price Index (but in no event greater than 5%) as determined pursuant to paragraph 12.1 above in this Addendum. If the Sublessor and Sublessee cannot agree on the fair market rent of the Premises for the applicable extension term within thirty (30) days after Sublessee has exercised its option for the extended term, Sublessor and Sublessee shall proceed with the determination of fair market rent pursuant to the procedures set forth in paragraph 37.1.3 of the Master Lease regarding the selection of appraisers and the determination of fair market rent by appraisers, including the time frames set forth in such provisions, as if Sublessee were "Tenant" thereunder, and Sublessor was "Landlord" thereunder. For purposes hereunder, "fair market rent" shall have the meaning set forth in paragraph 37.1.3 of the Master Lease as pertaining to the Premises. 12.7 Financial Statements. Sublessee represents and warrants that the financial statements of Sublessee dated January 22, 2002 delivered to Sublessor fairly and accurately represent Sublessee's financial condition. Sublessor agrees to maintain the confidentiality of such financial statements. 33 12.8 Indemnity and Insurance. Sublessor shall be deemed an indemnitee under each defense and indemnity obligation under the Master Lease assumed by Sublessee pursuant to the terms of this Sublease. Sublessee shall cause Sublessor and any others that Sublessor may request, to be named as additional insureds under those policies of insurance required to be maintained by Sublessee pursuant to the Assumed Obligations and as to such other insurance coverage Sublessor requires Sublessee to maintain pursuant to the terms of this Sublease. 12.9 Defaults. The occurrence of any one or more of the following events shall constitute a default by Sublessee under the Sublease with or without notice from Sublessor): (i) Sublessee's failure to pay any Base Rent or other Rent within ten (10) days after written notice thereof from Sublessor; (ii) Sublessee's failure to perform any of Sublessee's covenants, agreements or obligations under this Sublease [other than the non-payment of Rent which shall be governed by clause (i) above] if the failure continues for thirty (30) days after written notice of the failure from Sublessor to Sublessee. If the required cure of the noticed default cannot be completed within thirty (30) days, Sublessee's failure to perform shall constitute a default under this Sublease unless Sublessee undertakes to cure the failure within such thirty (30) day period and diligently and continuously pursues the cure thereof to completion as soon as possible, but in no event longer than sixty (60) days following Sublessor's delivery of such original notice of failure to perform; (iii) a general assignment by Sublessee for the benefit of creditors; (iv) the filing of a voluntary petition by Sublessee, or the filing of an involuntary petition by any of Sublessee's creditors seeking the rehabilitation, liquidation or reorganization of Sublessee under any law relating to bankruptcy, insolvency or other relief of debtors that is either not dismissed within ninety (90) days of filing or that results in issuance of an order for relief against Sublessee; (v) the appointment of a receiver or other custodian to take possession of all or substantially all of Sublessee's assets or of the leasehold created hereby; (vi) the attachment, execution or other judicial seizure of all or substantially all of Sublessee's assets or the leasehold created hereby; (vii) Sublessee and/or any one or more of its employees, contractors, agents, officers, directors or invitees commit or permit any act or omission which violates any term or condition of the Master Lease; (viii) Sublessee's failure to timely perform Sublessee's Assumed Obligations; and/or (ix) the occurrence of any other event or election stated under this Sublease to constitute a default by Sublessee. 12.10 Remedies. In addition to all remedies available to Sublessor at law, in equity, or under the terms of this Sublease in connection with any breach or default of Sublessee under this Sublease (including, without limitation, any violation of the Master Lease caused by Sublessee), Sublessor shall also have available to it all of the remedies set forth in Article 17 of the Master Lease in connection therewith. Such remedies under Article 17 of the Master Lease are hereby incorporated herein by reference and deemed to be set forth herein with "Sublessee" replacing "Tenant" and "Sublessor" replacing "Landlord" under such provisions. Without limiting any other rights or remedies of Sublessor in connection with Sublessee's breach or default under this Sublease, Sublessor shall also have the right to recover from Sublessee the worth at the time of the award of the amount by which the unpaid Rent for the balance of the Sublease term after the time of award exceeds the amount of such rental loss that Sublessee proves could have been reasonably avoided. For purposes of the immediately preceding sentence, "worth at the time of the award" is computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). The rights and remedies of Sublessor are not exclusive. Sublessor's exercise of any right or remedy in connection with Sublessee's breach or default under this Sublease shall not prevent Sublessor from exercising any other right or remedy which may be provided under this Sublease, under the Master Lease, at law, or in equity whether or not stated in this Sublease. The termination of this Sublease shall not release Sublessee from obligations arising prior to such termination (or as a result of any acts or omissions occurring prior to such termination) including, without limitation, any defense and/or indemnity obligations of Sublessee, and all such obligations shall survive the termination of this Sublease. 12.11 Assignment and Subletting. Sublessee shall not either voluntarily or by operation of law, assign, transfer, mortgage, pledge, hypothecate, sublease or encumber this Sublease, the Premises or any interest therein, without the prior written consent of Sublessor which consent may be given or withheld by Sublessor in Sublessor's sole, absolute and arbitrary discretion. Any such assignment, subletting, pledge, mortgage, hypothecation or other transfer of any interest in the Premises or this Sublease without such prior written consent shall be void and shall, at the option of Sublessor, constitute a default under this Sublease by Sublessee. Sublessor may freely assign in whole or in part, Sublessor's interests in the Master Lease and/or this Sublease. If Sublessor assigns or otherwise transfers any such interests, Sublessor shall be automatically released of all liability under any and all covenants and obligations contained in or derived under the Sublease or arising out of any act, occurrence or omission relating to the Premises which occurs after the consummation of such assignment. 34 12.12 Force Majeure. Neither Sublessor nor Sublessee shall be deemed to be in violation of this Sublease if it is delayed in performing any of its non-monetary obligations hereunder by Force Majeure, which term shall be deemed to mean any causes beyond the reasonable control of a party, including, without limitation, strikes, lock-outs, labor unrest, shortages of labor, war, terrorism, enemy action, riot, civil commotion, fire, accident or unavoidable casualty. Each party shall give the other prompt written notice of the occurrence of any Force Majeure, shall take all reasonable efforts to eliminate such event as soon as possible, and upon cessation of such event, shall promptly resume and perform the performance so delayed in accordance with its obligations under this Sublease. 12.13 Late Charge and Interest. Sublessee acknowledges that its late payment of Rent will cause Sublessor to incur costs and expenses not contemplated by this Sublease, including, but not limited to, administrative and collection costs, the exact amount of which is extremely difficult or impractical to fix. Accordingly, if any installment of Rent is not paid within five (5) days the date such Rent is due, Sublessee shall pay to Sublessor, in addition to the installment of Rent then owing, a late payment charge equal to five percent (5%) of the amount of the delinquent installment, regardless of whether a notice of default or notice of termination has been given by Sublessor. Sublessor and Sublessee agree that this late charge represents a reasonable estimate of the costs and expenses incurred by Sublessor from, and is fair compensation to Sublessor for, its loss suffered by such late payment by Sublessee. In addition to such late charge, any Rent or other amounts owing unto Sublessor under this Sublease which are not paid within five (5) days after the date they are due shall thereafter bear interest at the rate of ten percent (10%) per annum. Nothing contained herein shall relieve Sublessee of its obligation to pay Rent as and when due and in the manner recorded under this Sublease nor shall any provision hereunder constitute a waiver of any default of Sublessee with regard to any late or non-payment of Rent. 12.14 Master Lease Options and Extensions. Except as expressly set forth above in this Addendum, this Sublease does not confer upon Sublessee any right to extension options, expansion options, options to purchase, or rights of first refusal which may be provided under the Master Lease. Subject to the election rights of Master Lessor under paragraph 9.3(f) of this Sublease, if Sublessor's interest under the Master Lease terminates for any reason other than by the sole fault of Sublessor, this Sublease shall also terminate concurrently therewith and Sublessor and Sublessee hereunder shall have no further obligations or liability to each other except for those obligations of Sublessee hereunder which survive the termination of this Sublease. Sublessee understands that it is the obligation of Master Lessor, and not Sublessor, to provide to the Premises all services and utilities to be provided by Master Lessor under the terms of the Master Lease. 12.15 Exculpation. Notwithstanding any provision of this Sublease or the Master Lease to the contrary, Sublessor shall not be liable to Sublessee, and Sublessee waives all claims arising from, any loss, injury, death or other damage to person or property (including, but not limited to, Sublessee or Sublessee's property), in or about the Premises from any cause, including, but not limited to, defects in the Premises or any equipment or other personal property in the Premises; fire, mold, explosion or other casualties; damage to or defects in any telephone wiring or cabling; or bursts, ruptures, leakage, or overflow of any plumbing or other pipes, piping, tubes, tubing, lines, sparks, tanks, drains, drinking fountains, wash basins, sprinklers or other facilities), except to the extent such loss or injury is solely caused by the willful misconduct or gross negligence of Sublessor. In no event shall Sublessor be liable to Sublessee for any punitive or consequential damages or loss of business by Sublessee. 12.16 Taxes. In addition to any amounts payable by Sublessee pursuant to paragraph 12.2 above, Sublessee shall pay prior to delinquency all taxes and assessments against and levied upon trade fixtures, furnishings, equipment, improvements and other property contained in or made a part of the Premises. Whenever possible, Sublessee shall cause such items to be assessed and billed separately from the real property portion of the Building or Property (as defined in the Master Lease). Sublessee shall be responsible for all taxes and assessments attributable to such items assessed against any such real property. 12.17 Entry by Sublessor. Sublessor or its authorized representative shall have the right to enter the Premises at all reasonable times and upon reasonable notice (provided that in the event of an emergency, notice need not be given) for the purpose of inspecting the same or taking any action or doing any work permitted under (but nothing herein contained in this Sublease shall create or imply any duty on the part of Sublessor to make any such inspection or to take any such action or to do any such work). No such entry shall constitute an eviction of Sublessee. In connection with any such entry, Sublessor will use reasonable efforts not to disrupt or interfere with the normal operations of Sublessee's business. 35 12.18 Incorporation of Certain Terms. Without limiting Sublessee's Assumed Obligations, the following terms contained in the Master Lease are incorporated herein as terms of this Sublease (with each reference therein to "Lease," "Landlord" and "Tenant" to be deemed to refer to this Sublease, Sublessor and Sublessee, respectively): Article 4 (use) except for paragraph 4.1; Article 5 (alterations and additions); paragraph 6.1 (payment of utilities); paragraphs 7.1.1 and 7.1.2 (indemnification); paragraphs 8.3 (including 8.3.1 through 8.3.4) and 8.4 (tenant's insurance); paragraphs 9.1 and 9.2 (care of the Premises), except for the first sentence of paragraph 9.1 and the last two sentences of 9.2; Article 24 (estoppel certificates); Article 25 (subordination and attornment) provided that the phrase "if such successor so requests" shall be inserted immediately following the word "Lease" first occurring in the fourth line in the paragraph 25.2; Article 26 (holding over); Article 27 (liability of successors); 28.1 (easements); paragraphs 31.2.6 and 31.2.7 (indemnification); Article 32 (interpretation); and Article 33 (time of essence). 12.19 Consent. As stated in this Sublease, Master Lessor's execution of this Sublease is deemed to be Master Lessor's consent to Sublessee's subletting of the Premises pursuant to the terms and conditions hereunder. Such signatures will also be deemed Master Lessor's consent to Sublessee's use of the Premises as stated in this Sublease and Sublessee's non-exclusive use of common areas in connection with Sublessee's use of the Premises, subject, however, to this Sublease, the Master Lease, Master Lessor's rules and regulations, and all underlying leases, restrictions and covenants as to which such use is subject and subordinate. 12.20 First Offer. Sublessor grants to Sublessee a right of first offer ("First Offer Right") with respect to the space leased by Sublessor contiguous with the Premises ("First Offer Space") within the "Building" (as defined in the Master Lease). Sublessee's First Offer Right shall be on the terms and conditions set forth below. The First Offer Right shall pertain only to the first sublease pertaining to First Offer Space entered into by Sublessor after the commencement date of this Sublease. Sublessor shall provide Sublessee with written notice ("First Offer Notice") when Sublessor determines that the entire First Offer Space, or a portion thereof equal to or exceeding ten thousand (10,000) square feet, will become available for sublease to third parties. The First Offer Notice will describe the First Offer Space that will become available for sublease ("Specific First Offer Space") and state the base rent and other material terms under which Sublessor intends to offer such space to other prospective subtenants. If Sublessee wishes to exercise the First Offer Right, Sublessee must, within ten (10) days after delivery of the First Offer Notice to Sublessee, deliver notice to Sublessor of Sublessee's intention to exercise its First Offer Right with respect to all of the Specific First Offer Space. Sublessee must elect to exercise its First Offer Right, if at all, only with respect to all of the space offered by Sublessor to Sublessee, and Sublessee may not elect to sublease only a portion of that space unless Sublessor agrees thereto, as Sublessor determines in Sublessor's sole and absolute discretion. If Sublessee does not exercise its First Offer Right within the above-referenced ten (10) day response period, then, the First Offer Right hereunder shall automatically terminate and Sublessor shall be free to lease the First Offer Space or any portion or portions thereof to any one or more third parties on any terms at any times during the term of this Sublease without any obligation to provide Sublessee with any further right to Sublease all or any portion of the First Offer Space. The First Offer Right shall be personal to the originally named Sublessee under this Sublease and shall be exercisable only by such originally named Sublessee (and not by any assignee, sublessee or other transferee of such Sublessee's interest in this Sublease, or the Premises). Such originally named Sublessee may exercise the First Offer Right only if such originally named Sublessee occupies the entire Premises as of the date of the First Offer Notice. Sublessee shall not have the right to sublease First Offer Space or any portion thereof if Sublessee is in default under this Sublease as of the date of the attempted exercise of the First Offer Right by Sublessee or, at Sublessor's option (in Sublessor's sole and absolute discretion) as of the scheduled date of delivery of the Specific First Office Space to Sublessee. If Sublessee timely and validly exercises the First Offer Right, Sublessor shall tender the Specific First Offer Space to Sublessee on a date selected by Sublessor ("Delivery Date"). Sublessor shall not be liable to Sublessee or otherwise be in breach or default under this Sublease if Sublessor is unable to deliver the Specific First Offer Space to Sublessee on the projected Delivery Date due to the failure of any other subtenant or other occupant to timely vacate and surrender to Sublessor the Specific First Offer Space or any portion of it. If Sublessee timely and validly exercises the First Offer Right, then, beginning on the Delivery Date and continuing for the balance of the term of this Sublease (including any extensions) the Specific First Offer Space shall be part of the Premises under this Sublease (so that the term "Premises" in this Sublease shall refer to the space in the Premises immediately before the Delivery Date plus the Specific First Offer Space) and Sublessee's Share shall 36 be adjusted by Sublessor to reflect the increased square footage of the Premises, and thus the proportionately increased obligation of Sublessee for Common Area Expenses. Sublessee's sublease of theSpecific First Offer Space shall be on the same terms and conditions as affect the original Premises from time to time except as otherwise provided herein, and except that the material terms set forth in Sublessor's First Offer Notice shall apply, including, without limitation, the base rent for the Specific First Offer Space set forth in such notice. Sublessee agrees that if it subleases any Specific First Offer Space, Sublessee shall accept such space in its "as-is" condition. Sublessor shall not be required to construct any improvements in, or contribute any tenant improvement allowance for, any Specific First Offer Space. If Sublessee timely and validly exercises the First Offer Right, Sublessor and Sublessee shall, within fifteen (15) days after Sublessor's delivery of the Specific First Offer Space to Sublessee, confirm in writing the addition of the Specific First Offer Space to the Premises on the terms and conditions set forth herein. At Sublessor's election, such written confirmation shall also confirm the actual Delivery Date, the square footage of the Specific First Offer Space, the increase to Sublessee's Share of Common Area Expenses as adjusted to reflect the addition of the square footage of the Specific First Offer Space to the Premises, the rental commencement date for the Specific First Offer Space, and any other terms that Sublessor may reasonably request be confirmed with respect to this Sublease and the addition of the Specific First Offer Space to the Premises. Notwithstanding any provision of this Sublease to the contrary, Sublessee's First Offer Right hereunder shall not apply, and Sublessor shall have no obligation to provide any such right, during the last six (6) months of the term of this Sublease. 12.21 Notices. All notices required or permitted to be delivered by Sublessor or Sublessee under this Sublease shall be in writing and shall be personally delivered or sent by certified U.S. Mail, return receipt requested, postage prepaid, or by FedEx or other national recognized overnight courier service marked for next business day delivery. Notices to Sublessee shall be delivered to the address of Sublessee set forth across from Sublessee's signature in this Sublease, except that upon Sublessee's taking possession of the Premises, the Premises shall thereafter Sublessee's address for notice purposes under this Sublease. Notices to Sublessor shall be delivered to the address set forth across from Sublessor's signature in this Sublease or such other address as Sublessor may direct from time to time by written notice to Sublessee in conformance with this provision. All notices given in accordance herewith shall be deemed effective upon personal delivery or three (3) business days after deposit in the U.S. Mail or the next business day after the date of deposit with a nationally recognized overnight courier service. 12.22 Entire Sublease. The Addendum attached hereto and the Exhibits attached hereto are incorporated in this Sublease by reference as though fully set forth herein. This Sublease (including such attached Exhibits and Addendum, and those terms of the Master Lease referred to herein) set forth all of the covenants promises, agreements, conditions and understandings either oral or written between Sublessor and Sublessee concerning the Premises and there are no other covenants, promises, agreements, conditions, or undertakings, either oral or written, between them other than as set forth in this Sublease (including the Exhibits and Addendum attached to this Sublease, and those terms of the Master Lease referred to herein). This Sublease may be executed in counterparts all of which, when taken together, shall constitute a fully executed original. No subsequent alteration, amendment, change or addition to this Sublease shall be binding unless reduced to writing and signed by Sublessor and Sublessee; provided further, that if such alteration, amendment, change or addition to this Sublease requires the prior consent of the Master Landlord, then the same shall not be binding unless the prior written consent of Master Landlord thereto is obtained. 12.23 Master Lease. Sublessee acknowledges and agrees that this Sublease is subject and subordinate to the Master Lease. Sublessee shall not commit or permit any of its employees, contractors, agents, officers, directors, or invitees to commit any act or omission which violates any term or condition of the Master Lease. Sublessee further acknowledges that the Master Lease is subordinate and subject to certain underlying documents, instruments, agreements and restrictions, including, without limitation, the "Master Lease" defined under the Master Lease. Sublessee agrees to execute and delivery to Sublessor such other and further documents or instruments and take such further actions as may be reasonably requested by Sublessor to carry out and effectuate the provisions and purposes of this Sublease. 37 EX-10 5 ex10-ee.txt EXHIBIT 10.EE Exhibit 10(ee) FIRST AMENDMENT TO LEASE AGREEMENT AND AGREEMENT THIS FIRST AMENDMENT TO LEASE AGREEMENT AND AGREEMENT (the "First Amendment"), is entered into as of October 31, 2003, by and between GILLESPIE FIELD PARTNERS, LLC, a California limited liability company ("Landlord") and SPARKS EXHIBITS, LTD., a California corporation ("Tenant"), with reference to the following facts: A. Landlord and Tenant are all of the parties to that certain Lease Agreement dated as of June 29, 1998 (the "Lease"), wherein Landlord leased to Tenant certain real property located at 2025 Gillespie Way, El Cajon, California, having located thereon a single industrial building (the "Building") containing approximately 150,159 square feet of space (the "Original Premises"). B. Subsequent to execution of the Lease, Tenant's business requirements have changed and Tenant has requested that Landlord assist Tenant in locating a tenant to lease a portion of the Original Premises. In accordance with Tenant's request, Landlord has identified G.T.M. Wholesale Liquidators Inc. ("GTM") as a prospective tenant to lease a portion of the Original Premises comprising approximately 40,694 square feet (the "GTM Premises") and GTM is willing to lease the GTM Premises. C. Landlord and GTM have negotiated prospective lease terms for the GTM Premises, which lease terms are substantially as set forth in that certain Irrevocable Offer to Lease dated as of October 21, 2003, in the form attached to this First Amendment as Exhibit A (the "Offer"), having appended thereto that certain Lease Agreement dated as of September 18, 2003 (the "GTM Lease"). D. Landlord and Tenant desire to memorialize in writing the terms and conditions upon which Landlord and Tenant will mutually cooperate and undertake to pay for and construct certain tenant improvements which are required by the GTM Lease (the "GTM Tenant Improvements"), and upon occupancy by GTM of the GTM Premises and the satisfaction and/or fulfillment of the other terms and provisions of this First Amendment, the Lease will be and become partially terminated with respect to the portion of the Original Premises constituting the GTM Premises. NOW, THEREFORE, in consideration of the mutual covenants, agreements and undertakings contained in this First Amendment and the exchange of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Unless defined in this First Amendment, or except as otherwise expressly provided in this First Amendment, capitalized terms utilized in this First Amendment shall have the meanings ascribed to such terms in the Lease, or the GTM Lease, as applicable. 2. Acknowledgement. Tenant and Sparks Exhibits Corp., a Pennsylvania corporation ("Guarantor"), each hereby acknowledge receipt of the Offer and the GTM Lease. 38 3. Undertakings Regarding GTM Tenant Improvements. The GTM Lease requires that Landlord install and construct the GTM Tenant Improvements. Landlord and Tenant agree to equally share the aggregate cost of the GTM Tenant Improvements. The estimated cost to construct and install the GTM Tenant Improvements is attached to this First Amendment as Exhibit B (the "Cost Breakdown"). Landlord and Tenant each hereby approve the Cost Breakdown and the GTM Tenant Improvements. Tenant specifically acknowledges, agrees and understands that the GTM Tenant Improvements include, among other things, a demising wall physically separating the GTM Premises, separate metering of utilities, separate legal access to the GTM Premises and other legal and business requirements to configure the GTM Premises as separate space from the Original Premises. Concurrently upon the execution of this First Amendment, Tenant shall deposit, in cash in one lump sum, 50 percent of the aggregate estimated cost of the GTM Tenant Improvements with Landlord and Tenant understands and agrees that Landlord shall not be required to commence construction and installation of the GTM Tenant Improvements unless and until Tenant deposits the sums with Landlord referred to in the preceding sentence. Landlord shall undertake to construct and install, in accordance with the terms and provisions of the GTM Lease, the GTM Tenant Improvements. Tenant approves Landlord's entry into the Building and the GTM Premises in order to install and construct the GTM Tenant Improvements, demolition and/or construction activities necessary to configure the GTM Premises in accordance with the GTM Lease and agrees that Landlord may take or refrain from taking any action in good faith related to the responsibilities and undertakings of Landlord set forth in this First Amendment. Tenant agrees to physically vacate the GTM Premises immediately in order to allow Landlord to perform its undertakings pursuant to this Section 3 and further agrees to conduct its operations in such a manner that it will not unreasonably interfere with the performance by Landlord of its undertakings set forth in this Section 3. If the actual cost of the GTM Tenant Improvements exceeds or is less than the estimated cost, Tenant shall reimburse Landlord, or Landlord shall reimburse Tenant, as the case may be, in cash, 50 percent of any such excess or savings, as applicable, within five calendar days of receiving from Landlord, in writing, a breakdown of the actual cost, with reasonable supporting documentation as soon as practicable, which Landlord shall use its best efforts to furnish to Tenant by January 1, 2004. 4. Agreement to Partially Terminate Lease; Effectiveness. Landlord agrees with Tenant that, (i) upon payment by Tenant of Tenant's portion of the aggregate cost of the GTM Tenant Improvements in accordance with the provisions of Section 3 of this First Amendment, (ii) actual occupancy by GTM of the GTM Premises on a rent paying basis, and (iii) compliance, in full, with all other terms and conditions set forth in this First Amendment, the Lease shall, with no further action of the parties, be terminated with respect only to the portion of the Lease which pertains to the GTM Premises. Accordingly, the portion of the Lease pertaining to all of the Original Premises except the GTM Premises shall remain extant and in full force and effect, in accordance with its terms, unless and until Landlord and Tenant shall otherwise agree in writing. Landlord and Tenant shall execute a mutually acceptable written instrument acknowledging partial termination of the Lease in accordance with the provisions set forth above in this Section 4 and agreeing to such amendments and modifications of the Lease as are necessary and appropriate to reflect the conversion of the Building from Tenant as the single tenant occupying space therein to a multi-tenant configuration. 5. Amendment; Confirmation; Interpretation. To the extent, but only to the extent, necessary to give effect to this First Amendment, the Lease is deemed amended and modified. Except to the limited extent amended and modified hereby, the Lease is ratified and confirmed in all respects and remains extant and in full force and effect. 6. No Agency; Leasing Commissions and Landlord's Attorneys' Fees. Landlord and Tenant hereby acknowledge and agree that there is no agency relationship between Landlord and Tenant, either created by this First Amendment or otherwise. Landlord shall not be entitled to any leasing commissions in connection with locating GTM as a tenant for the GTM Premises, or otherwise in connection with the GTM Lease. In addition to the cost sharing arrangement described above in Section 3 with respect to the GTM Tenant Improvements, Tenant agrees to be responsible and liable (together with Landlord) for 50 percent each of the actual leasing commissions (not to exceed $66,000) and Landlord's attorneys' fees and costs related to the GTM Lease and the Landlord-Tenant related transactions, including without limitation, negotiation and preparation of this First Amendment and fees and costs expected to be incurred by Landlord in connection with negotiation and preparation of the instrument partially terminating the Lease referred to in Section 4 of this First Amendment. Landlord has provided Tenant with good faith estimates of such leasing commissions and Landlord's attorneys' fees and costs in Exhibit B attached hereto and incorporated by reference herein. Tenant agrees to deposit its share of such leasing commissions and Landlord's attorneys' fees and costs related to the GTM Lease in full in cash with Landlord upon the earlier of, the date such commissions and/or fees and costs are due and payable to the broker or Landlord's attorney, as applicable, or the date upon which the Lease is to be partially terminated as set forth in Section 4 above. 39 7. Indemnification. 7.1 By Tenant. Tenant hereby agrees to indemnify and hold Landlord, and the property and assets of Landlord, harmless, from and against any and all liabilities, damages, losses, costs, expenses, attorneys' fees and claims arising out of, resulting from or related to any breach or default by Tenant in the payment or performance of any of Tenant's agreements, promises, undertakings, obligations, responsibilities and/or liabilities under and by reason of this First Amendment, including specifically but not by way of limitation, Tenant's failure to vacate the GTM Premises and/or otherwise to affect adversely Landlord's efforts to perform its responsibilities and obligations respecting construction and installation of the GTM Tenant Improvements. 7.2 By Landlord. Landlord hereby agrees to indemnify and hold Tenant, and the property and assets of Tenant, harmless, from and against any and all liabilities, damages, losses, costs, expenses, attorneys' fees and claims arising out of, resulting from or related to any breach or default by Landlord in the payment or performance of Landlord's agreements, promises, undertakings, obligations, responsibilities and/or liabilities under and by reason of this First Amendment. 8. General Provisions. 8.1 Further Assurances. Each party hereto agrees to perform any further acts and execute and deliver any further documents that may be reasonably necessary to effectuate the provisions of this First Amendment. 8.2 Counterparts; Fax Signatures. This First Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile signatures shall have the same force and effect as original signatures. 8.3 Severability. If any provisions, or portions thereof, of this First Amendment or the application thereof are held to be unenforceable or invalid by any court of competent jurisdiction, the remainder of this First Amendment shall not be affected thereby and to this end only the provisions of this First Amendment are declared severable. 8.4 Successors and Assigns. Subject to the provisions of Section 8.10 of this First Amendment, all terms of this First Amendment shall be binding on and shall inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 8.5 Governing Law; Venue. This First Amendment shall be governed by, construed and enforced in accordance with the laws of the State of California and is to be performed in San Diego County, California and any action or other proceeding brought to enforce or interpret this First Amendment shall be brought in San Diego County, California. 8.6 Waiver. No waiver of any of the provisions of this First Amendment shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waive. No failure to enforce any right or provision hereunder shall preclude or affect the later enforcement of such right or provision. No waiver shall be binding unless executed by the party making the waiver. 8.7 Time. Time is of the essence with respect to the performance by each party of its rights and obligations hereunder. 8.8 Attorneys' Fees. In the event any attorney is employed by either party to this First Amendment with regard to any legal action, arbitration or other proceeding brought by either party for the enforcement or interpretation of this First Amendment, or because of any alleged dispute, breach, default, or misrepresentation involving any provisions of this First Amendment, the party prevailing in any such proceeding shall be entitled to recover reasonable attorneys' fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled. 8.9 No Joint Venture. The parties hereto are independent of one another and no joint venture, partnership or other collaborative venture is intended or implied by the provisions of this First Amendment. 8.10 Assignment. Neither party may assign this First Amendment nor any of its respective rights, liabilities and obligations under this First Amendment without the prior written consent of the other party, which may be given or withheld in such party's sole and unreviewable discretion. 40 8.11 Entire Agreement. This First Amendment, together with the Lease, constitutes the entire agreement between the parties pertaining to the subject matter contained in this First Amendment and supersedes all prior and contemporaneous agreements, representations and understandings of the parties with respect thereto. There are no representations, warranties, agreements or understandings, express or implied, written or oral between the parties hereto relating to the subject matter of this First Amendment which are not fully expressed herein. 8.12 Amendment. No supplement, amendment, modification, discharge or change of this First Amendment shall be binding unless executed in writing by all of the parties. 8.13 Authority. If a party to this First Amendment is a corporation or other entity which is not a natural person, each individual executing this First Amendment on behalf of said corporation or other entity represents and warrants that he is duly authorized to execute and deliver this First Amendment on behalf of said corporation or other entity in accordance with a duly adopted resolution of the board of directors of such corporation or the governing authority of such other entity or in accordance with the bylaws of such corporation or governing instrument(s) of such other entity, and that this First Amendment is binding upon such corporation or other entity in accordance with its terms. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first set forth above. Landlord: Tenant: GILLESPIE FIELD PARTNERS, LLC SPARKS EXHIBITS, LTD., a California limited liability company a California corporation By: ____________________________ By: ________________________ [Signature] [Signature] ____________________________ ________________________ [Print Name and Title] [Print Name and Title] Guarantor's Acknowledgement: The undersigned, as Guarantor (defined above in this First Amendment) of the Lease (defined above in this First Amendment), (i) agrees to and acknowledges the terms and provisions of the First Amendment set forth above, (ii) hereby requests that Landlord undertake the activities described above in this First Amendment with respect to the GTM Lease (defined above in this First Amendment) and (iii) agrees that nothing contained in this First Amendment shall affect the validity or enforceability of the Continuing Guaranty of Lease dated as of June 29, 1998 (the "Guaranty"), given by Guarantor to Landlord in connection with Tenant's execution and performance of the Lease. SPARKS EXHIBITS CORP., a Pennsylvania corporation By: ______________________ [Signature] ______________________ [Print Name and Title] 41 EXHIBIT A OFFER AND GTM LEASE 42 EXHIBIT B GTM TENANT IMPROVEMENTS COST BREAKDOWN AND ESTIMATED BROKERAGE COMMISSIONS AND LANDLORD'S ATTORNEYS' FEES AND COSTS GTM Tenant Improvements Cost Breakdown (Estimated) - -------------------------------------------------- Demising Wall $ 26,000 Dock Door $ 16,000 (Two--$8,000 each) Electrical $ 12,000 Office/Restroom Improvements and Retrofitting $ 55,000 -------- Total Estimated GTM Tenant Improvements Costs $109,000 Leasing Commissions (Estimated) $ 66,000 - ------------------------------------- Landlord Attorneys' Fees and Costs (Estimated) $ 12,000 - ------------------------------ Total Estimated GTM Tenant Improvement Costs, Leasing Commissions and Landlord's Attorneys' Fees and Costs $187,000 43 EX-10 6 ex10-ff.txt EXHIBIT 10.FF Exhibit 10(ff) SECOND AMENDMENT TO LEASE AGREEMENT AND ASSIGNMENT AND ASSUMPTION OF LEASE (Building J) This Second Amendment to Lease Agreement (this "Amendment") is made and entered into this 1st day of August, 2003 (the "Effective Date") by and among LIT-ENVP LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), EXHIBIT CRAFTS, INC., a California corporation ("Exhibit Crafts"), INTERNATIONAL EXPO SERVICES, INC., a California corporation ("IES") (Exhibit Crafts and IES are collectively referred to as the "Original Tenant"), and SPARKS EXHIBITS AND ENVIRONMENTS, LTD, a California corporation ("Assignee"). RECITALS A. Landlord's predecessor-in-interest and Original Tenant entered into the Lease Agreement (California Net Lease) dated September 22, 2000 (the "Original Lease") with respect to certain premises commonly known as Building J in the Heritage Springs Business Park in Santa Fe Springs, California consisting of approximately 91,440 rentable square feet (the "Premises"), as such Premises are more particularly described in the Lease. The Original Lease was amended pursuant to the First Amendment to Lease dated as of September 23, 2002 (the "First Amendment"). The Original Lease, as amended by the First Amendment, is collectively referred to herein as the "Lease". B. Exhibit Crafts desires to assign all of its interest in, to and under the Lease to Assignee and Assignee desires to accept such assignment and assume (on a joint and several basis with IBS) all of the Tenant's obligations under the Lease arising from and after the date hereof. C. Subject to the terms and conditions set forth in this Amendment, Landlord, Original Tenant and Assignee desire to (i) memorialize Exhibit Crafts' assignment and Assignee's assumption of the Lease, and (ii) to amend certain provisions of the Lease in accordance with the terms of this Amendment. D. Capitalized terms used but not defined herein shall have their meanings set forth in the Lease. From and after the Effective Date, all references to "Tenant", whether in the Lease or in this Amendment, shall mean collectively the Assignee and IES on a joint and several basis. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Assignment of Assumption. As of the Effective Date, Exhibit Crafts hereby assigns all of its right, title and interest in and to the Lease (as amended hereby) to Assignee, and Assignee hereby agrees to assume, on a joint and several basis with IES, all of the Tenant's obligations and liabilities under the Lease (as amended hereby) arising from and after the date of this Amendment. Based on Assignee's assumption as described in the previous sentence, Landlord hereby consents to the foregoing assignment and assumption. 2. Letter of Credit. On or before the Effective Date, Tenant shall deliver to Landlord a Letter of Credit with a Commitment Fee Amount of $ 145,000.00 and otherwise in accordance with the terms of Paragraph 5 of the Original Lease, except that (i) the Commitment Fee Amount shall be increased to $145,000.00 as described above, and (ii) subparagraph (b) of Paragraph 5 of the Original Lease shall be deleted in its entirety and replaced with the following: 44 "(b) Provided that Tenant is not then in default under this Lease, beyond all applicable notice and cure periods relating thereto, the Commitment Fee Amount shall be reduced by $20,000.00 on each of August 1 of 2004, 2005 and 2006." Within three (3) business days following Landlord's receipt of the new Letter of Credit, Landlord shall return the original Letter of Credit to Original Tenant. 3. Partial Base Rent Credit. Provided that Tenant is not then in default under the Lease (as amended hereby), beyond all applicable notice and cure periods relating thereto, commencing on August 1, 2003, Tenant shall be entitled to a partial credit against its Base Rent obligation, as to when the same becomes due, in accordance with the following schedule: Months of Lease Term Amount of Base Rent Credit -------------------- -------------------------- 8/1/03 - 7/31/04 $ 571.00 per month 8/1/04 - 7/31/05 $1,412.00 per month 8/1/05 - 7/31/06 $ 706.00 per month 4. Bond Assessment. Notwithstanding anything to the contrary contained in the Lease (as amended hereby), Tenant hereby acknowledges and agrees that its obligation to pay Tenant's Proportionate Share of Taxes shall include, without limitations, all assessments affecting the Project, including, without limitation, the assessments pursuant to the City of Santa Fe Springs $2,315,000 Limited Obligation Improvement Bonds, Heritage Springs Assessment District No. 2001-1. No additional amounts will be payable that is attributable to periods prior to the Effective Date with respect to such assessments. 5. Estoppel. Tenant warrants, represents and certifies to Landlord that as of the date of this Amendment, to the best of Tenant's knowledge, (a) Landlord is not in default under the Lease, and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when same becomes due. Landlord warrants, represents and certifies to Tenant that as of the date of this Amendment, to the best of Landlord's knowledge, (a) Tenant is not in default under the Lease, and (b) Tenant is paid current in its rent obligations under the Lease (as amended hereby) through July, 2003, subject to any reconciliation of Operating Expenses pursuant to the terms of the Lease. Exhibit Crafts hereby waives any claims that it may have against Landlord with respect to any matters arising prior to the date of this Amendment. 6. Attorney's Fees. In the event any party shall commence an action to enforce any provision of the Lease (as amended hereby), the prevailing party in such action shall be entitled to receive from the other party, in addition to damages, equitable or other relief, and all costs and expenses incurred, including reasonable attorneys fees and court costs and the fees and costs of expert witnesses, and fees incurred to enforce any judgment obtained. This provision with respect to attorneys fees incurred to enforce a judgment shall be severable from all other provisions of the Lease, shall survive any judgment, and shall not be deemed merged into the judgment. 7. Authority. Original Tenant, Assignee and Landlord each represents that it has full power and authority to enter into this Amendment and the person signing on behalf of each of Original Tenant, Assignee and Landlord has been fully authorized to do so by all necessary corporate or partnership action on the part of such party. 45 8. Original Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Lease shall remain in full force and effect. Landlord and Tenant each hereby ratifies the Lease, as amended hereby. 9. Binding Effect; Defined Terms; Joint and Several. This Amendment shall be binding upon and inure to the benefit of Landlord, its successors and assigns and Tenant and its permitted successors and permitted assigns. Capitalized terms used but not defined herein shall have their meanings set forth in the Lease. From and after the Effective Date, all references to "Tenant", whether in the Lease or in this Amendment, shall mean collectively the Assignee and IES on a joint and several basis. 10. Confidentiality. Tenant acknowledges and agrees that the content of this Amendment and any related documents, correspondence and discussions constitute confidential information (collectively, the "Confidential Information") and are to be kept strictly confidential by Tenant and shall not be disclosed by Tenant to any other party, except as required by applicable law or judicial process. Tenant further acknowledges that Tenant's agreement to keep all of the Confidential Information strictly confidential and not to disclose the same to any other party is a material inducement to Landlord to enter into this Amendment. Tenant shall indemnify, defend, reimburse and hold Landlord harmless from and against any and all claims, demands, losses, liabilities, causes of action, suits, judgments, damages, costs and expenses arising out of any breach by Tenant of this Section 10. 11. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement. 12. Effectiveness. Notwithstanding the execution of this Amendment by the parties or any other provision of this Amendment to the contrary, this Amendment shall not become effective unless and until Assignee delivers written notice to Landlord on or before August 15, 2003 certifying that Assignee has acquired the assets of Exhibit Crafts and is assuming the Lease, as amended by this Amendment (the "Assumption Notice"). If Landlord does not receive the Assumption Notice from Assignee on or before August 15, 2003, then without the requirement of any further writing or other act of any party, this Amendment shall be null, void and of no force or effect, and the Lease shall remain in full force and effect as if this Amendment were never executed. 46 IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date first written above.
- ------------------------------------------------------------------------------------------- LANDLORD: ORIGINAL TENANT: - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- LIT-ENVP LIMITED PARTENRSHIP, EXHIBIT CRAFTS, INC a Delaware limited partnership a California corporation - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT-ENVGP,LLC., a Delaware limited By: s/s Anthony Di Giorgio liability company, its sole general partner ---------------------- Name: Anthony Di Giorgio ------------------ Title: CEO --- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT Industrial Limited Partnership, a By; s/s John Kalata Delaware limited partnership, its sole member --------------- Name: John Kalata ----------- Title: Controller ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT Holdings GP, LLC, a Delaware INTERNATIONAL EXPO SERVICES, INC., limited liability company, its general a California corporation partner - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: Lion Industrial Properties, LP By: s/s Anthony Di Giorgio A Delaware limited partnership, ---------------------- its sole member Name: Anthony Di Giorgio ------------------ Title: CEO --- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT GP Sub, LLC a Delaware limited By; s/s John Kalata liability company, its general partner --------------- Name: John Kalata ----------- Title: Controller ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: Lion Industrial Trust, a Maryland real ASSIGNEE: estate investment trust, its manager SPARKS EXHIBITS AND ENVIRONMENTS, LTD., A California corporation - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: s/s Stacey Magee By: s/s Robert B. Ginsburg ---------------- ---------------------- Stacey Magee Name: Robert B. Ginsburg ------------ ------------------ Vice President Title: VP and CFO -------------- ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: s/s Alan I. Goldberg -------------------- Name: Alan I. Goldberg ---------------- Title: Secretary --------- - -------------------------------------------------------------------------------------------
47 FIRST AMENDMENT TO LEASE This First Amendment to Lease (this "Amendment") is made and entered into as of this 23 day of September, 2002, by and between CFH-ENVP LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and EXHIBIT CRAFTS INC., a California corporation and INTERNATIONAL EXPO SERVICES INC. , a California corporation (jointly and severally, the "Tenant"). RECITALS A. Tenant is the tenant pursuant to that certain Lease Agreement (California Net Lease) between Landlord and Tenant dated as of September 22, 2000 (the "Lease"), pursuant to which Tenant is currently leasing approximately 91,440 rentable square feet of space (the "Premises") in the building located at 10232 Palm Drive, Santa Fe Springs, California (the "Building"), as such Premises is more particularly described in the Lease. B. Landlord and Tenant desire to amend the Lease as provided herein. C. All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Lease. The term "Lease" where used in the Lease shall hereinafter refer to the Lease, as amended by this Amendment. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1 . Paragraph 14: Parking. The following is hereby added after the last sentence of Paragraph 14 of the Lease: "Notwithstanding anything to the contrary contained in this Lease, Tenant acknowledges and agrees that it shall not have reciprocal rights of parking with respect to any of the parcels comprising the Project other than the parcel encumbered by this Lease." 2. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement. 3. Original Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Lease shall remain in full force and effect and Tenant hereby ratifies the Lease, as amended by this Amendment. 48 IN WITNESS WHEREOF, this Amendment is executed as of the date first written above.
- -------------------------------------------------------------------------------------------------- "Landlord" "Tenant" - ------------------------------------------------------- ------ ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- CFH-ENVP LIMITED PARTNERSHIP, EXHIBIT CRAFTS, INC a Delaware limited partnership a California corporation - ------------------------------------------------------- ------ ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- By: CFH-ENVPGP, LLC By: s/s Anthony Di Giorgio A Delaware limited liability company ---------------------- Its: General Partner Name: Anthony Di Giorgio ------------------ Title: CEO --- - ------------------------------------------------------- ------ ----------------------------------- - -------------------------------------------------------------- ----------------------------------- By: CROW FAMILY HOLDINGS INTERNATIONAL EXPO SERVICES, INC., INDUSTRIAL LIMITED PARTNERSHIP, a California corporation a Delaware limited partnership Its: Member - -------------------------------------------------------------- ----------------------------------- - -------------------------------------------------------------- ----------------------------------- By: CFH INDUSTRIAL TRUST, INC., By: s/s Anthony Di Giorgio a Maryland corporation ---------------------- Its: General Partner Name: Anthony Di Giorgio ------------------ Title: CEO --- - -------------------------------------------------------------- ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- By: s/s Stacey Magee ---------------- Name: Stacey Magee ------------ Title: Vice President -------------- - --------------------------------------------------------------------------------------------------
49 EX-10 7 ex10-gg.txt EXHIBIT 10.GG Exhibit 10(gg) SECOND AMENDMENT TO LEASE AGREEMENT AND ASSIGNMENT AND ASSUMPTION OF LEASE (Building G) This Second Amendment to Lease Agreement (this "Amendment") is made and entered into this 1st day of August, 2003 (the "Effective Date") by and among LIT-ENVP LIMITED P ARTNERSHIP, a Delaware limited partnership ("Landlord"), EXHIBIT CRAFTS, INC., a California corporation ("Exhibit Crafts"), INTERNATIONAL EXPO SERVICES, INC., a California corporation ("IES") (Exhibit Crafts and IES are collectively referred to as the "Original Tenant"), and SPARKS EXHIBITS AND ENVIRONMENTS, LTD., a California corporation ("Assignee"). RECITALS A. Landlord's predecessor-in-interest and Original Tenant entered into the Lease Agreement (California Net Lease) dated September 22, 2000 (the "Original Lease") with respect to certain premises commonly known as Building G in the Heritage Springs Business Park in Santa Fe Springs, California consisting of approximately 31,210 rentable square feet (the "Premises"), as such Premises are more particularly described in the Lease. The Original Lease was amended pursuant to the First Amendment to Lease dated as of September 23, 2002 (the "First Amendment"). The Original Lease, as amended by the First Amendment, is collectively referred to herein as the "Lease". B. Exhibit Crafts desires to assign all of its interest in, to and under the Lease to Assignee and Assignee desires to accept such assignment and assume (on a joint and several basis with IES) all of the Tenant's obligations under the Lease arising from and after the date hereof. C. Subject to the terms and conditions set forth in this Amendment, Landlord, Original Tenant and Assignee desire to (i) memorialize Exhibit Crafts' assignment and Assignee's assumption of the Lease, and (ii) to amend certain provisions of the Lease in accordance with the terms of this Amendment. D. Capitalized terms used but not defined herein shall have their meanings set forth in the Lease. From and after the Effective Date, all references to "Tenant", whether in the Lease or in this Amendment, shall mean collectively the Assignee and IES on a joint and several basis. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Assignment of Assumption. As of the Effective Date, Exhibit Crafts hereby assigns all of its right, title and interest in and to the Lease (as amended hereby) to Assignee, and Assignee hereby agrees to assume, on a joint and several basis with IES, all of the Tenant's obligations and liabilities under the Lease (as amended hereby) arising from and after the date of this Amendment. Based on Assignee's assumption as described in the previous sentence, Landlord hereby consents to the foregoing assignment and assumption. 2. Letter of Credit. On or before the Effective Date, Tenant shall deliver to Landlord a Letter of Credit with a Commitment Fee Amount of $15,000.00 and in accordance with the terms of Paragraph 5 of the Original Lease. Within three (3) business days following Landlord's receipt of the new Letter of Credit, Landlord shall return the original Letter of Credit to Original Tenant. 50 3. Increase in Base Rent. For each of the twelve (12) months commencing on August 1, 2003 through July 31, 2004, Base Rent shall be increased by $948.34 per month (i.e., Base Rent shall equal the then scheduled Base Rent pursuant to the terms of the Lease plus $948.34). 4. Bond Assessment. Notwithstanding anything to the contrary contained in the Lease (as amended hereby), Tenant hereby acknowledges and agrees that its obligation to pay Tenant's Proportionate Share of Taxes shall include, without limitations, all assessments affecting the Project, including, without limitation, the assessments pursuant to the City of Santa Fe Springs $2,315,000 Limited Obligation Improvement Bonds, Heritage Springs Assessment District No. 2001-1. No additional amounts will be payable that is attributable to periods prior to the Effective Date with respect to such assessments. 5. Estoppel. Tenant warrants, represents and certifies to Landlord that as of the date of this Amendment, to the best of Tenant's knowledge, (a) Landlord is not in default under the Lease, and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when same becomes due. Landlord warrants, represents and certifies to Tenant that as of the date of this Amendment, to the best of Landlord's knowledge, (a) Tenant is not in default under the Lease, and (b) Tenant is paid current in its rent obligations under the Lease (as amended hereby) through July, 2003, subject to any reconciliation of Operating Expenses pursuant to the terms of the Lease. Exhibit Crafts hereby waives any claims that it may have against Landlord with respect to any matters arising prior to the date of this Amendment. 6. Attorney's Fees. In the event any party shall commence an action to enforce any provision of the Lease (as amended hereby), the prevailing party in such action shall be entitled to receive from the other party, in addition to damages, equitable or other relief, and all costs and expenses incurred, including reasonable attorneys fees and court costs and the fees and costs of expert witnesses, and fees incurred to enforce any judgment obtained. This provision with respect to attorneys fees incurred to enforce a judgment shall be severable from all other provisions of the Lease, shall survive any judgment, and shall not be deemed merged into the judgment. 7. Authority. Original Tenant, Assignee and Landlord each represents that it has full power and authority to enter into this Amendment and the person signing on behalf of each of Original Tenant, Assignee and Landlord has been fully authorized to do so by all necessary corporate or partnership action on the part of such party. 8. Original Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Lease shall remain in full force and effect. Landlord and Tenant each hereby ratifies the Lease, as amended hereby. 9. Binding Effect; Defined Terms; Joint and Several. This Amendment shall be binding upon and inure to the benefit of Landlord, its successors and assigns and Tenant and its permitted successors and permitted assigns. Capitalized terms used but not defined herein shall have their meanings set forth in the Lease. From and after the Effective Date, all references to "Tenant", whether in the Lease or in this Amendment, shall mean collectively the Assignee and IES on a joint and several basis. 10. Confidentiality. Tenant acknowledges and agrees that the content of this Amendment and any related documents, correspondence and discussions constitute confidential information (collectively, the "Confidential Information") and are to be kept strictly confidential by Tenant and shall not be disclosed by Tenant to any other party, except as required by applicable law or judicial process. Tenant further acknowledges that Tenant's agreement to keep all of the Confidential Information strictly confidential and not to disclose the same to any other party is a material inducement to Landlord to enter into this Amendment. Tenant shall indemnify, defend, reimburse and hold Landlord harmless from and against any and all claims, demands, losses, liabilities, causes of action, suits, judgments, damages, costs and expenses arising out of any breach by Tenant of this Section 10. 51 11. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement. 12. Effectiveness. Notwithstanding the execution of this Amendment by the parties or any other provision of this Amendment to the contrary, this Amendment shall not become effective unless and until Assignee delivers written notice to Landlord on or before August 15, 2003 certifying that Assignee has acquired the assets of Exhibit Crafts and is assuming the Lease, as amended by this Amendment (the "Assumption Notice"). If Landlord does not receive the Assumption Notice from Assignee on or before August 15, 2003, then without the requirement of any further writing or other act of any party, this Amendment shall be null, void and of no force or effect, and the Lease shall remain in full force and effect as if this Amendment were never executed. IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date first written above.
- ------------------------------------------------------------------------------------------- LANDLORD: ORIGINAL TENANT: - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- LIT-ENVP LIMITED PARTENRSHIP, EXHIBIT CRAFTS, INC a Delaware limited partnership a California corporation - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT-ENVGP,LLC., a Delaware limited By: s/s Anthony Di Giorgio liability company, its sole general partner ---------------------- Name: Anthony Di Giorgio ------------------ Title: CEO --- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT Industrial Limited Partnership, a By: s/s John Kalata Delaware limited partnership, its sole member --------------- Name: John Kalata ----------- Title: Controller ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT Holdings GP, LLC, a Delaware INTERNATIONAL EXPO SERVICES, INC., limited liability company, its general a California corporation partner - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: Lion Industrial Properties, LP By: s/s Anthony Di Giorgio A Delaware limited partnership, ---------------------- its sole member Name: Anthony Di Giorgio ------------------ Title: CEO --- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: LIT GP Sub, LLC a Delaware limited By: s/s John Kalata liability company, its general partner --------------- Name: John Kalata ----------- Title: Controller ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: Lion Industrial Trust, a Maryland real ASSIGNEE: estate investment trust, its manager SPARKS EXHIBITS AND ENVIRONMENTS, LTD., A California corporation - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: s/s Stacey Magee By: s/s Robert B. Ginsburg ---------------- ---------------------- Stacey Magee Name: Robert B. Ginsburg ------------ ------------------ Vice President Title: VP and CFO -------------- ---------- - ---------------------------------------------- ---- --------------------------------------- - ---------------------------------------------- ---- --------------------------------------- By: s/s Alan I. Goldberg -------------------- Name: Alan I. Goldberg ---------------- Title: Secretary --------- - -------------------------------------------------------------------------------------------
52 FIRST AMENDMENT TO LEASE This First Amendment to Lease (this "Amendment") is made and entered into as of this 23 day of September, 2002, by and between CFH-ENVP LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and EXHIBIT CRAFTS INC., a California corporation and INTERNATIONAL EXPO SERVICES INC., a California corporation (jointly and severally, the "Tenant"). RECITALS A. Tenant is the tenant pursuant to that certain Lease Agreement (California Net Lease) between Landlord and Tenant dated as of September 22, 2000 (the "Lease"), pursuant to which Tenant is currently leasing approximately 31,210 rentable square feet of space (the "Premises") in the building located at 12342 Hawkins Street, Santa Fe Springs, California (the "Building"), as such Premises is more particularly described in the Lease. B. Landlord and Tenant desire to amend the Lease as provided herein. C. All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Lease. The term "Lease" where used in the Lease shall hereinafter refer to the Lease, as amended by this Amendment. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Paragraph 14: Parking. The following is hereby added after the last sentence of Paragraph 14 of the Lease: "Notwithstanding anything to the contrary contained in this Lease, Tenant acknowledges and agrees that it shall not have reciprocal rights of parking with respect to any of the parcels comprising the Project other than the parcel encumbered by this Lease." 2. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement. 3 Original Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Lease shall remain in full force and effect and Tenant hereby ratifies the Lease, as amended by this Amendment. 53 IN WITNESS WHEREOF, this Amendment is executed as of the date first written above.
- -------------------------------------------------------------------------------------------------- "Landlord" "Tenant" - ------------------------------------------------------- ------ ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- CFH-ENVP LIMITED PARTNERSHIP, EXHIBIT CRAFTS, INC a Delaware limited partnership a California corporation - ------------------------------------------------------- ------ ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- By: CFH-ENVPGP, LLC By: s/s Anthony Di Giorgio A Delaware limited liability company ---------------------- Its: General Partner Name: Anthony Di Giorgio ------------------ Title: CEO --- - ------------------------------------------------------- ------ ----------------------------------- - -------------------------------------------------------------- ----------------------------------- By: CROW FAMILY HOLDINGS INTERNATIONAL EXPO SERVICES, INC., INDUSTRIAL LIMITED PARTNERSHIP, a California corporation a Delaware limited partnership Its: Member - -------------------------------------------------------------- ----------------------------------- - -------------------------------------------------------------- ----------------------------------- By: CFH INDUSTRIAL TRUST, INC., By: s/s Anthony Di Giorgio a Maryland corporation ---------------------- Its: General Partner Name: Anthony Di Giorgio ------------------ Title: CEO --- - -------------------------------------------------------------- ----------------------------------- - ------------------------------------------------------- ------ ----------------------------------- By: s/s Stacey Magee ---------------- Name: Stacey Magee ------------ Title: Vice President -------------- - --------------------------------------------------------------------------------------------------
54 EX-31 8 ex-31.txt EXHIBIT 31 EXHIBIT 31 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Marlton Technologies, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert B. Ginsburg, Chief Executive Officer of the Company, and Stephen P. Rolf, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, based on their knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Robert B. Ginsburg /s/ Stephen P. Rolf - ---------------------- ------------------- Robert B. Ginsburg Stephen P. Rolf Chief Executive Officer Chief Financial Officer November 14, 2003 November 14, 2003 55 EX-32 9 ex32-a.txt EXHIBIT 32A EXHIBIT 32(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert B. Ginsburg, certify that; (1) I have reviewed this quarterly report on Form 10-Q for Marlton Technologies, Inc.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrants' other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. November 14, 2003 - ----------------- /s/ Robert B. Ginsburg - ---------------------- Robert B. Ginsburg Chief Executive Officer 56 EX-32 10 ex32-b.txt EXHIBIT 32B CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Stephen P. Rolf, certify that: (1) I have reviewed this quarterly report on Form 10-Q for Marlton Technologies, Inc.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrants' other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. November 14, 2003 - ----------------- /s/ Stephen P. Rolf - ------------------- Stephen P. Rolf Chief Financial Officer 57 -----END PRIVACY-ENHANCED MESSAGE-----