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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM L0-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 3L, 1995
OR
[ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
] EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-16240
JB OXFORD HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
UTAH 95-4099866
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
9665 Wilshire Blvd., Suite 300; Beverly Hills, 90212
California
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 777-8888
Securities registered pursuant to Section 12(b) of None
the Act:
Securities registered pursuant to Section 12(g) of
the Act:
Name of each exchange on
Title of each class which registered
Common stock, $0.01 par 8,655,205 shares NASDAQ
value: outstanding at
February 29, 1996
Non-Voting Preferred stock, 200,000 shares N/A
$10.00 par value: outstanding at
February 29, 1996
Indicate by check mark whether the Registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of
the registrant at February 29, 1996 was approximately $19,754,900; such amount
computed as the average bid and asked prices of stock as of February 29, 1996.
PART I
ITEM 1. BUSINESS
JB Oxford Holdings, Inc. was incorporated in Delaware on March 31, 1987,
and relocated its state of incorporation to Utah in 1990. The terms `Company''
`Registrant'' and/or ``JBOH'' mean JB Oxford Holdings, Inc. and its consolidated
subsidiaries.
As of March 1, 1996, the Company and its subsidiaries had approximately 245
employees. The Company considers its employee relationships to be satisfactory.
The Company operates in a single industry segment. The only significant
subsidiary of the Company is JB Oxford & Company (`JBOC''), the broker-dealer
operation. No material part of the Company's consolidated revenues are received
from a single customer or group of customers.
General Developments
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JB Oxford & Company (`JBOC'') is a registered broker-dealer offering the
following services: (i) clearing, settlement, execution, safekeeping, cash and
margin account services for regional broker-dealers (`correspondents'') on a
fully-disclosed basis; (ii) discount brokerage services to the investing public
through its registered representatives; (iii) electronic and telephonic trading
services; (iv) financial consulting, investment banking and merchant banking
services.
During fiscal year 1995, Management continued the steady implementation of
a significant capital and business restructuring of the Company that began in
1994. The Company significantly improved its capital position during 1995 by
generating net profits and concluding certain transactions that had the
cumulative effect of increasing shareholders equity at December 31, 1995 to
approximately $8,444,000 from a deficit at the prior year end of approximately
$599,000.
Through a series of transactions in March and June 1995, the Company
converted all of its demand debt into $5,000,000 of 9% thirty month convertible
debt and $2,000,000 in 11% convertible preferred stock. Additionally, during
the year JBOC raised $2,000,000 in 9% three year subordinated debt from
unrelated parties in conjunction with the acquisition of three new
correspondents.
The Company is in the process of winding down all operations of Prolyx Data
Systems, Inc. (Prolyx). This computer product marketing subsidiary has not been
significant to the Company's operations and its closure will not have a
significant impact on the Company's earnings. Management also continues to
monitor the winding down of prior RKSI operations.
Clearing Brokerage Services/Trading & Execution
The clearance division grew in 1995 spurred by the acquisition of the
clearance business of a number of correspondents from the SIPC Trustee for a
failed New York broker dealer. As of February 29, 1996, JBOC provided clearing
services for 23 correspondents. JBOC will continue to grow this area of
business on a controlled basis. During the fourth quarter of 1995 and early
1996 JBOC was approved for membership in three major clearing mechanisms for the
securities clearing industry: Depository Trust Company (DTC); National
Securities Clearing Corporation (NSCC); and the Options Clearing Corporation
(OCC). Membership has enabled JBOC to settle transactions more efficiently and
at greater cost savings. It will also allow JBOC to utilize the latest
technologies available to enhance the Company's current clearing and execution
services.
JBOC's clearing business derives a portion of its income from interest
generated on individual customer margin accounts. A margin account allows the
customer to deposit less than the full cost of the security purchased while JBOC
lends the balance of the purchase price to the customer secured by the purchased
securities. Customers are charged interest on the amount borrowed to finance
their margin transactions ranging from .25% below to 2.25% above the broker call
rate, which is the rate at which JBOC can obtain financing using the margined
securities and firm securities as collateral. As of December 31, 1995, JBOC had
approximately 2,300 active margin accounts which had total debit balances of
approximately $128,000,000. This reflects an increase of $75,000,000, or 142%,
from the 1994 year-end In addition, pursuant to written agreements with
customers, broker-dealers are permitted by SEC regulations to lend customer
securities held as collateral in margin accounts. As of December 31, 1995,
customer free credit balances available to JBOC approximated $95,000,000.
In addition to financing the margin transactions by customer credit
balances, JBOC has established omnibus/financing accounts and lines of revolving
credit with other broker-dealers and banking institutions with an aggregate
borrowing limit of $22,000,000.
During fiscal year 1995, JBOC acted as a market-maker for a number of
public corporations representing a wide variety of industries. JBOC also
maintains an inventory of securities in its trading account. These securities
are used to facilitate sales to clients, as well as being actively traded by
JBOC with a view for profit.
The following table sets forth the revenue and related number of
transactions processed and the number of correspondents for the clearing
brokerage services division for the past three years:
Year Ended December 31
1995 1994 1993
-------------- -------------- --------------
Clearance and Execution $ 15,581,030 $ 9,710,609 $ 15,565,821
Interest Income $ 8,129,088 $ 3,134,825 $ 1,937,947
Number of Transactions 2,045,061 1,193,184 1,098,011
Processed
Correspondent Brokers-
Dealers Under Contract
at Year-end 23 18 13
Discount Brokerage Services
In August 1994, JBOC inaugurated its discount securities business. The
development of this new division included recruiting and training of brokers,
and the launching of a national advertising campaign utilizing both television
and print media. The business has rapidly grown from its startup in 1994 to
approximately 1,600 trades a day as of March l, 1996.
The deep discount retail operations are conducted out of the Beverly Hills,
Dallas, New York and Basel, Switzerland offices. JBOC's deep discount business
continued to expand in 1995 with both the Beverly Hills and Dallas branches
turning profitable early in the year. This success led to the opening of two
new branches in New York City and Basel, Switzerland. The Basel office serves
customers in more than thirty countries with language capabilities in English,
German, French and Spanish. In Beverly Hills, a specialized marketing group was
formed to offer discount services and financial products to the Asian community
beginning in Southern California, but eventually throughout the United States in
geographic area supporting significant Asian populations. Several more discount
branches are planned in 1996 and a lease was signed in February of 1996 for a
Miami branch and plans are under way to open an office in Boston.
Management believes that it is important to diversify the mix of products
and services available to customers and, in that vein, began a fixed income
division in early 1996. JBOC also intends to offer a wider range of mutual
funds during 1996.
Electronic Trading
In September 1994, JBOC unveiled its electronic securities trading
business, JB On-linea. In February 1996, JBOC introduced to the market a new,
Windows based version of its electronic trading product. Using this service,
customers are able, through their personal computer, to trade equities and
options, obtain quotes, retrieve account information and obtain research. Also,
using JBOC's Telephone Tradera service, customers can trade using any touch tone
telephone. Initial reaction to the introduction of JB On-linea and Telephone
Tradera have been better than expected and JBOC intends to eventually introduce
these products to its European customers. The growth of the Internet has led
Management to pursue the establishment of a Web site for JBOC. In the early
part of the second quarter of 1996, JBOC intends to introduce an electronic
trading facility accessible on the Internet that will enable customers to trade
as well as obtain quotes and research. Management believes JBOC's Internet
product will equal or surpass any similar product currently on the market.
Capital Markets
In late 1995, JBOC formed a Capital Markets division which serves companies
seeking capital of between $1 to $10 million in the form of investment advisory
services, bridge financings, initial and secondary offerings and private
placements. Several transactions were successfully concluded in 1995 and
several are currently pending completion. This division generated approximately
$226,000 in revenues which are included as part of other revenues.
Competition
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The securities industry, and the market areas in which JBOC is involved are
highly competitive. Although JBOC is not aware of any single competitor in all
of its different service fields, various companies compete in one or more
service lines. Some of these companies have substantially greater sales and
assets than JBOC. Management of the Company believes that JBOC is able to
compete due to its ability to provide high-quality, flexible and customer
sensitive responses and services. JBOC continually upgrades its computer
systems and services within each of its divisions to utilize and take advantage
of the most recent technological developments. Additionally, JBOC has
specialized in identifying selected markets and has emphasized the creation of
long-term relationships to meet customer needs more effectively.
While no single correspondent broker/dealer or customer represents 10% or
more of the Company's consolidated revenues, the Company has several significant
customers whose loss, in the aggregate, could be material to JBOC. The Company
believes that the likelihood of losing all such customers is remote.
Securities Industry Practices
- -----------------------------
JBOC is registered with the SEC and the NASD and is a member of the
following organizations: Chicago Stock Exchange, Midwest Clearing Corporation,
Pacific Stock Exchange, Cincinnati Stock Exchange, DTC, NSCC, OCC, NASD and SIA.
JBOC is registered as a securities broker-dealer in 49 states and the District
of Columbia, with application pending in the state of Maine. JBOC is also a
member of the Securities Investors Protection Corporation (`SIPC''), which
provides JBOC's customers with insurance protection for amounts of up to
$500,000 each, with a limitation of $100,000 on claims for cash balances. JBOC
has also acquired an additional $5 million in insurance coverage through SIPC as
added protection for individual customer's securities, covering all clients of
JBOC's fully-disclosed correspondents and discount customers.
JBOC and the securities industry in the United States are subject to
regulation by Federal and State laws. The SEC is the Federal agency charged
with administration of the Federal Securities Laws. Much of the regulation of
broker/dealers, however, has been delegated to self-regulatory organizations,
principally the NASD and the national securities exchanges. These
self-regulatory organizations adopt rules (subject to approval by the SEC) which
govern the industry and conduct periodic reviews of member broker/dealers.
Securities firms are also subject to regulation by state securities commissions
in the states in which they do business. The SEC, self-regulatory organizations
and state securities commissions may conduct administrative proceedings which
can result in censure, fine, suspension or expulsion of a broker/dealer, its
officers or employees. The principal purpose of regulation and discipline of
broker/dealers is the protection of customers and the securities markets, rather
than protection of creditors and shareholders of broker/dealers.
Business Risks
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Retail broker/dealers with clearing operations, such as JBOC, are exposed
to risks which exceed the simple risk of loss of business due to the loss of
retail customers. Broker-dealers engaged in the clearing operations for other
correspondent broker/dealers are exposed to losses beyond the loss of business
in the event that the correspondent fails. These risks result where the total
assets, securities held in inventory and cash of the failed correspondent are
insufficient to cover the unpaid customer debits, together with losses which may
be generated in the correspondent's trading account. JBOC has established
procedures to timely review a correspondent's inventory and assess JBOC's
exposure to unpaid inventory positions and to monitor each correspondent's daily
activity in a continuing effort to prevent such losses in the event of a
correspondent's failure. Management of JBOC has taken steps to assure that the
correspondent's inventory account is fully-paid, in an effort to increase JBOC's
financial security and provide added financial protection. JBOC monitors
required margin levels daily and, pursuant to such guidelines, requires the
customers to deposit additional collateral, or to reduce positions when
necessary. The Company also requires cash deposits from correspondents which
mitigate losses from their activities.
However, areas outside the control of Management of JBOC and which affect
the securities market, such as severe down-turns or declines in market activity,
may cause added financial exposure. This is particularly true with regard to
the receivables which are carried in customers' margin accounts. A significant
decline in market value may decrease the value of securities pledged in the
margin accounts to a point that the margin loan would exceed such value. While
JBOC is authorized to liquidate the securities and to utilize the
correspondent's account balances to cover any short-fall, in a worse case
scenario, such collateral may not be sufficient to cover all losses.
Net Capital Requirements
- ------------------------
Every broker/dealer doing business with the public is subject to the
Uniform Net Capital Rule (the `Rule''), promulgated by the SEC (Rule 15c3-1),
which establishes minimum net capital requirements for such broker/dealers. The
Rule is designed to measure financial integrity and liquidity in order to assure
the broker/dealer's financial stability within the securities market. JBOC is a
registered broker/dealer and is subject to the Rule.
In computing net capital under the Rule, various adjustments are made to
exclude assets not readily convertible into cash and to reduce the value of
other assets, such as a firm's position in securities. A deduction is made
against the market value of the securities to reflect the possibility of a
market decline prior to sale. Compliance with the Rule could require intensive
use of capital and could limit JBOC's ability to pay dividends to the Company,
which in turn could limit the Company's ability to pay dividends to its
shareholders. JBOC has, at all times, been in compliance with the Rule.
Failure to comply with the Rule would require the Company to infuse additional
capital into the broker/dealer and may subject the broker/dealer to certain
restrictions which may be imposed by the SEC, the NASD and other regulatory
bodies. Moreover, in the event that the Company could not or elected not to
infuse the additional capital or otherwise bring the broker/dealer into
compliance, the broker/dealer would ultimately be forced to cease operations.
At December 31, 1995, JBOC has elected to use the alternative method
permitted by the Rule, which requires it to maintain minimum net capital, as
defined, equal to the greater of $250,000 or two percent of aggregate debit
balances arising from customer transactions, as defined. The Rule also
provides, among other things, for a restriction on the payment of cash
dividends, payments on subordinated borrowings or the repurchase of capital
stock if the resulting excess net capital would fall below five percent of
aggregate debits. At December 31, 1995, JBOC had net capital of $12,494,561,
which was 8.6% of aggregate debit balances and $9,598,267 in excess of the
minimum amount required. At December 31, 1994, JBOC had net capital of
$2,676,782, which was 3.8% of aggregate debit balances and $1,274,386 in excess
of the minimum amount required. JBOC has agreed with the NASD to maintain
excess net capital of not less than $2,500,000. To comply with the agreement,
during the year ended to December 31, 1995 the parent company contributed
$4,000,000 in additional capital to JBOC. Additionally, JBOC obtained
$2,000,000 in subordinated loans from unrelated parties.
ITEM 2. PROPERTIES
The principal offices of the Company and JBOC are located at 9665 Wilshire
Blvd., 3rd Floor, Beverly Hills, California 90212. As of February 29, 1996, the
Company and its subsidiaries conduct their operations from and have their
administrative offices at the following locations:
Area
Location (Sq. Feet) Principal Use Owned Or Leased
- ------------------------ ---------- --------------- ---------------
9665 Wilshire Blvd., 3rd Floor Leased to
Beverly Hills, CA 15,321 JBOH and JBOC Oct. 2002
9665 Wilshire Blvd., 2nd Floor
Beverly Hills, CA 3,459 JBOC Month to Month
5221 N. O'Connor Rd, Suite 800 Leased to
Irving, Texas 8,856 JBOC Sept. 1998
Peter Merian-Strasse 50
Basel, CH-4002 Switzerland 1,880 JBOC Month to Month
One Exchange Plaza, 19th Floor Leased from June
New York, NY 7,023 JBOC 1995 to June 2006
801 Brickell Ave. Suite 2450 Leased from Feb
Miami, FL 6,993 JBOC 1996 to Feb 2003
999 18th Street, Suite 1440
Denver, CO 1,171 Prolyx Month to Month
655 Sky Way, Suite 123A
San Carlos, CA 590 Prolyx Month to Month
The Company's office and the offices and facilities of its subsidiaries are
considered by management to be generally suitable and adequate for their
intended purposes.
ITEM 3. LEGAL PROCEEDINGS
The Company and/or its subsidiaries are a party to a number of pending
legal or administrative proceedings, of which those identified below, may, in
the opinion of Management of the Company, after consultation with counsel, have
a substantial impact upon the Company. All of the legal and administrative
proceedings have arisen in the conduct of its business. Additionally,
previously reported matters have been resolved and are discussed separately
below.
Robert F. Smith vs. Reynolds Kendrick Stratton, Inc., William Stratton, Wm.
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Michael Reynolds, et al. NASD Arbitration No. 94-00519
- ------------------------
In an arbitration matter filed in February 1994, the claimant seeks
rescission of certain sales in his customer account and damages of $750,000.
The claimant alleged that RKSI and former principals breached fiduciary duties
and failed to disclose material information. The ultimate outcome is not
determinable at this stage and Management intends to vigorously contest this
matter.
Remo Ferrari, et al. vs. Reynolds Kendrick Stratton, Inc., Robert Kendrick, et
- ------------------------------------------------------------------------------
al. NASD Arbitration No. 94-00444
- ---------------------------------
In an arbitration filed with the NASD in January 1994, the claimants are a
group of investors who sold short Future Communications, Inc. (`FCMI'').
Claimants did not have an account with RKSI, however, they have alleged that
RKSI is responsible for the damages Claimants realized when their short
positions in FCMI were bought in. Claimants are seeking damages in the amount
of $740,000, plus punitive damages. The proceeding has been stayed pending
determination of whether Claimants are members of the FCMI class action and
bound by the settlement agreement entered therein (see Jaffee below). The
ultimate outcome is not determinable at this stage and Management intends to
vigorously contest this matter.
Adams et. al. vs. OTRA Clearing, Inc., et. al. Case No. 626182
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This matter was filed in the San Diego County Superior Court in July 1990.
The Plaintiffs allege that OTRA Clearing Inc. knowingly cleared unregistered
securities for its former correspondent broker Hamilton Williams. The case was
filed on behalf of hundreds of individuals who comprise the Plaintiff Class.
The Company successfully demurred to four Amended Complaints; however, the Court
allowed the fifth Amended Complaint to stand, and the parties are conducting
additional discovery. The Company anticipates filing a Motion to Decertify the
Class, and Management will continue to vigorously defend this matter.
Marvin & Dorothy Frankel vs. JB Oxford & Company, JB Oxford Holdings, Inc.,
- ---------------------------------------------------------------------------
Reynolds Kendrick Stratton, Inc., Robert Kendrick, Wm. Michael Reynolds, et al.
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NASD Arbitration No. 94-04075
In an arbitration matter filed in October 1994, the claimants allege that
RKSI and former principals breached fiduciary duties, recommended non suitable
investments, fraud, and failure to disclose material information. JBOC has been
named as an alleged successor to RKSI; JBOH has been named as the parent
company. Claimants seek damages in the amount of $482,000. The ultimate
outcome is not determinable at this stage and Management intends to vigorously
contest this matter.
Shirley A. Robinson vs. Robert Kendrick, Reynolds Kendrick Stratton, Inc., and
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JB Oxford Holdings, Inc. NASD Arbitration No. 95-00118
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In an arbitration matter filed in January 1995, the claimant alleges that
RKSI and former principals breached fiduciary duties, recommended non suitable
investments, fraud, failure to disclose material information, and failure to
supervise. JBOH has been named as the parent company to RKSI. Claimant seeks
damages in the amount of $525,000. The ultimate outcome is not determinable at
this stage and Management intends to vigorously contest this matter.
Shea & Gould vs. RKS Financial Group, Inc., et al. Case No. 95-0641
- -------------------------------------------------
This is an action commenced in March 1995, in the United States District
Court of New York. The claim is brought by former counsel for the Company and
alleges payment due for professional services in the amount of $681,217. An
answer and counter claim by the Company was filed asserting among other claims
that the Company was overcharged for services. The ultimate outcome and range
of possible loss, if any, is not determinable at this stage. Management intends
to vigorously contest this matter.
Olde Discount Corporation vs. JB Oxford & Company NASD Arbitration No. 95-
- -------------------------------------------------
04710
In an arbitration matter filed in October 1995, the Claimant alleges that
JB Oxford & Company induced breach of contract by former and current Olde
employees, misappropriated and converted confidential and proprietary Olde
information, and interfered with Olde's prospective business relationships.
Claimant is seeking unspecified damages in excess of $10 million. Extensive
discovery has been conducted, and some of Claimant's initial allegations have
been withdrawn. Management has been advised by outside legal counsel that the
claims are without merit, and will vigorously contest this matter. Management
believes the ultimate outcome will not affect the financial condition of the
Company.
SETTLED LEGAL PROCEEDINGS
William L. Herron and Naomi S. Herron vs. OTRA Securities Group, Inc., OTRA
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Clearing, Inc., et. al. Case No. 91-C-714S
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This matter was filed in the Federal District Court in Utah in July 1991.
This is a class action lawsuit against the Company in which plaintiffs' class
representatives alleged wrongdoing in charging a maintenance fee on the
Company's customer accounts and in its practice of liquidating customer accounts
if the customer failed to pay the fee. A settlement agreement has been executed
by the parties and an Order and Judgment of Settlement Approval has been entered
by the Court. The settlement had no impact on the Company's earnings.
Jaffee , et al. vs. Bosco, et. al. Case No. 3:93-CV-2064X
- ----------------------------------
This is a consolidated class action commenced in October 1993 against RKSI
and JBOH, pending in the United States District Court for the Northern District
of Texas, Dallas Division. The claim arises out of the purchase and sale by the
Plaintiffs and the Class of Future Communications, Inc., (`FCMI'') stock. A
settlement agreement has been executed by the parties, pending final court
approval, a hearing on which is scheduled in April 1996. The settlement, if
approved by the Court, will not have a significant impact on future earnings.
Brantley, et al. vs. Reynolds Kendrick Stratton, Inc., et. al. Case No.
- --------------------------------------------------------------
93-Civ-7074 (TPG)
This is an action commenced in October 1993 against RKSI and JBOH, pending
in the United States District Court for the Southern District of New York. The
claim was brought by and on behalf of a purported class of persons who purchased
the common stock of FCMI in order to cover short sales after May 17, 1993 and
before August 31, 1993. The settlement agreement executed in Jaffee (above) has
been written to include and settle all claims from this matter.
District Business Conduct Committee vs. Reynolds Kendrick Stratton, Inc., et al.
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Complaint No. C01950006
This complaint was filed in February 1995 by the NASD District 1 office in
San Francisco, California against RKSI and certain of its former principals and
brokers. The Offer of settlement, consent and sanctions submitted by RKSI was
approved by the National District Business Conduct Committee. The settlement,
which was entered into without any admission of liability, did not have a
significant impact on the Company's earnings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the shareholders during the
fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY & RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market with
prices quoted on the NASD's Automated Quotation System (NASDAQ) under the
trading symbol `JBOH." Quotations given are from NASDAQ and represent prices
between dealers exclusive of a retail mark-up, mark-down or commission. They do
not necessarily represent actual transactions.
QUARTERLY STOCK PRICE AND DIVIDEND DATA
1-31-96 2-29-96
------- -------
Price range of common stock
High $ 3.13 $ 2.88
Low 2.88 2.75
Close 3.00 2.88
Quarter Ended
3-31-95 6-30-95 9-30-95 12-31-95
------- ------- ------- --------
Price range of common stock
High $ 1.59 $ 1.69 $ 2.03 $ 2.94
Low 1.50 1.50 1.88 2.63
Close 1.59 1.50 1.94 2.82
Quarter Ended
3-31-94 6-30-94 9-30-94 12-31-94
------- ------- ------- --------
Price range of common stock
High $ 1.50 $ 1.00 $ 2.25 $ 1.25
Low 0.63 0.19 0.38 0.31
Close 0.69 0.38 1.03 1.00
The number of record holders of the Company's common stock as of February
29, 1996 was 1,042.
Dividends
- ---------
JBOH has not declared or paid cash dividends on its common stock. It is
Management's position that, given the past expansion and overall business
growth, it has been prudent to retain and increase its capital base. The
Company does not currently anticipate paying cash dividends. Future payments of
dividends will depend upon, among other factors, the Company's consolidated
earnings, overall financial condition and cash requirements.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth below should be read and reviewed in conjunction
with the Management's discussion and analysis, consolidated financial statements
and related notes, all included under Item 7 & 8 of this report.
JB OXFORD HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Amounts in Thousands, Except Per Share Data)
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
INCOME STATEMENT DATA
Revenues $ 39,605 $ 16,511 $ 32,560 $ 16,207 $ 14,196
Net Income (Loss) 5,225 (7,588) (1,807) 225 912
Primary Earnings (Loss) 0.62 (1.33) (0.35) 0.06 0.26
Per Share
Fully Diluted Earnings 0.40 (1.33) (0.35) 0.06 0.26
(Loss) Per Share
Dividends -- -- -- -- --
BALANCE SHEET DATA
Total Assets $175,764 $ 87,533 $ 61,785 $ 39,707 $ 19,809
Long-Term Debt 6,623 451 640 548 264
Liabilities (Excluding 160,697 87,681 55,155 33,365 14,243
Long-Term)
Total Shareholders' Equity 8,444 (599) 5,989 5,794 5,303
(Deficit)
Book Value Per Share .98 (.09) 1.13 1.56 1.48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company and its subsidiaries are directly affected by general economic
and market conditions, including fluctuations in volume and price levels of
securities, changes in levels of customer margin accounts, free credits and
stock loan and borrowed, changes in interest rates and demand for financial
services, all of which have an impact on revenues from all sources. With regard
to the primary subsidiary, JBOC, periods of reduced market activity adversely
affect profitability because income from operations decreases while certain
expenses remain relatively fixed. Management believes that the Company is
financially sound and that it has the ability to meet its present and future
capital requirements.
The Company's financial condition improved significantly during the 12
months ended December 31, 1995, as compared to the same period ended 1994,
marked by the Company's third consecutive quarter of strong earnings growth.
Shareholders' Equity was approximately $8,444,000, compared to a deficit at the
prior year end of approximately $599,000. Total assets at December 31, 1995
increased in excess of $88,000,000 or more than 100%. Management attributes the
Company's growth and earnings improvement to the steady implementation of a full
strategic capital and financial restructuring of the Company that began in late
1994 and continued throughout 1995. That restructuring, which primarily
affected the Company's wholly-owned subsidiary JBOC, included the following
significant areas:
Capital Restructuring
- ---------------------
A key component of Management's strategic plan for the Company was the
restructuring of its capital position. In March of 1995, the Company converted
approximately $7,000,000 in demand debt due a shareholder to 9% thirty month
convertible term debt with payments amortized using a 10 year schedule.
Management believes it will be able to meet this obligation at maturity or enter
into a new agreement with the note holder to extend the maturity of the note.
Also in March of 1995, JBOC issued $2,000,000 in three year Subordinated Debt in
connection with obtaining the clearing business of three new correspondents. In
the second quarter of 1995, the Company converted $2,000,000 of its thirty month
convertible debt to convertible preferred stock callable eighteen months after
issuance. The coupon on this preferred issue started at 11% and increases over
time to 15%. Also in the second quarter, outstanding options were exercised
which increased shareholders' equity by approximately $1,944,000. Management
believes that the Company's overall capital position was significantly
strengthened as a result of these transactions.
Business Analysis
- -----------------
During 1995, the Company increased its correspondent clearing business. In
the first quarter of 1995, JBOC acquired a significant and profitable
correspondent clearing business as a result of a SIPC liquidation of a New York
clearing firm. Through increased advertising and other marketing efforts, JBOC
attracted additional clearing business during 1995. At the same time, JBOC
asked several of its less profitable or less credit worthy correspondents to
seek other clearing relationships. The clearing division of JBOC's business
contributed in large part to 1995's overall profitability and to a 71% increase
in the average number of monthly transactions processed over 1994 averages.
Management believes JBOC should continue to increase this area of JBOC's
business but only on a selected basis taking into account the profitability and
credit risk of potential new correspondents.
JBOC's deep discount operation, which began in the last quarter of 1994,
continued to expand aggressively in 1995. From one office and one employee, the
deep discount operation grew to offices in Beverly Hills, Dallas, New York City
and Basel, Switzerland. A total of 121 salespersons and assistants are
currently employed by this division. Additional expansion is anticipated in
1996 and a lease for a new branch office in Miami was signed in February 1996,
with plans for Boston, Chicago and San Francisco underway. Management will
continue to concentrate its efforts to expand the deep discount brokerage
business in what it believes to be a growing market niche. Although competition
continues to be keen for the deep discount customer, Management believes that
through pricing, marketing, customer service and innovative product lines,
JBOC's share of this market will grow. To such ends, JBOC in late 1995 formed a
specialized marketing group to offer JBOC's services to the Asian community
beginning in Southern California, and eventually throughout the United States in
geographic area supporting significant Asian populations.
Management believes that electronic deep discount trading is also a segment
of the market that JBOC should aggressively pursue. In February 1996, JBOC
introduced to the market JB On-linea a new, Windows based version of its
electronic trading product. Using this service, customers are able, through
their personal computer, to trade equities and options, obtain quotes, retrieve
account information and obtain research. Also, using JBOC's Telephone Tradera
service, customers can trade using any touch tone telephone. Initial reaction
to the introduction of JB On-linea and Telephone Tradera have been better than
expected and JBOC intends to eventually introduce these products to its European
customers. The growth of the Internet has led Management to pursue the
establishment of a Web site for JBOC. In the early part of the second quarter
of 1996, JBOC intends to introduce an electronic trading facility accessible on
the Internet that will enable customers to trade as well as obtain quotes and
research. Management believes JBOC's Internet product will equal or surpass any
similar product currently on the market.
In late 1995, JBOC formed a Capital Markets division for the purpose of
facilitating transactions for companies requiring capital infusions in the $1 to
$10 million range. Management believes that there are quality companies in the
market place requiring this level of funding with not many sources available
because of their size or stage of business development. JBOC intends to seek
out these companies and in appropriate situations provide access to capital in
the form of bridge financings, initial public offerings, secondary offerings and
private placements. The Capital Markets division completed several transactions
in 1995 and currently has several transactions in various stages of completion.
In line with its efforts to introduce new products to its customers in
appropriate situations, JBOC intends to offer Capital Markets investment
opportunities on a prudent basis to its discount customers.
Management also believes that it is important to diversify the products
made available to its discount customer base. In addition to capital market
opportunities, JBOC recently started a fixed income division housed in its New
York City branch. This division will offer fixed income product to its discount
customers including municipal, corporate and US government securities. JBOC
also intends to increase its ability to offer a wider range of mutual fund
products to customers.
At December 31, 1995 and 1994, the Company had a deferred income tax asset
of $1,379,170 and $1,774,652 net of a valuation allowance of $500,000 and
$1,615,618. The deferred tax asset resulted from the tax effect of the net
operating loss occurring in 1994. (See Note 10 of the Consolidated Financial
Statements for additional information.) For this receivable to be realized, the
Company must generate sufficient taxable income before the expiration of the NOL
carryforward. During 1995, the Company realized approximately $1,400,000 of the
deferred tax asset and reduced the valuation allowance to approximately
$500,000. Federal tax rules impose limitations on the use of net operating
losses following certain changes in ownership. Such a change occurred in 1995
which will limit the use of the federal net operating loss carryforward to
$2,044,000 per year.
Class Action Settlements
- ------------------------
At the outset of 1995, Management made it a priority to resolve the class
action lawsuits against the Company during the year. Too much of the Company's
financial and human resources were being devoted to these matters and away from
implementing Management's business plan. In December 1995, the Company entered
into settlement agreements in two class action matters subject to Court
approval. One matter was confirmed by a Court in March 1996 and the other
matter is scheduled for final Court approval in April 1996. The settlements had
no impact on 1995 earnings nor will they impact future earnings.
Results of Operations
- ---------------------
YEAR ENDED DECEMBER 31, 1995, COMPARED TO
YEAR ENDED DECEMBER 31, 1994
Total revenue increased by $23,093,998 or 140% to $39,605,357 during 1995.
The most significant change was an increase in trading profits of $7,120,082.
The current year's trading profits were $4,063,908, compared with trading losses
of $3,056,174 in the prior year.
Clearing and execution revenue increased by $5,870,421 or 60% to
$15,581,030 in 1995. This revenue increase is the direct result of a 71%
increase in transaction volume during 1995 due to changes in the rules governing
day trading and the additional correspondents obtained from a failed broker-
dealer. The Company expects growth to continue in the correspondent clearing
division in the coming year.
The Company also experienced significant growth in the deep discount retail
operation. This division was launched in August 1994 in Beverly Hills and late
1994 in Dallas. These operations became profitable in 1995 as commission
revenue increased $5,399,567 or 141% to $9,230,666 in 1995. The Company also
reorganized its representative office in Basel Switzerland to a branch office in
the last quarter of 1995. Additionally, the Company opened an office in the
Wall Street District of New York City; it is anticipated that these offices will
be profitable in the first quarter of 1996.
Interest revenue increased by $4,994,263 or 159% to $8,129,088 in 1995.
This increase is largely due to the success in the deep discount division. The
Company offers competitive interest rates, and has been able to attract new
customer balances. In addition to carrying increased customer balances, the
Company earns further interest spreads by actively participating in the stock
loan and borrow business. During 1995, interest rates in general were higher
than 1994, which also contributed to the increased interest revenues.
Valuation revenues decreased by $1,236,319 or 100% in 1995 from 1994
because the Houlihan Valuation subsidiaries were sold in late 1994.
Other revenues increased $945,984 or 57% to $2,600,665 in 1995.
Approximately $1,000,000 of the other revenues in 1995 resulted from devalued
investment securities being sold in the open market at the time of subsequent
increases in value. Included in other revenues in the current year are
investment banking fees of approximately $226,000 generated by the Capital
Markets Group. It is anticipated that this division will experience significant
growth during 1996.
Total expense increased $6,743,193 or 26% to $32,864,036 during 1995. The
largest variance was interest expense, which increased $2,780,210 or 170% to
$4,411,991 during 1995. The percentage increase in interest expense is greater
than interest income (discussed above) because of an effort to attract customer
balances, JBOC offered very competitive rates on both debit and credit balances
that reduced historical interest spreads.
Commission expense increased by $2,447,788 or 101% to $4,871,309 in 1995.
This compares favorably with the 141% increase in commission income discussed
above. The percentage pay out for the deep discount operation is less than the
pay out on the full service retail operation that dominated the 1994 commission
expense.
Employee compensation decreased $510,060 or 8% to $5,713,091 in 1995. This
decrease results primarily from the disposition of the Houlihan Valuation
subsidiaries which accounted for approximately $725,000 of the total for 1994.
It is anticipated that employee wages and related expenses will increase over
the next year as the Company continues to expand.
Occupancy and equipment costs decreased by $214,062 or 11% to $1,656,237 in
1995. This decrease consists mostly of the closing of the RKSI subsidiary in
July 1994, with the rent expense continuing for the balance of the year. This
closure resulted in the reduction of rent in the San Francisco and Florida
offices of RKSI, in the approximate amount of $300,000. Additionally, the
Valuation subsidiaries incurred approximately $100,000 of rent expense in 1994.
Promotional expense increased $496,263, or 35% to $1,917,667 in 1995.
Advertising and the production of television commercials represent $1,510,955 of
this expense for 1995. This expense will continue to grow as the Company
develops its deep discount business and two additional commercials were produced
in early 1996. The Company is also focusing on more advertising in Europe for
the Basel, Switzerland branch office. As new branches are opened, additional
advertising funds will be budgeted to promote the development of such offices.
Bad debt expense increased by $416,557 or 34% to $1,636,710 in 1995.
Approximately half of the bad debt expense relates to resolution of RKSI class
action suits. Because most of the suits are resolved, bad debt expense is
expected to decline in the coming year.
Other expenses such as communications, clearing, and data processing costs
have increased in relation to the increase in related business.
YEAR ENDED DECEMBER 31, 1994, COMPARED TO:
YEAR ENDED DECEMBER 31, 1993
Total revenue decreased by $16,048,890 or 49% to $16,511,359 during 1994.
The most significant change was a decrease in commissions earned of $5,937,140
or 61%. The institutional sales department of RKSI was discontinued in the last
quarter of 1993. This department was responsible for 37% of the commission
revenue during 1993. The retail department of RKSI was discontinued during July
1994. This department produced approximately $6,000,000 of commission revenue
during 1993. RKSI's commission revenue declined $6,947,069 or 72% during 1994.
RKSI ceased operating during July 1994 and withdrew its license as a securities
broker dealer at that time.
Clearing and execution revenue decreased by $5,855,212 to $9,710,609 or 38%
during 1994. The decrease was due, in part because of reductions in the amount
charged on trade tickets. This decrease resulted because of changes in certain
trading rules and the competition from other clearing firms. The trade volume
increased during 1994, by approximately 9%.
Trading revenue decreased by $5,491,151 or 225% to a trading loss of
$3,056,174 during 1994. RKSI began to operate a Florida trading operation
during the spring of 1994. This department operated at a deficit, contributing
only $189,793 in trading revenue for the 4 months it was in operation. RKSI
also had other trading losses relating to its retail activities and during 1994,
RKSI had an overall trading loss of $1,136,471. JBOC also had trading losses of
$1,919,703 during 1994, resulting from various trading and investing activities.
As a result of these losses, trading strategies have been redefined.
Valuation revenue declined $859,552 or 41% during 1994. The Houlihan
Valuation Subsidiaries where disposed of during 1994. There is no significant
impact on the future operations of the Company as there has been no significant
contribution to the earnings of the Company by these subsidiaries.
Interest revenue increased by $1,196,878 or 62% during 1994. This increase
is the result of increased margin balances, where finance charges are earned,
and increased interest rates during 1994. The net interest income increased
$352,330 or 30% during 1994.
During August of 1994, JBOC began the development of a deep discount retail
operation. At December 1994 this operation averaged over 400 trades a day. The
operation has continued to grow during the early part of 1995, averaging more
than 700 trades a day during March. This operation became profitable in 1995.
(See discussion for 1995 compared to 1994.)
Total expense decreased $9,347,288 or 26% during 1994. The largest
decrease in expense was in bad debts which decreased $8,133,842 or 87%.
Commission expense decreased $4,569,713 or 65% during 1994. This relates
directly to the reductions in commission revenue discussed above. Interest
expense increased $844,548 or 107% during 1994. This increase is directly
related to the increase in interest revenue discussed above. However, the
interest expense increased more rapidly because of the additional temporary
financing, which was at higher interest rates, needed as a result of the loss
during the year.
Promotional expense increased $492,620 or 53% during 1994, and related to
the development of the deep discount and On-Line trading operations.
Promotional expenses continued to grow in 1995.
Professional expense increased $768,507 or 30% during 1994. During 1994
additional expenses were incurred as the Company made two changes in the In-
house General Counsel position, as well as with the change in outside counsel.
This situation together with the relocation of the legal office from Salt Lake
City to Beverly Hills created inefficiencies in the legal counsel area.
Professional fees for 1995 were reduced significantly.
The other operating expense had marginal increases related to the increase
in volume of transactions processed. The Company leased a new in-house computer
system during 1994 which contributed to the increase in data processing costs.
The Company's clearing and execution revenue were reduced due to outside
competition. Additionally, the Company lost a large correspondent during July
1994, and concurrently began the development of its own discount and On-Line
trading operations. These factors together with the closing of the RKSI
operation contributed significantly to the large losses of 1994.
The income tax benefit increased by $920,102 or 84% during 1994. This
resulted from the deferred tax effect of the loss carryforward net of the
valuation allowance.
Liquidity and Capital Resources
- -------------------------------
The majority of the Company's corporate assets at December 31, 1995, were
held by its subsidiary, JBOC, and consisted of cash or assets readily
convertible to cash. The Company's statement of financial condition reflects
this largely liquid financial position. The majority of the Company's
proprietary securities positions are in JBOC's trading accounts, both long and
short; the majority of these positions are readily marketable and actively
traded. Receivables with other brokers and dealers primarily represent current
open transactions which typically settle within a few days, or stock borrow and
loan transactions where the contracts are adjusted to market values weekly.
The Company finances its business operations through funds generated
through its subsidiaries business services. JBOC is subject to the net capital
rules of the SEC. At December 31, 1995, JB Oxford had regulatory net capital of
$12,494,561, which exceeded the minimum requirement by $9,598,267. In addition
to financing the margin transactions by customer credit balances, JBOC has
established omnibus/financing accounts and lines of revolving credit with other
broker/dealers and banking institutions with an aggregate borrowing limit of
$22,000,000. Amounts loaned bear interest at a fluctuating rate based on broker
call and prime, with the average rates ranging from 7.25% to 8.625% at December
31, 1995.
Liquidity December 31, 1995 Compared to December 31, 1994
The Company's cash position increased in 1995, increasing $15,792,593 to
$15,949,577. Cash generated from operations amounted to $24,312,074. The most
significant source of cash was the change in amounts due to/from brokers in the
amount of $29,037,820. The Company was able to utilize the cash segregated
under federal regulations as a current source of cash in the amount of
$9,625,831, additionally, net income of $5,224,548 was a source of cash.
The Company's main use of cash was to increase the net customer balances in
1995 by $22,144,670. Additionally $3,119,877 of cash was used to acquire
additional marketable securities.
Cash used in financing activities was $7,317,853 primarily for the
reduction of $13,466,716 in short term borrowings. Cash provided by financing
activities was in the form of notes payable which are subordinated to the claims
of general creditors in the amount of $2,000,000. Additionally, there were
loans from stockholders and the exercise of warrants providing $4,476,082 in
cash to the Company.
The Company used cash of $1,201,628 in investing activities, all for
capital expenditures. The Company's requirement for capital resources is not
material to the business as a whole. The Company plans to open two additional
offices in the second quarter of 1996. These additional offices are sited for
Miami, and Boston. The current budget for capital expenditures for these
offices is estimated at $150,000 per office. The Company has tentatively
planned to open two additional offices in late 1996, in Chicago and San
Francisco.
The Company will continue to up-grade its communication systems in the
coming year. Costs to upgrade these systems will be recovered over a period of
one to two years, and are not deemed to be significant.
Liquidity December 31, 1994 Compared to December 31, 1993
Cash used in operating activities increased $2,064,287 or 57% to $5,686,626
during 1994 from 1993. The most significant use of cash is the net loss for the
year of $7,588,382 and the increase in cash segregated under federal and other
regulations of $9,669,533. The most significant increase in cash provided by
operations is the net increase in payable to customers/receivable from customers
of $11,335,286.
Cash used in investing activities decreased 102,709 or 20% to $401,065
during 1994 from 1993. Substantially all of the investing activities during
both years relate to capital expenditures.
Cash provided by financing activities increased $2,582,346 or 87% to
$5,562,066 during 1994 from 1993. Advances on short-term borrowing of
$2,515,800, loans from stockholders of $2,234,905 and the issuance of common
stock in the amount of $1,000,000 were financing activities that provided cash
during 1994. Notes payable were reduced by $188,639 and accounted for the uses
of cash in financing activities during 1994.
JB OXFORD & COMPANY
SHORT TERM BORROWING
(Amounts in Thousands)
Category of aggregate
short-term borrowings a b c d e
--------- ------- --------- --------- -------
Year Ended December 31, 1995
collateralized by:
Customer securities $ -- $ -- $ 13,857 $ 2,482 7.8%
Firm securities -- -- 850 375 8.0%
Year Ended December 31, 1994
collateralized by:
Customer securities $ 12,481 7.8% $ 12,481 $ 6,331 6.5%
Firm securities 986 8.5% 2,030 1,471 7.1%
Year Ended December 31, 1993
collateralized by:
Customer securities $ 8,921 5.5% $ 11,368 $ 6,022 5.4%
Firm securities 2,030 6.0% 4,090 2,193 5.6%
a)Balance at end of period
b)Weighted average interest rate
c)Maximum amount outstanding during the period
d)Average amount outstanding during the period
e)Weighted average interest rate during the period
The weighted average interest rate during the period was calculated by
factoring the balances at the end of each month at the various rates, and
computing a weighted average on the results.
In March 1995, JBOC acquired the majority of customer accounts of a failed
broker dealer. Concurrent with this acquisition, the Company restructured 100%
of its $5,031,000 demand debt to term debt in the form of senior secured
convertible notes with a thirty month term, amortized over 10 years, at an
annual interest rate of 9%. As part of the restructuring, an additional
$2,000,000 of senior secured convertible notes were issued by the Company under
identical terms to the restructured demand debt. As an additional inducement
for the convertible note, the Company has agreed to pay any refunds received
from the Internal Revenue Service as a prepayment on the note. The parties
further agreed to negotiate in good faith to extend the maturity date up to 60
months. Additionally, JBOC obtained $2,000,000 in cash subordinated debt due in
March 1998 with interest payable monthly at 9%. These transactions during the
first quarter of 1995 substantially improved the liquidity of the Company.
Management believes it will be able to meet these obligations with future
earnings of the Company.
Management believes that existing capital available, together with the
established revolving credit lines, provides the Company with adequate financial
resources to meet its capital needs at the present operating level. However,
in order for the Company to assure continued growth and stability, and to
protect against the potential impact which could result from the failure of any
combination of its correspondent broker/dealer clients, Management is exploring
additional sources of capital to increase the Company's liquidity and capital
base. At the present time, the Company has no significant commitments for
capital expenditures.
Impact of Inflation
Inflation has had a minimal impact on the operations and financial
condition of the Company. The Company will continue to monitor costs and
productivity constantly and will adjust prices and operations as necessary to
meet inflationary impacts or market changes.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, and certain
identifiable intangible assets, should be recognized and how impairment losses
should be measured. The Company does not expect adoption to have a material
effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation": (SFAS No. 123) issued by the Financial Accounting
Standards Board (FASB) is effective for specific transactions entered into after
December 15, 1995, while the disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes a fair value method of accounting for stock-
based compensation plans and for transactions in which an entity acquire goods
or services from non-employees in exchange for equity instruments. The Company
does not expect adoption to have a material effect on its financial position or
results of operations. At the present time, the Company has not determined if
it will change its accounting policy for stock based compensation or only
provide the required financial statements disclosures. As such, the impact on
the Company's financial position and results of operations is currently unknown.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Independent Auditors' Report 22
Consolidated Statements of Financial Condition
December 31, 1995 and 1994 23-24
Consolidated Statements of Operations
Years Ended December 31, 1995, 1994 and 1993 25
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Years Ended December 31, 1995, 1994 and 1993 26
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993 27
Notes to Consolidated Financial Statements 28-40
Financial Statement Schedule I - Condensed Financial Statements
(Parent Company Only) 41-44
Financial Statement Schedule II - Valuation and Qualifying Accounts 45
INDEPENDENT AUDITORS' REPORT
Board of Directors
JB Oxford Holdings, Inc.
Beverly Hills, California
We have audited the accompanying consolidated statements of financial condition
of JB Oxford Holdings, Inc. and Consolidated Subsidiaries, as of December 31,
1995 and 1994 and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the three years ended
December 31, 1995. We have also audited the schedules listed in the
accompanying index. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedules. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JB Oxford Holdings,
Inc. (formerly RKS Financial Group, Inc.) and Consolidated Subsidiaries at
December 31, 1995 and 1994, and the results of their operations and cash flows
for each of the three years ended December 31, 1995 in conformity with generally
accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN, LLP
Los Angeles, California
February 20, 1996
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
1995 1994
-------------- --------------
ASSETS:
Cash and cash equivalents $ 15,949,577 $ 156,984
Cash segregated under federal and other
regulations 43,702 9,669,533
Receivable from broker/dealers and clearing
organizations (Net of allowance for doubtful
accounts of $2,103,802 for both years) 6,607,553 16,492,065
Receivable from customers
(Net of allowance for doubtful accounts of
$4,333,291 and $4,119,204) 143,169,584 54,685,994
Other receivables
(Net of allowance for doubtful accounts of
$1,979,793 and $1,815,014) 868,599 636,730
Securities owned - at market value 4,587,422 1,467,545
Furniture, equipment and leasehold improvements
(At cost - less accumulated depreciation and
amortization of $2,011,326 and $1,472,158) 2,043,847 1,381,386
Income taxes refundable -- 359,000
Deferred income taxes (Net of valuation
allowance of $500,000 and $1,615,618) 1,379,170 1,774,652
Other assets 1,114,838 909,557
-------------- --------------
TOTAL ASSETS $ 175,764,292 $ 87,533,446
============== ==============
See accompanying notes to Consolidated Financial Statements.
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
1995 1994
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
LIABILITIES:
Payable to broker/dealers and clearing $ 30,080,110 $ 10,926,802
organizations
Payable to customers 121,583,187 55,030,181
Securities sold not yet purchased - at market 224,163 160,760
value
Accounts payable and accrued liabilities 7,939,221 4,006,078
Income taxes payable 621,291 --
Loans from stockholders 4,622,543 4,090,905
Notes payable 249,840 13,917,802
Loans subordinated to the claims of general 2,000,000 --
creditors
------------- -------------
TOTAL LIABILITIES 167,320,355 88,132,528
------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock ($10 par value
200,000 shares authorized; 200,000 and 0 shares
issued and outstanding) 2,000,000 --
Common stock ($.01 par value 100,000,000 shares
authorized; 8,655,205 and 6,432,983 shares
issued and outstanding) 86,552 64,330
Additional paid-in capital 9,447,296 7,525,074
Accumulated deficit (3,089,911) (8,188,486)
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 8,443,937 (599,082)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 175,764,292 $ 87,533,446
============= =============
See accompanying notes to Consolidated Financial Statements
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31
1995 1994 1993
------------- ------------- -------------
REVENUES:
Clearing and execution $ 15,581,030 $ 9,710,609 $ 15,565,821
Trading profits (losses) 4,063,908 (3,056,174) 2,434,977
Commissions 9,230,666 3,831,099 9,768,239
Valuation -- 1,236,319 2,095,871
Interest 8,129,088 3,134,825 1,937,947
Other 2,600,665 1,654,681 757,394
------------ ------------ ------------
Total Revenues 39,605,357 16,511,359 32,560,249
------------ ------------ ------------
EXPENSES:
Employee compensation 5,713,091 6,223,151 6,083,793
Commission expense 4,871,309 2,423,521 6,993,234
Clearing and floor brokerage 2,696,131 2,168,257 1,925,483
Communications 3,134,580 2,445,640 2,498,555
Occupancy 1,656,237 1,870,299 1,672,959
Interest 4,411,991 1,631,781 787,233
Data processing charges 2,841,834 2,198,797 1,563,000
Professional services 2,434,105 3,360,230 2,591,723
Promotional 1,917,667 1,421,404 928,784
Bad debts 1,636,710 1,220,153 9,353,995
Other operating expenses 1,550,381 1,157,610 1,069,372
------------ ------------ ------------
Total Expenses 32,864,036 26,120,843 35,468,131
------------ ------------ ------------
Income (Loss) Before Income Taxes 6,741,321 (9,609,484) (2,907,882)
Income Tax Provision (Benefit) 1,516,773 (2,021,102) (1,101,000)
------------ ------------ ------------
Net Income (Loss) $ 5,224,548 $ (7,588,382) $ (1,806,882)
============ ============ ============
Primary Net Income (Loss) Per 0.62 (1.33) (.35)
Share
Fully diluted Income (Loss) Per 0.40 (1.33) (.35)
Share
Weighted average number of
shares of common stock & common
stock equivalents
Primary 8,205,626 5,711,522 5,156,681
Fully diluted 13,478,573 5,711,522 5,156,681
See accompanying notes to Consolidated Financial Statements.
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
- ---------
Preferred Stock Common Stock
-------------------------- --------------------------
Retained
Additional Earnings
Paid-in (Accum
Shares Amount Shares Amount Capital (Accum Total
------------ ------------ ------------ ------------ ------------- ------------ ------------
Balance at Jan 1, 1993 - - $ -- 3,719,122 $ 37,191 $ 4,549,875 $ 1,206,778 $ 5,793,844
Issuance of common stock -- -- 1,600,000 16,000 1,984,000 -- 2,000,000
Exercise of stock options 2,750 28 2,310 -- 2,338
Net Loss -- -- -- -- -- (1,806,882) (1,806,882)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at Dec. 31, 1993 -- -- 5,321,872 53,219 6,536,185 (600,104) 5,989,300
Issuance of stock -- -- 1,111,111 11,111 988,889 -- 1,000,000
Net Loss -- -- -- -- -- (7,588,382) (7,588,382)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at Dec. 31, 1994 -- -- 6,432,983 64,330 7,525,074 (8,188,486) (599,082)
Issuance of preferred stock 200,000 2,000,000 2,000,000
Exercise of warrants 2,222,222 22,222 1,922,222 1,944,444
Net Income -- -- -- -- -- 5,224,548 5,224,548
Cash Dividends - preferred stock -- -- -- -- -- (125,973) (125,973)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at Dec. 31, 1995 200,000 $ 2,000,000 8,655,205 $ 86,552 $ 9,447,296 $ (3,089,911) $ 8,443,937
============ ============ ============ ============ ============ ============ ============
See accompanying notes to Consolidated Financial Statements.
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31
1995 1994 1993
------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,224,548 $ (7,588,382) $ (1,806,882)
Adjustments to reconcile net income
(loss) to cash used in operating
activities:
Depreciation and amortization 545,481 313,901 401,747
Deferred rent (772) 326,797 513,828
Provision for bad debts 1,636,710 1,220,153 9,353,995
Gain recognized on sale of
subsidiaries -- (67,726) --
Changes in assets and liabilities:
Cash segregated under federal and
other regulations 9,625,831 (9,669,533) 263,658
Receivable from broker/dealers
and clearing organizations 9,884,512 (7,498,623) (7,504,086)
Receivable from customers (88,697,676) (10,189,947) (24,618,247)
Other receivables (1,654,493) 277,402 (168,785)
Securities owned (3,119,877) 1,471,536 208,883
Other assets (211,595) (498,029) (85,901)
Payable to broker/dealers and
clearing organizations 19,153,308 6,619,361 308,377
Payable to customers 66,553,006 21,525,233 18,873,066
Securities sold not yet purchased 63,403 12,339 9,203
Accounts payable and accrued 3,933,915 (213,432) 1,900,465
liabilities
Income taxes payable/receivable 1,375,773 (1,727,676) (1,271,660)
------------ ------------ ------------
Net cash provided by (used in) 24,312,074 (5,686,626) (3,622,339)
operating activities ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of subsidiaries -- (16,565) --
Capital expenditures (1,201,628) (384,500) (503,774)
------------- ------------ ------------
Net cash used in investing activities (1,201,628) (401,065) (503,774)
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (201,246) (188,639) (145,698)
Advances (repayments) on short term
borrowing (13,466,716) 2,515,800 (732,920)
Subordinated loans 2,000,000 -- --
Loans from stockholders 2,531,638 2,234,905 1,856,000
Issuance of stock 1,944,444 1,000,000 2,002,338
Payment of cash dividends -
preferred stock (125,973) -- --
------------- ------------ ------------
Net cash provided by (used in)
financing activities (7,317,853) 5,562,066 2,979,720
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 15,792,593 (525,625) (1,146,393)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 156,984 682,609 1,829,002
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR $ 15,949,577 $ 156,984 $ 682,609
============ ============ ============
See accompanying notes to Consolidated Financial Statements.
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Reporting Entity:
- -----------------
The accompanying consolidated financial statements for 1995 include the
accounts of JB Oxford Holdings, Inc. (``he Company'') (``JBOH''), and its
wholly-owned subsidiaries, JB Oxford & Company (``BOC''), Reynolds Kendrick
Stratton, Inc. (``KSI''); and its 90% owned subsidiary, Prolyx Data Systems,
Inc. (``rolyx''). The consolidated financial statements for 1994 and 1993 also
include the following wholly-owned subsidiaries which have been subsequently
sold: Oxford Transfer and Registrar Agency, Inc. (`Oxford Transfer''); Houlihan
Dorton Jones Nicolatus & Stuart Inc. (`HDJ''); Houlihan Valuation Advisors of
Northern California (`HVANC''); Houlihan Valuation Advisors of Southern
California (`HVASC''); Houlihan Valuation Advisors of Kansas City, Inc.
(``VAKC''); and Houlihan Valuation Advisors East (``HVAE''). The Company
operates in only one industry segment. The Company derives its revenues
primarily from its correspondent clearing services, discount operation, and
trading activities. No individual customer accounts for 10% or more of
consolidated revenues. Intercompany balances have been eliminated in
consolidation. Additionally, minority shareholders' interests are not
separately presented as the amounts are not significant.
Effective August 1994, the Company disengaged its association with the
Houlihan Valuation Advisor subsidiaries. These entities have been returned to
the ownership of the individual valuation personnel. While the spin-offs did
not result in sales proceeds, the Company did recognize a gain of $20,823. In
addition, the Company is no longer at risk for ongoing operating costs and
future liabilities associated with these entities. Similarly, on May 31, 1994,
the Company sold its securities transfer subsidiary, Oxford Transfer & Registrar
Agency, Inc. for a gain of $46,903. None of these entities were significant to
the Company's consolidated balance sheet or consolidated statement of
operations.
The Company and JBOC have their principal offices in Beverly Hills,
California. JBOC's discount division has branches in Beverly Hills, CA; Irving,
TX; New York, NY; and Basel, Switzerland.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents. Highly liquid
investments are both readily convertible to known amounts of cash and are so
near their maturity that they present insignificant risk of changes in value
because of interest rate changes.
Security Transactions
- ---------------------
Customers' security transactions are recorded on a settlement date basis with
related revenue and expenses recorded on a trade date basis. Proprietary
security transactions of the Company are recorded on a trade date basis.
Securities Owned
- ----------------
Marketable securities are valued at quoted market value and securities not
readily marketable are valued at fair value as determined by the management of
the Company. Fluctuations in market value (or fair value) are included in the
Consolidated Statement of Operations.
Depreciation and Amortization
- -----------------------------
Depreciation of furniture and equipment is provided on a straight-line
basis over the estimated useful lives of the property which range from three to
seven years. Leasehold improvements are amortized over the lesser of the
economical useful lives of the improvements or the term of the lease.
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share of common and common stock equivalents were
computed by dividing net earnings (loss), after deducting the preferred dividend
requirements, by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period. Common stock
equivalents are options that are freely exercisable into common stock at less
than market exercise prices. Common stock equivalents are not included in the
weighted average number of shares when the inclusion would increase the earnings
per share or decrease the loss per share.
For 1994 and 1993, options and or warrants are not included in common stock
equivalents because of the anti-dilutive effect.
Fully diluted earnings per share are computed based on the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period, as if the convertible debentures and convertible preferred stock
were converted into common stock at the beginning of the period after giving
retroactive effect to the elimination of interest expense, net of income tax
effect, applicable to the convertible debentures.
Income Taxes
- ------------
Deferred income taxes represent temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.
Use of Estimates
- ----------------
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 year.
Actual results could differ from those estimates.
NOTE 3. CASH AND CASH EQUIVALENTS
Included in cash and cash equivalents are securities purchased under
agreements to resell on an overnight basis in the amount of $11,122,438.
Securities purchased are U.S. Treasury instruments which must be at least 102%
of the cash tendered. The market value of these securities is $11,344,887 at
December 31, 1995.
NOTE 4. CASH SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS
Cash is segregated in special reserve bank accounts for the exclusive
benefit of customers under Rule 15c3-3 of the Securities and Exchange Act of
1934, as amended. The Company made a deposit of $3,000,000 pursuant to these
rules into the special reserve account on January 3, 1996.
NOTE 5. RECEIVABLE FROM AND PAYABLE TO BROKER/DEALERS AND CLEARING
ORGANIZATIONS
At December 31, amounts receivable from and payable to broker/dealers and
clearing organizations result from the Company's normal trading activities and
consist of the following:
1995 1994
------------ ------------
Receivable:
Securities borrowed $ 6,309,865 $ 15,682,300
Securities failed to deliver 297,688 51,030
Net settlements with clearing organizations -- 758,735
------------ ------------
$ 6,607,553 $ 16,492,065
============ ============
Payable:
Securities failed to receive $ 352,349 $ 809,744
Securities loaned 21,148,266 9,849,000
Correspondents 7,187,078 268,058
Omnibus accounts and net settlements with
clearing organizations 1,392,417 --
------------ ------------
$ 30,080,110 $ 10,926,802
============ ============
Securities failed to deliver and failed to receive represent the contract
value of securities that have not been delivered or received subsequent to
settlement date. At December 31, 1995 the market value of the securities failed
to deliver was $298,577 and failed to receive was $345,465. At December 31,
1994 the market value of the market value of the securities failed to deliver
was $79,510 and failed to receive was $910,204.
The amounts due from/to clearing organizations represents failed to deliver
and failed to receive on a continuous net settlement basis. All open positions
are adjusted to market daily.
Securities borrowed and securities loaned represent deposits made or
received from other broker/dealers and relate to securities failed to deliver or
failed to receive transactions. The Company also participates in the lending
and borrowing of securities other than those of customers. All open positions
are adjusted to market values weekly. These deposits approximate the market
value of the underlying securities.
The Company clears security transactions for correspondent broker/dealers.
Settled securities and related transactions for these correspondents are
included in Payable - Correspondents.
NOTE 6. MARKETABLE SECURITIES AND SECURITIES SOLD NOT YET PURCHASED
Marketable securities owned and sold but not yet purchased consist of
trading and investment securities at quoted market values, as illustrated below:
Sold, But Not
Owned Yet Purchased
------------- ---------------
Balances as of December 31, 1995:
Corporate bonds, debentures, and notes $ -- $ 17,471
Corporate stocks 4,015,855 206,692
Options and warrants 571,567 --
------------ -------------
$ 4,587,422 $ 224,163
============ =============
Balances as of December 31, 1994:
Corporate stocks 1,467,545 160,760
------------ -------------
$ 1,467,545 $ 160,760
============ =============
The Company also holds securities (a) for which there is no market on a
securities exchange or no independent publicly quoted market, (b) that cannot be
publicly offered or sold unless registration has been effected under the
Securities Act of 1933, or (c) that cannot be offered or sold because of the
other arrangements, restrictions, or conditions applicable to the securities or
to the Company. Such securities are carried at nominal value and are not
material to the financial statements.
As a part of its ongoing trading activities the Company may hold derivative
financial instruments for trading purposes. These instruments consist of
options and warrants and are not used as hedge instruments to reduce financial
market risks. The Company does not trade futures, forward, swap or any other
financial instruments except options and warrants. The market value of warrants
at December 31, 1995 is $571,567. Trading gains or losses relating to options
and warrants is not material to the operations of the Company.
NOTE 7. NOTES PAYABLE
JBOC maintains firm and customer financing arrangements with an aggregate
borrowing limit of $22,000,000. Amounts loaned bear interest at a fluctuating
rate based on broker call and prime and are fully collateralized by marketable
securities valued at $33,833,093 at December 31, 1994. Such collateral includes
$31,633,533 of customers' margin account securities and $2,199,560 of securities
owned by the Company and non-customers. The Company has no outstanding
borrowings collateralized by marketable securities at December 31, 1995.
At December 31, notes payable consist of the following:
Balance at
end of period a b c d
------------- ------ ------------- ------------- -----
1995
- ----
Collateralized by:
Customer securities $ -- -- 13,857,000 2,482,000 7.8%
Firm securities -- -- 850,000 375,000 8.0%
Other 249,840 9.5% 267,000 342,000 9.5%
------------
$ 249,840
============
1994
- ----
Collateralized by:
Customer securities $ 12,480,662 7.8% $ 12,481,000 $ 6,331,000 6.5%
Firm securities 986,054 8.5% 2,030,000 1,471,000 7.1%
Other 451,086 9.5% 781,000 616,000 9.5%
------------
$ 13,917,802
============
a)Weighted average interest rate.
b)Maximum amount outstanding during the period.
c)Average amount outstanding during the period.
d)Weighted average interest rate during the period. This amount was calculated
by factoring the balances at the end of each month at the various rates, and
computing a weighted average on the results.
See Note 11: Related Party Transactions for disclosure relating to
shareholder loans outstanding at December 31, 1995.
NOTE 8. LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
The borrowings under subordinated loan agreements at December 31, 1995,
consist of three separate loans totaling $2,000,000. Each agreement carries
interest at broker call plus 2%, not to exceed 9% payable monthly. All
agreements are due March 31, 1998. On January 12, 1996, $1,000,000 of the above
subordinated debt was assigned, for consideration, to a company controlled by a
significant shareholder of the Company. The fair value of the debt approximates
carrying value. The subordinated loan agreements have been approved by the NASD
and are thus available in computing regulatory net capital.
NOTE 9. CONVERTIBLE PREFERRED STOCK
On June 5, 1995, $2,000,000 of the convertible debentures were exchanged
for 200,000 shares of $10 par value non-voting convertible preferred stock. The
preferred stock is convertible to common stock at the rate of $.90 per share of
common stock based on the par value of the preferred stock. The preferred stock
currently pays a quarterly dividend of 11% which will increase periodically to a
maximum of 15%. The dividends are cumulative, and the Company has certain
redemption rights.
NOTE 10. INCOME TAXES (BENEFIT)
The income tax provision (benefit) in the Consolidated Statements of
Operations consists of the following components:
Years Ended December 31,
1995 1994 1993
------------- ------------- -------------
Current
Federal $ 900,989 $ (359,000) $ (272,000)
State 220,302
------------ ------------ ------------
1,121,291 (359,000) (272,000)
------------ ------------ ------------
Deferred
Federal 108,961 (1,255,995) $ (630,000)
State 286,521 (406,107) (199,000)
------------ ------------ ------------
395,482 (1,662,102) (829,000)
------------ ------------ ------------
TOTAL $ 1,516,773 $ (2,021,102) $ (1,101,000)
============ ============ ============
The significant components of deferred income tax expense (benefit) are as
follows:
Years Ended December 31,
1995 1994 1993
------------ ------------ ------------
Temporary differences, net $ (296,705) $ (63,566) $ (829,000)
Federal net operating loss
carryforwards 1,452,299 (2,772,492) --
State net operating loss
carryforwards 355,506 (350,212) --
Valuation allowance (1,115,618) 1,615,618 --
Additional refund received (91,450) --
------------ ------------ ------------
$ 395,482 $ (1,662,102) $ (829,000)
============ ============ ============
Deferred tax assets - net included in the Consolidated Statements of
Financial Condition are as follows:
Year Ended December 31,
1995 1994
------------- -------------
Temporary differences resulting in
future deductible amounts $ 433,427 $ 277,218
Federal net operating loss 1,320,193 2,772,492
carryforwards
State net operating loss 125,550 377,212
carryforwards
------------ ------------
Deferred tax assets 1,879,170 3,426,922
------------ ------------
Temporary differences resulting in
future taxable amounts -- (36,652)
------------ ------------
Deferred tax liability -- (36,652)
------------ ------------
Valuation allowance (500,000) (1,615,618)
------------ ------------
Deferred tax asset - net $ 1,379,170 $ 1,774,652
============ ============
The Company has federal and state net operating loss carryforwards of
approximately $3,819,000 and $1,350,000 which expire in 2009. The tax effect of
the net operating loss carryforwards, net of a valuation allowance, has been
recorded as Management believes it is more likely than not that the Company will
realize this asset. Federal tax rules impose limitations on the use of net
operating losses following certain changes in ownership. The Company
experienced such a change in 1995, which will limit the use of the federal net
operating loss carryforward to $2,044,000 per year.
Reconciliations of the provision for income taxes (benefit) to the expected
income tax based on statutory rates are as follows:
Years Ended December 31,
1995 1994 1993
------------- ------------- -------------
Provision (benefit) - Federal
statutory rate $ 2,292,050 $ (3,267,225) $ (988,000)
Increase (decrease) in income taxes
resulting from:
Valuation allowance (1,115,618) 1,615,618 --
State taxes net of Federal tax
benefit 404,479 (262,005) (95,700)
Other (64,138) (107,490) (17,300)
------------- ------------- -------------
$ 1,516,773 $ (2,021,102) $ (1,101,000)
============= ============= =============
NOTE 11. RELATED PARTY TRANSACTIONS
In September 1993, three shareholders loaned a total of $3,086,000 to JBOH.
JBOH then contributed cash to RKSI, increasing its investment in the subsidiary.
At December 31, 1993 the unpaid balance was $1,856,000. Related interest
expense for 1993 was $32,788. During 1994, one shareholder loaned an additional
$3,500,000, while two other shareholders were repaid a total of $1,265,095; the
total shareholder loan outstanding at December 31, 1994 was $4,090,905. Related
interest expense for 1994 was $263,487. At December 31, 1994, all shareholder
loans were payable on demand.
In March, 1995, the Company restructured 100% of its $5,031,000 ($4,090,905
at December 31, 1994) demand debt to term debt in the form of senior secured
convertible notes with a thirty month term, amortized over 10 years, at an
annual interest rate of 9%. As part of the restructuring, an additional
$2,000,000 of senior secured convertible notes were issued by the Company under
identical terms to the restructured demand debt. The total shareholder loan
outstanding at December 31, 1995 was $4,622,543. Related interest expense for
1995 was $520,297.
Future annual payments including interest required under the terms of the
senior secured convertible notes are as follows:
Year ending December 31:
1996 $ 710,043
1997 4,540,895
---------------
$ 5,250,938
===============
During 1995, in connection with opening and maintaining a representative
office in Switzerland, JBOC reimbursed a company controlled by a significant
shareholder of the Company approximately $800,000 in expenses which are included
in the consolidated statement of operations. In October 1995, the
representative office became a branch office of JBOC.
NOTE 12. STOCKHOLDERS' EQUITY (DEFICIT)
The Company has adopted a stock option plan (the `Plan'') pursuant to
which 453,000 shares of common stock have been reserved for issuance to officers
and full-time employees of the Company. The Plan is administered by the
Company's Board of Directors which determines, among other things, the persons
to be granted options under the Plan, the number of shares subject to each
option and the option price, which shall not be less than market value.
In the third quarter of 1994 as part of the sale of stock to raise capital
of $1,000,000, investors received 1,111,111 Series A Warrants to purchase one
additional share of stock at $0.85, expiring on August 1, 1996 and 1,111,111
Series B Warrants to purchase one additional share of stock at $0.90 expiring on
August 1, 1997. In addition, during 1994, four employees and a director
received options to purchase 460,000 shares.
In the second quarter of 1993 as part of the sale of stock to raise capital
of $2,000,000, each investor received a warrant to purchase one additional share
of stock at the exercise price of $1.25 for each share originally purchased;
such exercise must occur within 18 months of the original investment.
Changes in stock options/warrants for the years ended December 31, 1995,
1994, and 1993 are summarized below:
1995 1994 1993
------------- ------------- -------------
Outstanding, beginning of the year 2,482,222 2,100,000 8,250
Granted 465,000 2,682,222 2,100,000
Exercised (2,222,222) -- (2,750)
Canceled / expired -- (2,300,000) (5,500)
----------- ----------- -----------
Outstanding at end of year 725,000 2,482,222 2,100,000
=========== =========== ===========
Subsequent to December 31, 1995, additional stock options were issued.
NOTE 13. REGULATORY REQUIREMENTS
JBOC is subject to the Securities and Exchange Commission's Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital. JBOC has elected to use the alternative method permitted by the Rule,
which requires it to maintain minimum net capital, as defined, equal to the
greater of $250,000 or two percent of aggregate debit balances arising from
customer transactions, as defined. The Rule also provides, among other things,
for a restriction on the payment of cash dividends, payments on subordinated
borrowings or the repurchase of capital stock if the resulting excess net
capital would fall below five percent of aggregate debits.
At December 31, 1995 JBOC had net capital of $12,494,561, which was 8.6% of
aggregate debit balances and $9,598,267 in excess of the minimum amount
required. At December 31, 1994, JBOC had net capital of $2,676,782, which was
3.8% of aggregate debit balances and $1,274,386 in excess of the minimum amount
required.
NOTE 14. COMMITMENTS, CONTINGENT LIABILITIES AND OTHER
The Company offers its employees participation in a 401(k) savings plan.
Eligible employees are able to contribute a portion of their compensation. The
Company matches 25% of these contributions up to 6% of the employees wage.
Expense for 1995 amount to $17,420.
The Company and/or its subsidiaries are defendants in several lawsuits and
arbitrations the most significant of which follow:
a)In an arbitration matter the claimant seeks rescission of certain sales in
his customer account and damages of $750,000. The claimant alleged that RKSI
and current and former principals breached fiduciary duties and failed to
disclose material information. The ultimate outcome is not determinable at
this stage and Management intends to vigorously contest this matter.
b)In a Class Action filed against OTRA Clearing Inc., plaintiffs allege that
OCI. knowingly cleared unregistered securities for its former correspondent
broker Hamilton Williams. The Company successfully demurred to four Amended
Complaints; however, the Court allowed the fifth Amended Complaint to stand,
and the parties are conducting additional discovery. The Company anticipates
filing a Motion to Decertify the Class, and Management will continue to
vigorously defend this matter.
c)In an arbitration matter filed with the NASD, the claimants are a group of
investors who sold short FCMI stock. Claimants did not have an account with
RKSI, however, they have alleged that RKSI is responsible for the damages
Claimants realized when their short positions in FCMI were bought in.
Claimants are seeking damages in the amount of $740,000, plus punitive
damages. The proceeding has been stayed pending determination of whether
Claimants are members of the FCMI class action and bound by the settlement
agreement entered therein. The ultimate outcome is not determinable at this
stage and Management intends to vigorously contest this matter.
d)In an arbitration matter filed in October 1994, the claimants allege that
RKSI and former principals breached fiduciary duties, recommended non
suitable investments, fraud, and failure to disclose material information.
JBOC has been named as an alleged successor to RKSI; JBOH has been named as
the parent company. Claimants seek damages in the amount of $482,000. The
ultimate outcome is not determinable at this stage and Management intends to
vigorously contest this matter.
e)In an arbitration matter, the claimant alleges that RKSI and former
principals breached fiduciary duties, recommended non suitable investments,
fraud, failure to disclose material information, and failure to supervise.
JBOH has been named as the parent company to RKSI. Claimant seeks damages in
the amount of $525,000. The ultimate outcome is not determinable at this
stage and Management intends to vigorously contest this matter.
f)In an action commenced in March 1995, in the United States District Court of
New York. A claim was brought by former counsel for the Company and alleges
payment due for professional services in the amount of $681,217. An answer
and counter claim by the Company was filed asserting among other claims that
the Company was overcharged for services. The ultimate outcome and range of
possible loss, if any, is not determinable at this stage. Management intends
to vigorously contest this matter.
The ultimate outcome of these uncertainties discussed above is unknown.
Moreover, due to the nature of arbitration matters, it is impossible to predict
the ultimate outcome and/or range of loss. Accordingly, no provision for any
liability that might result has been made in the accompanying financial
statements.
Future annual minimum rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 1995, were as follows:
Year ending December 31:
1996 950,198
1997 1,067,946
1998 998,913
1999 930,212
2000 976,240
Thereafter 2,543,143
---------------
$ 7,466,652
===============
The Company received certain concessions for a lease included above which
is being amortized ratably over the lease term.
Rent expense was as follows:
Year ending
December 31:
1995 $ 822,873
1994 969,395
1993 904,393
The Company has an Employee Stock Ownership Plan which covers employees of
the Company. Contributions to the Plan are determined annually by the Board of
Directors of the Company. No contributions have been made for the years ended
December 31, 1995, 1994, and 1993.
NOTE 15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, JBOC's customer and correspondent
clearance activities involve the execution, settlement and financing of various
securities and financial instrument transactions. In the event the customers or
correspondents are unable to fulfill their contractual obligations, JBOC may be
obligated to discharge the obligation of the non-performing party and, as a
result, may incur a loss.
As a part of its normal brokerage activities, JBOC sells securities not yet
purchased ("short sales") for its own account. The establishment of short
positions exposes JBOC to an off-balance sheet market risk in the event prices
increase, as JBOC may be obligated to acquire the securities at prevailing
market prices.
JBOC's customer securities activities are transacted on either a cash or
margin basis. In a margin transaction, JBOC extends credit to the customer,
subject to various regulatory and internal margin requirements, collateralized
by cash and securities in the customer's account. In addition, JBOC executes
and clears customer transactions involving the sale of securities not yet
purchased ("short sales") and the writing of option contracts. Such
transactions may expose JBOC to significant off-balance-sheet risk in the event
margin requirements are not sufficient to fully cover losses which customers may
incur. In the event the customer fails to satisfy its obligations, JBOC may be
required to purchase or sell financial instruments at prevailing market prices
in order to fulfill the customer's obligations.
JBOC seeks to control the risks associated with its customer activities by
requiring customers to maintain margin collateral in compliance with various
regulatory and internal guidelines. JBOC monitors required margin levels daily
and, pursuant to such guidelines, requires the customers to deposit additional
collateral, or to reduce positions, when necessary. Additionally, JBOC requires
clearing deposits from the correspondents.
JBOC is a market-maker for public corporations representing a wide variety
of industries whose securities are traded in the NASD's Automated Quotation
System (`NASDAQ''), the NASDAQ National Market System and, to a minor extent,
on the NASD Bulletin Board. JBOC selects companies in which it makes a market
based on a review of the current market activity, and also to facilitate trading
activity of its correspondents' clients. Market making activities may result in
concentration of securities which may expose JBOC to additional off-balance-
sheet risk.
In the normal course of business, JBOC executes, as agent or principal,
transactions on behalf of customers. If the agency or principal transactions do
not settle because of failure to perform by either the customer or the
counterparty, JBOC may be obligated to discharge the obligation of the non-
performing party and, as a result, may incur a loss if the market value of the
securities are different from the contract amount of the transactions.
JBOC does not anticipate nonperformance by customers or counterparties in
the above situation. JBOC's policy is to monitor its market exposure and
counterparty risk. In addition, JBOC has a policy of reviewing, as considered
necessary, the credit standing of each customer with which it conducts business.
JBOC arranges secured financing by pledging securities owned and unpaid
customer securities for short term borrowings, securities loaned and to satisfy
margin deposits of clearing organizations. JBOC also actively participates in
the borrowing and lending of securities. In the event the counterparty in these
and other securities loaned transactions is unable to return such securities
pledged or repay the deposit placed with them, JBOC may be exposed to the risks
of acquiring the securities at prevailing market prices or holding collateral
possessing a market value less than that of the related pledged securities.
JBOC controls the risks by monitoring the market value of securities pledged and
requiring adjustments of collateral levels where necessary.
NOTE 16. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1995 1994 1993
------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 4,457,909 $ 1,610,734 $ 756,111
Income taxes 500,000 -- 159,135
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On June 5, 1995 $2,000,000 of the 9%
Senior Secured Convertible Note was
exchanged for 200,000 shares of $10
par value non-voting convertible
preferred stock. See Note 11:
Related Party Disclosures.
Increase in equity through the 2,000,000 -- --
reduction of debt
Market value of stock borrowed from
shareholders on date of borrow -- 1,049,600 --
The Company sold Oxford Transfer &
Registrar Agency, Inc., a subsidiary,
on May 31, 1994. In conjunction with
the sale, the following schedules the
cash and non-cash portion of the
transaction:
Fair value of assets sold (25,562)
Cash proceeds from the sale 32,465
Note receivable 40,000
------------
Gain recognized on the sale 46,903
============
In August 1994 the Company reverted
ownership of the five Houlihan
Valuation subsidiaries to the
individual valuation personnel. In
conjunction with the subsidiary
dispositions, the following schedules
the cash and non-cash portion of the
transaction:
Fair value of assets sold 69,853
Cash given up (49,030)
------------
Gain recognized on the sale (20,823)
============
NOTE 17. UNAUDITED SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION
Below is selected quarterly financial data for each fiscal quarter during
the years ended December 31, 1995 and 1994. This information should be read in
conjunction with the consolidated financial statements included elsewhere
herein.
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
----------- ----------- ----------- ----------- -----------
1995
- ----
Revenues $ 5,265,062 $ 8,618,339 $11,912,823 $13,809,133 $39,605,357
Income before 16,088 1,403,323 2,490,803 2,831,107 6,741,321
taxes
Net income 9,688 841,723 1,494,804 2,878,333 5,224,548
Primary
earnings per
share -- .12 .16 .28 .62
Fully diluted
earnings per
share -- .08 .10 .18 .40
1994
- ----
Revenues $ 6,390,433 $ 5,425,392 $ 3,045,023 $ 1,650,512 $16,511,360
Loss before (490,455) (1,724,978) (3,942,381) (3,451,670) (9,609,484)
taxes
Net (loss) (319,455) (1,122,978) (2,560,381) (3,585,568) (7,588,382)
Net (loss) per
share (.06) (.21) (.42) (.56) (1.33)
During the fourth quarter of 1995, Management made an adjustment to the
valuation allowance of the deferred tax asset of $1,115,618. This reduced
income tax expense during this period.
Quarterly earnings per share for 1995 has been restated as convertible
preferred stock is not a common stock equivalent.
NOTE 18. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, and certain
identifiable intangible assets, should be recognized and how impairment losses
should be measured. The Company does not expect adoption to have a material
effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation": (SFAS No. 123) issued by the Financial Accounting
Standards Board (FASB) is effective for specific transactions entered into after
December 15, 1995, while the disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes a fair value method of accounting for stock-
based compensation plans and for transactions in which an entity acquire goods
or services from non-employees in exchange for equity instruments. The Company
does not expect adoption to have a material effect on its financial position or
results of operations. At the present time, the Company has not determined if
it will change its accounting policy for stock based compensation or only
provide the required financial statements disclosures. As such, the impact on
the Company's financial position and results of operations is currently unknown.
SCHEDULE I. CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
JB OXFORD HOLDINGS, INC.
STATEMENTS OF FINANCIAL CONDITION
December 31,
1995 1994
------------- -------------
ASSETS:
Cash and cash equivalents $ 708,357 $ 18,471
Investment in subsidiaries 14,674,072 7,256,922
Income taxes refundable -- 359,000
Deferred income taxes (Net of valuation
allowance of $500,000 and $1,615,618) 1,379,170 1,774,652
Other assets 598,882 742,360
------------- -------------
TOTAL ASSETS $ 17,360,481 $ 10,151,405
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
LIABILITIES:
Accounts payable and accrued liabilities 2,292,363 2,075,637
Net payables to subsidiaries 215,310 736,739
Income taxes payable 621,291 --
Loans from stockholders 4,622,543 4,090,905
Notes payable 1,165,037 3,847,206
------------- -------------
TOTAL LIABILITIES 8,916,544 10,750,487
------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock ($10 par value
200,000 shares authorized; 200,000 and 0
shares issued and outstanding) 2,000,000 --
Common stock ($.01 par value 100,000,000
shares authorized; 8,655,205 and 6,432,983
shares issued and outstanding) 86,552 64,330
Additional paid-in capital 9,447,296 7,525,074
Accumulated deficit (3,089,911) (8,188,486)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 8,443,937 (599,082)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 17,360,481 $ 10,151,405
============= =============
See accompanying notes to Condensed Financial Information
JB OXFORD HOLDINGS, INC.
STATEMENTS OF OPERATIONS
For The Years Ended December 31
1995 1994 1993
------------ ------------ ------------
REVENUES 2,173,421 532,373 681,383
----------- ----------- -----------
EXPENSES
General and administrative 1,915,569 3,449,380 1,264,285
Interest expense 550,509 340,494 48,256
Bad debt expense (178,129) 192,951 1,053,041
----------- ----------- -----------
Total Expenses 2,287,949 3,982,825 2,365,582
----------- ----------- -----------
Income (Loss) before equity
interest in subsidiary income (114,528) (3,450,452) (1,684,199)
Equity interest in subsidiary
income (loss) 6,855,849 (6,159,032) (1,223,684)
----------- ----------- -----------
Income (Loss) Before Income
Taxes 6,741,321 (9,609,484) (2,907,883)
Income Tax Provision (Benefit) 1,516,773 (2,021,102) (1,101,000)
----------- ----------- -----------
Net Income (Loss) $ 5,224,548 $(7,588,382) $(1,806,883)
=========== =========== ===========
JB OXFORD HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
For The Years Ended December 31
1995 1994 1993
------------ ------------- -----------
Net cash provided by (used in) operating
activities $ 3,037,946 $ (1,231,886) $(628,394)
----------- ------------ ----------
Cash flows from investing activities:
Investment in subsidiaries (4,000,000) (1,409,581)(7,065,598)
Sale of subsidiaries -- 141,581 --
Capital expenditures (16,000) (29,320) (69,332)
----------- ------------ ----------
Net cash used in investing activities (4,016,000) (1,297,320)(7,134,930)
----------- ------------ ----------
Cash flows from financing activities:
Notes payable (2,682,169) (694,887) 3,909,752
Loans from stockholders 2,531,638 2,234,905 1,856,000
Issuance of stock 1,944,444 1,000,000 2,002,338
Payment of cash dividends - preferred
stock (125,973) -- --
----------- ------------ ----------
Net cash provided by financing activities 1,667,940 2,540,018 7,768,090
----------- ------------ ----------
Net increase in cash and cash equivalents 689,886 10,812 4,766
Cash and cash equivalents at beginning of
year 18,471 7,659 2,893
----------- ------------ -----------
Cash and cash equivalents at end of year $ 708,357 $ 18,471 $ 7,659
=========== ============ ===========
See accompanying notes to Condensed Financial Information
JB OXFORD HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The parent company only financial statements present JB Oxford Holdings,
Inc.'s statements of financial condition, operations and cash flows by
accounting for the investment in its consolidated subsidiaries on the equity
method.
The accompanying condensed financial information should be read with the
consolidated financial statements and notes to consolidated financial
statements.
NOTE 2. REVENUES
The Company receives substantially all of its revenues from its
subsidiaries. Management fees of $2,000,000 were received from JBOC in 1995.
The balance of the revenues for 1995 and 1994 and 1993 consists of rents
received from subsidiaries for office space and furniture and equipment.
NOTE 3. RESTRICTIONS ON THE TRANSFER OF FUNDS FROM SUBSIDIARY TO THE PARENT
JBOC, as part of its normal broker/dealer activity has minimum capital
requirements as imposed by regulatory agencies which restricts the amount of
funds that can be transferred to the Parent Company. See Note 13 to the
consolidated financial statements for discussion of these requirements.
NOTE 4. LOANS FROM STOCKHOLDERS
In September 1993, three shareholders loaned a total of $3,086,000 to JBOH.
JBOH then contributed cash to RKSI, increasing its investment in the subsidiary.
At December 31, 1993 the unpaid balance was $1,856,000. Related interest
expense for 1993 was $32,788. During 1994, one shareholder loaned an additional
$3,500,000, while two other shareholders were repaid a total of $1,265,095; the
total shareholder loan outstanding at December 31, 1994 was $4,090,905. Related
interest expense for 1994 was $263,487. At December 31, 1994, all shareholder
loans were payable on demand.
In March, 1995, the Company restructured 100% of its $5,031,000 ($4,090,905
at December 31, 1994) demand debt to term debt in the form of senior secured
convertible notes with a thirty month term, amortized over 10 years, at an
annual interest rate of 9%. As part of the restructuring, an additional
$2,000,000 of senior secured convertible notes were issued by the Company under
identical terms to the restructured demand debt. The total shareholder loan
outstanding at December 31, 1995 was $4,622,543. Related interest expense for
1995 was $520,297.
Future annual payments including interest required under the terms of the
senior secured convertible notes are as follows:
Year ending
December 31:
1996 $ 710,043
1997 4,540,895
------------
$ 5,250,938
============
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a defendant in several lawsuits and arbitrations the most
significant of which follows:
a)In an arbitration matter filed in October 1994, the claimants allege that
RKSI and former principals breached fiduciary duties, recommended non
suitable investments, fraud, and failure to disclose material information.
JBOC has been named as an alleged successor to RKSI; JBOH has been named as
the parent company. Claimants seek damages in the amount of $482,000. The
ultimate outcome is not determinable at this stage and Management intends to
vigorously contest this matter.
b)In an arbitration matter, the claimant alleges that RKSI and former
principals breached fiduciary duties, recommended non suitable investments,
fraud, failure to disclose material information, and failure to supervise.
JBOH has been named as the parent company to RKSI. Claimant seeks damages in
the amount of $525,000. The ultimate outcome is not determinable at this
stage and Management intends to vigorously contest this matter.
c)In an action commenced in March 1995, in the United States District Court of
New York. A claim was brought by former counsel for the Company and alleges
payment due for professional services in the amount of $681,217. An answer
and counter claim by the Company was filed asserting among other claims that
the Company was overcharged for services. The ultimate outcome and range of
possible loss, if any, is not determinable at this stage. Management intends
to vigorously contest this matter.
The ultimate outcome of these uncertainties discussed above is unknown.
Moreover, due to the nature of arbitration matters, it is impossible to predict
the ultimate outcome and/or range of loss. Accordingly, no provision for any
liability that might result has been made in the accompanying financial
statements.
Future annual minimum rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 1994, were as follows:
Year ending
December 31:
1996 950,198
1997 1,067,946
1998 998,913
1999 930,212
2000 976,240
Thereafter 2,543,143
-----------------
$ 7,466,652
=================
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to
beginning of costs and Balance at
period expenses Deductions end of
period
1995
- ---- ----------- ---------- ----------- ----------
Allowance for:
Receivable from broker/
dealers and clearing
organizations $2,103,802 $ -- $ -- $2,103,802
Customer Accounts 4,119,204 236,449 (22,362) 4,333,291
Other Receivables 1,815,014 164,779 -- 1,979,793
Deferred tax asset 1,615,618 (1,115,618) 500,000
1994
- ----
Allowance for:
Receivable from broker/
dealers and clearing
organizations $2,090,859 $ 12,943 $ -- $2,103,802
Customer Accounts 4,103,609 921,865 (906,270) 4,119,204
Other Receivables 1,960,014 -- (145,000) 1,815,014
Deferred tax asset -- 1,615,618 -- 1,615,618
1993
- ----
Allowance for:
Receivable from broker/
dealers and clearing
organizations $ 927,182 $1,479,823 $ (316,146) $2,090,859
Customer Accounts 606,012 4,103,609 (606,012) 4,103,609
Other Receivables 1,143,300 816,714 -- 1,960,014
Deductions represent amounts written off.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There were no changes in and or disagreements with the accountants on
accounting or financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the directors and executive officers of the Registrant followed
by their business experience:
Name Age Position Period Served
- ---------------------- ----- ------------------------ ---------------------
EXECUTIVE OFFICERS
- ------------------
Stephen Rubenstein 52 Director, President, CEO Since March 1994
(Director since May
1994)
Bruce A. Cole 48 Executive Vice Since March 31, 1994
President; General
Counsel
Mitchell S.T. Wine 38 Director, Secretary Since August 1993
Michael J. Chiodo 38 Acting CFO Since May 1994
DIRECTORS
- ---------
Richard Houlihan 56 Director Since 1989
John Broome 63 Director Since August 1995
Jose Abadin 35 Director Since June 1994
VP Sales of JBOC (Director since August
1995)
Timothy Tyrrell 35 Director Since December 1993
VP Trading of JBOC (Director since August
1995)
BUSINESS EXPERIENCE
- -------------------
STEPHEN M. RUBENSTEIN
President and CEO of Registrant and JBOC, August 1994 to present. Chief
Administrative Officer of RKSI and JBOC, March 1994 to August 1994. Financial
Consultant specializing in services to financial industry participants and
attorneys, June 1992 - March 1994. Managing Director, Price Waterhouse,
Financial Services Industry Group, December 1990 - June 1992. Chief Operations
Officer and Chief Financial Officer and Treasurer, Cantor Fitzgerald & Co., 1985
- - 1990. Mr. Rubenstein holds a BS degree in Accounting from Bernard Baruch
College, NYC, 1968 and is currently affiliated with AICPA, California Society of
CPA's, SIA and Association of Western Securities Management.
BRUCE A. COLE
General Counsel and Executive Vice President, JB Oxford Holdings, Inc.,
March 1994 to present. Special Counsel to Rubenstein & Perry, emphasis on
business and corporate law with extensive involvement in corporate restructuring
and securities industries matters, 1991 - March 1994. Founding partner in the
law firm of Hendrickson, Higbie & Cole, 1989 to 1991. Mr. Cole received a BA in
Philosophy from the University of California at Los Angeles in 1968, and a JD
from the University of San Francisco in 1976.
MITCHELL S.T. WINE
Vice President of WSP Marketing International Ltd., a sales promotion and
marketing firm, Toronto, Ontario, 1990-present. Received Masters in Business &
Administration from Columbia University, New York, NY, 1989. Admitted to
California State Bar in 1985. Admitted to Province of Ontario Bar, 1982.
Practiced law with McCarthy Tetrault in Toronto, Ontario, 1982-1988. Mr. Wine
received a law degree (LL.B.) from University of Toronto, Toronto, Ontario:
Awarded Dean's key on graduation, 1982. Received Bachelor of Arts degree Cum
Laude from Queen's University in Kingston, Ontario, 1979.
MICHAEL J. CHIODO
Acting Chief Financial Officer, JB Oxford Holdings, Inc., August 1994 to
present. Chief Financial Officer, JB Oxford & Company, January 1994 to present.
Mr. Chiodo was previously employed by Reynolds Kendrick Stratton, Inc. from
August 1990 to December 1993, where he was named the Chief Financial Officer in
October 1992. He is a former partner of the accounting firm of Sorensen Chiodo
& May. Mr. Chiodo received a BS in Accounting from Westminster College in Salt
Lake City, Utah in 1978. Mr. Chiodo is a Certified Public Accountant and is
affiliated with AICPA.
RICHARD HOULIHAN
Principal, Houlihan Valuation Advisors, 1985 - present. Mr. Houlihan was
the founder, former CEO (1970-1985), and current part-owner of Houlihan Lokey
Howard & Zukin Inc., 1970 - present. Financial Vice President of Carr-Sigoloff
Industries, 1969 - 1970. Former manager in the management consulting division,
Price Waterhouse & Company, 1962 - 1969. Mr. Houlihan holds a BS in accounting
from Brigham Young University, 1962, and a Master of Valuation Science (MVS)
from Lindenwood College, 1991. Mr. Houlihan is a CPA, an Accredited Senior
Appraiser (ASA), a Senior Member of the Member of the American Society of
Appraisers, Business Valuation and Certified General Appraiser. Mr. Houlihan is
a member of the AICPA and the California and Nevada Society of CPA's.
JOHN BROOME
Mr. Broome is a retired Chartered Accountant (the Canadian equivalent of a
U.S. Certified Public Accountant). Mr. Broome was formerly the Managing Partner
of KPMG, Montreal office, 1974 - 1988. Among his professional assignments was
assisting in taking Air Canada public, in 1990. Mr. Broome is currently active
as a Director in several private and public companies, including Delhi
Industries, Toronto; CompAs Electronics, Ottawa; and Trustee, Franklands
Foundation, Montreal; his duties include chairing the Audit Committees of many
of these Boards. Mr. Broome received a degree in Commerce from McGill
University in Montreal, 1954; became a Chartered Accountant in 1958, and
received an honorary designation as Fellow Chartered Accountant in 1989.
JOSE ABADIN
Vice President and the Director of National Sales of JB Oxford & Company,
the Company's broker-dealer subsidiary, June 1994 to present. He was District
Branch Manager, Olde Discount Stockbrokers, 1991-June 1994; Stockbroker,
Shearson Lehman Hutton, 1987-1991 and Stockbroker, R.G. Dickinson & Company,
1985-1987. Mr. Abadin received a B.S. degree in Biology from Tulane University,
New Orleans, 1983.
TIMOTHY J. TYRRELL
Vice President of Trading of JB Oxford & Company, the Company's broker-
dealer subsidiary, December 1993 to present. He was Manager of Trading, H.J.
Meyers & Company, 1990-1993; Institutional Sales and Trading, Morgan, Olmstead,
Kennedy, Gardner, 1984-1990. Mr. Tyrrell attended Suffolk Community College in
New York, 1978-1980.
INVOLVEMENT IN LEGAL PROCEEDINGS
- --------------------------------
There are no events that occurred during the past five years for any of the
above named persons that would require disclosure under this section.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission.
As of February 29, 1996, based on copies of such reports furnished to the
Company, there were no reportable untimely filings under Forms 3,4, or 5 by
persons subject to Section 16(a) of the Securities Exchange Act of 1934, except
as follows: Stephen Rubenstein filed a late Form 4 reporting option grants;
Bruce Cole filed a late Form 4 reporting option grants; Mitchell Wine filed a
late Form 4 reporting option grants; Richard Houlihan filed a late Form 4
reporting option grants; John Broome filed a late initial statement of
beneficial ownership reporting option grants; Jose Abadin filed a late initial
statement of beneficial ownership reporting option grants; and Timothy Tyrrell
filed a late initial statement of beneficial ownership reporting option grants.
See `Item 12. Security Ownership of Certain Beneficial Owners and
Management''below for beneficial owners of more than ten percent or any other
person subject to disclosure per Section 16 of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the annual compensation
for those serving as executive officers and directors as of December 31, 1995
and compensated by the Company or any of its subsidiaries for each of the last
three completed fiscal years.
Long Term
Compensation
-------------
Annual Compensation
--------------------------------------
Options
Granted
Salary Commission Bonus (shares)
----------- ----------- ----------- -----------
Year
-----
Stephen Rubenstein 1995 $ 213,956 -- -- 100,000
Director, CEO 1994 150,800 -- -- 100,000
1993 -- -- -- --
Bruce A. Cole 1995 189,250 -- -- 40,000
Exec Vice President 1994 129,595 -- -- 40,000
General Counsel 1993 -- -- -- --
Mitchell S.T. Wine 1995 9,500 -- -- 25,000
Secretary, Director 1994 -- -- -- --
1993 -- -- -- --
Michael J. Chiodo 1995 102,575 -- 26,000 --
Acting CFO 1994 100,000 -- -- --
1993 92,417 -- -- --
Richard Houlihan 1995 15,500 -- -- 25,000
Director 1994 31,632 -- -- --
1993 58,286 -- -- --
John Broome 1995 5,875 -- -- 25,000
Director 1994 -- -- -- --
1993 -- -- -- --
Jose Abadin 1995 107,251 380,838 -- --
Director 1994 41,477 62,497 -- 50,000
VP Sales of JBOC 1993 -- -- -- --
Timothy Tyrrell 1995 84,386 195,396 1,500 50,000
Director 1994 84,000 437,994 -- --
VP Trading of JBOC 1993 63,000 123,493 -- --
This table excludes the value of certain incidental personal benefits. The
incremental cost to the Company of providing such incidental personal benefits
did not, for the current year, exceed the lesser of $50,000 or 10% of annual
salary and bonus for any of the respective individuals named in the table as set
forth.
Outside directors are compensated $2,500 for each quarterly meeting
attended. The chairmen of the compensation committee and audit committee
receive an additional $5,000 and $7,500 a year respectively for their duties.
Employee directors are not compensated for meeting attendance.
JB OXFORD HOLDINGS, INC.
OPTION GRANTS IN THE CURRENT YEAR
12-31-95
The following table summarizes individual grants of stock options made during the current year to each of the named executive
officers.
( a ) ( b ) ( c ) ( d ) ( e ) ( f )
Potential Realized Value
----------------------------
% of Total
Number of Options
Securities Grants to at 5% stock at 10% stock
Underlying Employees Exercise Date First Expiration price price
Name Grant Date Options during Year Price ($/sh) Exercisable Date appreciation appreciation
- ------------------- ----------- ------------- ----------- ------------ ----------- ----------- ------------ ---------------
Stephen Rubenstein 1-1-95 25,000 1.00 1-1-95 1-1-05 15,725 39,852
4-1-95 25,000 1.41 4-1-95 4-1-05 22,172 56,191
7-1-95 25,000 1.50 7-1-95 7-1-05 23,588 59,778
10-1-95 25,000 2.03 10-1-95 10-1-05 31,922 80,900
------------ ------------ ------------
100,000 53% 93,407 236,721
============ ============ ============
Bruce Cole 1-1-95 10,000 1.00 1-1-95 1-1-05 6,290 15,941
4-1-95 10,000 1.41 4-1-95 4-1-05 8,869 22,477
7-1-95 10,000 1.50 7-1-95 7-1-05 9,435 23,911
10-1-95 10,000 2.03 10-1-95 10-1-05 12,767 32,360
------------ ------------ ------------
40,000 21% 37,361 94,689
============ ============ ============
(a) Name of the executive officer
(b) The number of securities underlying the options granted.
(c) For the options granted, its % of total options granted to employees in the current year.
(d) Exercise price per share
(e) Expiration date
(f) Potential realized value at assumed annual rates of stock price appreciation of 5% & 10% compounded for the option term.
JB OXFORD HOLDINGS, INC.
AGGREGATED OPTION EXERCISES DURING THE YEAR AND OPTION VALUES AT YEAR END
12-31-95
The following table summarizes any options exercised during the current year by each of the named executive officers, and the year-
end value of unexercised options on an aggregate basis.
( a ) ( b ) ( c ) ( d ) ( e )
Shares Acquired Value Realized Shares Unexercised Value of Unexercised
Name on Exercise on Exercise Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------ ---------------- ---------------- ----------------------------- -----------------------------
Stephen Rubenstein -- -- 200,000 -- 347,000 --
Bruce Cole -- -- 80,000 -- 138,800 --
Mitchell Wine -- -- -- 25,000 -- 21,813
Richard Houlihan -- -- -- 25,000 -- 21,813
John Broome -- -- -- 25,000 -- 21,813
Jose Abadin -- -- 50,000 -- 78,125 --
Timothy Tyrrell -- -- -- 50,000 -- 43,625
(a) Name of the executive officer
(b) The number of shares received upon exercise of the option.
(c) The aggregate dollar value realized upon exercise of the option.
(d) The total number of securities underlying unexercised options held at the end of the current year which are
exercisable/unexercisable.
(e) The aggregate dollar value of in-the-money, unexercised options held at the end of the fiscal year, which are
exercisable/unexercisable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently comprised of the following
Directors who were elected to the committee on September 29, 1995. Newly
elected to the committee in the current year was John Broome. All other members
were re-elected.
Richard Houlihan, Chair
John Broome
Mitchell S.T. Wine
Richard Houlihan is an officer of Houlihan Valuation Advisors (HVA). HVA,
up until September 1994 was a subsidiary of the registrant. It has been sold,
and Mr. Houlihan's only affiliation to the registrant now is as a director.
Mitchell S.T. Wine also serves as the Secretary of the Company, in addition
to his responsibilities on the Compensation Committee.
As required under Item 402(j)(1)(iii) and 402(j)(3) of Regulation S-K, none
of the members of the Compensation Committee had any relationship requiring
disclosure under any paragraph of Item 404 of Regulation S-K.
PERFORMANCE TABLE
- -----------------
The Company's common shares are traded on the National Association of
Securities Dealers Automated Quotations (`NASDAQ'') under the trading symbol
JBOH. The Performance Graph and table below shows changes over the past five
years in the value of $100 invested in (1) JB Oxford Holding, Inc.'s Common
Stock, and (2) the NASDAQ Financial Industry Index. The performance of the
index and the Company's Common Stock assumes the reinvestment of all dividends.
Comparison of Five Year Cumulative Total Return
Between JB Oxford Holdings, Inc. and The NASDAQ Financial Index
Base Year 1990
Performance Table
- -----------------
Closing Index
JBOH closing Price NASDAQ compared
price compared Index to base
to base year
year
---------- --------- ------- -------
BASE YEAR 12/31/90 $ 3.375 100 96.641 100
12/31/91 5.625 167 149.540 155
12/31/92 4.500 133 213.884 221
12/31/93 1.125 33 248.587 257
12/31/94 1.000 30 249.168 258
12/31/95 2.813 83 363.023 376
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth those individuals who beneficially owned
more than five percent of the Company's Common Stock as of February 29, 1996.
In addition, the number of shares of the Company's Common Stock beneficially
owned by each director and officer, and the number of shares beneficially owned
by the directors and executive officers of the Company as a group, as of
February 29, 1996 are disclosed below in the same table. The information was
furnished to the Company by the identified individuals and by the Company's
Transfer Agent.
Amount and Nature of Percent of Common
Name Beneficial Ownership Shares Outstanding
- ------------------- -------------------- ------------------
BENEFICIAL OWNERS OF MORE THAN 5%
- ---------------------------------
Walter E. Senior 490,000 (1) 5.6%
P.O. Box 641033
Los Angeles, CA 90064
Felix A. Oeri 946,668 10.9%
Peter Merian-Strasse 50
CH-4002 Basel, Switzerland
EXECUTIVE OFFICERS
- ------------------
Stephen Rubenstein 235,000 (2) 2.6%
Bruce A. Cole 90,000 (3) 1.0%
DIRECTORS
- ---------
Richard Houlihan 95,800 (4) 1.1%
Mitchell S.T. Wine 185,000 (5) 2.1%
John Broome 25,000 (6) -- (9)
Jose Abadin 50,000 (7) -- (9)
Timothy Tyrrell 50,000 (8) -- (9)
DIRECTORS & EXECUTIVE OFFICERS AS A GROUP
- -----------------------------------------
730,800 8.0%
(1)Includes 50,000 shares which may be acquired upon exercise of options.
(2)Includes 225,000 shares which may be acquired upon exercise of options.
(3)Includes 90,000 shares which may be acquired upon exercise of options.
(4)Includes 25,000 shares which may be acquired upon exercise of options.
(5)Includes 25,000 shares which may be acquired upon exercise of options.
(6)Includes 25,000 shares which may be acquired upon exercise of options.
(7)Includes 50,000 shares which may be acquired upon exercise of options.
(8)Includes 50,000 shares which may be acquired upon exercise of options.
(9)Less than 1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995, all transactions involving officers or directors of the
Company were considered by Management to be adequately disclosed elsewhere in
the 10-K as part of Note 11 to the Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The financial statements and schedules required to be filed by Item 8 of
this form and paragraph (d) are contained herein as follows:
Page
Independent Auditors' Report 22
Consolidated Statements of Financial Condition
December 31, 1995 and 1994 23 - 24
Consolidated Statements of Operations
Years Ended December 31, 1995, 1994 and 1993 25
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Years Ended December 31, 1995, 1994 and 1993 26
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993 27
Notes to Consolidated Financial Statements 28 - 40
Financial Statement Schedule I - Condensed Financial Statements
(Parent Company Only) 41 - 44
Financial Statement Schedule II - Valuation and Qualifying Accounts 45
Listed below are exhibits as required by Item 601 of Regulation S-K:
Exhibit No Description
- ---------- -----------
3.1 Articles of Incorporation of JBOH, as amended, October 16, 1990
(incorporated herein by reference to Exhibit 1 of JBOH's Current Report
on Form 8-K, dated October 30, 1990, filed with the Commission).
3.2 By-Laws of JBOH, as amended, October 16, 1990 (incorporated herein by
reference to Exhibit 1 of JBOH's Current Report on Form 8-K dated
October 30, 1990, filed with the commission).
10.1 * Executive Employment Agreement between OTRA Clearing, Inc. and
William R. Stratton, dated March 31, 1987 (incorporated herein by
reference to Exhibit 7 of JBOH's Form S-18, Registration Statement No.
33-14002LA, filed with the Commission).
10.2 Office Building Lease between First Interstate Bank of Utah and Frank
K. Stuart & Associates Inc., dated December 3, 1987, for HDJ Salt Lake
City, Utah office space (incorporated herein by reference to Exhibit
10.1 of JBOH's Annual Report on Form 10-K for the year ended December
31, 1990, filed with the Commission).
10.3 Office Lease Agreement between J. Michael Martin Properties and OTRA
Securities Group, Inc., dated December 20, 1991, to lease Salt Lake
City office space (incorporated herein by reference to Exhibit 10.1 of
JBOH's Annual Report on Form 10-K for the year ended December 31, 1991,
filed with the Commission).
10.4 Commercial Office Lease between One Eighty Montgomery St. and OTRA
Securities Group, Inc., dated September 25, 1991, to lease San
Francisco office space (incorporated herein by reference to Exhibit
10.2 of JBOH's Annual Report on Form 10-K for the year ended December
31, 1991, filed with the Commission).
10.5 Standard Office Lease between St. George Beverly Hills, Inc. and OTRA
Clearing, Inc., dated January 31, 1992, to lease Beverly Hills office
space (incorporated herein by reference to Exhibit 10.3 of JBOH's
Annual Report on Form 10-K for the year ended December 31, 1991, filed
with the Commission).
10.6 Data Service Agreement between Securities Industry Software Corp. and
OTRA Clearing, Inc., dated June 8, 1992 (incorporated herein by
reference to Exhibit 10 of JBOH's Quarterly Report on Form 10-Q for the
period ended June 30, 1992, filed with the Commission).
10.7 Lease Agreement between Denver-Place Associates Ltd. Partnership and
Reynolds Kendrick Stratton, Inc. dated Oct. 22, 1987, for Denver office
space (incorporated herein by reference to Exhibit 10.2 of the JBOH
Form 10-K filed with the Commission for the year ended December 31,
1987).
10.8 Lease Agreement between T-Las Colinas Towers Corp. and Reynolds
Kendrick Stratton, Inc., dated October 1, 1993, to lease Irving, Texas
office space for Dallas area branch (incorporated herein by reference
to Exhibit 10.8 of the JBOH Form 10-K filed with the Commission for the
year ended December 31, 1993).
10.9 * Executive Employment Agreement between JBOH and Mark M. Rossow, dated
January 3, 1994 (incorporated herein by reference to Exhibit 10.9 of
the JBOH Form 10-K filed with the Commission for the year ended
December 31, 1993).
10.10 * Executive Employment Agreement between JBOH and Stephen Rubenstein,
dated March 23, 1994 (incorporated herein by reference to Exhibit 10.10
of the JBOH Form 10-K filed with the Commission for the year ended
December 31, 1993).
10.11 * Executive Employment Agreement between JBOH and Bruce A. Cole, dated
March 31, 1994 (incorporated herein by reference to Exhibit 10.11 of
the JBOH Form 10-K filed with the Commission for the year ended
December 31, 1993).
10.12 * Signing Bonus Agreement and Note between RKSI and Robert W. Kendrick,
dated February 25, 1993 (incorporated herein by reference to Exhibit
10.8 of the JBOH Form 10-K filed with the Commission for the year ended
December 31, 1993).
10.13 Asset Purchase Agreement between RKSI and JBOC & Company, executed as
of December 31, 1993 (incorporated herein by reference to Exhibit 10.13
of the JBOH Form 10-K filed with the Commission for the year ended
December 31, 1993).
10.14 Assignment and Assumption Agreement for Beverly Hills office space
between JBOH and RKSI, executed as of December 31, 1993 (incorporated
herein by reference to Exhibit 10.8 of the JBOH Form 10-K filed with
the Commission for the year ended December 31, 1993).
10.15 Commercial office lease Agreement between Bank of Communications. and
JB Oxford & Company, executed as of June, 1995, to lease New York
office space (incorporated herein by reference to Exhibit 10.1 of the
JBOH Form 10-Q filed with the Commission for the quarter ended June 30,
1995).
10.16 Commercial office lease Agreement between Brickell Square Corporation
Limited. and JB Oxford Holdings, Inc., executed as of February 21,
1996, to lease Miami office space, filed herewith.
11.1 Computation of earnings per share, filed herewith.
18.1 Letter regarding change in certified public accountants from Deloitte &
Touche to BDO Seidman, dated September 20, 1993 (incorporated herein by
reference to Exhibit 1 of JBOH's Current Report on Form 8-K, dated
September 24, 1993 and amended October 28, 1993, filed with the
Commission).
22 List of significant subsidiaries, filed herewith.
28 Employee Stock Ownership Plan (incorporated herein by reference to
Exhibit 28 of JBOH's Annual Report on Form 10-K for the year ended
December 31, 1988, filed with the Commission).
* Indicates that exhibit is a management contract or compensatory plan or
arrangement.
REPORTS ON FORM 8-K
There were no events as required to be reported on Form 8-K during the
fourth quarter ended December 31, 1995.
EXHIBIT 11
JB OXFORD HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
For The Years Ended December 31
1995 1994 1993
----------- ----------- -----------
PRIMARY EARNINGS PER SHARE
Net income (loss) $ 5,224,548 $(7,588,382) $(1,806,882)
Preferred stock dividends (125,973) -- --
----------- ----------- -----------
Net income for primary earnings $ 5,098,575 $(7,588,382) $(1,806,882)
=========== =========== ===========
Weighted average common shares
outstanding 7,615,631 5,711,522 5,156,681
Weighted average options outstanding (1) 1,437,304 -- --
Stock acquired with proceeds (847,309) --
----------- ----------- -----------
Weighted average common shares and
equivalents outstanding 8,205,626 5,711,522 5,156,681
=========== =========== ===========
Primary Earnings Per Share $ 0.62 $ (1.33) $ (0.35)
=========== = ========= ===========
FULLY DILUTED EARNINGS PER SHARE
Net income (loss) $ 5,224,548 $(7,588,382) $(1,806,882)
Interest on convertible debentures, net
of income tax 180,428 -- --
----------- ----------- -----------
Net Income for fully diluted earnings $ 5,404,976 $(7,588,382) $(1,806,882)
=========== =========== ===========
Weighted average common shares
outstanding 7,615,631 5,711,522 5,156,681
Weighted average options outstanding (1) 1,437,304 -- --
Weighted average convertible debentures 3,729,264 -- --
Weighted average convertible preferred
stock 1,290,715 -- --
Stock acquired with proceeds (594,341) --
----------- ----------- -----------
Weighted average shares common shares and
equivalents outstanding 13,478,573 5,711,522 5,156,681
=========== =========== ===========
Fully Diluted Earnings Per Share $ 0.40 $ (1.33) $ (0.35)
=========== =========== ===========
(1) Common stock equivalents are not included in 1994 and 1993 because the
inclusion would decrease the loss per share.
EXHIBIT 22
State Or Percentage
Jurisdiction Voting
Name Of Securities
Incorporation Owned By
Parent
------------- -----------
JB Oxford & Company Utah 100%
Reynolds Kendrick Stratton, Inc. Colorado 100%
Prolyx Data Systems, Inc. Utah 90%
The subsidiaries listed above are all of the subsidiaries owned by JB Oxford
Holdings, Inc.
EXHIBIT 10.16 ONE BRICKELL SQUARE STANDARD OFFICE LEASE
EXHIBIT(S)
Exhibit "A" Floor Plan
Exhibit "B" Work Letter
Exhibit "C" Rules and Regulations
Exhibit "D" Cleaning Specifications
Exhibit "E" Form of Letter of Credit
PREAMBLE Date of Lease: February , 1996
PREAMBLE Landlord: Brickell Square Corporation Limited
PREAMBLE Tenant: JB Oxford Holdings, Inc.
SECTION 1 Premises: Suite 2450, as shown on Exhibit "A", of One Brickell
Square, 801 Brickell Avenue, Miami, Florida 33131 (One Brickell Square
together with the garage parking facilities included therein are
collectively referred to as the "Building").
SECTION 1 Net Rentable Area of Premises: 6,993 square feet which is
stipulated and agreed by the parties.
SECTION 2 Commencement Date: as defined in Work Letter Agreement attached
to the Lease as Exhibit "B".
SECTION 2 Expiration Date: Seven (7) years after Commencement Date;
provided, however, that the Lease Term shall be automatically extended
for an additional three (3) year period unless Tenant shall terminate
this Lease effective as of the expiration of the Seventh Lease Year by
giving Landlord notice of such termination at least 270 days prior to
the expiration of the Seventh Lease Year. Tenant's failure to give
such notice of termination as provided in the preceding sentence shall
be conclusive evidence of its decision not to terminate the Lease. In
the event Tenant properly elects to terminate this Lease, Tenant shall
pay to Landlord a termination fee in consideration of such
termination. The termination fee shall equal $167,613.35, which fee
shall be Tenant's total obligation to Landlord for three (3) months of
Base Rent (based on an annual rate of $34 per Rentable Area) plus
Florida sales tax and Tenant's total obligation to Landlord for
unamortized tenant improvements and unamortized leasing commissions,
with respect to the period from and after the Termination Date. Said
fee shall be payable concurrently with the giving of the notice of
termination by good certified check of Tenant payable to the order of
Landlord.
SECTION 2 Lease Term: Seven (7) years subject to the automatic renewal term
described above.
SECTION 3 Base Rent in the First and Second Lease Years shall be Tweny-Nine
and 00/100 Dollars ($29.00) per square foot of Rentable Area per annum
or Two Hundred Two Thousand Seven Hundred Ninety-Seven and 00/100
Dollars ($202,797.00) per annum (based upon the approximated Rentable
Area set forth above) per year payable monthly in advance, without
deduction or offset, on the first day of each calendar month together
with applicable sales tax and applicable local taxes, in equal
installments of Sixteen Thousand Eight Hundred Ninety-Nine and 75/100
Dollars ($16,899.75) each together with applicable sales tax and
applicable local taxes, beginning on the Commencement Date and on the
first day of the Second Lease Year. Notwithstanding the foregoing,
the first payment of Base Rent due hereunder shall be paid by Tenant
on the earliest date on which this Lease has been signed by Landlord
and Tenant. Each year commencing on the Commencement Date (or
commencing on the first day of the first month following the
Commencement Date if the Commencement Date is other than the first day
of the month, in which event the First Lease Year shall include the
period between the Commencement Date and the first month thereafter)
or anniversary thereof is hereafter referred to as a "Lease Year."
Base Rent in the Third and Fourth Lease Years shall be Thirty and
00/100 Dollars ($30.00) per square foot of Rentable Area per annum or
Two Hundred Nine Thousand Seven Hundred Ninety and 00/100 Dollars
($209,790.00) per annum (based upon the approximated Rentable Area set
forth above) per year payable monthly in advance, without deduction or
offset, on the first day of each calendar month together with
applicable sales tax and applicable local taxes, in equal installments
of Seventeen Thousand Four Hundred Eighty-Two and 50/100 Dollars
($17,482.50) each together with applicable sales tax and applicable
local taxes, beginning on the first day of each of the Third and
Fourth Lease Years.
Base Rent in the Fifth and Sixth Lease Years shall be Thirty-One
and 00/100 Dollars ($31.00) per square foot of Rentable Area per annum
or Two Hundred Sixteen Thousand Seven Hundred Eighty-Three and 00/100
Dollars ($216,783.00) per annum (based upon the approximated Rentable
Area set forth above) per year payable monthly in advance, without
deduction or offset, on the first day of each calendar month together
with applicable sales tax and applicable local taxes, in equal
installments of Eighteen Thousand Sixty-Five and 25/100 Dollars
($18,065.25) each together with applicable sales tax and applicable
local taxes, beginning on the first day of each of the Fifth and Sixth
Lease Years.
Base Rent in the Seventh Lease Year shall be Thirty-Two and
00/100 Dollars ($32.00) per square foot of Rentable Area per annum or
Two Hundred Twenty-Three Thousand Seven Hundred Seventy-Six and 00/100
Dollars ($223,776.00) per annum (based upon the approximated Rentable
Area set forth above) per year payable monthly in advance, without
deduction or offset, on the first day of each calendar month together
with applicable sales tax and applicable local taxes, in equal
installments of Eighteen Thousand Six Hundred Forty-Eight and 00/100
Dollars ($18,648.00) each together with applicable sales tax and
applicable local taxes, beginning on the first day of the Seventh
Lease Year.
In the event the Lease Term is automatically renewed in
accordance with Section 2 above, Base Rent in the Eighth through Tenth
Lease Years shall be Thirty-Four and 00/100 Dollars ($34.00) per
square foot of Rentable Area per annum or Two Hundred Thirty-Seven
Thousand Seven Hundred Sixty-Two and 00/100 Dollars ($237,762.00) per
annum (based upon the approximated Rentable Area set forth above) per
year payable monthly in advance, without deduction or offset, on the
first day of each calendar month together with applicable sales tax
and applicable local taxes, in equal installments of Nineteen Thousand
Eight Hundred Thirteen and 50/100 Dollars ($19,813.50) each together
with applicable sales tax and applicable local taxes, beginning on the
first day of each of the Eighth, Ninth and Tenth Lease Years.
Section 3 Base Year: 1996
Section 3 Tenant's Share: 1.7335%. Landlord and Tenant acknowledge that
Tenant's Share has been obtained by taking the Net Rentable Area of
the Premises and dividing such number by 403,400 square feet, and
multiplying such quotient by 100. In the event Tenant's Share is
changed during a calendar year by reason of a change in the Net
Rentable Area of the Premises, Tenant's Share shall thereafter mean
the result obtained by dividing the new Net Rentable Area of the
Premises by 403,400 and multiplying such quotient by 100.
Section 4 Security Deposit Received: $175,000 Letter of Credit.
Section 5 Use of Premises: General office use of Tenant only.
Tenant's Address for Notices Prior to Commencement Date:
9665 Wilshire Boulevard
3rd Floor
Beverly Hills, CA 90212
Tenant's Address for Notices After Commencement Date:
Tenant
The Premises
Landlord's Address for Notices:
801 Brickell Avenue
Suite 870
Miami, Florida 33131
Attention: Building Manager
With copies to:
(1) AFA Asset Services Inc.
150 East 58th Street, 27th Floor
New York, New York 10155-2798
(2) Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attention: Allan M. Rosenbloom, Esq.
Section 8 Number of Parking Spaces: 8.
Section 15 Amount of General Comprehensive Liability Insurance:
$1,000,000.00.
Section 41 Tenant's Real Estate Broker: Esslinger Wooten Maxwell, Inc.
Landlord's Real Estate Broker: Summa Properties
Section 42 Guarantor(s): None.
Work Letter:
Paragraph 2 Landlord's Contribution: Two Hundred Nine Thousand Seven
Hundred Ninety and 00/100 Dollars ($209,790.00)
Paragraph 6 Tenant's Construction Agent: Jose Abadin
Certain of the information relating to the Lease, including many of the
principal economic terms, are set forth in the foregoing Basic Lease Information
Rider (the "BLI Rider"). The BLI Rider and the Lease are, by this reference,
hereby incorporated into one another. In the event of any direct conflict
between the terms of the BLI Rider and the terms of the Lease, the BLI Rider
shall control. Where the Lease simply supplements the BLI Rider and does not
conflict directly therewith, the Lease shall control.
IN WITNESS WHEREOF, Landlord and Tenant have signed this BLI Rider as of
this day of January, 1996.
----
WITNESSES: "LANDLORD"
BRICKELL SQUARE CORPORATION LIMITED
WITNESSES: "TENANT"
JB OXFORD HOLDINGS, INC.
ONE BRICKELL SQUARE
STANDARD OFFICE LEASE
THIS LEASE ("Lease") is made as of the day of January, 1996, by and
-----
between BRICKELL SQUARE CORPORATION LIMITED, a Bahamian corporation authorized
to do business in the State of Florida ("Landlord") and JB OXFORD HOLDINGS,
INC., a UTAH corporation ("Tenant").
W I T N E S S E T H:
1. PREMISES; COMMON AREAS
Landlord leases to Tenant and Tenant leases from Landlord the Premises
described in the Basic Lease Information Rider (the "BLI Rider") attached to the
front of this Lease and incorporated into this Lease by this reference, and as
more particularly shown on the floor plan attached hereto as Exhibit "A" and by
this reference incorporated herein ("Premises") . The parties hereby agree that
the Premises contain the number of Net Rentable Area set forth in the BLI Rider.
In addition to the Premises, Tenant has the right to use, in common with others,
the lobby, public entrances, public stairways, public areas and public elevators
of the Building (the "Common Areas"). The Common Areas serving the Building,
will at all times be subject to Landlord's exclusive control and management in
accordance with the terms and provisions of this Lease.
2. LEASE TERM; LEASE DATE
A. General. The lease term ("Lease Term") is for the period of time
set forth in the BLI Rider, commencing on the Lease commencement date set forth
in the BLI Rider ("Commencement Date") and ending on the Lease expiration date
set forth in the BLI Rider ("Expiration Date"). Tenant's obligation to pay all
rent, including Base Rent, Overhead Rent and Additional Rent, (collectively,
"Rent"), as such terms are hereafter defined, will commence on the Commencement
Date.
{PRIVATE }3. RENT{TC \L 1 "3. RENT"}
A. Base Rent. During the Lease Term, Tenant will pay as the base
rent for the Premises ("Base Rent") the amounts set forth in the BLI Rider, with
same being payable without demand, setoff or deduction, in advance, on or before
the first day of each month, in equal monthly installments of the amounts set
forth in the BLI Rider plus applicable sales and other such taxes as are now or
later enacted.
B. Overhead Rent. Beginning on the Commencement Date, Tenant shall
pay Tenant's Share , as defined in the BLI Rider, of (i) the total amount of the
annual Operating Expenses (as hereafter defined) that are in excess of Operating
Expenses incurred during the Base Year, as defined in the BLI Rider, and (ii)
the total amount of Taxes (as hereafter defined) that are in excess of Taxes
incurred for the Base Year. As used herein, "Overhead Rent" means the total of
Tenant's Share of Operating Expenses and Taxes. Prior to each calendar year,
beginning with the calendar year immediately following the Base Year, Landlord
shall, in advance, reasonably estimate for each such calendar year the total
amount of the Overhead Rent. One-twelfth (1/12) of the estimated Overhead Rent
shall be payable monthly, along with the monthly payment of the Base Rent. On
or before March 31 following a calendar year for which Overhead Rent is payable
hereunder, Landlord shall use diligent efforts to provide Tenant with a
reconciliation statement showing the amount of the actual components of Overhead
Rent for the previous calendar year. If the reconciliation statement reflects
an underpayment in either component of Overhead Rent, Landlord shall also
deliver to Tenant an invoice which Tenant shall pay within thirty (30) days
following receipt of such invoice or with the due date of its next monthly
payment of Rent, whichever shall first occur. If the reconciliation statement
reflects an overpayment in either component of Overhead Rent, Tenant shall be
entitled to a credit against the next payment(s) of Rent in an amount equal to
the overpayment. For a period of thirty (30) days after receipt of the
reconciliation statement, Tenant shall have the right, upon advance notice, to
visit Landlord's office in the Building during Business Hours, as hereafter
defined, to inspect its books and records concerning the Overhead Rent. When
calculating annual Taxes, such calculation shall, with respect to ad valorem
taxes, be calculated with reference to the gross amount set forth in the
official tax bill issued by the appropriate taxing authorities, irrespective of
the amount actually paid by Landlord for such calendar year in light of a
protest or dispute over the amount of such Taxes. In the event the Taxes for
any calendar year are in fact contested by Landlord, however, ultimately the
amount payable for that calendar year shall be the amount found to be payable in
a final determination, whether such final determination is in the form of a
pronouncement from the appropriate tribunal or a settlement. The delivery of
the aforedescribed projection statement after January 1 and/or the
reconciliation after March 31 shall not be deemed a waiver of any of Landlord's
rights to collect monies and/or a waiver of any of the duties and obligations of
Tenant as described in this section or as provided elsewhere in the Lease. As
used in this paragraph 3., the following terms shall have the following
meanings:
(1) The term "Operating Expenses" shall mean (i) any and all
costs of ownership, management, operation, repair and maintenance of the
Building, including, without limitation, wages, salaries, professionals' fees,
taxes, insurance, benefits and other payroll burdens of all employees, Building
Management fee, janitorial, maintenance, guard and other services, building
management office rent or rental value, power, fuel, water, waste disposal,
landscaping care, lighting, garbage removal, window cleaning, system
maintenance, parking area care, and any and all other utilities, materials,
supplies, maintenance, repairs, insurance applicable to the Building and
Landlord's personal property and depreciation on personal property, and (ii) the
cost (amortized over such reasonable period as Landlord shall determine together
with interest at the rate of twelve percent (12%) per annum on the unamortized
balance) of any capital improvements made to the Building by Landlord after the
date of this Lease that reduce other Operating Expenses or made to the Building
by Landlord after the date of this Lease that are required under any
governmental law or regulation; provided, however, that Operating Expenses shall
not include real property taxes, depreciation on the Building other than
depreciation on carpeting and wallcovering in public corridors and Common Areas,
costs of tenants' improvements, real estate broker's commissions, interest and
capital items other than those referred to in subsection (ii) above. Landlord
shall maintain accounting books and records in accordance with sound accounting
principles. In determining the amount of Operating Expenses for any calendar
year, (i) if less than one-hundred percent (100%) of the Building shall have
been occupied by tenants and fully used by them, Operating Expenses shall be
increased to an amount equal to the like operating expenses which would normally
be expected to be incurred had such occupancy been one-hundred percent (100%)
and had such full utilization been made during the entire period or (ii) if
Landlord is not furnishing particular work or services (the cost of which if
performed by Landlord would constitute an Operating Expense) to a tenant who has
undertaken to perform such work or service in lieu of the performance thereof by
Landlord, Operating Expenses shall be deemed to be increased by an amount equal
to the additional expense which would reasonably have been incurred during such
period by Landlord had Landlord furnished such work or service to such tenant.
Landlord hereby agrees to deduct each calendar year from the amount of the
Operating Expenses the total amount of any and all sums, amounts or charges paid
by Tenant or other tenants of the Building directly to Landlord or its agent for
specific tenant requested services or specific utility charges, if applicable.
(2) The term "Taxes" shall mean the gross amount of all
impositions, taxes, assessments (special or otherwise), water and sewer
assessments and other governmental liens or charges of any and every kind,
nature and sort whatsoever, ordinary and extraordinary, foreseen and unforeseen,
and substitutes therefor, including all taxes whatsoever (except for taxes for
the following categories which shall be excluded from the definition of Taxes:
any inheritance, estate, succession, transfer or gift taxes imposed upon
Landlord or any income taxes specifically payable by Landlord as a separate
tax-paying entity without regard to Landlord's income source as arising from or
out of the Building and/or the land on which it is located) attributable in any
manner to the Building, the land on which the Building is located or the rents
(however the term may be defined) receivable therefrom, or any part thereof, or
any use thereon, or any facility located therein or used in conjunction
therewith or any charge or other amount required to be paid to any governmental
authority, whether or not any of the foregoing shall be designated "real estate
tax", "sales tax", "rental tax", "excise tax", "business tax", or designated in
any other manner.
Tenant hereby agrees that the Overhead Rent from time to time computed by
Landlord shall be final and binding for all purposes of this Lease unless,
within thirty (30) days after Landlord provides Tenant with written notice of
the amount thereof, Tenant provides Landlord with written notice (i) disputing
the mathematical accuracy of such amount (the "Disputed Amount"), (ii)
designating an attorney or accountant, reasonably acceptable to Landlord, and
appointed by Tenant, at its sole cost and expense, to review the mathematical
accuracy of the Disputed Amount with Landlord and/or its designated
representatives and (iii) confirming that the Disputed Amount shall not be
subject to adjustment, and agreeing to pay all of Landlord's costs and expenses
in connection with such review, including attorneys' fees and accountants' fees,
unless as a result thereof the Disputed Amount is demonstrated to reflect a
mathematical error in excess of five percent (5%) of the amount actually due
from Tenant. Landlord hereby agrees, in the event it receives such notice from
Tenant, to cooperate in promptly completing such review and promptly refunding
any portion of the Disputed Amount which exceeds the amount actually due from
Tenant.
C. Late Charge. Tenant covenants and agrees to pay a late charge in
the amount of Seventy Five and 00/100 ($75.00) Dollars for any payment of Rent
not received by Landlord on or before the date when same is due. Tenant shall
also pay Landlord interest at a rate equal to eighteen percent (18%) per annum
accruing on any Rent(s) outstanding. Tenant shall pay Landlord any such late
charge(s) or interest within five (5) days after Landlord notifies Tenant of
same.
D. Definition of Rent. The term "Rent" shall refer collectively to
Base Rent, Overhead Rent and Additional Rent. The term "Additional Rent" is
sometimes used herein to refer to any and all other sums payable by Tenant
hereunder, including, but not limited to, parking charges and sums payable on
account of default by Tenant. All Rent shall be paid by Tenant without offset,
demand or other credit, and shall be payable only in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. All sums payable by Tenant
hereunder by check shall be obtained against a financial institution located in
the United States of America. The Rent shall be paid by Tenant at the Building
management office located in the Building or elsewhere as designated by Landlord
in writing to Tenant. Any Rent payable for a portion of a month shall be
prorated based upon the number of days in the applicable calendar month.
E. Rent Taxes. In addition to Base Rent and Overhead Rent, Tenant
shall and hereby agrees to pay to Landlord each month a sum equal to any sales
tax, tax on rentals and any other similar charges now existing or hereafter
imposed, based upon the privilege of leasing the space leased hereunder or based
upon the amount of rent collected therefor.
F. Commencement other than First Day. If Tenant's possession of the
Premises commences on any day other than the first day of the month, Tenant
shall occupy the Premises under the terms of this Lease and the pro rata portion
of the Rent shall be paid by Tenant; provided, however, that in such an event
the Commencement Date, for the purposes of this Lease, shall be deemed to be the
first day of the month immediately following the month in which possession is
given.
G. Overhead Rent after Expiration Date. Overhead Rent for the final
months of this Lease is due and payable even though it may not be calculated
until subsequent to the Expiration Date of the Lease. Tenant expressly agrees
that Landlord, at Landlord's sole discretion, may apply the Security Deposit, as
defined in the BLI Rider, in full or partial satisfaction of any Overhead Rent
due for the final months of this Lease. If said Security Deposit is greater
than the amount of any such Overhead Rent and there are no other sums or amounts
owed Landlord by Tenant by reason of any other terms, provisions, covenants or
conditions of this Lease, then Landlord shall refund the balance of said
Security Deposit to Tenant as provided herein. Nothing herein contained shall
be construed to relieve Tenant, or imply that Tenant is relieved, of the
liability for or the obligation to pay any Overhead Rent due for the final
months of this Lease by reason of the provisions of this paragraph, nor shall
Landlord be required first to apply said Security Deposit to such Overhead Rent
if there are any other sums or amounts owed Landlord by Tenant by reason of any
other terms, provisions, covenants or conditions of this Lease.
4. SECURITY DEPOSIT; SECURITY INTEREST
A. Security Deposit. Tenant has deposited with the Landlord an
unconditional, transferable, irrevocable, sight draft letter of credit
substantially in the form annexed as Exhibit "E" in the sum of $175,000 (the
"Letter of Credit"), as security for the full and faithful performance of the
terms, covenants and conditions of this Lease. The Letter of Credit shall be
maintained throughout the Term and shall not mature until a date which is no
earlier than sixty (60) days following the expiration of the tenancy created
hereby, whether by lapse of time or otherwise (the "Maturity Date"). If the
Tenant cannot obtain the Letter of Credit with such an extended maturity date,
Landlord will accept the Letter of Credit if (a) it has an initial maturity date
of at least one (1) year, (b) it will be automatically renewed for additional
one (1) year terms until a date which is no earlier than the Maturity Date and
(c) the issuing bank is obligated to give Landlord written notice of its
intention not to renew the Letter of Credit at least thirty (30) days prior to
the then current maturity date. Tenant understands and agrees that upon receipt
of such notice from the issuing bank, unless Landlord shall have received a
replacement letter of credit in form and issued by a bank acceptable to Landlord
on or before ten (10) days prior to the expiration date of the Letter of Credit
held by Landlord, the Letter of Credit shall be drawn down by Landlord and the
proceeds held by Landlord without interest to Tenant as the security deposit
required by this Article In the event default shall be made in the payment of
Rent or Additional Rent required to be paid by Tenant, or default shall be made
by Tenant in the performance of any of the other covenants, agreements or
conditions by it to be kept and performed hereunder, and such default is not
cured within the time specified in Section 23, Tenant hereby authorizes
Landlord, at its election, without notice to draw down on the Letter of Credit
and apply the proceeds therefrom, to the payment of Rent or Additional Rent due
hereunder or in remedying any other default hereunder. In the event of a
dispute as to whether or not Landlord is entitled to draw down on the Letter of
Credit, Landlord may draw down on the Letter of Credit prior to its expiration
and Tenant hereby waives any right to object thereto (and Landlord shall incur
no liability for drawing down on such Letter of Credit, whether done rightfully
or wrongfully), provided that Landlord shall deal with the Letter of Credit
proceeds in the same manner as it is obligated to deal with the security deposit
under this Article. Any action taken by Landlord under this Article shall not
be construed to be a waiver of any of its other rights available under this
Lease or by law, or in case of subsequent default, of any of its rights to
enforce any remedy available to Landlord by law or under the provisions of this
Lease, including the remedies set forth in this Article. If the proceeds of
the Letter of Credit or any part thereof are used, applied or retained in curing
any default, Tenant, upon demand, shall immediately deposit with Landlord an
amount in cash equal to the amount so used, applied or retained and if Tenant
shall fail to do so, such failure shall constitute a default under this Lease,
affording Landlord the same remedies as a default in payment of Rent. Within
sixty (60) days after the expiration of the tenancy hereby created, whether by
lapse of time or otherwise, provided Tenant shall have complied with all of the
terms, covenants and conditions of this Lease, Landlord shall return to Tenant
the Letter of Credit and/or such undrawn portion thereof then remaining on
deposit with Landlord hereunder and send a letter to the issuer of the Letter of
Credit authorizing its cancellation. The proceeds from the Letter of Credit if
being held as the security deposit under this Lease may be commingled with
Landlord's funds and shall not bear interest to Tenant.
Notwithstanding the foregoing, at any time after the expiration of the
Seventh (7th) Lease Year, the amount of the Letter of Credit may be reduced to
$100,000 provided that (i) Tenant shall request and obtain Landlord's written
consent to any replacement letter of credit or any amendment to the existing
Letter of Credit evidencing said reduction (which consent shall not be
unreasonably withheld or delayed provided the form of said replacement letter of
credit or amendment is otherwise in compliance with this Section A); and (ii)
Tenant is not in default of this Lease and no event has occurred which would
constitute a default with the giving of notice and the passage of time.
In case of a sale or transfer of the fee of the Premises, or any cessation
of Landlord's interest therein, whether in whole or in part, Landlord may either
transfer the Letter of Credit or pay over any unapplied proceeds therefrom to
the succeeding owner of the Premises and from and after such payment Landlord
shall be relieved of all liability with respect thereto. The provisions of the
preceding sentence shall apply to every subsequent sale or transfer of the fee
of the Premises, and any successor of Landlord may, upon such sale, transfer, or
other cessation of the interest of such successor in the Premises, whether in
whole or in part,either assign its rights under the Letter of Credit or pay over
any unapplied proceeds therefrom to the successor owner of the Premises and
shall thereupon be relieved of a liability with respect thereto.
B. Security Interest. In addition to any statutory lien granted to
landlords under the laws of Florida, Landlord shall have, at all times, and
Tenant hereby grants and agrees to grant Landlord a valid security interest to
secure payment of all Base Rent, Overhead Rent and Additional Rent and all other
sums payable under this Lease as Rent becoming due hereunder from Tenant, and to
secure payment of any damages or loss which Landlord may suffer by reason of the
breach by Tenant of any covenant, agreement or condition contained herein, upon
all goods, equipment, fixtures, furniture, improvements, inventory, chattel, and
other personal property of Tenant presently, or which may hereafter be situated
within the Premises whether now owned or hereafter acquired, and all proceeds
therefrom, including, without limitation, insurance proceeds (collectively
"Personal Property"), and such Personal Property shall not, during any period a
default exists, be removed from the Premises without the prior consent of
Landlord, which consent may be withheld in Landlord's sole discretion, until all
arrearages in Rent, as well as any and all other sums of money then due to
Landlord hereunder, shall first have been paid and discharged and all the
covenants, agreements and conditions hereof have been fully complied with and
performed by Tenant.
5. USE
A. General. Tenant will use and occupy the Premises solely for the
operation of the business set forth in the BLI Rider and for no other use
whatsoever. Tenant acknowledges that its type of business, as above specified,
is a material consideration for Landlord's execution of this Lease. Tenant will
not commit waste upon the Premises nor suffer or permit the Premises or any part
of them to be used in any manner, or suffer or permit anything to be done in or
brought into or kept in the Premises or the Building, which would: (i) violate
any law or requirement of public authorities, (ii) cause injury to the Building
or any part thereof, (iii) annoy or offend other tenants or their patrons or
interfere with the normal operations of HVAC, plumbing or other mechanical or
electrical systems of the Building or the elevators installed therein, (iv)
constitute a public or private nuisance, or (v) alter the appearance of the
exterior of the Building or of any portion of the interior other than the
Premises pursuant to the provisions of this Lease. Tenant agrees and
acknowledges that Tenant shall be responsible for obtaining any special
amendments to the certificate of occupancy for the Premises and/or the Building
and any other governmental permits, authorizations or consents required solely
on account of Tenant's use of the Premises.
B. Prohibited Uses. Notwithstanding anything to the contrary in
this Lease or the BLI Rider, including but not limited to, the "Use of Premises"
Section of the BLI Rider, Tenant hereby represents, warrants and agrees that
Tenant's business is not and shall not be, and that Tenant shall not use the
Premises or any part thereof, or permit the Premises or any part thereof to be
used, (i) for the business of photographic, multilith or multigraph
reproductions or offset printing; (ii) for a retail banking, trust company,
depository, guarantee or safe deposit business open to the general public, (iii)
as a savings bank, a savings and loan company open to the general public, (iv)
for the sale to the general public of travelers checks, money orders, drafts,
foreign exchange or letters of credit or for the receipt of money for
transmission, (v) as a stock broker's or dealer's office or for the underwriting
or sale of securities open to the general public, (vi) as a restaurant or bar or
for the sale of confectionery, soda, beverages, sandwiches, ice cream or baked
goods or for the preparation, dispensing or consumption of food or beverages in
any manner whatsoever, (vii) as a news or cigar stand, (viii) as an employment
agency, labor union office, physician's or dentist's office, dance or music
studio, school (except for the training of employees of Tenant), (ix) as a
barber shop or beauty salon, or (x) for the business of (a) operating a shared
office facility, that is, a business which subleases space and/or offers
centralized services to subtenants or customers on a shared basis, such as
secretarial, receptionist, telephone, etc., or (b) for a fee to persons inside
or outside of the Building, providing as a service word processing, secretarial,
video conferencing, conference services, telephone answering, receptionist or
mail receipt services. Nothing in this Section shall preclude Tenant from using
any part of the Premises for photographic, multilith or multigraph reproductions
to the extent that such uses are incidental to Tenant's own business or
activities.
6. ACCEPTANCE OF PREMISES; LANDLORD'S WORK
Improvements, if any, to be made to the Premises by Tenant shall be
made in accordance with the Work Letter. Improvements, if any, to be made to
the Premises by Landlord are specifically set forth in the Work Letter and there
are no others. All leasehold improvements (as distinguished from trade fixtures
and apparatus) installed in the Premises at any time, whether by or on behalf of
Tenant or by or on behalf of Landlord, shall not be removed from the Premises at
any time, unless such removal is consented to in advance by Landlord; and at the
expiration of this Lease (either on the Termination Date or upon such earlier
termination as provided in this Lease), all such leasehold improvements shall be
deemed to be part of the Premises, shall not be removed by Tenant when it
vacates the Premises, and title thereto shall vest solely in Landlord without
payment of any nature to Tenant. All trade fixtures and apparatus (as
distinguished from leasehold improvements) owned by Tenant and installed in the
Premises shall remain the property of Tenant and shall be removable at any time,
including upon the expiration of the Term; provided Tenant shall not at such
time be in default of any terms or covenants of this Lease, and provided
further, that Tenant shall repair any damage to the Premises caused by the
removal of said trade fixtures and apparatus and shall restore the Premises to
substantially the same condition as existed prior to the installation of said
trade fixtures and apparatus. The taking of possession by Tenant (or any
permitted assignee or subtenant of Tenant) of all or any portion of the Premises
for the conduct of business will be deemed conclusive evidence that Tenant has
found the Premises, and all of their fixtures and equipment, acceptable. In the
event of a default by Tenant hereunder, Landlord may, in addition to any other
remedies provided elsewhere herein or allowed by law, all of which are
cumulative, enter upon the Premises and take possession of any and all Personal
Property of Tenant situated within the Premises, without liability for trespass
or conversion, and sell the same at public or private sale, with or without
having such property at the sale, after giving Tenant reasonable notice of the
time and place of any public sale or of the time after which any private sale is
to be made, at which sale the Landlord or its assigns may purchase such Personal
Property unless otherwise prohibited by law. Unless otherwise provided by law,
and without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable notice shall be met if such notice is
given in the manner prescribed in this Lease at least five (5) days before the
time of sale. The proceeds from any such disposition, less any and all expenses
connected with the taking of possession, holding and selling of the Personal
Property (including, without limitation, reasonable attorneys' fees and legal
expenses) shall be applied as a credit against the indebtedness secured by the
security interest granted in this Section. Any surplus shall be paid to Tenant
or as otherwise required by law, and Tenant shall pay any deficiencies
forthwith. Contemporaneous with the execution of this Lease, and, at any other
time during the Lease Term if requested by Landlord, Tenant shall execute and
deliver to Landlord Uniform Commercial Code financing statements in sufficient
form so that when properly filed, the security interest hereby given shall
thereupon be perfected. If requested hereafter by Landlord, Tenant shall also
execute and deliver to Landlord Uniform Commercial Code financing statement
change instruments in sufficient form to reflect any proper amendment or
modification in or extension of the aforesaid contract lien and security
interest hereby granted. Landlord shall, in addition to all of its rights
hereunder, also have all of the rights and remedies of a secured party under the
Uniform Commercial Code as applicable in Florida.
7. PARKING
A. General. As long as Tenant is not in default under this Lease,
Landlord will provide Tenant during the Lease Term with unassigned, nonexclusive
parking spaces in the Building parking garage for the number of automobiles set
forth in the BLI Rider. Such parking spaces may be used only by principals and
employees of Tenant. Tenant will pay parking rent (plus tax) each month, per
parking space, in the amount set forth in the BLI Rider with respect to the
Building garage. Such parking rent (plus tax) shall be billed by Landlord's
management company for the Building garage and payable by Tenant directly to
such management company unless Landlord notifies Tenant of a different
procedure. Tenant acknowledges that its guests and visitors will be charged for
parking at then current rates as established by Landlord.
B. Rates. The rates charged for Tenant parking and guest or visitor
parking may be increased from time to time at the discretion of Landlord. The
parking rates charged hereunder will be in accordance with prevailing market
conditions, consistent with office buildings of similar quality to and in the
immediate geographic area of the Building. If Tenant fails to pay parking
charges when due, Landlord may, by written notice to Tenant, elect to proceed as
provided under the default provisions of this Lease and/or cease to provide all
or any of the foregoing parking spaces.
C. Reservations. Landlord has and reserves the right to alter the
methods used to control parking and the right to establish such controls and
rules and regulations (such as parking stickers to be affixed to vehicles)
regarding parking that Landlord may deem desirable. Without liability, Landlord
will have the right to tow or otherwise remove vehicles improperly parked,
blocking ingress or egress lanes, or violating parking rules, at the expense of
the offending tenant and/or owner of the vehicle. In the event Tenant fails to
utilize, regularly and consistently, all of the parking spaces for which Tenants
pays parking rent under the BLI Rider, Landlord shall have the right to
terminate Tenant's right to use such unused parking. Upon such termination of
the use of parking spaces by Landlord, Tenant shall receive a reduction in
parking rent in an amount equal to the number of parking spaces taken hereunder,
times the per space rent paid by Tenant. Tenant agrees (i) to comply with the
notice of termination; (ii) that such termination shall become unconditionally
effective, without further documentation on the noticed date of termination; and
(iii) that such termination shall not constitute an eviction, constructive or
otherwise, a default or breach by Landlord or any kind, or the basis for any
form of Rent abatement, set-off, claim or like action by Tenant. Landlord and
Tenant further agree that any parking spaces, the use of which are terminated
under the aforementioned procedure, shall be made available by Landlord to
Tenant or other tenants, as Landlord elects in its discretion.
D. Conditions. Tenant's right to use, and its right to permit its
principals and guests to use, the parking facilities pursuant to this Lease are
subject to the following conditions: (i) Landlord has made no representations
or warranties with respect to the parking area, the number of spaces located
therein or access thereto; (ii) Landlord reserves the right to reduce the number
of spaces in the parking area by not more than ten percent (10%) of the then
number of parking area spaces in the parking area and/or change access thereto
provided that the number of spaces specified in the BLI Rider continue to be
available for Tenant's use; and none of the foregoing shall entitle Tenant to
any claim against Landlord or to any abatement of Rent (or any part thereof);
(iii) Landlord has no obligation to provide a parking garage attendant and
Landlord shall have no liability on account of any loss or damage to any vehicle
or the contents thereof, Tenant hereby agreeing to bear the risk of loss for
same; (iv) Tenant, its agents, employees and invitees, shall park their
automobiles and other vehicles only where and as designated from time to time by
Landlord within the parking area; (v) if and when so requested by Landlord,
Tenant shall furnish Landlord with the license numbers of any vehicles of
Tenant, its agents and employees; and (vi) Landlord (or the operator of the
parking area) may charge Tenant (and/or its employees, invitees and visitors)
directly for the parking fee established by Landlord (or such operator) from
time to time for the use of such parking area.
8. BUILDING SERVICES
A. General. In general, the services set forth below will be
provided by Landlord at a service level set, defined and regulated by Landlord
consistent with office buildings of similar quality to and in the same immediate
geographic area as the Building. During the Lease Term, the regular business
hours ("Business Hours") of the Building will be 8:00 a.m. to 6:00 p.m., Monday
through Friday, and on Saturday, 8:00 a.m. to 6:00 p.m. on a limited basis so
long as Tenant provides Landlord with advance notice of Tenants requirement for
same, except holidays generally recognized by state and federal governments or
as may be shortened in accordance with applicable policies or regulations
adopted by any utility company servicing the Building or government. Landlord
reserves the right to increase the Business Hours. The Building will be
accessible to Tenant, its subtenants, agents, servants, employees, contractors,
invitees or licensees (collectively, "Tenant's Agents") at all times during
Business Hours.
(1) Janitorial Service:
Landlord agrees to provide during the Lease Term janitorial
services for the Premises customarily provided in office buildings of similar
quality to and in the same immediate geographic area as the Building, all as
more particularly described on Exhibit "D" hereto and by this reference
incorporated herein. Janitorial service will be provided after Business Hours
at the Building, but no janitorial services will be provided on Saturdays,
Sundays and holidays generally recognized by state and federal government.
Should Tenant require additional janitorial services beyond those customarily
provided by Landlord, Tenant may request same in writing from Landlord and if
Landlord agrees to provide such services, Tenant will be billed for same by
Landlord at a reasonable rate, as determined by Landlord, and those costs and
expenses when billed will be Additional Rent due under this Lease.
(2) Electricity:
(a) During the Lease Term, electric power will be available
for the purposes of lighting and general office equipment use in amounts
consistent with Building standard electrical capacities. The Building standard
mechanical and electrical systems are designed to accommodate loads generated by
lights and office equipment such as typewriters, dictating equipment, photocopy
equipment, etc., up to the standard maximum capacities as set forth in the Work
Letter attached hereto as Exhibit "B".
(b) Tenant acknowledges that Tenant's intended use of the
Premises excludes material use of the Premises beyond Business Hours. Material
use shall be deemed to mean the operation of an additional "shift", either full
or part time, or use of the Premises after Business Hours in any way that may
preclude or interfere with the providing of janitorial services to the Premises.
In the event Tenant's use of the Premises requires more electrical power than
set forth above, whether by intensity of use, load or type of equipment, Tenant
may then be billed for such additional use and such billings will be billed to
Tenant as Additional Rent. Landlord will utilize Landlord's customary method of
billing Tenant for excess electrical power consumption. At Landlord's option,
Landlord, at Tenant's expense, may have an engineer estimate Tenant's usage, and
bill Tenant at standard utility rates for the excess usage or install a submeter
for the purposes of monitoring Tenant's excess power consumption. Landlord and
Tenant agree that Landlord's implementation of the electrical monitoring and
billing procedures set forth herein shall in no way be construed so as to deem
Landlord a private or public utility company.
(c) Landlord reserves the right, after Business Hours, to turn
off all unnecessary lighting in the unoccupied areas of the Building and the
Premises to minimize the energy consumption of the Building in both the Common
Areas and the Premises.
(3) HVAC Services:
Landlord agrees to provide, during Business Hours, heating,
ventilating and air conditioning for the purposes of comfort control. Landlord
and Tenant agree that Landlord's HVAC system is not designed to cool machinery
and equipment. If Tenant requires additional HVAC services for comfort control
at times other than during Business Hours, Landlord will bill Tenant as
Additional Rent for the number of hours used at Landlord's then standard
prevailing rate for after-hours use of HVAC services. This rate will be subject
to change during the Lease Term in Landlord's discretion based upon operational
costs and expenses, including wear and tear on the system and its components.
The HVAC air distribution system and control system will remain under the
control of Landlord, who will regulate the systems' setting and adjustment. At
Landlord's option, Landlord may secure HVAC controls (thermostats) in lockable
metal boxes to regulate the efficiency and use of the system. Tenant agrees
that Landlord will have complete control over the setting and regulation of all
air distribution, vents, vanes and dampers so as to provide comfortable working
conditions.
(4) Water and Sewer:
Landlord agrees to provide municipally supplied cold water and sewer
services to the Common Areas for lavatory purposes.
(5) Elevator Service:
Landlord will provide elevator service during Business Hours and, at
Landlord's sole discretion, Landlord may provide restricted elevator service
during non-Business Hours.
B. Interruption of Services. It is understood and agreed that
Landlord does not warrant that any of the services referred to above, or any
other services which Landlord may supply, will be free from interruption.
Tenant acknowledges that any one or more of such services may be suspended by
reason of accident or repairs, alterations or improvements necessary to be made,
or by strikes or lockouts, or by reason of operation of law, or other causes
beyond the control of Landlord. No such interruption or discontinuance of
service will be deemed an eviction or a disturbance of Tenant's use and
possession of the Premises or any part thereof, or render Landlord liable to
Tenant for damages or abatement of Rent or relieve Tenant from the
responsibility of performing any of Tenant's obligations under this Lease.
9. SECURITY
With respect to security for the Building and the parking garage(s),
Landlord and Tenant hereby agree as follows:
A. Landlord's Responsibility. Landlord shall: (1) install a system
to limit access to the Building and parking garage(s), and (2) respond to
Building alarms and/or reports of an emergency nature on a twenty-four (24) hour
basis.
B. Tenant's Responsibility. Tenant shall: (1) abide by all
policies, procedures and rules and regulations for use of the access system, (2)
report promptly the loss or theft of all keys which would permit unauthorized
entrance to the Premises, Building or parking garage(s), (3) report to Landlord
the employment or discharge of employees and their vehicle's make, model, and
license number, (4) promptly report to Landlord door-to-door solicitation or
other unauthorized activity in the Building or parking garage(s), and (5)
promptly inform the Landlord's Building manager in the event of a break-in or
other emergency.
C. Interruption of Security. Tenant acknowledges that the above
security provisions may be suspended or modified at Landlord's sole discretion
or as a result of causes beyond the reasonable control of Landlord. No such
interruption, discontinuance or modification of security service will constitute
an eviction, constructive eviction, or a disturbance of Tenant's use and
possession of the Premises, and further, no interruption, discontinuance or
modification of security service will render Landlord liable to Tenant or
third-parties for damages, abatement of Rent, or otherwise, or relieve Tenant of
the responsibility of performing Tenant's obligations under this Lease.
10. REPAIRS, MAINTENANCE AND UTILITIES
A. Landlord's Responsibilities. During the Lease Term, Landlord
shall define, set, and maintain the level of repairs and maintenance for the
Building, the Common Areas, and all other areas serving the Building, in a
manner comparable to office buildings of similar quality to and in the immediate
geographic area of the Building. Landlord's responsibilities with respect to
this paragraph are as follows: (1) the structural and roof systems of the
Building and parking garage(s), (2) the Building standard electrical and
mechanical systems, (3) the primary water and sewer systems of the Building,
(4) the Building Common Areas and the common area furniture, fixtures, and
equipment, (5) the landscaped areas in and about the Building, (6) the parking
lot(s) and garage(s) of the Building, and (7) replacement of Building standard
fluorescent light bulbs in the Premises and Common Areas.
B. Tenant's Responsibilities. During the Lease Term, Tenant will
repair and maintain the following at Tenant's expense:
(1) The interior portion of the demising walls, the interior
partition walls of the Premises and their wall-covering, and the entry door to
the Premises.
(2) The electrical and mechanical systems not considered
Building standard which have been installed by either Landlord or Tenant, for
the exclusive use and benefit of Tenant. The following examples are for
clarification and are not all inclusive: (a) electrical services for computers
or similar items, (b) projection room equipment such as dimmers, curtains, or
similar items, (c) water closet plumbing, kitchen plumbing or similar items,
(d) HVAC for other than comfort cooling in the Premises, (e) security systems
for the Premises, (f) telephone system for the Premises; and (g) other similar
systems.
(3) Except for the janitorial services to be provided by
Landlord, if any, as set forth in this Lease, the repair and maintenance of the
floor covering of the Premises, including VAT flooring, ceramic tiles, marble,
wood flooring, or similar coverings, shall be performed by Landlord upon
Tenant's request, at Tenant's expense, and Tenant will be billed for same as
Additional Rent. At least once per year, if necessary, Landlord will clean
Tenant's carpeting at Tenant's expense to be billed to Tenant as Additional
Rent. Should additional cleaning be requested by Tenant, such cleaning will be
available at Tenant's expense and will be billed to Tenant as Additional Rent.
(4) All cabinets and millwork (regardless of ownership) so long
as said cabinets and millwork are for the exclusive use and benefit of Tenant.
(5) All other personal property, improvements or fixtures,
except any of same expressly designated in this Lease as those which Landlord
shall maintain. Those items to be repaired and maintained by Tenant include,
but are not limited to, the following: (a) ceiling tiles and ceiling grid,
(b) molding or other woodwork and panelling, (c) light fixtures and bulbs,
(d) draperies, blinds or wallhangings, (e) glass partition walls, (f) water
closets and kitchen areas, (g) doors and locksets, and (h) vaults, safes, or
secured areas. For the aforesaid items, Landlord may elect, with Tenant's
approval (which approval will not be unreasonably withheld) to maintain and
repair same at Tenant's expense and Tenant will be billed for same as Additional
Rent.
C. Repairs and Maintenance; Miscellaneous. Notwithstanding anything
to the contrary in this Lease, Landlord shall have no responsibility to repair
or maintain the Building, any of its components, the Common Areas, the Premises,
or any fixture, improvement, trade fixture, or any item of personal property
contained in the Building, the Common Areas, and/or the Premises if such repairs
or maintenance are required because of the occurrence of any of the following:
(i) the acts, misuse, improper conduct, omission or neglect of Tenant or
Tenant's Agents, or (ii) the conduct of business in the Premises. Should
Landlord elect to make repairs or maintenance occasioned by the occurrence of
any of the foregoing, Tenant shall pay as Additional Rent all such costs and
expenses incurred by Landlord. Landlord shall have the right to approve in
advance all work, repair, maintenance or otherwise, to be performed under this
Lease by Tenant and all of Tenant's repairmen, contractors, subcontractors and
suppliers performing work or supplying materials. Tenant shall be responsible
for all permits, inspections and certificates for accomplishing the above.
Tenant shall obtain lien waivers for all work done in or to the Premises.
11. TENANT'S ALTERATIONS
A. General. During the Lease Term, Tenant will make no alterations,
additions or improvements in or to the Premises or the Building, of any kind or
nature, including, but not limited to, alterations, additions or improvements
in, to, or on, telephone or computer installations (any and all of such
alterations, additions or improvements other than those set forth in the work
letter attached hereto are collectively referred to in this Lease as the
"Alteration(s)"), without the prior written consent of Landlord, which consent
shall not be unreasonably withheld. Tenant shall submit to Landlord detailed
drawings and plans of the proposed alterations at the time Landlord's consent is
sought. Should Landlord consent to any proposed Alterations by Tenant, such
consent will be conditioned upon Tenant's agreement to comply with all
requirements established by Landlord, including safety requirements and the
matters referenced in Section 22 of this Lease. As stated herein, all
Alterations made hereunder will become Landlord's property when incorporated
into or affixed to the Building. However, at Landlord's option Landlord may, at
the expiration of the Lease Term, require Tenant, at Tenant's expense, to remove
Alterations made by or on behalf of Tenant and to restore the Premises to their
original condition.
B. Alteration Fee
(1) Tenant shall pay to Landlord as Additional Rent in connection with all
Alterations a fee (the "Alteration Fee") for its supervision and overhead in
connection with each such Alteration, for Landlord's review and approval of all
plans and specifications for such Alteration, for Landlord's construction
coordination and monitoring of such Alteration, and for all other reasonable
costs and expenses incurred by Landlord as a result of or in connection with
each such Alteration, a fee equal to ten percent (10%) of the total construction
cost of each such Alteration. There shall be excluded from the computation of
the construction cost of each Alteration the cost of furniture, removable
furnishings, draperies, office equipment, painting, carpeting, removable
cabinetry, items of special decoration and telephone installation and
engineer's, architects', space planners' and other professionals' fees.
(2) Prior to making any Alteration, Tenant shall submit to Landlord a
statement of Tenant's independent architect, if one is employed, or Tenant's
contractor, estimating the total cost of such Alteration and the estimated time
required to complete such Alteration. The Alteration Fee shall be calculated on
the basis of such estimate and paid in equal monthly installments during the
course of the performance of the Alteration, together with the monthly
installments of Base Rent thereafter coming due. Within ten business days after
completion of the Alteration, Tenant shall pay to Landlord the entire balance of
the Alteration Fee if not theretofore paid in full.
(3) Within ten business days after completion of any Alteration, Tenant
shall submit to Landlord a statement of Tenant's independent architect, if one
is employed, or Tenant's contractor, certifying the total cost of such
Alteration. The Alteration Fee shall be adjusted, if necessary, based on the
certification. If the Alteration Fee, as adjusted, shall be greater than the
amount theretofore paid to Landlord by Tenant on account of such Alteration Fee,
Tenant shall pay such deficiency simultaneously with the delivery to Landlord of
the certification, which deficiency shall bear interest at the annual rate (the
"Applicable Rate") equal to two percent (2%) in excess of the publicly announced
prime (or corporate base) rate of interest then in effect at Citibank, N.A. (or
its successors) until paid if not paid within the time required for the payment
thereof. If such Alteration Fee, as adjusted, is less than the amount
theretofore paid to Landlord by Tenant on account of such Alteration Fee,
Landlord, within 30 days after Landlord's receipt of the certification, shall
pay to Tenant the amount of such overpayment. If Landlord shall dispute the
statement certifying the total costs of such Alteration, Landlord shall have the
right, within 30 days after receipt of the certification, to employ an
independent certified public accountant to review Tenant's books and records
relating to such Alteration. The determination of such accountant shall be
conclusively binding upon the parties, and, if necessary, the Alteration Fee
shall be adjusted accordingly based upon such determination. If such
determination shall reveal that the Alteration Fee paid on account of such
Alteration shall have been understated by more than five percent (5%), then
Tenant shall pay the fees of the accountant in connection with such review, and
the payment to be made to Landlord as a result of such understatement shall bear
interest at the Applicable Rate. Any adjustment in the Alteration Fee, together
with interest thereon at the Applicable Rate, as well as any payment of the fees
of such accountant, shall be paid by Tenant to Landlord as additional rent
within ten business days after such accountant's determination.
12. LANDLORD'S ADDITIONS AND ALTERATIONS
Landlord has the right to make changes in and about the Building, garages
and parking areas, including, but not limited to, signs, entrances, address or
name of Building. Such changes may include, but not be limited to,
rehabilitation, redecoration, refurbishment and refixturing of the Building and
expansion of or structural changes to the Building. The right of Tenant to
quiet enjoyment and peaceful possession given under the Lease will not be deemed
breached or interfered with by reason of Landlord's actions pursuant to this
paragraph so long as such actions do not materially deprive Tenant of its use
and enjoyment of the Premises.
13. ASSIGNMENT AND SUBLETTING
A. Landlord's Consent Required. Except as provided below with respect to
assignment of this Lease following Tenant's bankruptcy, Tenant will not effect a
transfer without first obtaining the consent of Landlord, which consent Landlord
shall not unreasonably withhold provided that all of the requirements of
paragraph B. of this Section 13 are satisfied. As used in this Section 13, any
of the following shall be deemed to be a transfer: assignment of this Lease, in
whole or in part; sublet of all or any part of the Premises; any license
allowing anyone other than Tenant to use or occupy all or any part of the
Premises; a pledge or encumbrance by mortgage or other instrument of Tenant's
interest in this Lease; any transfer of corporate shares as described in
paragraph C. of this Section 13; or any transfer of partnership interest as
described in paragraph D. of this Section 13. Consent by Landlord to any
transfer shall not constitute a waiver of the requirement for such consent to
any subsequent transfer. In lieu of approving any transfer, Landlord may elect
to terminate this Lease by giving Tenant notice of such election, in which event
this Lease and the rights and obligations of the parties hereunder shall cease
as of a date set forth in such notice which date shall not be less than sixty
(60) days after the date of such notice. In the event of any such termination,
all Rent (other than any Additional Rent due Landlord by reason of Tenant's
failure to perform any of its obligations hereunder) shall be adjusted as of the
date of such termination
B. Conditions for Transfer Approval. The parties recognize that this
Lease and the Premises are unique, and that the nature and character of the
operations within and management of the Premises are important to the success of
the Building. Accordingly, Landlord shall be entitled to arbitrarily withhold
its consent to any transfer, unless all of the following conditions are
satisfied, in which event, Landlord agrees that it shall not unreasonably
withhold its consent to the transfer in question:
(1) In Landlord's reasonable judgment, the proposed assignee or subtenant
or occupant is engaged in a business or activity, which (a) is in keeping with
the then standards of the Building, (b) is limited to the use of the Premises as
general and executive offices, and (c) will not violate any negative covenant as
to use contained in any other lease of office space in the Building;
(2) The proposed assignee or subtenant or occupant is a reputable person
of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
(3) The form of the proposed sublease or instrument of assignment or
occupancy shall be reasonably satisfactory to Landlord, and shall comply with
the applicable provisions of this Paragraph;
(4) There shall not be more than a total of three (3) occupants (including
Tenant, Landlord or its designee) of the Premises; and
(5) The proposed subtenant or assignee or occupant shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be subject
to the service of process in, and the jurisdiction of the courts of the State of
Florida.
(6) Such transferee shall assume in writing, in a form acceptable to
Landlord, all of Tenant's obligations hereunder and Tenant shall provide
Landlord with a copy of such assumption/ transfer document;
(7) Tenant shall pay to Landlord a transfer fee of One Thousand Five
Hundred Dollars ($1,500.00) prior to the effective date of the transfer in order
to reimburse Landlord for all of its internal costs and expenses incurred with
respect to the transfer, including, without limitation, costs incurred in
connection with the review of financial materials, meetings with representative
of transferor and/or transferee and preparation, review, approval and execution
of the required transfer documentation, and, in addition, Tenant shall reimburse
Landlord for any out-of-pocket costs and expenses incurred with respect to such
transfer;
(8) As of the effective date of the transfer and continuing throughout the
remainder of the Term, the Base Rent shall not be less than the Base Rent set
forth in the BLI Rider;
(9) Tenant to which the Premises were initially leased shall continue to
remain liable under this Lease for the performance of all terms, including but
not limited to, payment of Rental due under this Lease;
(10) Tenant's guarantor shall continue to remain liable under the terms of
the Guaranty of this Lease and, if Landlord deems it necessary, such guarantor
shall execute such documents necessary to insure the continuation of its
guaranty;
(11) Each of Landlord's Mortgagees shall have consented in writing to such
transfer.
(12) Tenant shall give notice of a requested transfer to Landlord, which
notice shall be accompanied by (a) a conformed or photostatic copy of the
proposed assignment or sublease, the effective or commencement date of which
shall be at least 60 days after the giving of such notice, (b) a statement
setting forth in reasonable detail the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the Premises, (c)
current financial information with respect to the proposed assignee or
subtenant, including, without limitation, its most recent financial report and
(d) such other information as Landlord may reasonably request.
C. Transfer of Corporate Shares. If Tenant is a corporation other
than a corporation the outstanding voting stock of which is listed on a
"national securities exchange," as defined in the Securities Exchange Act of
1934) and if at any time after execution of this Lease any part or all of the
corporate shares shall be transferred by sale, assignment, bequest, inheritance,
operation of law or other disposition (including, but not limited to, such a
transfer to or by a receiver or trustee in federal or state bankruptcy,
insolvency, or other proceedings) so as to result in a change in the present
control of said corporation by the person(s) now owning a majority of said
corporate shares, a transfer shall be deemed to have occurred. Tenant shall
give Landlord notice that such transfer is imminent at least fifteen (15) days
prior to the date of such transfer. If any such transfer is made (and
regardless of whether Tenant has given notice of same), Landlord may elect to
terminate this Lease at any time thereafter by giving Tenant notice of such
election, in which event this Lease and the rights and obligations of the
parties hereunder shall cease as of a date set forth in such notice which date
shall not be less than sixty (60) days after the date of such notice. In the
event of any such termination, all Rent (other than any Additional Rent due
Landlord by reason of Tenant's failure to perform any of its obligations
hereunder) shall be adjusted as of the date of such termination.
D. Transfer of Partnership Interests. If Tenant is a general or
limited partnership and if at any time after execution of this Lease any part or
all of the interests in the capital or profits of such partnership or any voting
or other interests therein shall be transferred by sale, assignment, bequest,
inheritance, operation of law or other disposition (including, but not limited
to, such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings, and also including, but not limited
to, any adjustment in such partnership interests) so as to result in a change in
the present control of said partnership by the person or persons now having
control of same, a transfer shall be deemed to have occurred. Tenant shall give
Landlord notice that such transfer is imminent at least fifteen (15) days prior
to the date of such transfer. If any such transfer is made (and regardless of
whether Tenant has given notice of same), Landlord may elect to terminate this
Lease at any time thereafter by giving Tenant notice of such election, in which
event this Lease and the rights and obligations of the parties hereunder shall
cease as of a date set forth in such notice which date shall be not less than
sixty (60) days after the date of such notice. In the event of any such
termination, all Rent (other than any Additional Rent due Landlord by reason of
Tenant's failure to perform any of its obligations hereunder) shall be adjusted
as of the date of such termination.
E. Acceptance of Rent from Transferee. The acceptance by Landlord
of the payment of Rent following any assignment or other transfer prohibited by
this Article shall not be deemed to be a consent by Landlord to any such
assignment or other transfer nor shall the same be deemed to be a waiver of any
right or remedy of Landlord hereunder.
F. Additional Provisions Respecting Transfers. Without limiting
Landlord's right to withhold its consent to any transfer by Tenant, and
regardless of whether Landlord shall have consented to any such transfer,
neither Tenant nor any other person having an interest in the possession, use or
occupancy of the Premises or any part thereof shall enter into any lease,
sublease, license, concession, assignment or other transfer or agreement for
possession, use or occupancy of all or any portion of the Premises, which
provides for rental or other payment for such use, occupancy or utilization
based, in whole or in part, on the net income or profits derived by any person
or entity from the space so leased, used or occupied, and any such purported
lease, sublease, license, concession, assignment or other transfer or agreement
shall be absolutely void and ineffective as a conveyance of any right or
interest in the possession, use or occupancy of all or any part of the Premises.
There shall be no deduction from the rental payable under any sublease or other
transfer no from the amount thereof passed on to any person or entity, for any
expenses or costs related in any way to the subleasing or transfer of such
place.
If Landlord shall consent to any Transfer, Tenant shall in consideration
therefor, pay to Landlord as Additional Rent an amount equal to the Transfer
Consideration. For purposes of this paragraph, the term Transfer Consideration
shall mean in any Lease Year (i) any rents, additional charges or other
consideration payable to Tenant by the transferee of the Transfer which is in
excess of the Base Rent and Overhead Rent accruing during such Lease Year and
(ii) all sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture or other personal property in excess of the
fair market sale or rental value thereof as of the date of the Transfer. The
Transfer Consideration shall be paid to Landlord as and when paid by the
transferee to Tenant. Landlord shall have the right to audit Tenant's books and
records upon reasonable notice to determine the amount of Transfer Consideration
payable to Landlord. In the event such audit reveals an understatement of
Transfer Consideration in excess of five percent (5%) of the actual Transfer
Consideration due Landlord, Tenant shall pay for the cost of such audit within
ten (10) days after Landlord's written demand for same.
14. TENANT'S INSURANCE COVERAGE
A. General. Tenant agrees that, at all times during the Lease Term
(as well as prior and subsequent thereto if Tenant or any of Tenant's Agents
should then use or occupy any portion of the Premises), it will keep in force,
with an insurance company licensed to do business in the State of Florida, and
at least A-rated in the most current edition of Best's Insurance Reports and
acceptable to Landlord, (i) without deductible, comprehensive general liability
insurance, including coverage for bodily injury and death, property damage and
personal injury and contractual liability as referred to below, in the amount of
not less than the amount set forth in the BLI Rider, combined single limit per
occurrence for injury (or death) and damages to property, (ii) with deductible
of not more than Five Thousand Dollars ($5,000.00), insurance on an "All Risk or
Physical Loss" basis, including sprinkler leakage, vandalism, malicious
mischief, fire and extended coverage, covering all improvements to the Premises,
fixtures, furnishings, removable floor coverings, equipment, signs and all other
decoration or stock in trade, in the amounts of not less than the full
replacement value thereof, and (iii) workmen's compensation and employer's
liability insurance, if required by statute. Such policies will: (i) include
Landlord and such other parties as Landlord may reasonably designate as
additional insured's, (ii) be considered primary insurance, (iii) include within
the terms of the policy or by contractual liability endorsement coverage
insuring Tenant's indemnity obligations under paragraph 19, and (v) provide that
it may not be cancelled or changed without at least thirty (30) days prior
written notice from the company providing such insurance to each party insured
thereunder. Tenant will also maintain throughout the Lease Term worker's
compensation insurance with not less than the maximum statutory limits of
coverage.
B. Evidence. The insurance coverages to be provided by Tenant will
be for a period of not less than one year. At least fifteen (15) days prior to
the Commencement Date, Tenant will deliver to Landlord original certificates of
all such paid-up insurance; thereafter, at least fifteen (15) days prior to the
expiration of any policy Tenant will deliver to Landlord such original
certificates as will evidence a paid-up renewal or new policy to take the place
of the one expiring.
15. LANDLORD'S INSURANCE COVERAGE
A. General. Landlord will at all times during the Lease Term
maintain a policy or policies of insurance insuring the Building against loss or
damage by fire, explosion or other hazards and contingencies typically covered
by insurance for an amount acceptable to the mortgagees encumbering the
Building. Landlord reserves the right to self insure in lieu of maintaining
such policies.
B. Tenant's Acts. Tenant will not do or permit anything to be done
upon or bring or keep or permit anything to be brought or kept upon the Premises
which will increase Landlord's rate of insurance on the Building. If by reason
of the failure of Tenant to comply with the terms of this Lease, or by reason of
Tenant's occupancy (even though permitted or contemplated by this Lease), the
insurance rate shall at any time be higher than it would otherwise be, Tenant
will reimburse Landlord for that part of all insurance premiums charged because
of such violation or occupancy by Tenant. Tenant agrees to comply with any
requests or recommendation made by Landlord's insurance underwriter inspectors.
16. WAIVER OF RIGHT OF RECOVERY
A. General. Except as provided in Section 39, neither Landlord nor
Tenant shall be liable to the other for any damage to any building, structure or
other tangible property, or any resulting loss of income, or losses under
worker's compensation laws and benefits, even though such loss or damage might
have been occasioned by the negligence of such party, its agents or employees.
The provisions of this Section shall not limit the indemnification for liability
to third parties pursuant to Section 19. As used in this Section 16.A.,
"damage" refers to any loss, destruction or other damage.
B. Exclusions. Tenant acknowledges that Landlord will not carry
insurance on improvements, furniture, furnishings, trade fixtures, equipment
installed in or made to the Premises by or for Tenant, and Tenant agrees that
Tenant, and not Landlord, will be obligated to promptly repair any damage
thereto or replace the same.
17. DAMAGE OR DESTRUCTION BY CASUALTY
A. Absolute Right to Terminate. If by fire or other casualty the
Premises are damaged or destroyed to the extent of twenty five-percent (25%) or
more of the replacement cost thereof, or the Building is damaged or destroyed to
the extent of twenty-five per cent (25%) or more of the replacement cost
thereof, Landlord will have the option of terminating this Lease or any renewal
thereof by serving written notice upon Tenant within one hundred and eighty
(180) days from the date of the casualty and any prepaid Rent or Additional Rent
will be prorated as of the date of destruction and the unearned portion of such
Rent will be refunded to Tenant without interest.
B. Qualified Right to Terminate. If by fire or other casualty
either the Premises or the Building is damaged or destroyed to the extent of
less than twenty-five per cent (25%) but more than ten percent (10%) of the
replacement cost of the Premises or the Building (as applicable) (or the
Premises or Building are damaged to a lesser degree but Section 17C does not
apply because of the number of years remaining in the Lease Term), then Landlord
may, so long as it treats Tenant and similarly situated tenants in a
nondiscriminatory manner, either terminate this Lease by serving written notice
upon Tenant within one hundred and eighty (180) days of the date of destruction
or Landlord may restore the Premises.
C. Obligation to Restore. If by fire or other casualty either the
Premises or the Building is destroyed or damaged, but only to the extent of ten
percent (10%) or less of the replacement cost of the Premises or the Building
(as applicable), and, also, the unexpired Lease Term, including any previously
exercised renewal option, is more than three years, then Landlord will restore
the Premises.
D. Rent Adjustments. In the event of restoration by Landlord, all
Base Rent and Additional Rent paid in advance shall be apportioned as of the
date of damage or destruction and all such Base Rent and Additional Rent as
above described thereafter accruing shall be equitably and proportionately
adjusted according to the nature and extent of the destruction or damage,
pending substantial completion of rebuilding, restoration or repair. In the
event the destruction or damage is so extensive as to make it unfeasible for
Tenant to conduct Tenant's business in the Premises, Rent and Additional Rent
under this Lease will be completely abated until the Premises are substantially
restored by Landlord or until Tenant resumes use and occupancy of the Premises,
whichever shall first occur. Landlord will not be liable for any damage to or
any inconvenience or interruption of business of Tenant or any of Tenant's
Agents occasioned by fire or other casualty.
E. Qualifications. Said restoration, rebuilding or repairing will
exist and will be at Landlord's sole cost and expense, subject to the
availability of applicable insurance proceeds. Landlord shall have no duty to
restore, rebuild or replace Tenant's personal property and trade fixtures.
Notwithstanding anything to the contrary in this Lease, including, but not
limited to this Section 17A, Landlord's obligation(s) to repair, rebuild or
restore the Building or the Premises shall exist (i) only to the extent of
insurance proceeds received by Landlord in connection with the condition or
event which gave rise to Landlord's obligation to repair, rebuild or restore
and/or (ii) only so long as the area unaffected by the casualty may, as
determined by Landlord using reasonable business judgment, be restored as a
profitable, self functioning unit.
18. CONDEMNATION AND EMINENT DOMAIN
A. Absolute Right to Terminate. If all or a material part of the
Premises or the Building or the parking spaces is taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or by purchase in lieu thereof, and the taking would prevent
or materially interfere with the use of the Premises for the purpose for which
they are then being used, this Lease will terminate and the Rent and Additional
Rent will be abated during the unexpired portion of this Lease effective on the
date physical possession is taken by the condemning authority. Tenant will have
no claim to the condemnation award.
B. Obligation to Restore. In the event an immaterial part of the
Premises or the Building or the parking spaces is taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain or by purchase in lieu thereof, and this Lease is not
terminated as provided in subsection A above, then Landlord shall, subject to
the remaining provisions of this Section, at Landlord's expense, restore the
Premises to the extent necessary to make them reasonably tenantable. The Rent
and Additional Rent payable under this Lease during the unexpired portion of the
Lease Term shall be adjusted to such an extent as may be fair and reasonable
under the circumstances. Tenant shall have no claim to the condemnation award
with respect to the leasehold estate but, in a subsequent, separate proceeding,
may make a separate claim for trade fixtures installed in the Premises by and at
the expense of Tenant and Tenant's moving expense. In no event will Tenant have
any claim for the value of the unexpired Lease Term.
C. Qualifications. Notwithstanding the foregoing, Landlord's
obligation to restore exists (i) only if and/or to the extent, that the
condemnation or similar award received by Landlord is sufficient to compensate
Landlord for its loss and its restoration costs and/or (ii) the area unaffected
by the condemnation or similar proceeding may, as determined by Landlord's
reasonable business judgment, be restored as a profitable, and self functioning
unit.
19. LIMITATION OF LANDLORD'S LIABILITY; INDEMNIFICATION
A. Personal Property. All personal property placed or moved into
the Building will be at the sole risk of Tenant or other owner. Landlord will
not be liable to Tenant or others for any damage to person or property arising
from environmental concerns, as hereafter defined, theft, vandalism, HVAC
malfunction, the bursting or leaking of water pipes, any act or omission of any
cotenant or occupant of the Building or of any other person, or otherwise.
B. Limitations. Notwithstanding any contrary provision of this
Lease: (i) Tenant will look solely (to the extent insurance coverage is not
applicable or available) to the interest of Landlord (or its successor as
Landlord hereunder) in the Building for the satisfaction of any judgment or
other judicial process requiring the payment of money as a result of any
negligence or breach of this Lease by Landlord or its successor or of Landlord's
managing agent (including any beneficial owners, partners, corporations and/or
others affiliated or in any way related to Landlord or such successor or
managing agent) and Landlord has no personal liability hereunder of any kind,
and (ii) Tenant's sole right and remedy in any action or proceeding concerning
Landlord's reasonableness (where the same is required under this Lease) will be
an action for declaratory judgment and/or specific performance.
C. Indemnity. Tenant agrees to indemnify, defend and hold harmless
Landlord and its agents from and against all claims, causes of actions,
liabilities, judgments, damages, losses, costs and expenses, including
reasonable attorneys' fees and costs, including appellate proceedings and
bankruptcy proceedings, incurred or suffered by Landlord and arising from or in
any way connected with the Premises or the use thereof or any acts, omissions,
neglect or fault of Tenant or any of Tenant's Agents, including, but not limited
to, any breach of this Lease or any death, personal injury or property damage
occurring in or about the Premises or the Building or arising from Environmental
concerns, as hereafter defined. Tenant will reimburse Landlord upon request for
all costs incurred by Landlord in the interpretation and enforcement of any
provisions of this Lease and/or the collection of any sums due to Landlord under
this Lease, including collection of agency fees, and reasonable attorneys' fees
and costs, regardless of whether litigation is commenced, and through all
appellate actions and proceedings, including bankruptcy proceedings, if
litigation is commenced. The foregoing claims, causes of actions, liabilities,
judgments, damages, losses, costs and expenses shall include but not be limited
to any of same arising from Tenant's failure to comply with any of the
requirements of Americans with Disabilities Act ("ADA") within the Premises.
20. RELOCATION OF TENANT
A. General. Recognizing that the Building is large and the needs of
tenants as to space may vary from time to time, and in order for Landlord to
accommodate Tenant and prospective tenants, Landlord expressly reserves the
right, prior to and/or during the Lease Term, at Landlord's sole expense, to
move Tenant from the Premises and relocate Tenant in other space of Landlord's
choosing of approximately the same dimensions and size within the Building,
which other space will be decorated by Landlord at its expense. Landlord may
use decorations and materials from the existing Premises, or other materials, so
that the space in which Tenant is relocated will be comparable in its interior
design and decoration to the space from which Tenant is removed.
B. No Interference. During the relocation period Landlord will use
reasonable efforts not to unduly interfere with Tenant's business activities and
Landlord agrees to substantially complete the relocation within a reasonable
time under all then existing circumstances.
C. Premises. This Lease and each of its terms and conditions will
remain in full force and effect and be applicable to any such new space and such
new space will be deemed to be the Premises demised hereunder; upon request
Tenant will execute such documents which may be requested to evidence,
acknowledge and confirm the relocation (but it will be effective even in the
absence of such confirmation).
D. Costs. Landlord's obligation for expenses of removal and
relocation will be the actual cost of relocating and decorating Tenant's new
space, and Tenant agrees that Landlord's exercise of its election to remove and
relocate Tenant will not release Tenant in whole or in part from its obligations
hereunder for the full Lease Term. No rights granted in this Lease to Tenant,
including the right of peaceful possession and quiet enjoyment, will be deemed
breached or interfered with by reason of Landlord's exercise of the relocation
right reserved herein.
E. Notice. If Landlord exercises its relocation right under this
paragraph, (i) Tenant will be given thirty (30) days prior notice in writing and
(ii) Landlord will reimburse Tenant for the reasonable cost of telephone
relocation necessitated by the exercise of said right of relocation.
21. COMPLIANCE WITH LAWS AND PROCEDURES
A. Compliance. Tenant, at its sole cost, will promptly comply with
all applicable laws, guidelines, rules, regulations and requirements, whether of
federal, state, or local origin, applicable to the Premises and the Building,
including, but not limited to, the Americans with Disabilities Act, 42 U.S.C. '
12101 et seq, and those for the correction, prevention and abatement of
nuisance, unsafe conditions, or other grievances arising from or pertaining to
the use or occupancy of the Premises. Tenant acknowledges that (i) the Premises
and the parking facilities may contain potentially hazardous substances,
including, but not limited to, asbestos containing materials, radon gas, mineral
fibers, and other like materials (all of such materials are referred to herein
as "Environmental Concerns") and (ii) Tenant has been advised that the Premises
and the Building do contain asbestos containing materials. Accordingly, Tenant
agrees that Tenant and Tenant's Agents shall comply with all operation and
maintenance programs and guidelines implemented or promulgated from time to time
by Landlord or its consultants, including, but not limited to, those matters set
forth in subsections B and C below, in order to reduce the risk to Tenant,
Tenant's Agents or any other tenants of the Building of injury from
Environmental Concerns. Tenant at its sole cost and expense shall be solely
responsible for taking any and all measures which are required to comply with
the requirements of the ADA within the Premises. Any Alterations to the
Premises made by or on behalf of Tenant for the purpose of complying with the
ADA or which otherwise require compliance with the ADA shall be done in
accordance with this Lease; provided, that Landlord's consent to such
Alterations shall not constitute either Landlord's assumption, in whole or in
part, of Tenant's responsibility for compliance with the ADA, or representation
or confirmation by Landlord that such Alterations comply with the provisions of
the ADA.
B. Notice Prior to Work. Tenant shall provide thirty (30) days
notice to Landlord prior to the performance by Tenant, Tenant's Agents or
contractors of any structural repairs, renovation and/or maintenance, to the
Premises. Such notice shall include a detailed description of the work
contemplated. Tenant shall not perform, or cause to be performed, any such
repair, renovation and/or maintenance without the written consent of Landlord,
and, if such consent is granted, the repair, renovation and/or maintenance must
be performed in accordance with the terms of Landlord's consent. Tenant agrees
to bear the expense of whatever preventive or abatement measures are required by
Landlord's consent with respect to friable asbestos or any other material.
C. Indemnification. Tenant shall indemnify, defend, and hold
harmless Landlord from and against any and all claims or liability arising from
the performance of the repair, renovation, and/or maintenance described above.
This indemnity shall include, but not be limited to, claims or liabilities
asserted against Landlord based upon negligence, strict liability or other
liability by operation of law to any third party or government entity, and all
costs, attorney's fees, expenses, and liabilities incurred by Landlord in the
defense of any such claim. Landlord shall defend any such claim at Tenant's
expense by counsel selected by Landlord. Furthermore, as a material part of the
consideration to Landlord for the entering into of this Lease, Tenant assumes
all risk of damages to property or injury to persons in, upon, or about the
Premises arising from any act or omission of Tenant, Tenant's Agents, employees,
contractors, and invitees, resulting in the release or threatened release of
friable asbestos. Tenant shall be liable for the entire cost of abating and
remediating any such release or threatened release, and Tenant shall indemnify,
defend, and hold harmless Landlord from and against any and all claims or
liability arising therefrom.
D. Radon. In accordance with Florida Law, the following disclosure
is hereby made:
RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risk to persons who are exposed to it over time. Levels of radon that
exceed Federal and State Guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
22. RIGHT OF ENTRY
Landlord and its agents will have the right to enter the Premises
during all reasonable hours to make necessary repairs to the Premises. In the
event of an emergency, Landlord or its agents may enter the Premises at any
time, without notice, to appraise and correct the emergency condition. Said
right of entry will, after reasonable notice, likewise exist for the purpose of
removing placards, signs, fixtures, alterations, or additions which do not
conform to this Lease. Landlord or its agents will have the right to exhibit
the Premises at any time to prospective tenants within one hundred and eighty
days (180) before the Expiration Date of the Lease.
23. DEFAULT
A. Events of Default By Tenant. If (1) Tenant vacates, abandons or
surrenders all or any part of the Premises prior to the Expiration Date, or (2)
Tenant fails to fulfill any of the terms or conditions of this Lease or any
other lease heretofore made by Tenant for space in the Building or (3) the
appointment of a trustee or a receiver to take possession of all or
substantially all of Tenant's assets occurs, or if the attachment, execution or
other judicial seizure of all or substantially all of Tenant's assets located at
the Premises, or of Tenant's interest in this Lease, occurs, or (4) Tenant or
any of its successors or assigns or any guarantor of this Lease ("Guarantor")
should file any voluntary petition in bankruptcy, reorganization or arrangement,
or an assignment for the benefit of creditors or for similar relief under any
present or future statute, law or regulation relating to relief of debtors, or
(5) Tenant or any of its successors or assigns or any Guarantor should be
adjudicated bankrupt or have an involuntary petition in bankruptcy,
reorganization or arrangement filed against it, or (6) Tenant shall permit,
allow or suffer to exist any lien, judgment, writ, assessment, charge,
attachment or execution upon Landlord's or Tenant's interest in this Lease or to
the Premises, and/or the fixtures, improvements and furnishings located thereon;
then, Tenant shall be in default hereunder.
B. Tenant's Grace Periods. If (1) Tenant fails to pay Rent or
Additional Rent on the date due or (2) Tenant fails to cure any other default
within ten (10) days after notice from Landlord specifying the nature of such
default (unless such default is of a nature that it cannot be completely cured
within said ten (10) day period and steps have been diligently commenced to cure
or remedy it within such ten (10) day period and are thereafter pursued with
reasonable diligence and in good faith), then Landlord shall have such remedies
as are provided under this Lease and/or under the laws of the State of Florida.
C. Repeated Late Payment. Regardless of the number of times of
Landlord's prior acceptance of late payments and/or late charges, (i) if
Landlord notifies Tenant twice in any 6-month period that Base Rent or any
Additional Rent has not been paid when due, then any other late payment within
such 6-month period shall automatically constitute a default hereunder and (ii)
the mere acceptance by Landlord of late payments in the past shall not,
regardless of any applicable laws to the contrary, thereafter be deemed to waive
Landlord's right to strictly enforce this Lease, including Tenant's obligation
to make payment of Rent on the exact day same is due, against Tenant.
D. Landlord's Default. If Tenant asserts that Landlord has failed
to meet any of its obligations under this Lease, Tenant shall provide written
notice ("Notice of Default") to Landlord specifying the alleged failure to
perform, and Tenant shall send by certified mail, return receipt requested, a
copy of such Notice of Default to any and all mortgage holders, provided that
Tenant has been previously advised of the address(es) of such mortgage
holder(s). Landlord shall have a thirty (30) day period after receipt of the
Notice of Default in which to commence curing any non-performance by Landlord,
and Landlord shall have as much time thereafter to complete such cure as is
necessary so long as Landlord's cure efforts are diligent and continuous. If
Landlord has not begun the cure within thirty (30) days of receipt of the Notice
of Default, or Landlord does not thereafter diligently and continuously attempt
to cure, then Landlord shall be in default under this Lease. If Landlord is in
default under this Lease, then the mortgage holder(s) shall have an additional
thirty (30) days, after receipt of a second written notice from Tenant, within
which to cure such default or, if such default cannot be cured within that time,
then such additional time as may be necessary so long as their efforts are
diligent and continuous.
24. LANDLORD'S REMEDIES FOR TENANT'S DEFAULT
A. Landlord's Options. If Tenant is in default of this Lease,
Landlord may, at its option, in addition to such other remedies as may be
available under Florida law:
(1) terminate this Lease and Tenant's right of possession; or
(2) terminate Tenant's right to possession but not the Lease
and/or proceed in accordance with any and all provisions of paragraph B below.
B. Landlord's Remedies.
(1) Landlord may without further notice reenter the Premises
either by force or otherwise and dispossess Tenant by summary proceedings or
otherwise, as well as the legal representative(s) of Tenant and/or other
occupant(s) of the Premises, and remove their effects and hold the Premises as
if this Lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end; and/or
at Landlord's option,
(2) All Rent and all Additional Rent for the balance of the Term
will, at the election of Landlord, be accelerated and the present worth of same
for the balance of the Lease Term, net of amounts actually collected by
Landlord, shall become immediately due thereupon and be paid, together with all
expenses of every nature which Landlord may incur such as (by way of
illustration and not limitation) those for attorneys' fees, brokerage,
advertising, and refurbishing the Premises in good order or preparing them for
re-rental; and/or at Landlord's option,
(3) Landlord may re-let the Premises or any part thereof, either
in the name of Landlord or otherwise, for a term or terms which may at
Landlord's option be less than or exceed the period which would otherwise have
constituted the balance of the Lease Term, and may grant concessions or free
rent or charge a higher rental than that reserved in this Lease; and/or at
Landlord's option,
(4) Tenant or its legal representative(s) will also pay to
Landlord as liquidated damages any deficiency between the Rent and all
Additional Rent hereby reserved and/or agreed to be paid and the net amount, if
any, of the rents collected on account of the lease or leases of the Premises
for each month of the period which would otherwise have constituted the balance
of the Lease Term.
25. LANDLORD'S RIGHT TO PERFORM FOR TENANT'S ACCOUNT
If Tenant fails to observe or perform any term or condition of this
Lease within the grace period, if any, applicable thereto, then Landlord may
immediately or at any time thereafter perform the same for the account of
Tenant. If Landlord makes any expenditure or incurs any obligation for the
payment of money in connection with such performance for Tenant's account
(including reasonable attorneys' fees and costs in instituting, prosecuting
and/or defending any action or proceeding through appeal), the sums paid or
obligations incurred, with interest at eighteen percent (18%) per annum, will be
paid by Tenant to Landlord within ten (10) days after rendition of a bill or
statement to Tenant. In the event Tenant in the performance or non-performance
of any term or condition of this Lease should cause an emergency situation to
occur or arise within the Premises or in the Building, Landlord will have all
rights set forth in this paragraph immediately without the necessity of
providing Tenant any advance notice.
26. LIENS
A. General. In accordance with the applicable provisions of the
Florida Mechanic's Lien Law and specifically Florida Statutes, Section 713.10,
no interest of Landlord whether personally or in the Premises, or in the
underlying land or Building of which the Premises are a part or the leasehold
interest aforesaid shall be subject to liens for improvements made by Tenant or
caused to be made by Tenant hereunder. Further, Tenant acknowledges that
Tenant, with respect to improvements or alterations made by Tenant or caused to
be made by Tenant hereunder, shall promptly notify the contractor making such
improvements to the Premises of this provision exculpating Landlord's liability
for such liens.
B. Default. Notwithstanding the foregoing, if any mechanic's lien
or other lien, attachment, judgment, execution, writ, charge or encumbrance is
filed against the Building or the Premises or this leasehold, or any
alterations, fixtures or improvements therein or thereto, as a result of any
work action or inaction done by or at the direction of Tenant or any of Tenant's
Agents, Tenant will discharge same of record within ten (10) days after the
filing thereof, failing which Tenant will be in default under this Lease. In
such event, without waiving Tenant's default, Landlord, in addition to all other
available rights and remedies, without further notice, may discharge the same of
record by payment, bonding or otherwise, as Landlord may elect, and upon request
Tenant will reimburse Landlord for all costs and expenses so incurred by
Landlord plus interest thereon at the rate of eighteen percent (18%) per annum.
27. NOTICES
Notices to Tenant under this Lease will be addressed to Tenant and
mailed or delivered to the address set forth for Tenant in the BLI Rider.
Notices to Landlord under this Lease (as well as the required copies thereof)
will be addressed to Landlord (and its agents) and mailed or delivered to the
address set forth in the BLI Rider. Notices will be personally delivered or
given by registered or certified mail, return receipt requested. Notices
delivered personally will be deemed to have been given as of the date of
delivery and notices given by mail will be deemed to have been given forty-eight
(48) hours after the time said properly addressed notice is placed in the mail.
Each party may change its address from time to time by written notice given to
the other as specified above.
28. MORTGAGE; ESTOPPEL CERTIFICATE; SUBORDINATION
Landlord has the unrestricted right to convey, mortgage and refinance
the Building, or any part thereof. Tenant agrees, within seven (7) days after
notice, to execute and deliver to Landlord or its mortgagee or designee such
instruments as Landlord or its mortgagee may require, certifying the amount of
the Security Deposit and whether this Lease is in full force and effect, and
listing any modifications. This estoppel certificate is intended to be for the
benefit of Landlord, any purchaser or mortgagee of Landlord, or any purchaser or
assignee of Landlord's mortgage. The estoppel certificate will also contain
such other information as Landlord or its designee may request. This Lease is
and at all times will be subject and subordinate to all present and future
mortgages or ground leases which may affect the Building and/or the parking
garage(s), and to all recastings, renewals, modifications, consolidations,
replacements, and extensions of any such mortgage(s), and to all increases and
voluntary and involuntary advances made thereunder. The foregoing will be
self-operative and no further instrument of subordination will be required. In
the event that the holder ("Lender") of any encumbrance ("Mortgage") on the
Building or any other person acquires title to the Building pursuant to the
exercise of any remedy provided for in the Mortgage or by reason of the
acceptance of a deed in lieu of foreclosure (the Lender, any other such person
and their participants, successors and assigns being referred to herein as the
"Purchaser"), Tenant covenants and agrees to attorn to and recognize and be
bound to Purchaser as its new Landlord, and except as provided below, this Lease
shall continue in full force and effect as a direct Lease between Tenant and
Purchaser, except that, notwithstanding anything to the contrary herein or in
the Lease, the provisions of the Mortgage will govern with respect to the
disposition of proceeds of insurance policies or condemnation or eminent domain
awards. So long as the Lease is in full force and effect and Tenant is not in
default under any provision of this Lease, and no event has occurred that has
continued to exist for a period of time (after notice, if any, required by this
Lease) as would entitle Landlord to terminate this Lease or would cause without
further action by Landlord, the termination of this Lease or would entitle
Landlord to dispossess the Tenant thereunder:
A. The right of possession of Tenant to the Premises shall not be
terminated or disturbed by any steps or proceedings taken by Lender in the
exercise of any of its rights under the Mortgage or the indebtedness secured
thereby;
B. This Lease shall not be terminated or affected by said exercise
of any remedy provided for in the Mortgage, and any sale by Lender of the
Building pursuant to the exercise of any rights and remedies under the Mortgage
or otherwise, shall be made subject to this Lease and the rights of Tenant
hereunder.
C. In no event shall Lender or any other Purchaser be:
(1) liable for any act or omission of Landlord or any prior
landlord;
(2) liable for the return of any security deposit;
(3) subject to any offsets or defenses that the Tenant might
have against Landlord or any prior landlord;
(4) bound by any payment or rent or additional rent that Tenant
might have paid to Landlord or any prior landlord for more than the current
month; or
(5) bound by any amendment or modifications of the Lease made
without Lender's or such other Purchaser's prior written consent.
D. Provided that Landlord has previously notified Tenant of Lender's
address for notice, Tenant agrees to give prompt written notice to Lender of any
default by Landlord that would entitle Tenant to cancel this Lease, and agrees
that notwithstanding any provision of this Lease, no notice of cancellation
thereof given on behalf of Tenant shall be effective unless Lender has received
said notice and has failed within 30 days of the date of receipt thereof to cure
Landlord's default, or if the default cannot be cured within 30 days, has failed
to commence and to diligently pursue the cure of Landlord's default which gave
rise to such right of cancellation. Tenant further agrees to give such notices
to any successor of Lender, provided that such successor shall have given
written notice of Tenant of its acquisition of Lender's interest in the Mortgage
and designated the address to which such notices are to be sent.
E. Tenant acknowledges that Landlord may execute and deliver to
Lender an Assignment of Leases and Rents conveying the rentals under this Lease
as additional security for the loan secured by the Mortgage, and Tenant hereby
expressly consents to such Assignment.
F. Tenant agrees that it will not, without the prior written consent
of Lender, do any of the following, and any such purported action without such
consent shall be void as against Lender:
(1) modify this Lease or any extensions or renewals thereof in such a
way as to reduce the Rent, accelerate Rent payments, shorten the original term,
or change any renewal option;
(2) terminate this Lease except as provided by its terms; or
(3) tender or accept a surrender of this Lease or make prepayment in
excess of one month of rent thereunder.
G. Tenant agrees to certify in writing to Lender, upon request,
whether or not any default on the part of Landlord exists and the nature of any
such default.
H. The foregoing provisions shall be self-operative and effective
without the execution of any further instruments on the part of Lender or
Tenant. However, Tenant agrees to execute and deliver to Lender or to any
person to whom Tenant herein agrees to attorn such other instruments as either
shall request in order to effectuate said provisions.
29. ATTORNMENT AND MORTGAGEE'S REQUEST
A. Attornment. If any mortgagee of the Building comes into pos-
session or ownership of the Premises, or acquires Landlord's interest by
foreclosure of the mortgage or otherwise, upon the mortgagee's request Tenant
will attorn to the mortgagee.
B. Mortgage Modification. If a mortgagee of the Building requests
modifications to this Lease as a condition to disbursing any monies to be
secured by the mortgage, Tenant agrees that within seven (7) days after request
by the mortgagee Tenant will execute, acknowledge and deliver to the mortgagee
an agreement, in form and substance satisfactory to the mortgagee, evidencing
such modifications, provided they do not increase Tenant's obligations under
this Lease or materially adversely affect the leasehold interest created by this
Lease.
C. Estoppel Letter. Tenant agrees that within seven (7) days after
request by any mortgagee of the Building, Tenant will execute, acknowledge and
deliver to the mortgagee a notice in form and substance satisfactory to the
mortgagee (as prepared by Landlord), setting forth such information as the
mortgagee may require with respect to this Lease and/or the Premises. If for
any reason Tenant does not timely comply with the provisions of this paragraph,
Tenant will be deemed to have confirmed that this Lease is in full force and
effect with no defaults on the part of either party and without any right of
Tenant to offset, deduct or withhold any Rent or Additional Rent.
30. TRANSFER BY LANDLORD
If Landlord's interest in the Building terminates by reason of a bona
fide sale or other transfer, Landlord will, upon transfer of the Security
Deposit to the new owner, thereupon be released from all further liability to
Tenant under this Lease. At the expiration or termination of the Lease Term,
Tenant shall deliver to Landlord all keys to the Premises and make known to
Landlord the location and combination of all safes, locks and similar items.
31. SURRENDER OF PREMISES; HOLDING OVER
A. Surrender. Tenant agrees to surrender the Premises to Landlord
on the Expiration Date (or sooner termination of the Lease Term pursuant to
other applicable provisions hereof) in as good condition as they were at the
commencement of Tenant's occupancy, ordinary wear and tear, and damage by fire
and windstorm excepted.
B. Restoration. In all events, Tenant will promptly restore all
damage caused in connection with any removal of Tenant's personal property.
Tenant will pay to Landlord, upon request, all damages that Landlord may suffer
on account of Tenant's failure to surrender possession as and when aforesaid and
will indemnify Landlord against all liabilities, costs and expenses (including
all reasonable attorneys' fees and costs if any) arising out of Tenant's delay
in so delivering possession, including claims of any succeeding tenant.
C. Removal. Upon expiration of the Lease Term, Tenant will not be
required to remove from the Premises Building standard items, all of such
Building standard items are the property of Landlord.
D. Holdover. If Tenant shall be in possession of the Premises after
the expiration of the Term, in the absence of any agreement extending the Term,
the tenancy under this Lease shall become one from month to month, terminable by
either party on thirty (30) days' prior notice, and shall be subject to all of
the terms and conditions of this Lease as though the Term had been extended from
month to month, except that (i) the Base Rent payable hereunder for each month
during said holdover period shall be equal to twice the monthly installment of
Base Rent payable during the last month of the Term and (ii) all Overhead Rent
payable hereunder shall be prorated for each month during such holdover period.
E. No Surrender. No offer of surrender of the Premises, by delivery
to Landlord or its agent of keys to the Premises or otherwise, will be binding
on Landlord unless accepted by Landlord, in writing, specifying the effective
surrender of the Premises. At the expiration or termination of the Lease Term,
Tenant shall deliver to Landlord all keys to the Premises and make known to
Landlord the location and combinations of all locks, safes and similar items.
No receipt of money by Landlord from Tenant after the Expiration Date (or sooner
termination) shall reinstate, continue or extend the Lease Term, unless Landlord
specifically agrees to same in writing signed by Landlord at the time such
payment is made by Tenant.
32. NO WAIVER; CUMULATIVE REMEDIES
A. No Waiver. No waiver of any provision of this Lease by either
party will be deemed to imply or constitute a further waiver by such party of
the same or any other provision hereof. The rights and remedies of Landlord
under this Lease or otherwise are cumulative and are not intended to be
exclusive and the use of one will not be taken to exclude or waive the use of
another, and Landlord will be entitled to pursue all rights and remedies
available to landlords under the laws of the State of Florida. Landlord, in
addition to all other rights which it may have under this Lease, hereby
expressly reserves all rights in connection with the Building or the Premises
not expressly and specifically granted to Tenant under this Lease and Tenant
hereby waives all claims for damages, loss, expense, liability, eviction or
abatement it has or may have against Landlord on account of Landlord's exercise
of its reserved rights, including, but not limited to, Landlord's right to alter
the existing name, address, style or configuration of the Building or the Common
Areas, signage, suite identifications, parking facilities, lobbies, entrances
and exits, elevators and stairwells.
B. Rent Payments. No receipt of money by Landlord from Tenant at
any time, or any act, or thing done by, Landlord or its agent shall be deemed a
release of Tenant from any liability whatsoever to pay Rent, Additional Rent, or
any other sums due hereunder, unless such release is in writing, subscribed by a
duly authorized officer or agent of Landlord and refers expressly to this
Section. Any payment by Tenant or receipt by Landlord of less than the entire
amount due at such time shall be deemed to be on account of the earliest sum
due. No endorsement or statement on any check or any letter accompanying any
check or payment shall be deemed an accord and satisfaction. In the case of
such a partial payment or endorsement, Landlord may accept such payment, check
or letter without prejudice to its right to collect all remaining sums due and
pursue all of its remedies under the Lease.
33. WAIVER
To the extent permitted by law, Tenant hereby waives: (a) jury trial
in any action or proceeding regarding a monetary default by Tenant and/or
Landlord's right to possession of the Premises, and (b) in any action or
proceeding by Landlord for eviction where Landlord has also filed a separate
action for damages, Tenant waives the right to interpose any counterclaim in
such eviction action. Moreover, Tenant agrees that it shall not interpose or
maintain any counterclaim in such damages action unless it pays and continues to
pay all Rent, as and when due, into the registry of the court in which the
damages action is filed. In the event of any dispute hereunder, or any default
in the performance of any term or condition of this Lease, the prevailing party
in litigation shall be entitled to recover all costs and expenses associated
therewith, including reasonable attorneys' fees.
34. CONSENTS AND APPROVALS
If Tenant requests Landlord's consent or approval under this Lease,
and if in connection with such requests Landlord deems it necessary to seek the
advice of its attorneys, architects and/or other experts, then Tenant shall pay
the reasonable fee of Landlord's attorneys, architects and/or other experts in
connection with the consideration of such request and/or the preparation of any
documents pertaining thereto. Whenever under this Lease Landlord's consent or
approval is expressly or impliedly required, the same may be arbitrarily
withheld except as otherwise specified herein.
35. RULES AND REGULATIONS
Tenant agrees to abide by all rules and regulations attached hereto as
Exhibit "C" and incorporated herein by this reference, as reasonably amended and
supplemented from time to time by Landlord. Landlord will not be liable to
Tenant for violation of the same or any other act or omission by any other
tenant.
36. SUCCESSORS AND ASSIGNS
This Lease will be binding upon and inure to the benefit of the
respective heirs, personal and legal representatives, successors and permitted
assigns of the parties hereto.
37. QUIET ENJOYMENT
In accordance with and subject to the terms and provisions of this
Lease, Landlord warrants that it has full right to execute and to perform under
this Lease and to grant the estate demised and that Tenant, upon Tenant's
payment of the required Rent and Additional Rent and performing of all of the
terms, conditions, covenants, and agreements contained in this Lease, shall
peaceably and quietly have, hold and enjoy the Premises during the full Lease
Term.
38. ENTIRE AGREEMENT
This Lease, together with the BLI Rider, exhibits, schedules, addenda
and guaranties (as the case may be) fully incorporated into this Lease by this
reference, contains the entire agreement between the parties hereto regarding
the subject matters referenced herein and supersedes all prior oral and written
agreements between them regarding such matters. This Lease may be modified only
by an agreement in writing dated and signed by Landlord and Tenant after the
date hereof.
39. HAZARDOUS MATERIALS
A. Prohibition of Storage. As used herein, "Hazardous Materials
Laws" means all federal, state and local laws, statutes, ordinances and
regulations, rules, rulings, policies, orders and administrative actions and
orders relating to industrial hygiene, environmental protection or the use,
analysis, generation, manufacture, storage, disposal or transportation of any
oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or
waste, infectious waste, or other hazardous, toxic, contaminated or polluting
materials, substances or wastes, including, without limitation, any "hazardous
substances," "hazardous wastes," "hazardous materials" or "toxic substances"
under any such laws, ordinances or regulations (collectively, "Hazardous
Materials"). Tenant shall, at its own expense, at all times and in all
respects: (i) comply with all Hazardous Materials Laws regarding Hazardous
Materials introduced in or about the Building by or at the direction of Tenant
or in connection with Tenant's use of the Premises ("Tenant's Hazardous
Materials"); and (ii) procure, maintain in effect and comply with all conditions
of any and all permits, licenses and other governmental and regulatory approvals
relating to Tenant's Hazardous Materials within, on, under or about the Building
in conformity with all applicable Hazardous Materials Laws and prudent industry
practices regarding management of such Hazardous Materials. Landlord recognizes
and agrees that Tenant may use Tenant's Hazardous Materials in normal quantities
that are applicable to general office use and that such use by Tenant shall not
be deemed a violation of this Section, so long as the levels are not in
violation of any Hazardous Materials Laws. Upon termination or expiration of
the Lease, Tenant shall, at its own expense, cause all of Tenant's Hazardous
Materials to be removed from the Premises and Building Common Area and
transported for use, storage or disposal in accordance and compliance with all
applicable Hazardous Materials Laws. Landlord acknowledges that it is not the
intent of this Article to prohibit Tenant from operating its business as
described in this Lease. Tenant may operate its business according to the
custom of the industry so long as the use or presence of Tenant's Hazardous
Materials is strictly and properly monitored according to all applicable
governmental requirements. Tenant shall indemnify, protect, defend (by counsel
reasonably acceptable to Landlord), and hold Landlord and Landlord's Indemnitees
free and harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses and expenses (including attorneys' fees) or death of or
injury to any person or damage to any property whatsoever, including, without
limitation, the Building common area, arising from or caused in whole or in
part, directly or indirectly, by the presence in or about the Building of any of
Tenant's Hazardous Materials or by Tenant's failure to comply with any Hazardous
Materials Law regarding Tenant's Hazardous Materials or in connection with any
removal, remediation, clean up, restoration and materials required hereunder to
return the Premises and any other property of whatever nature to their condition
existing prior to the appearance of Tenant's Hazardous Materials.
B. Disclosure Warning and Notice Obligations. Tenant shall comply
with all laws, ordinances and regulations in the State where the Premises is
located regarding the disclosure of the presence or danger of Tenant's Hazardous
Materials. Tenant acknowledges and agrees that all reporting and warning
obligations required under the Hazardous Materials Laws with respect to Tenant's
Hazardous Materials are the sole responsibility of Tenant, whether or not such
Hazardous Materials Laws permit or require Landlord to provide such reporting or
warnings, and Tenant shall be solely responsible for complying with such
Hazardous Materials Laws regarding the disclosure of, the presence or danger of
Tenant's Hazardous Materials. Tenant shall immediately notify Landlord, in
writing, of any complaints, notices, warnings, reports or asserted violations of
which Tenant becomes aware relating to Hazardous Materials on or about the
Premises. Tenant shall also immediately notify Landlord if Tenant knows or has
reason to believe Tenant's Hazardous Materials have or will be released in or
about the Building.
C. Environmental Tests and Audits. Tenant shall not perform or
cause to be performed, any Hazardous Materials surveys, studies, reports or
inspection, relating to the Premises without obtaining Landlord's advance
written consent, which consent may be withheld in Landlord's sole discretion.
At any time prior to the expiration of the Lease Term, Landlord shall have the
right to enter upon the Premises in order to conduct appropriate tests and to
deliver to Tenant the results of such tests to demonstrate that levels of any
Hazardous Materials in excess of permissible levels has occurred as a result of
Tenant's use of the Premises.
D. Survival/Tenant's Obligations. The respective rights and
obligations of Landlord and Tenant under this Article shall survive the
expiration or termination of this Lease.
40. BANKRUPTCY PROVISIONS
A. Event of Bankruptcy. If this Lease is assigned to any person or
entity pursuant to the provisions of the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code"), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute the property of Tenant
or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and
all monies or other considerations constituting Landlord's property under this
Section not paid or delivered to Landlord shall be held in trust for the benefit
of Landlord and shall be promptly paid or delivered to Landlord. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed all
of the obligations arising under this Lease on and after the date of such
assignment.
B. Additional Remedies. In addition to any rights or remedies
hereinbefore or hereinafter conferred upon Landlord under the terms of this
Lease, the following remedies and provisions shall specifically apply in the
event Tenant is in default of this Lease:
(1) In all events, any receiver or trustee in bankruptcy shall
either expressly assume or reject this Lease within sixty (60) days following
the entry of an "Order for Relief" or within such earlier time as may be
provided by applicable law.
(2) In the event of an assumption of this Lease by a debtor or
by a trustee, such debtor or trustee shall within fifteen (15) days after such
assumption (i) cure any default or provide adequate assurance that defaults will
be promptly cured; (ii) compensate Landlord for actual pecuniary loss or provide
adequate assurance that compensation will be made for actual monetary loss,
including, but not limited to, all attorneys' fees and costs incurred by
Landlord resulting from any such proceedings; and (iii) provide adequate
assurance of future performance.
(3) Where a default exists under this Lease, the trustee or
debtor assuming this Lease may not require Landlord to provide services or
supplies incidental to this Lease before its assumption by such trustee or
debtor, unless Landlord is compensated under the terms of this Lease for such
services and supplies provided before the assumption of such Lease.
(4) The debtor or trustee may only assign this Lease if (i) it
is assumed and the assignee agrees to be bound by this Lease, (ii) adequate
assurance of future performance by the assignee is provided, whether or not
there has been a default under this Lease, and (iii) the debtor or trustee has
received Landlord's prior written consent pursuant to the provisions of this
Lease. Any consideration paid by any assignee in excess of the rental reserved
in this Lease shall be the sole property of, and paid to, Landlord.
(5) Landlord shall be entitled to the fair market value for the
Premises and the services provided by Landlord (but in no event less than the
rental reserved in this Lease) subsequent to the commencement of a bankruptcy
event.
(6) Any security deposit given by Tenant to Landlord to secure
the future performance by Tenant of all or any of the terms and conditions of
this Lease shall be automatically transferred to Landlord upon the entry of an
"Order of Relief".
(7) The parties agree that Landlord is entitled to adequate
assurance of future performance of the terms and provisions of this Lease in the
event of an assignment under the provisions of the Bankruptcy Code. For
purposes of any such assumption or assignment of this Lease, the parties agree
that the term "adequate assurance" shall include, without limitation, at least
the following: (i) any proposed assignee must have, as demonstrated to
Landlord's satisfaction, a net worth (as defined in accordance with generally
accepted accounting principles consistently applied) in an amount sufficient to
assure that the proposed assignee will have the resources to meet the financial
responsibilities under this Lease, including the payment of all Rent; the
financial condition and resources of Tenant are material inducements to Landlord
entering into this Lease; (ii) any proposed assignee must have engaged in the
permitted use described in the BLI Rider for at least five (5) years prior to
any such proposed assignment, the parties hereby acknowledging that in entering
into this Lease, Landlord considered extensively Tenant's permitted use and
determined that such permitted business would add substantially to the tenant
balance in the Building, and were it not for Tenant's agreement to operate only
Tenant's permitted business on the Premises, Landlord would not have entered
into this Lease, and that Landlord's operation of the Building will be
materially impaired if a trustee in bankruptcy or any assignee of this Lease
operates any business other than Tenant's permitted business; (iii) any
assumption of this Lease by a proposed assignee shall not adversely affect
Landlord's relationship with any of the remaining tenants in the Building taking
into consideration any and all other "use" clauses and/or "exclusivity" clauses
which may then exist under their leases with Landlord; and (iv) any proposed
assignee must not be engaged in any business or activity which it will conduct
on the Premises and which will subject the Premises to contamination by any
Hazardous Materials.
41. MISCELLANEOUS
A. If Tenant has a lease for other space in the Building, any
default by Tenant under such lease will constitute a default hereunder.
B. If any term or condition of this Lease or the application thereof
to any person or circumstance is, to any extent, invalid or unenforceable, the
remainder of this Lease, or the application of such term or condition to persons
or circumstances other than those as to which it is held invalid or
unenforceable, is not to be affected thereby and each term and condition of this
Lease is to be valid and enforceable to the fullest extent permitted by law.
This Lease will be construed in accordance with the laws of the State of
Florida.
C. Submission of this Lease to Tenant does not constitute an offer,
and this Lease becomes effective only upon execution and delivery by both
Landlord and Tenant.
D. Tenant acknowledges that it has not relied upon any statement,
representation, prior or contemporaneous written or oral promises, agreements or
warranties, except such as are expressed herein.
E. Tenant will pay before delinquency all taxes assessed during the
Lease Term against any occupancy interest in the Premises or personal property
of any kind owned by or placed in, upon or about the Premises by Tenant.
F. If Tenant, with Landlord's consent, occupies the Premises or any
part thereof prior to the beginning of the Lease Term, all provisions of this
Lease will be in full force and effect commencing upon such occupancy, and Base
Rent and Additional Rent, where applicable, for such period will be paid by
Tenant at the same rate herein specified.
G. Each party represents and warrants that it has not dealt with any
agent or broker in connection with this transaction except for the agents or
brokers specifically set forth in the BLI Rider with respect to each Landlord
and Tenant. If either party's representation and warranty proves to be untrue,
such party will indemnify the other party against all resulting liabilities,
costs, expenses, claims, demands and causes of action, including reasonable
attorneys' fees and costs through all appellate actions and proceedings, if any.
The foregoing will survive the end of the Lease Term.
H. Neither this Lease nor any memorandum hereof will be recorded by
Tenant.
I. Nothing contained in this Lease shall be deemed by the parties
hereto or by any third party to create the relationship of principal and agent,
partnership, joint venturer or any association between Landlord and Tenant, it
being expressly understood and agreed that neither the method of computation of
Rent nor any other provisions contained in this Lease nor any act of the parties
hereto shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.
J. Whenever in this Lease the context allows, the word "including"
will be deemed to mean "including without limitation". The headings of
articles, sections or paragraphs are for convenience only and shall not be
relevant for purposes of interpretation of the provisions of this Lease.
K. This Lease does not create, nor will Tenant have, any express or
implied easement for or other rights to air, light or view over or about the
Building or any part thereof.
L. Landlord reserves the right to use, install, monitor, and repair
pipes, ducts and conduits within the walls, columns, and ceilings of the
Premises.
M. Any acts to be performed by Landlord under or in connection with
this Lease may be delegated by Landlord to its managing agent or other
authorized person or firm.
N. It is acknowledged that each of the parties hereto has been fully
represented by legal counsel and that each of such legal counsel has contributed
substantially to the content of this Lease. Accordingly, this Lease shall not
be more strictly construed against either party hereto by reason of the fact
that one party may have drafted or prepared any or all of the terms and
provisions hereof.
O. Landlord and Tenant acknowledge that the terms and provisions of
this Lease have been negotiated based upon a variety of factors, occurring at a
coincident point in time, including, but not limited to: (i) the individual
principals involved and the financial strength of Tenant, (ii) the nature of
Tenant's business and use of the Premises, (iii) the current leasing market
place and the economic conditions affecting rental rates, (iv) the present and
projected tenant mix of the Building, and (v) the projected juxtaposition of
tenants on the floor(s) upon which the Premises are located and the floors
within the Building. Therefore, recognizing the totality, uniqueness,
complexity and interrelation of the aforementioned factors, the Tenant agrees to
use its best efforts not to disseminate in any manner whatsoever, (whether by
word of mouth, mechanical reproduction, physical tender or by any manner of
visual or aural transmission or review) the terms and conditions of this Lease
to third parties who could in any way be considered presently or in the future
as prospective tenants for this or any other leasehold property with which
Landlord may be involved.
P. If more than one person or entity is named herein as Tenant,
their liability hereunder will be joint and several. In case Tenant is a
corporation, Tenant (a) represents and warrants that this Lease has been duly
authorized, executed and delivered by and on behalf of Tenant and constitutes
the valid and binding agreement of Tenant in accordance with the terms hereof,
and (b) Tenant shall deliver to Landlord or its agent, concurrently with the
delivery of this Lease, executed by Tenant, certified resolutions of the board
of directors (and shareholders, if required) authorizing Tenant's execution and
delivery of this Lease and the performance of Tenant's obligations hereunder.
In case Tenant is a partnership, Tenant represents and warrants that all of the
persons who are general or managing partners in said partnership have executed
this Lease on behalf of Tenant, or that this Lease has been executed and
delivered pursuant to and in conformity with a valid and effective authorization
therefor by all of the general or managing partners of such partnership, and is
and constitutes the valid and binding agreement of the partnership every partner
therein in accordance with its terms. It is agreed that each and every present
and future partner in Tenant shall be and remain at all times jointly and
severally liable hereunder and that neither the death, resignation or withdrawal
of any partner, nor the subsequent modification or waiver of any of the terms
and provisions of this Lease, shall release the liability of such partner under
the terms of this Lease unless and until Landlord shall have consented in
writing to such release.
Q. Landlord has made no inquiries about and makes no representations
(express or implied) concerning whether Tenant's proposed use of the Premises is
permitted under applicable law, including applicable zoning law; should Tenant's
proposed use be prohibited, Tenant shall be obligated to comply with applicable
law and this Lease shall nevertheless remain in full force and effect.
R. Notwithstanding anything to the contrary in this Lease, if
Landlord cannot perform any of its obligations due to events beyond Landlord's
control, the time provided for performing such obligations shall be extended by
a period of time equal to the duration of such events. Events beyond Landlord's
control include, but are not limited to, hurricanes and floods and other acts of
God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.
S. Tenant agrees to pay, before delinquency, all taxes assessed
during the Lease Term agreement (i) all personal property, trade fixtures, and
improvements located in or upon the Premises and (ii) any occupancy interest of
Tenant in the Premises.
42. DELIVERY OF GUARANTY
At or prior to the parties execution of this Lease Landlord has
delivered to Tenant a form of guaranty (the "Guaranty") to be signed by each
Guarantor identified in the BLI Rider. Tenant's failure to deliver the Guaranty
fully executed by the Guarantor within 5 days from the earliest date on which
this Lease has been signed by the parties shall constitute an Event of Default.
IN WITNESS WHEREOF, the parties have signed and delivered this Lease
as of the day and year first above written.
WITNESSES: "LANDLORD"
BRICKELL SQUARE CORPORATION LIMITED [SEAL]
WITNESSES: "TENANT"
JB OXFORD HOLDINGS, INC.
EXHIBIT "B"
WORK LETTER AGREEMENT
In the event of any inconsistencies between this Agreement and the Lease
dated concurrently herewith to which this Agreement is attached as Exhibit "B",
this Agreement shall control. Capitalized terms used in this Agreement shall,
unless otherwise specifically set forth herein, have the same meanings as in the
Lease.
1. Landlord shall complete or cause the completion of the initial
buildout of the Premises as shown on the Final Plans (defined in Paragraph 2.)
and as more fully described in this Section ("Tenant's Initial Improvements").
As Tenant's agent, Landlord shall retain an architect and/or engineer licensed
in the State of Florida to prepare complete and detailed demolition,
architectural, structural, mechanical and engineering plans and specifications
prepared by and stamped and certified by such architect or engineer, showing
Tenant's Initial Improvements ("Construction Plans"). The cost of the
Construction Plans shall be the responsibility of Tenant, except that if
Paragraph 2. establishes a financial contribution of Landlord toward the cost of
Tenant's Initial Improvements, Landlord will pay the cost of the Construction
Plans out of such financial contribution. The Construction Plans shall be
substantially in accordance with the preliminary space plan initialed by the
parties at or prior to execution of the Lease, and shall otherwise be acceptable
to Landlord in its reasonable discretion. Tenant's Initial Improvements shall
meet or exceed the minimum standards for Tenant's Initial Improvements ("Minimum
Building Materials and Construction") attached hereto as Exhibit "B-1" and
otherwise as determined by Landlord in its reasonable discretion. If
applicable, Tenant's Construction Plans shall include all information necessary
to reflect Tenant's requirements for the installation of any supplemental air
conditioning system and ductwork, heating, electrical, plumbing and other
mechanical systems and all work necessary to connect any special or non-standard
facilities to the Building's base mechanical, electrical and structural systems.
Tenant's submission shall include not less than one (1) set of sepias, three (3)
signed and sealed sets, and six (6) bidding sets of black and white prints for
each bidder. Tenant's Construction Plans shall include, but not be limited to,
indication or identification of the following:
A. locations and structural design of all floor area requiring live
load capacities in excess of 75 pounds per square foot;
B. the density of occupancy in large work areas;
C. the location of any food service areas or vending equipment rooms
if permitted by Landlord;
D. areas requiring 24-hour air conditioning, Tenant=s supplemental
HVAC units (if any), and electrical consumption submeters if required by
Landlord;
E. location of rooms for telephone equipment;
F. locations and types of plumbing, if any, required for toilets
(other than core facilities), sinks, drinking fountains, etc.;
G. light switching of offices, conference rooms, etc.;
H. layouts for specially installed equipment, including computers,
size and capacity of mechanical and electrical services required and heat
projection of equipment;
I. dimensioned location of: (a) electrical receptacles (120 volts),
including receptacles for wall clocks, and telephone outlets and their
respective locations (wall or floor), (b) electrical receptacles for use in
the operation of Tenant's business equipment which requires 208 volts or
separate electrical circuits, (c) electronic calculating, CRT systems,
etc., and (d) special audio-visual requirements;
J. special fire protection equipment and raised flooring where
permitted by Building systems and otherwise approved by Landlord;
K. reflected ceiling plan;
L. information concerning air conditioning loads, including, but not
limited to, air volume amounts at all supply vents;
M. non-building standard ceiling heights and/or materials;
N. materials, colors and designs of wall coverings and finishes;
O. painting and decorative treatment required to complete all
construction;
P. swing of each door;
Q. a schedule for doors (including dimensions for undercutting of
doors to clear carpeting) and frames complete with hardware; and
R. all other information necessary to make the work complete and in
all respects ready for operation.
2. As used herein, "Final Plans" refers to the Construction Plans after
the same have been approved in writing by Landlord. Other than Landlord's
Contribution, if any, set forth in the BLI Rider which Landlord shall contribute
to the cost of the Construction Plans and Tenant's Initial Improvements
("Landlord's Contribution"), Tenant shall be responsible for the entire cost of
Tenant's Initial Improvements including any revisions to the Final Plans
("Revisions").
3. Promptly following Landlord's approval of the Final Plans, Landlord
shall submit to Tenant the estimate of the cost of Tenant's Initial Improvements
which exceeds Landlord's Contribution ("Tenant's Extra Cost"). Tenant shall
either approve or disapprove the estimate of Tenant's Extra Cost within three
(3) days after submission by Landlord. If Tenant shall disapprove all or a
portion of the estimate of the Tenant's Extra Cost, Landlord shall as Tenant's
agent and at Tenant's expense cause the Construction Plans to be revised and
resubmitted to the applicable contractors for revised bids. This process shall
continue until Tenant approves Tenant's Extra Cost estimate; provided, however,
such process shall not continue more than thirty (30) days following Landlord's
initial advice as to the amount of Tenant's Extra Cost, during which such thirty
(30) day period, Tenant shall be required to approve the then-existing amount of
Tenant's Extra Cost based on Landlord's and Tenant's negotiations with the
selected contractor. Notwithstanding the foregoing, Tenant shall approve of
Tenant's Extra Cost if (i) the same is not more than 5% greater than Landlord's
Contribution or (ii) Landlord agrees in writing that it shall pay any portion of
Tenant's Extra Cost that exceeds an amount equal to 105% of Landlord's
Contribution. Tenant's approval of Tenant's Extra Cost shall be evidenced by
the payment of same to Landlord, and Tenant shall be responsible for the payment
of any sales or other taxes applicable to Tenant=s Extra Cost. Landlord agrees
that, unless Tenant is in default of its obligations under this Work Letter
Agreement or the Lease, it shall only disburse the Tenant's Extra Cost monies on
account of work in place. Time shall be of the essence with respect to Tenant's
obligations hereunder.
4. Landlord shall not be responsible or liable for any delay in
substantially completing Tenant's Initial Improvements as a result of any act,
neglect, failure or omission of Tenant, its agents, servants, employees,
contractors, or subcontractors ("Tenant Delay"). Tenant Delay includes without
limitation any of the following:
A. Tenant's failure to furnish plans, drawings, and specifications
in accordance with and at the times required by this Work Letter; or
B. any delays resulting from the disapproval by Landlord or
Landlord's Consultant of all or a portion of Tenant's revised plans and
specifications as resubmitted after initial submission; or
C. any delays resulting from Tenant's disapproval of the cost of
Tenant's Extra Cost, which delay shall be deemed to commence upon the date
of Tenant's disapproval of the cost of Tenant's Extra Cost and end on the
date of Tenant's final approval of such cost; or D. Tenant's request for
materials, finishes or installations which are not readily available at the
time Landlord is ready to install same; or
E. Any change(s) to or revision(s) of the Final Plans ("Revisions");
or
F. the performance of work by a person, firm or corporation employed
by Tenant and delays in the completion of the said work by said person,
firm, or corporation.
5. Tenant shall pay to Landlord a sum equal to any additional cost to
Landlord in completing Tenant's Initial Improvements resulting from any Tenant
Delay. Any such sums shall be in addition to any sums payable pursuant to
paragraph 3 and shall be paid to Landlord within ten (10) days after Landlord
submits an invoice to Tenant therefor. Such costs shall be collectible in the
same manner as Additional Rent whether or not the Lease Term shall have
commenced, and if Tenant defaults in the payment of such cost, Landlord shall
have no obligation to continue the performance of Tenant's Initial Improvements
until Tenant shall have cured such default.
6. Except as hereinafter provided, neither Tenant nor its agents,
employees, invitees or independent contractors shall enter the Premises during
construction of Tenant's Initial Improvements. Tenant hereby designates
Tenant's Construction Agent as set forth in the BLI Rider for the purposes of
submitting to Landlord or Landlord's Consultant and authorizing Revisions to the
Final Plans. Tenant's Construction Agent shall have the right from time to time
to inspect the Premises during the course of Tenant's Initial Improvements
provided Tenant's Construction Agent shall make a prior appointment with
Landlord and/or its contractor at a mutually convenient time.
7. Upon the granting of consent by Landlord or Landlord's Consultant,
which shall not be unreasonably withheld, Tenant or its agents may enter the
Premises prior to the Commencement Date to perform such decorative or other
tenant finishing work ("Tenant Work") as it may desire provided that the Tenant
Work in no way interferes with the performance of Tenant's Initial Improvements
and such entry shall be deemed under all the terms, covenants and conditions of
this Lease, except the covenant to pay Base Rent. In the event Landlord, in its
sole discretion, determines that the performance by Tenant or any of its agents
of any Tenant Work is impeding or impairing in any way the performance of
Tenant's Initial Improvements, then, upon notice to Tenant, Tenant shall cease
or cause the cessation of such Tenant Work until the receipt of notification
from Landlord or Landlord's Consultant that Tenant may once again enter the
Premises in order to perform the Tenant Work. In the event Tenant Agent or
Tenant's contractor enters the Building, as may be permitted by Landlord or
Landlord's Consultant, Tenant shall indemnify and hold Landlord harmless from
and against any and all loss, liability, damage, cost and expense, including
without limitation, reasonable attorneys' fees and disbursements, claimed or
actually arising from, growing out of or related to (a) any act, neglect or
failure to act of Tenant or anyone entering the Building with Tenant's
permission, (b) the performance of Tenant Work, or (c) any other reason
whatsoever arising out of said entry upon the Building. The provisions of this
section shall survive the termination of this Lease.
8. Tenant shall have the right to make Revisions. All Revisions shall be
subject to Landlord's prior written approval, which shall not be unreasonably
withheld provided the Revisions are non-structural in nature. Landlord shall
either approve or disapprove the Revisions within five (5) business days after
submission thereof by Tenant. Without limiting the generality of the foregoing,
no Revision will be approved unless (a) all changes to and modifications from
the Final Plans are circled or highlighted as per standard practices and (b)
said Revisions conform with the requirements of this Work Letter. Landlord or
Landlord's Consultant shall notify Tenant in writing of the cost of the
Revisions, and any Tenant Delay that the performance of the same may entail. If
Tenant agrees with the cost and delay of such Revisions, Tenant shall
acknowledge Tenant's approval in writing within three (3) business days after
Landlord's notice thereof to Tenant. If Tenant fails to approve of the cost of
such Revisions (and, if requested by Landlord, the amount of any Tenant Delay
that Landlord estimates will occur as a result of such Revisions) within three
(3) business days, Landlord or Landlord's Consultant shall not approve such
Revisions. The cost of any Revisions shall be borne solely by Tenant. An
additional fee based on such cost shall be payable in the manner and at the
times set forth in paragraph 3.
9. Landlord shall, subject to Tenant Delays and any other cause beyond
Landlord's reasonable control, use due diligence to complete Tenant's Initial
Improvements as soon as may be practicable, but Landlord shall not be liable in
any manner whatsoever for its failure to do so by any particular date.
10. Landlord shall notify Tenant of the date of Substantial Completion at
least five (5) days prior thereto. As used herein, "Substantial Completion"
shall mean that, with the exception of punch-list items, Tenant's Initial
Improvements shall have been completed in accordance with the Final Plans and
all mechanical systems serving or affecting the Premises shall then be in
working order. Landlord and Tenant shall thereupon set a mutually convenient
time for Tenant's Construction Agent and Landlord or Landlord's Consultant to
inspect the Premises, at which time Tenant's architect shall prepare and submit
to Landlord a punch list of items to be completed. Upon completion of the
inspection, Tenant's Construction Agent shall acknowledge in writing that
substantial completion has occurred, subject to any punch list items to be
completed. Landlord shall diligently complete the approved work on the punch
list items. In the event Tenant shall fail to confer with Landlord within five
(5) days of Landlord's notice setting forth the date of Substantial Completion,
which conference shall confirm Substantial Completion of Tenant's Initial
Improvements has occurred, (a) Tenant shall have no right to enter the Premises
for the purposes of conducting its business therefrom until Tenant and Tenant's
Construction Agent met with Landlord in the Premises and prepare a punch list of
incomplete items, if applicable, and (b) Tenant's Initial Improvements shall be
deemed completed and satisfactory in all respects. As used in the Lease, the
"Commencement Date" shall be the earliest of the following: (a) the date of
Substantial Completion; (b) the date on which Tenant takes possession of the
Premises; and (c) the date that Substantial Completion would have occurred but
for any Tenant Delay as determined by Landlord in its reasonable discretion.
Notwithstanding the foregoing, the Commencement Date shall not be set earlier
than the Substantial Completion date on account of Tenant Delay resulting from
excusable Revisions. Excusable Revisions are those that are necessitated by (i)
failure of the Final Plans to comply with applicable building code requirements
or (ii) discrepancies between the Final Plans and actual conditions of the
Building.
11. In the event of any dispute as to when and whether the work performed
or required to be performed by Landlord has been substantially completed, the
certificate of Landlord's Consultant or a temporary or final certificate of
occupancy or completion (as may be applicable) issued by the local governmental
authority shall be conclusive evidence of such completion, effective on the date
of the issuance of such certificate to Tenant.
EXHIBIT "B-1"
2.01-1 AIR CONDITIONING
The scope of building standard heating, ventilation and air conditioning
work is generally defined in Landlord's mechanical drawing by Jaros, Baum &
Bolles, entitled HVAC-7A, dated January 12, 1984. The following is a general
description of said scope:
Conditioned air is supplied from the Building's central plant to each floor
via riser duct in the core area, and distributed over the Premises in medium
pressure, insulated duct to variable air volume (VAV) boxes. Heat is provided
by electric reheat coils, integral with VAV boxes located around Building
exterior walls.
Temperature control is by individual, room mounted thermostat for each VAV
box.VAV boxes feed ceiling slot diffusers at the window walls and slot diffusers
built into ceiling light fixtures.
Air return is via plenum above ceiling, fed through slot diffusers and
light fixtures not utilized for supply.
Building standard HVAC design parameters include:
Inside heating: 72/F
Inside cooling: 78/F under peak design conditions.
Building is intended to be operated at 75/F
2.01-2 CEILING
All ceilings will be at 9'0" above floor slab, and run over the interior
partitions. Ceiling construction to consist of a 2'0" by 2'0" suspended
extruded aluminum grid (white), with 3/4" thick acoustical layin tile, equal or
similar to Armstrong "Nondirectional Fissured Travertone."
2.01-3 LIGHTING
All lighting to be in ceiling, fluorescent fixtures, not more than one per
80 rentable square feet. Fixtures are 2 ft. by 4 ft. parabolic troffer, with 3"
deep louver, 18 louver cells, finished in specular silver. Each fixture to have
3-40 watt lamps (277 volt), warm white. Individual switches (toggle type,
ivory) will be provided for rooms and corridors.
2.01-4 PARTITIONS
Except as required by the South Florida Building Code, all partitions shall
be of the following construction and finish: 2 1/2" steel stud framing, 24" on
center, to underside of 9'0" high ceiling, clad on both sides with one layer of
5/8" gypsum board; painted each side with two latex flat coasts, from building
standard palette, not more than one color per room and five colors per Premises;
4" straight vinyl base, both sides.
2.01-5 DOOR SPECIFICATION
All doors to be wood, solid core, premachined, white ash, stained or
painted from building standard palette. Door frames are hollow metal, painted.
landlord will provide one pair of entry doors to the Premises, set in a 6'0"
wide by 9'0" high frame; all other doors to be 3'0" wide by 9'0" high. Each
door will be provided with one heavy duty, lever handle latch set, two pairs of
ball bearing hinges, and one floor mounted door stop, except that a lockset, one
closer and a flush bolt will be installed on the entry door.
2.01-6FLOOR COVERING
All floors to receive carpeting and pad in accordance with the following
specification: Yarn - 100% Badische continuous filiment nylon with scotchgard,
24 oz. weight, 9.7 stitches per inch, and 0.28" pile height; Pad - 56 oz.
weight, 0.250" thick. Building standard color pallette.
2.01-7WINDOW TREATMENT
All windows to have white aluminum venetian blinds with 1" wide slats,
equal or similar to Levelor Lorentzen, Inc. "Riviera Blind." Landlord will not
permit substitutions by Tenant.
2.01-8ELECTRICAL OUTLETS
120 Volt utility power will be provided by duplex, wall mounted receptacles
(ivory), not more than one per 150 rentable square feet.
2.01-9TELEPHONE OUTLETS
One telephone wall mounted outlet (ivory), with conduit only to 6" above
ceiling, will be provided not more than one per 200 rentable square feet.
2.01-10 FIRE SPRINKLER
Automatic fire sprinkler system to be installed throughout Premises, with
semi-recessed heads in ceiling, not centered in grid.
2.01-11 SPECIFICATIONS
Technical specifications for building standard leasehold improvements may
be examined at Landlord's offices. Where manufacturers of any product to be
incorporated into the Landlord's work are identified by name in the
specifications, Landlord reserves the right at any time to select alternate
sources offering products of equal or similar quality.
EXHIBIT "C"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, and halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than ingress and egress to and from the
Premises.
2. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without the prior written
consent of Landlord. Such awnings, projections, curtains, blinds, shades,
screens or other fixtures must be of a quality, type, design, and color, and
attached in the manner approved by Landlord.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
Premises or Building or on the inside of the Premises if the same can be seen
from the outside of the Premises without the prior written consent of Landlord
except that the name of Tenant may appear on the entrance door of the Premises.
In the event of a violation of the foregoing by Tenant, Landlord may remove same
without any liability and may charge the expense incurred by such removal to the
Tenant or Tenants violating this rule. Interior signs on doors and the
directory shall be inscribed, painted or affixed for each Tenant by Landlord at
the expense of such Tenant and shall be of a size and style acceptable to the
Landlord.
4. Tenant shall not occupy or permit any portion of the Premises demised
to it to be occupied as an office for a public stenographer or typist, or as a
barber or manicure shop, or as an employment bureau. Tenant shall not engage or
pay any employees on the Premises, except those actually working for Tenant at
the Premises, nor advertise for labor giving an address at the Premises. The
Premises shall not be used for gambling, lodging, or sleeping or for any immoral
or illegal purposes. The Premises shall not be used for the manufacture,
storage, or sale of merchandise, goods or property of any kind whatsoever.
5. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageway or other public places in the
Building shall not be covered or obstructed by any Tenant nor shall any bottles,
parcels or other articles be placed on the window sills. No materials shall be
placed in the corridors or vestibules nor shall any articles obstruct any air
conditioning supply or exhaust vent.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures by Tenant, its servants,
employees, agents, or licensees shall be borne by Tenant.
7. No Tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building of which they form a part. No boring, cutting,
or stringing of wires shall be permitted, except with the prior written consent
of Landlord, and as it may direct. Should a Tenant require telegraphic,
telephonic, annunciator or other communication service, Landlord will direct the
electricians where and how wires are to be introduced and placed, and none shall
be introduced or placed except as Landlord shall direct. Electric current shall
not be used for power or heating without Landlord's prior written permission.
Neither Tenant nor Tenant's Agents including, but not limited to, electrical
repairmen and telephone installers, shall lift, remove or in any way alter or
disturb any of the interior ceiling materials of the Premises or Building, nor
shall any of same have any access whatsoever to the area above the interior
ceiling of the Premises or the Building except with the prior written consent of
Landlord and in accordance with guidelines established by Landlord. No antennas
shall be permitted.
8. No bicycles, vehicles, or animals of any kind shall be brought into or
kept in or about the Premises, and no cooling shall be done or permitted by any
Tenant on said Premises. No Tenant shall cause or permit any unusual or
objectionable odors to be produced upon or permeate from the Premises.
9. Landlord shall have the right to retain a passkey and to enter the
Premises at any time, to examine same or to make such alterations and repairs as
may be deemed necessary, or to exhibit same to prospective Tenants during normal
business hours.
10. No Tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, talking machine, unmusical noise, whistling, singing,
or in any other way. No Tenant shall throw anything out of doors, windows,
skylights, or down the passageways.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or the mechanism thereof. Each Tenant must, upon the termination of his
tenancy restore to the Landlord all keys of offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant. Tenant shall pay to the
Landlord the cost of any lost keys.
12. Tenant will refer all contractors, contractors' representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval, and control before performance of any
contractual service. This provision shall apply to all work performed in the
building, including installations of telephones, telegraph equipment, electrical
devices and attachments, and installations of any nature affecting floors,
walls, woodwork, trim, windows, ceilings, equipment or any other physical
portion of the Building.
13. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the Landlord or its agent may determine from time to time. All such
movement shall be under supervision of Landlord and in the manner agreed between
Tenant and Landlord by pre-arrangement before performance. Such pre-
arrangements initiated by Tenant will include determination by Landlord, subject
to his decision and control, of the time, method, and routing of movement and
limitations imposed by safety or other concerns which may prohibit any article,
equipment or any other item from being brought into the building. Landlord
reserves the right to prescribe the weight and position of all safes, which must
be placed upon 2-inch thick plank strips to distribute the weight. Any damage
done to the Building or to other Tenants or to other persons in bringing in or
removing safes, furniture or other bulky or heavy articles shall be paid for by
the Tenant.
14. Tenant agrees that all machines or machinery placed in the Premises by
Tenant will be erected and placed so as to prevent any vibration or annoyance to
any other Tenants in the Building of which the Premises are a part, and it is
agreed that upon written request of Landlord, Tenant will, within ten (10) days
after the mailing of such notice, provide approved settings for the absorbing,
preventing, or decreasing of noise from any or all machines or machinery placed
in the Premises.
15. Each Tenant shall, at its expense, provide artificial light for the
employees of the Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in said Premises.
16. The requirements of Tenant will be attended to only upon written
application at the office of the Building. Employees of Landlord shall not
receive or carry messages for or to any Tenant or other person nor contract with
or render free or paid services to any Tenant or Tenant's agent, employees, or
invitees.
17. Canvassing, soliciting, and peddling in the Building is prohibited and
each Tenant shall cooperate to prevent the same.
18. Tenant shall have the free use of the mail chutes, if any, installed
in the Building, but the Landlord in no wise guarantees efficiency of the said
mail chutes and shall be in no wise responsible for any damage or delay which
may arise from use thereof.
19. Landlord will not be responsible for lost, stolen, or damaged
property, equipment, money, or jewelry from Tenant's area or public rooms
regardless of whether such loss occurs when area is locked against entry or not.
20. Landlord specifically reserves the right to refuse admittance to the
Building from 6 p.m. to 8 a.m. daily, or on Saturdays, Sundays or legal
holidays, to any person or persons who cannot furnish satisfactory
identification, or to any person or persons who, for any other reason in the
Landlord's judgment, should be denied access to the Premises. Landlord, for the
protection of the Tenant and Tenant's effects may prescribe hours and intervals
during the night and on Saturdays, Sundays and holidays, when all persons
entering and departing the Building shall be required to enter their names, the
offices to which they are going or from which they are leaving, and the time of
entrance and departure in a register provided for the purpose by the Landlord.
21. No Tenant, nor any of Tenant's Agents, shall at any time bring or keep
upon the Premises any inflammable, combustible, or explosive fluid, chemical, or
substance.
22. Landlord reserves the right to make such other and further reasonable
rules and regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Premises, and for the preservation of good
order therein and any such other or further rules and regulations shall be
binding upon the parties hereto with the same force and effect as if they had
been inserted herein at the time of the execution hereof.
EXHIBIT "D"
CLEANING SPECIFICATIONS
GENERAL CLEANING NIGHTLY
General Offices:
1. All hardsurfaced flooring to be swept using approved dustown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ashtrays and screen all sand urns.
5. Empty all waste receptacles and remove wastepaper.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
8. Sweep all private stairways.
Lavatories:
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls, and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill toilet tissue holders.
8. Empty and clean sanitary disposal receptacles.
WEEKLY
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a person's
reach.
3. Wipe clean all brass and other bright work.
MONTHLY
High dust premises complete the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors,
bucks and other surfaces nor reached in nightlycleaning.
3. Dust all pipes, ventilating and air-conditioning louvres, ducts, high
moldings and other high areas not reached in nightly cleaning.
4. Dust all venetian blinds.
PERIODICALLY (not less than semiannually) Wash all windows.
FTL-96967
EXHIBIT "E"
Brickell Square Corporation Limited
One Brickell Square
801 Brickell Avenue
Miami, Florida 33131
Irrevocable Letter of Credit No.
Gentlemen:
We hereby issue our irrevocable Letter of Credit No. in your
-------
favor as beneficiary in the amount of $175,000.
This Letter of Credit is established as security for Brickell Square
Corporation Limited, and its successors, as landlord of the premises known as
801 Brickell Avenue, Miami, Florida (the "Building") under an agreement of lease
dated February , 1996 (the "Agreement of Lease") with JB Oxford Holdings, Inc.
This credit is payable at sight drawn on us accompanied by a signed
statement by someone purported to be the beneficiary stating either (a) that the
tenant is in default under the Agreement of Lease or (b) that this Letter of
Credit is to expire within 30 days and a renewal or replacement of this Letter
of Credit has not been received by the beneficiary.
Partial drawings are authorized under this credit.
This credit is valid for presentation at our offices at [insert name
and address of Miami bank branch] on or before expiration date of this letter.
This Letter of Credit shall expire in Miami on [insert date two months
--------
after lease expiration].
This Letter of Credit is transferable and assignable, without
additional charge to beneficiary, in connection with a sale or transfer by
landlord of either the Building or Agreement of Lease. Requests for change of
beneficiary will be honored upon receipt of statement of last named beneficiary
that the Building or the Agreement of Lease has been transferred.
Except as stated herein payment of presentations made under this
credit is not subject to any conditions or qualification.
We hereby engage that presentations made in accordance with the terms and
conditions of this credit will be duly honored.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits, (1983 Revision) International Chamber of Commerce Publication No. 400.
- ------- END OF EXHIBIT 10.16 ONE BRICKELL SQUARE STANDARD OFFICE LEASE --------
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, JB Oxford Holdings, Inc. has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
JB Oxford Holdings, Inc.
Stephen M. Rubenstein Chief Executive Officer
Michael J. Chiodo Acting Chief Financial Officer
Richard Houlihan Director
Mitchell S.T. Wine Director
March 29, 1996