Exhibit 10.34 Letter Agreement between Technology Service Group, Inc. and
Mr. James Lacy dated September 18, 1996, amendment thereto
and Assignment and Assumption of Real Estate Lease between
Technology Service Group, Inc., Mr. James Lacy and
G.P.E.D.C. dated November 6, 1996
109
September 18, 1996
Mr. James Lacy
c/o Gilliam Candy Co.
P.O. Box 1060-2401 Powell
Paducah, KY 42002
Re: Lease Assignment
Dear Sirs:
The purpose of this letter (sometimes hereinafter referred to as this
"Agreement") is to set forth our understanding of the terms and conditions on
which Technology Service Group, Inc. ("TSG") will assign to Mr. James Lacy
("Lacy"), with an address of P.O. Box 2828, Cookeville, Tennessee 38502, and
Lacy will assume, all of TSG's rights and obligations under that certain lease
agreement dated November 30, 1990 between G.P.E.D.C., Inc. ("GPEDC") as lessor
and TSG as lessee (the "Lease") relating to an approximately 100,000 square-foot
manufacturing facility located at 2400 South Beltline Road, Paducah, Kentucky
(the "Facility").
1. Background.
(a) The initial term of the Lease is five and one-half years commencing on
December 1, 1990 with an option to renew the Lease for two additional
periods of five years each. The Lease gives TSG an option to purchase
the property at the end of the lease term, including any extensions
thereof, at a price of $10,000.
(b) On March 20, 1996, the initial term of the Lease was extended for a
period of one year to May 31, 1997.
(c) The Lease may be assigned by TSG with the written consent GPEDC.
Accordingly this Agreement is contingent upon TSG obtaining such
consent. If such consent is not given on or before November 1, 1996,
this Agreement shall thereupon become null and void and of no further
force or effect, and neither party shall thereafter be liable
hereunder to the other party in any manner or respect.
2. The Closing.
(a) The closing of the assignment of the Lease shall occur on November 1,
1996 (the "Closing Date").
(b) On the Closing Date, the parties hereto shall execute and deliver,
each to the other, the form of Assignment and Assumption of Real
Estate Lease set forth as Exhibit A (the "Assignment") and Lacy shall
pay to TSG fifty thousand dollars ($50,000) by certified check or wire
transfer, whereupon Lacy shall take possession of the property (the
"Time of Possession").
110
Gilliam Candy Co.
September 18, 1996
Page 2
(c) In the event that a material adverse change in the condition of the
Facility occurs between the date of this Agreement and the Closing
Date, TSG shall have the option either (i) within thirty (30) days of
the Closing Date to restore, at its expense, the condition of the
Facility to the condition it was in on the date hereof, or (ii) to pay
the cost of such restoration to Lacy on the Closing Date. If TSG shall
fail to restore the condition of the Facility or to pay the costs
thereof to Lacy, this Agreement shall become null and void and of no
further force or effect, and neither party shall thereafter be liable
hereunder to the other party in any manner or respect.
3. Post and Pre Closing Subleases. As further consideration for the Assignment--
(a) From the Closing Date through December 31, 1996, TSG shall have the
right to occupy and use, rent-free, up to 30,000 square feet of
storage space in the Facility. Lacy shall furnish to TSG without
charge therefor such use of the utilities servicing the Facility as
TSG shall reasonably request.
(b) From the date hereof through the Closing Date, Lacy shall have the
right to occupy and use, rent-free, up to 10,000 square feet of
storage space in the Facility. TSG shall furnish to Lacy without
charge therefor such use of the utilities servicing the Facility as
Lacy shall reasonably request.
(c) From and after the Closing, Lacy shall at its own expense carry
property, casualty and liability insurance on the Facility, and so
long as TSG is occupying any part of the Facility, TSG shall at its
own expense carry casualty insurance on its personal property located
in the Facility.
(d) From the date hereof through the Closing Date, so long as Lacy is
occupying any part of the Facility, Lacy shall at its own expense
carry casualty insurance on its personal property located in the
facility.
4. Prorations. Real property taxes, utility charges and all rent under the
Lease shall be equitably pro-rated between the parties as of the Closing
Date.
5. Personal Property. Except as provided herein, all personal property owned
and leased by TSG shall be removed from the premises by TSG on or before
December 31, 1996. TSG shall provide to Lacy, at no additional cost to
Lacy, the Merlin telephone system and all office furniture presently
located in the primary office area. In addition, TSG shall provide Lacy
with the opportunity to bid on any other furniture, fixtures and equipment
that TSG determines to sell or dispose of, but Lacy shall be given no
preference over any other bidder for such property.
111
Gilliam Candy Co.
September 18, 1996
Page 3
6. Fixtures. Except as set forth herein, TSG shall not remove overhead
lighting fixtures, air supply piping, power feed wiring, air conditioning
system, PBX intercom system or any plumbing, electrical and exhaust systems
or any fixtures, including overhead conveyer systems, that were not
installed by TSG. It is understood that fixtures that were installed by TSG
and that are removable without serious damage to the Facility as set forth
in Exhibit B hereto, may be removed by TSG for relocation, sale or other
disposition. Any damage to the Facility caused by such removal shall be
repaired by TSG at its cost.
Lacy agrees to assume TSG's obligations pursuant that certain equipment and
service agreement between TSG and ADT Security dated January 5, 1994.
7. Due Diligence. Lacy represents and warrants to TSG that it has read the
Lease in its entirety, has been given access to the Facility by TSG to
perform such investigations thereof as it deems necessary, and has had an
opportunity to do such other and further investigations prior to the Time
of Possession as it deems necessary, including environmental tests and
surveys and examinations of official records and the like. If the
environmental due diligence procedures reveal any possible environmental
problems, then Lacy at his option, on or before November 1, 1996, may
declare this Agreement null and void and of no further force or effect, and
neither party shall thereafter be liable hereunder to the other party in
any manner or respect. If Lacy shall assume the Lease, he shall take
possession of the Facility at the Time of Possession in "as is" condition
"with all faults.
8. Miscellaneous.
(a) This Agreement together with Exhibits A and B contains the entire
understanding of the parties on the subject matter hereof except as
otherwise expressly contemplated herein; shall not be amended, and no
term hereof shall be waived, except by written agreement of the
parties signed by each of them; shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns; may
be executed in one or more counterparts each of which shall be deemed
an original hereof, but all of which shall constitute but one and the
same agreement; and shall not be assignable by a party without the
prior written consent of the other party.
(b) The words "herein," "hereof," "hereunder," "hereby," "herewith" and
words of similar import when used in this Agreement shall be construed
to refer to this Agreement as a whole. The word "including" shall mean
including, but not limited to any enumerated items.
(c) Each party and its counsel has reviewed this Agreement. Accordingly,
the normal rule of construction that any ambiguities and uncertainties
are to be resolved against the party preparing an agreement will not
be employed in the interpretation of this Agreement; rather the
Agreement shall be construed as if all parties had jointly prepared
it.
(d) No representation, affirmation of fact, course of prior dealings,
promise or condition in connection herewith or usage of the trade not
expressly incorporated herein shall be binding on the parties.
112
Gilliam Candy Co.
September 18, 1996
Page 4
(e) The failure to insist upon strict compliance with any term, covenant
or condition contained herein shall not be deemed a waiver of such
term, nor shall any waiver or relinquishment of any right at any one
or more times be deemed a waiver or relinquishment of such right at
any other time or times.
(f) The captions of the paragraphs herein are for convenience only and
shall not be used to construe or interpret this Agreement.
If the foregoing sets forth our agreement on the matters contained in this
letter, please so indicate by signing and returning a copy of this letter to
TSG.
Very truly yours,
Technology Service Group, Inc.
By: /s/ Winton Schriner
------------------------------
M. Winton Schriner
Executive Vice President
Accepted and Agreed:
James Lacy
By: /s/ James Lacy
------------------------------
Guarantee:
Gilliam Candy Co.
Gilliam Candy Co., c/o Fine Products Company, Inc., P.O. Box 1060-2401 Powell,
Paducah, KY 42002 hereby guarantees performance of all of the obligations of
Lacy as set forth herein.
By: /s/ James Lacy, Chairman
------------------------------
Name:
Title:
113
EXHIBIT A
Assignment and Assumption of Real Estate Lease
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, Technology Service Group, Inc., a Delaware corporation hereby
sells, assigns and transfers to Mr. James Lacy ("Assignee"), with an address of
P.O. Box 2828 Cookeville, Tennessee 38502, all its right, title and interest in
and to that certain lease agreement dated November 30, 1990 between G.P.E.D.C.,
Inc. as lessor and Technology Service Group, Inc. as lessee, AS IS AND WITH ALL
FAULTS, and Assignee hereby assumes and agrees to perform or pay all obligations
of the lessee under the Lease in accordance with and subject to its terms.
IN WITNESS WHEREOF, this instrument has been executed by the parties as of the
day of November 1996.
Technology Service Group, Inc. James Lacy
By: /s/ Winton Schriner By: /s/ James Lacy
-------------------------- --------------------------
M. Winton Schriner
Executive Vice President
Guarantee
Gilliam Candy Co., c/o Fine Products Company, Inc., P.O. Box 1060-2401 Powell,
Paducah, KY 42002 hereby guarantees performance of all of the obligations of
James Lacy pursuant to this Assignment and Assumption of Real Estate Lease.
By: /s/ James Lacy, Chairman
-------------------------
Name:
Title:
----------
THE UNDERSIGNED G.P.E.D.C., INC. HEREBY CONSENTS TO THE FOREGOING ASSIGNMENT AND
FROM AND AFTER THE DATE HEREOF AGREES TO LOOK SOLELY TO MR. JAMES LACY FOR THE
PERFORMANCE OF ALL OF LESSEES' OBLIGATIONS UNDER THE FOREGOING SAID LEASE.
G.P.E.D.C., Inc.
By: _____________________________
Name:
Title:
114
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by Winton Schriner, on
behalf of Technology Service Group, Inc., this 18th day of September 1996.
My commission expires: 9-21-1999.
/s/ Ruby English
- ----------------------
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by James L. Lacy, on behalf
of Mr. James Lacy, ("Assignee"), this 18th day of September 1996.
My commission expires: 9-21-1999
/s/ Ruby English
- ----------------------
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by James L/ Lacy, on behalf
of Gilliam Candy Co., this 18th day of September 1996.
My commission expires: 9-21-1999
/s/ Ruby English
- -----------------------
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by
___________________________, _____________________________, on behalf of
G.P.E.D.C., Inc. this __ day of November 1996.
My commission expires:____________________.
_______________________
Notary Public
Commonwealth of Kentucky at Large
115
EXHIBIT B
Fixtures to be Removed by Technology Service Group, Inc.
1. Two Wall mounted Model 200 Degreasers, with power safety switches
2. Three floor gravity skatewheel type conveyor systems
3. Conformal coat Binks spray booth
4. Two Simplex digital time clocks
5. Electrovert Model EPK-1 Econopak SMT wave solder machine with vent and
blower, including transformer, 3-phase control panel and 3 wall
mounted control panels
6. Electrovert Model Ultraclean water ultrasonic cleaner
7. R&S Water Service water softener, with Technetic 1000 metering pump
8. Ruddglass commercial water heater, 120 gallons
9. P&G Pram Machine & Pram sand blast cabinet
10. P&G Sandblast Hopper
11. Power roller belt conveyor, two drives
12. Blasdel Enterprises, Inc. infrared drying oven
13. Overhead paint conveyor, chain & link type, with drive
14. DeVilbiss 7-1/2 hp horizontal tank mounted reciprocating air
compressor
15. Sullair Model 10B-24H, 25 hp Rotary Screw air compressor, horizontal
tank
16. Sears 3 hp Vertical tank mounted air compressor
17. Kellog American 5 hp horizontal tank mounted reciprocating air
compressor
18. Washing machine & Dryer
19. First aid boxes
20. Rotary drill, with venting
21. Acroprint time clock
116
Assignment and Assumption of Real Estate Lease
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, Technology Service Group, Inc., a Delaware corporation hereby
sells, assigns and transfers to Mr. James Lacy ("Assignee"), with an address of
P.O. Box 2828, Cookeville, Tennessee 38502 all its right, title and interest in
and to that certain lease agreement dated November 30, 1990 between G.P.E.D.C.,
Inc. as lessor and Technology Service Group, Inc. as lessee, AS IS AND WITH ALL
FAULTS, and Assignee hereby assumes and agrees to perform or pay all obligations
of the lessee under the Lease in accordance with and subject to its terms.
IN WITNESS WHEREOF, this instrument has been executed by the parties as of the
day of November 1996.
Technology Service Group, Inc. James Lacy
By: /s/ Winton Schriner By: /s/James Lacy
------------------------------ --------------------------
M. Winton Schriner
Executive Vice President
Guarantee
Gilliam Candy Co., c/o Fine Products Company, Inc., P.O. Box 1060-2401 Powell,
Paducah, KY 42002 hereby guarantees performance of all of the obligations of
James Lacy pursuant to this Assignment and Assumption of Real Estate Lease.
By: /s/ James Lacy, Chairman
------------------------------
Name:
Title:
----------
THE UNDERSIGNED G.P.E.D.C., INC. HEREBY CONSENTS TO THE FOREGOING ASSIGNMENT AND
FROM AND AFTER THE DATE HEREOF AGREES TO LOOK SOLELY TO MR. JAMES LACY FOR THE
PERFORMANCE OF ALL OF LESSEES' OBLIGATIONS UNDER THE FOREGOING SAID LEASE.
G.P.E.D.C., Inc.
By: /s/ Kristin Reese
------------------------------
Name: Kristin Reese
Title: President & CEO
117
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by Winton Schriner, on
behalf of Technology Service Group, Inc., this 18th day of September 1996.
My commission expires: 9-21-1999 .
/s/ Ruby English
- -------------------------
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY )
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by James L. Lacy, on behalf
of Mr. James Lacy, ("Assignee"), this 18th day of September 1996.
My commission expires: 9-21-1999
/s/ Ruby English
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY)
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by James L/ Lacy, on behalf
of Gilliam Candy Co., this 18th day of September 1996.
My commission expires: 9-21-1999
/s/ Ruby English
Notary Public
Commonwealth of Kentucky at Large
COMMONWEALTH OF KENTUCKY)
COUNTY OF McCRACKEN ) ss:
The foregoing instrument was acknowledged before me by Kristin Reese, President
& CEO, on behalf of G.P.E.D.C., Inc. this 6th day of November 1996.
My commission expires: 4/15/99
_________________________________
Notary Public
Commonwealth of Kentucky at Large
118
AMENDMENT TO LEASE ASSIGNMENT
================================================================================
This Amendment to Lease Assignment ("Amendment") is entered into between
Mr. James Lacy ("Lacy") and Technology Service Group ("TSG") as of November 5,
1996.
Whereas, Lacy and TSG had previously entered into a Lease Assignment dated
September 18, 1996 (the "Lease Assignment"); and
Whereas the Lease Assignment was subject to the approval of G.P.E.D.C.,
Inc. ("GEPDC") and the Kentucky Development Finance Authority ("KDFA"), and
Whereas, GPEDC requires certain changes to the Lease Assignment for its
consent to the assignment; and
Whereas, the Lease Assignment was to have been finalized on November 1,
1996, but was not completed by that date; and
Whereas, Lacy and TSG desire to complete the assignment of the lease and
agree to the changes set forth below in order to complete the Lease Assignment.
1. TSG represents and warrants for itself and International Teleservice
Corporation (ITC), that TSG and ITC are in full compliance with section 15 of
the lease between GPEDC and ITC dated November 30, 1990 (the "Lease").
2. TSG and ITC further represent and warrant that by December 31, 1996 they
will remove all of their assets in such a manner as to comply with section 15 of
the Lease. TSG will enter into the Environmental Indemnity Agreement with James
Lacy which is attached hereto as Exhibit A and is incorporated herein by
reference. The "As Is" character of the lease assignment shall not apply to any
recovery pursuant to section 15 of the Lease or the Environmental Indemnity
Agreement.
3. The representations and warranties of TSG pursuant to items 1 and 2
above shall survive the closing of the Lease Assignment and a period of 2 years
thereafter.
4. Since the time for the closing of the Lease Assignment was extended from
November 1, 1996 to November 6, 1996, Lacy will be responsible for rent for the
entire month of November, without any proration.
5. TSG will maintain insurance coverage on the leased premises until the
parties close the Lease Assignment.
6. Gilliam Candy Co., Inc., hereby signs this Amendment to indicate its
consent to the amendment of the Lease Assignment, since Gilliam guaranteed the
performance of all the obligations of Lacy pursuant to the Lease Assignment.
7. This Amendment shall be binding upon and inure to the benefit of the
parties and their successors and assigns.
119
8. The parties by their signatures below hereby ratify and affirm the Lease
Assignment dated September 18, 1996, in all respects, except as modified by this
Amendment.
TECHNOLOGY SERVICE GROUP, INC.
By: /s/ Winton Schriner /s/ James Lacy
---------------------------- ---------------------------
M. WINTON SCHRINER JAMES LACY
Executive Vice President
GILLIAM CANDY CO., INC.
By: /s/ James Lacy
----------------------
JAMES LACY, Chairman
120
EXHIBIT A TO AMENDMEMT TO LEASE AGREEMENT
Environmental Indemnity Agreement
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement") is made as of this 5th
day of November, 1996 by and between Technology Service Group, Inc. (hereinafter
referred to as "TSG") and James Lacy (hereinafter referred to as "Lacy").
Background
On the date of this Agreement, TSG is assigning to Lacy, and Lacy is assuming,
all of TSG's rights and obligations under that certain lease agreement dated
November 30, 1990 (the "Lease") relating to a manufacturing facility located at
2400 South Beltline Road, Paducah, Kentucky (the "Facility"). The parties are
entering into this Agreement to establish the liabilities of the parties with
respect to environmental matters arising at the Facility.
THEREFORE, for and in consideration of the mutual covenants contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. TSG Environmental Representations
(a) To its knowledge, TSG has complied with all environmental laws
relating to its operation of the Facility and no action, suit,
proceeding, complaint, or notice has been received by TSG relating to
the Facility alleging any failure to so comply. Without limiting the
generality of the preceding sentence, to its knowledge TSG has
obtained and been in compliance with all of the terms and conditions
of all environmental permits, licenses, and other authorizations that
are required under, and has complied with all other conditions that
are contained in, all environmental laws except to the extent that
failure to so comply would not have a material adverse effect on TSG.
(b) To its knowledge, TSG has not operated the Facility in a manner that
could form the basis for any present or future action, suit,
proceeding or complaint giving rise to any liability for damage to the
site on which the Facility is located under any environmental law.
2. TSG's Obligations. TSG shall assume responsibility and liability for, and
shall indemnify Lacy from and against, (a) any violation of any
environmental laws whether federal, state or local, and (b) any
environmental liabilities relating to the Facility any of which arose out
of the conduct of TSG at the Facility and that occurred prior to the date
hereof or out of the conduct of TSG while occupying a portion of the
Facility hereafter; provided, however, that TSG shall not be obligated to
perform or pay the cost of any remediation at the Facility under this
indemnity unless such remediation is required by a governmental authority
pursuant to an applicable environmental law. The foregoing notwithstanding,
TSG shall at its cost and expense, dispose of in an environmentally
acceptable manner, all paint thinners and any other chemicals, solvents or
cleaning agents that were used by TSG during the period that it occupied
the Facility.
Exhibit A Page 1
121
3. Lacy's Obligations. Lacy shall assume responsibility and liability for, and
shall indemnify TSG from and against, (a) any violation of any
environmental laws, whether federal, state or local, and (b) any
environmental liabilities relating to the Facility, any of which arises out
of the operation, possession or occupation of the Facility by Lacy on or
after the date hereof, except for any violation that is attributable to TSG
under Section 2, above.
4. Cooperation. Each party as an indemnified party hereunder shall provide
prompt notification to the other (indemnifying) party of any claim for
indemnification under this Agreement and shall provide all reasonable
cooperation to the indemnifying party in presenting or defending a claim
(including the filing or defending of a suit or other judicial or
administrative proceeding for contribution, indemnification, cost recovery,
reimbursement, or other cause of action) against or by any entity or
person, such cooperation to include the provision of personnel and
documents. Any out-of-pocket expenses incurred by the indemnified party in
complying with this Section 4 shall be reimbursed by the indemnifying
party.
5. Miscellaneous.
(a) This Agreement contains the entire understanding of the parties on the
subject matter hereof; shall not be amended, and no term hereof shall
be waived, except by written agreement of the parties signed by each
of them; shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns; may be executed in one or
more counterparts each of which shall be deemed an original hereof,
but all of which shall constitute but one and the same agreement; and
shall not be assignable by a party without the prior written consent
of the other party.
(b) The words "herein," "hereof," "hereunder," "hereby," "herewith" and
words of similar import when used in this Agreement shall be construed
to refer to this Agreement as a whole. The word "including" shall mean
including, but not limited to any enumerated items.
(c) Each party and its counsel has reviewed this Agreement. Accordingly,
the normal rule of construction that any ambiguities and uncertainties
are to be resolved against the party preparing an agreement will not
be employed in the interpretation of this Agreement; rather the
Agreement shall be construed as if all parties had jointly prepared
it.
(d) No representation, affirmation of fact, course of prior dealings,
promise or condition in connection herewith or usage of the trade not
expressly incorporated herein shall be binding on the parties.
(e) The failure to insist upon strict compliance with any term, covenant
or condition contained herein shall not be deemed a waiver of such
term, nor shall any waiver or relinquishment of any right at any one
or more times be deemed a waiver or relinquishment of such right at
any other time or times.
Exhibit A Page 2
122
6. The captions of the paragraphs herein are for convenience only and shall
not be used to construe or interpret this Agreement.
7. The recitals set forth in "Background," above, are incorporated herein and
made a part hereof as the agreements of the parties as fully and with the
same force and effect as if reiterated herein in full.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
Technology Service Group, Inc.
By: /s/ Winton Schriner /s/ James Lacy
------------------------------------ ----------------------------
Winton Schriner
Executive Vice President Operations
Exhibit A Page 3
123