UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended September 30, 1998.
|_| Transition period pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the transition period from _____________ to ______________.
0-20727
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(Commission File Number)
Novoste Corporation
-------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-2787476
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4350-C International Blvd., Norcross, GA 30093
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: (770) 717-0904
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
(Item 1) Yes |X| No |_|
(Item 2) Yes |X| No |_|
As of October 23, 1998 there were 10,686,862 shares of the Registrant's Common
Stock outstanding.
Exhibit Index on page: 18
Total number of pages: 48
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NOVOSTE CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997 3
Consolidated Statements of Operations (unaudited) for
the three and nine months ended September 30, 1998
and 1997 and the period from inception (May 22, 1992)
through September 30, 1998 4
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended September 30, 1998 and 1997
and the period from inception (May 22, 1992)
through September 30, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
2
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NOVOSTE CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 23,467,292 $ 35,993,933
Short-term investments 10,827,081 12,408,785
Prepaid expenses 205,625 88,099
Inventory 236,430 --
------------ ------------
Total current assets 34,736,428 48,490,817
------------ ------------
Property and equipment, net 2,324,291 1,061,526
License agreements, net 129,531 139,758
Other assets 299,457 103,855
------------ ------------
$ 37,489,707 $ 49,795,956
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,204,206 $ 523,678
Accrued expenses and taxes withheld 2,669,876 1,903,276
------------ ------------
Total current liabilities 3,874,082 2,426,954
------------ ------------
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 10,692,642 and 10,332,042 shares
issued, respectively 106,926 103,320
Additional paid-in capital 76,919,202 74,908,631
Deficit accumulated during the development stage (43,048,694) (27,619,109)
------------ ------------
33,977,434 47,392,842
Less treasury stock, 5,780 shares of common
stock at cost (23,840) (23,840)
Unearned compensation (337,969) --
------------ ------------
Total shareholders' equity 33,615,625 47,369,002
------------ ------------
$ 37,489,707 $ 49,795,956
============ ============
</TABLE>
See accompanying notes.
3
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NOVOSTE CORPORATION
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From inception
Three months ended Nine months ended (May 22, 1992)
September 30, September 30, through June 30,
1998 1997 1998 1997 1998
---------------------------- ---------------------------- --------------
<S> <C> <C> <C> <C> <C>
Miscellaneous revenues $ -- $ -- $ -- $ 29,313 $ 320,200
Costs and expenses:
Research and development 5,685,268 3,137,301 13,597,906 8,618,578 35,357,805
General and administrative 799,805 382,484 1,852,670 1,342,605 7,676,544
Marketing 832,230 284,723 1,703,656 575,390 4,257,757
------------ ------------ ------------ ------------ ------------
7,317,303 3,804,508 17,154,232 10,536,573 47,292,106
------------ ------------ ------------ ------------ ------------
Loss from operations (7,317,303) (3,804,508) (17,154,232) (10,507,260) (46,971,906)
------------ ------------ ------------ ------------ ------------
Interest income 511,560 284,786 1,724,647 939,810 4,104,971
Interest expense -- -- -- -- (181,759)
------------ ------------ ------------ ------------ ------------
Net loss $ (6,805,743) $ (3,519,722) $(15,429,585) $ (9,567,450) $(43,048,694)
============ ============ ============ ============ ============
Net loss per share, basic and diluted $ (0.64) $ (0.41) $ (1.47) $ (1.14)
============ ============ ============ ============
Weighted average shares outstanding 10,601,916 8,489,546 10,483,965 8,375,739
============ ============ ============ ============
</TABLE>
See accompanying notes.
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NOVOSTE CORPORATION
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From inception
(May 22, 1992)
For the nine months through
ended September 30, September 30,
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(15,429,585) $ (9,567,450) $(43,048,694)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 392,536 310,150 1,693,274
Issuance of stock for services or compensation 741,740 202,500 1,959,058
Changes in assets and liabilities:
Inventory (236,430) -- (236,430)
Prepaid expenses (117,526) (21,865) (213,084)
Accounts payable 680,528 150,591 1,204,206
Accrued expenses and taxes withheld 766,600 809,341 3,064,383
Other (195,602) 130,719 (330,920)
------------ ------------ ------------
Net cash used by operations (13,397,739) (7,986,014) (35,908,207)
------------ ------------ ------------
Cash flows from investing activities
Maturity (purchase) of short-term investments 1,581,704 3,627,060 (10,827,081)
Purchase of property and equipment, net (1,645,075) (192,204) (3,670,528)
------------ ------------ ------------
Net cash provided (used) by investing activities (63,371) 3,434,856 (14,497,609)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of notes payable -- -- 4,770,150
Repayment of notes payable -- -- (2,970,150)
Proceeds from issuance of common stock 934,469 333,805 72,073,108
------------ ------------ ------------
Net cash provided by financing activities 934,469 333,805 73,873,108
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (12,526,641) (4,217,353) 23,467,292
Cash and cash equivalents at beginning of period 35,993,933 19,954,827 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 23,467,292 $ 15,737,474 $ 23,467,292
============ ============ ============
Supplemental disclosures of cash flow information
Cash paid for interest -- -- $ 165,137
============ ============ ============
</TABLE>
See accompanying notes.
5
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NOVOSTE CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with instructions to Article 10 of
Regulation S-X. Accordingly, such consolidated financial statements do not
include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
The operating results of the interim periods presented are not necessarily
indicative of the results to be achieved for the year ending December 31, 1998.
The accompanying consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 1997 and for the cumulative period from May 22, 1992 (inception)
through December 31, 1997, included in the Company's 1997 Annual Report on Form
10-K filed with the Securities and Exchange Commission ("SEC").
In August 1998 the Company established a subsidiary, Novoste B.V., in Eindhoven,
The Netherlands. The consolidated financial statements include the accounts of
Novoste Corporation and the wholly-owned subsidiary. Intercompany transactions
and accounts are eliminated in consolidation.
Note 2. Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market. Inventory primarily consists of finished goods.
Note 3. Net Loss Per Share
The basic and diluted loss per share is computed based on the weighted average
number of common shares outstanding. Common equivalent shares are not included
in the per share calculations where the effect of their inclusion would be
antidilutive.
Note 4. Cash Equivalents and Investments
Cash equivalents are comprised of certain highly liquid investments with
maturities of less than three months at the time of their acquisition. In
addition to cash equivalents, the Company has investments in commercial paper
that are classified as short-term (mature in more than 90 days but less than one
year). Such investments are classified as held-to-maturity, as the Company has
the ability and intent to hold them until maturity. Investments held-to-maturity
are carried at amortized cost, adjusted for the amortization or accretion of
premiums or discounts without recognition of gains or losses that are deemed to
be temporary. Premiums and discounts are amortized or accreted over the life of
the related instrument as an adjustment to yield using the straight-line method,
which approximates the effective interest method. Interest income is recognized
when earned. Fair value approximates carrying value for all cash equivalents and
investments.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Information
The statements contained in this Form 10-Q that are not historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding the expectations, beliefs, intentions or strategies
regarding the future. The Company intends that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the Company's views
as of the date they are made with respect to future events and financial
performance, but are subject to many uncertainties and risks which could cause
the actual results of the Company to differ materially from any future results
expressed or implied by such forward-looking statements. Some of these risks are
discussed below in the section "Certain Factors That May Impact Future
Operations." Additional risk factors are discussed in "Item 1 - Business" of the
Company's 1997 Form 10-K and other reports filed by the Company from time to
time on Forms 10-Q and 8-K. The Company does not undertake any obligation to
update or revise any forward-looking statement, made by it or on its behalf,
whether as a result of new information, future events, or otherwise.
Overview
Novoste commenced operations as a medical device company in May 1992. Commencing
in 1994 the Company has devoted substantially all of its efforts to developing
the Beta-Cath(TM) System, an intraluminal beta radiation catheter delivery
system designed to reduce the frequency of restenosis subsequent to percutaneous
transluminal coronary angioplasty ("PTCA").
For the period since its capitalization through September 30, 1998 the Company
has earned minimal non-recurring revenues and experienced significant losses in
each period. At September 30, 1998 the Company had an accumulated deficit of
approximately $43.0 million. Novoste expects to incur significant operating
losses through at least 2000 as the Company continues research and development
projects, conducts its clinical trials in the United States, Canada and Europe,
seeks regulatory approval or clearance for its products, expands its sales and
marketing efforts in contemplation of product introduction and market
development, and increases its administrative activities to support growth of
the Company. The Company believes that current cash balances and short-term
investments, together with interest thereon, will be sufficient to meet the
Company's operating and capital requirements through the third quarter of 1999.
The Company may in the future seek to raise additional funds through bank
facilities, debt or equity offerings or other sources of capital. There can be
no assurance that additional financing, if required, will be available on
satisfactory terms, or at all. See Liquidity and Capital Resources.
The development, manufacture, sale and distribution of medical devices such as
the Company's Beta-Cath(TM) System are subject to numerous regulations imposed
by governmental authorities, principally the FDA and corresponding state and
foreign agencies. The regulatory process is lengthy, expensive and uncertain.
FDA approval of a Pre Market Approval ("PMA") application and approval from the
Nuclear Regulatory Commission (NRC) are required before the Beta-Cath(TM) System
can be marketed in the United States. Securing FDA approval will require
submission to the FDA of extensive clinical data and technical information. The
Company received approval of the Beta-Cath(TM) System for sale in Europe during
the third quarter of 1998. However, the Company does not expect regulatory
approval of the Beta-
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Cath(TM) System for sale in the United States prior to 2000 and there can be no
assurance when or if such approvals will be obtained.
In 1996 and 1997 the Company conducted a feasibility clinical trial at four
hospitals under an Investigational Device Exemption ("IDE") granted by the FDA
to determine the clinical safety of the Beta-Cath(TM) System for use in coronary
arteries and a total of 85 patients were enrolled. As of September 30, 1998, 78
of the 85 patients had received angiographic follow-up analyzed in a core lab.
Of the 78 patients 17% were reported restenotic. This data suggests a greater
than 50% reduction in the rate of restenosis in patients who received treatment
with the Beta-Cath(TM) System when compared to a historical control group (from
the Lovastatin Restenosis Trial) which received PTCA only and had been selected
based upon inclusion and exclusion criteria similar to those utilized by the
Company. Arteries treated with the Beta-Cath(TM) System on average maintained
91% of the enlargement achieved with PTCA (a "late loss index" of 9%). The
following table compares the Company's data on the 78 patients to an historical
control group:
Novoste Lovastatin
Feasibility Placebo
Studies Group
------- -----
No. of Treated Patients 78 161
Restenosis Rate 17% 42%
Late Loss Index 9% 43%
No. of Patients Receiving Stents 13 0(1)
Stent Restenosis Rate 8% N/A
(1) Coronary stents were not commercially available at the time of the
Lovastatin Restenosis Trial.
On July 30, 1997 the Company initiated a randomized, triple-masked,
placebo-controlled, multicenter human clinical trial under an IDE granted by the
FDA to determine the clinical safety and efficacy of the Beta-Cath(TM) System
for use in coronary arteries. The Company expects to enroll approximately 1,100
patients in the trial at up to 45 medical sites located in the United States as
well as additional sites located in Europe and Canada. The patients are divided
into two approximately equal subgroups, one for PTCA alone and one with coronary
stenting. Each subgroup of the trial is randomized to either intracoronary
radiation therapy or a placebo control. In both subgroups patients who receive
the beta radiation will receive dosages of 14Gy for vessels ranging from at
least 2.7 to 3.35 millimeters and 18Gy for vessels ranging from 3.35 to 4.0
millimeters. A follow-up review of patients 30 days after treatment and a
follow-up angiogram eight months after the initial treatment will be performed
to observe the treated artery. The angiograms will be analyzed to determine
whether there has been an incidence of restenosis and to measure the late loss
index (the extent of the loss in the enlargement of lumen achieved with PTCA).
As of October 19, 1998 a total of 669 patients had been enrolled at 43 U.S.
clinical sites and 3 international sites.
On July 9, 1998 the Company received approval from the FDA for an
Investigational Device Exemption (IDE) supplement to begin the "STents And
Radiation Therapy" (START) Trial, designed to determine the safety and efficacy
of ICRT in treating "in-stent restenosis." In-stent restenosis occurs when
arteries with previously placed stents have re-narrowed due to excessive tissue
growth inside the stent. As of October 19, 1998 a total of 26 patients had been
enrolled at nine clinical sites.
There can be no assurance that the Company's research and development efforts
will be successfully completed. There can be no assurance that clinical trials
will be completed in a timely fashion or demonstrate the safety and efficacy of
the Beta-Cath(TM) System. Additionally, there can be no assurance that the
Beta-Cath(TM) System will be approved by the FDA, the NRC, any foreign
governmental agency, or
8
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that the Beta-Cath(TM) System or any other product developed by the Company will
be successfully introduced or attain any significant level of market acceptance.
The Company has recently organized a European subsidiary, Novoste B.V., to
conduct its European operations. While the Company has obtained the CE mark
certification to commercialize the Beta-Cath(TM) System in Europe, there can be
no assurance that the Company will ever achieve either significant revenues from
sales of its Beta-Cath(TM) System or ever achieve or sustain profitability.
Results of Operations
Net loss for the three months ended September 30, 1998 was $6,806,000, or
($0.64) per share, as compared to $3,520,000, or ($0.41) per share, for the
three months ended September 30, 1997. Net loss for the nine months ended
September 30, 1998 was $15,430,000, or ($1.47) per share, as compared to
$9,567,000 or ($1.14) per share for the year earlier period. The increase in net
loss for the three and nine months ended September 30, 1998 compared to the year
earlier period is primarily due to increased spending for research and
development as well as increased marketing related to the Company's development
of its Beta-Cath(TM) System, offset by increased interest income earned from the
investment of the net proceeds from the secondary public offering in November
1997.
Revenues. No revenues were earned in the three and nine months ended September
30, 1998. Miscellaneous revenues were $29,000 for the nine months ended
September 30, 1997, due to the sale of a product line.
Research and Development Expenses. Research and development expenses increased
81% to $5,685,000 for the three months ended September 30, 1998 from $3,137,000
for the three months ended September 30, 1997. For the nine months ended
September 30, 1998, research and development expenses increased 58% to
$13,598,000 from $8,619,000 for the same period in 1997. These increases were
primarily a result of patient enrollment and patient follow-up costs in the
Company's clinical trials, and services provided by outside consultants in the
development of the Beta-Cath(TM) System and manufacture of its components. The
Company expects research and development expenses to further increase in the
immediate future as the Company continues clinical trials of its Beta-Cath(TM)
System in both the U.S. and selected foreign countries.
General and Administrative Expenses. General and administrative expenses
increased 109% to $800,000 for the three months ended September 30, 1998 from
$382,000 for the three months ended September 30, 1997. For the nine months
ended September 30, 1998 general and administrative expenses increased 38% to
$1,853,000 from $1,343,000, for the same period in 1997. This increase for the
three month period was primarily a result of additional personnel and higher
salaries. The Company expects general and administrative expenses to increase in
the future in support of a higher level of operations. The Company also expects
it will incur an additional expense in the fourth quarter of 1998 in relation to
the pending move of its facilities within the same area.
Marketing Expenses. Marketing expenses increased 192% to $832,000 for the three
months ended September 30, 1998 from $285,000 for the three months ended
September 30, 1997. For the nine months ended September 30, 1998, marketing
expenses increased 196% to $1,704,000 from $575,000 for the same period in 1997.
These increases primarily related to preparation for the European commercial
launch of the Beta-Cath(TM) System and arose from increased trade show costs,
consulting fees and increased headcount. The Company expects sales and marketing
expenses to significantly increase in the
9
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future, as direct distribution is established in Europe, and if and when the
Beta-Cath(TM) System is approved in the U.S. and launched commercially.
Interest Income. Net interest income increased 80% to $512,000 for the three
months ended September 30, 1998 from $285,000 for the three months ended
September 30, 1997. For the nine months ended September 30, 1998 interest income
increased 84% to $1,725,000 from $940,000 for the same period in 1997. The
increase in interest income was primarily due to larger cash equivalents and
short-term investment balances after the Company's secondary public offering in
November 1997.
Liquidity and Capital Resources
The Company has financed its activities since inception up to May 23, 1996, the
date of the Company's initial public offering, through private placements of its
Common Stock, Class B Common Stock and promissory notes. Since inception through
September 30, 1998 the Company obtained funds aggregating approximately $72.1
million in net proceeds from the issuance of Common Stock and Class B Common
Stock (including approximately $30.6 million in net proceeds from its initial
public offering which closed in May 1996 and approximately $32.2 million in net
proceeds from its secondary public offering which closed in November 1997), and
approximately $1.8 million in net proceeds from the issuance of convertible
promissory notes.
During the nine months ended September 30, 1998 and 1997 the Company used cash
to fund operations of $13.4 million and $8.0 million, respectively. Cash used to
fund operations since inception was approximately $35.9 million. The increase in
cash used in operations was due primarily to increased research and development
activities and initiation of marketing activities related to the Beta-Cath(TM)
System. The Company's expenditures for equipment and improvements have
aggregated $3.7 million since inception. Future cash needs for operating
activities are anticipated to be higher than historical levels because of the
development, manufacturing scale-up and commercialization of the Beta-Cath(TM)
System, subject to the factors discussed below.
The Company's principal source of liquidity at September 30, 1998 consisted of
cash, cash equivalents and short-term investments of $34.3 million. The Company
did not have any credit lines available or outstanding borrowings at September
30, 1998.
The Company has obtained all of its requirements of radioactive sources to date
pursuant to an agreement with a single supplier, Bebig Isotopentechnik and
Umweltdiagnostik GmbH, (the "Supplier"), a German corporation. On July 23, 1998
the Company executed an amendment to its framework agreement with the Supplier,
whereby the Company received a lien on all tangible and intangible assets used
by the Supplier in the design and manufacture of the Strontium 90 radioactive
sources. In addition, the agreement provides for the Company's option to
purchase the tangible assets, and obtain a fully-paid license to all
intellectual property used in the manufacture of the radioactive sources, for
$4,019,400. This amount will be paid in the form of a license fee on units
delivered which payments are expected to commence in the fourth quarter of 1998.
The Company anticipates that its operating losses will continue through at least
2000 because it plans to expend substantial resources in funding clinical trials
in support of regulatory approvals, and continues to expand research and
development and marketing activities. The Company believes that current cash
balances and short-term investments, together with interest thereon, will be
sufficient to meet the Company's operating and capital requirements through the
third quarter of 1999. However, the
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Company's future liquidity and capital requirements will depend upon numerous
factors, including the progress of the Company's clinical research and product
development programs; the receipt of and the time required to obtain regulatory
clearances and approvals; the resources required to gain approvals; the
resources the Company devotes to the development, manufacture and marketing of
its products; the resources required to hire and develop a direct sales force in
the United States and certain European countries, and to expand manufacturing
capacity; market acceptance and demand for its products; and other factors. The
Company may in the future seek to raise additional funds through bank
facilities, debt or equity offerings or other sources of capital. There can be
no assurance that additional financing, if required, will be available on
satisfactory terms, or at all.
Impact of Year 2000
The Company is aware of the issues that many companies will face as the year
2000 approaches. The Company relies on computers and computer software to run
its business, as do its vendors, suppliers and customers. In July 1998 the
Company installed and implemented a complete enterprise resource planning
software package that includes integrated manufacturing and financial modules
that replaced the Company's then existing financial software program. The vendor
of the new software package has warranted that it is compliant with year 2000
requirements. The Company will continue to conduct a comprehensive review of its
computer systems to identify the systems that could be affected by the Year 2000
issue and is developing an implementation plan to resolve any issues that may
arise. The Company believes that non-information technology systems and its
products are not significantly impacted. The Company believes that any year 2000
problems encountered by suppliers are not likely to have a material adverse
effect on the Company's operations. Costs associated with the year 2000
assessment and correction of problems are expensed as incurred. Based on
management's current assessment, the Company does not believe that the cost of
such actions will be material. Failure of the Company's computer systems or that
of its suppliers or service providers could have a material adverse effect on
the Company's business, financial condition and results of operations.
Certain Factors That May Impact Future Operations
Limited Operating History. The Company has a limited history of operations.
Since its inception in May 1992 the Company has been primarily engaged in
research and development of its Beta-Cath(TM) System. The Company has generated
only limited revenue and does not have experience in manufacturing, marketing or
selling its products in quantities necessary for achieving profitability. There
can be no assurance that the Company's products will be commercialized or that
the Company will achieve significant revenues from either international or
United States sales. In addition, there can be no assurance that the Company
will achieve or sustain profitability in the future.
History of Losses and Expectation of Future Losses. The Company has experienced
significant operating losses since inception and as of September 30, 1998 had an
accumulated deficit of $43.0 million. The development and further
commercialization of the Company's current products and other new products, if
any, will require substantial development, clinical, regulatory, manufacturing
and other expenditures. The Company expects its operating losses to continue
through at least the year 2000 as the Company continues to expand its product
development, clinical trials, and marketing efforts.
Risk of Inadequate Funding. The Company anticipates that its operating losses
will continue through at least 2000 because it plans to expend substantial
resources in funding clinical trials in support of
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regulatory approvals and continues to expand research and development and
marketing activities. Novoste believes that current cash balances and short-term
investments, together with interest thereon, will be sufficient to meet the
Company's operating and capital requirements through the third quarter of 1999.
However, the Company's future liquidity and capital requirements will depend
upon numerous factors, including the progress of the Company's clinical research
and product development programs; the receipt of and the time required to obtain
regulatory clearances and approvals; the resources required to gain approvals;
the resources the Company devotes to the development, manufacture, and marketing
of its products; the resources required to hire and develop a direct sales force
in the United States and certain European countries; the rate of sales in
Europe; expansion of manufacturing capacity and other facilities requirements;
market acceptance and demand for its products; and other factors. The Company
may in the future seek to raise additional funds through bank facilities, debt
or equity offerings or other sources of capital. There can be no assurance that
additional financing, if required, will be available on satisfactory terms, or
at all.
Dependence on Beta-Cath(TM) System; Market Acceptance. The Company anticipates
that for the foreseeable future it will be solely dependent on the successful
development and commercialization of the Beta-Cath(TM) System. The Beta-Cath(TM)
System will require further development, as well as regulatory clearance or
approval, before it can be marketed in the United States or internationally.
There can be no assurance that the Company's development efforts will be
successful or that the Beta-Cath(TM) System will be shown to be safe or
effective, cleared or approved by regulatory authorities, capable of being
manufactured in commercial quantities at acceptable costs, approved by payors
for reimbursement or successfully marketed. In addition, there can be no
assurance that demand for the Beta-CathTM System will be sufficient to allow
profitable operations. Failure of the Beta-Cath(TM) System to be successfully
commercialized would have a material adverse effect on the Company's business,
financial condition and results of operations.
Early Stages of Clinical Trials; No Assurance of Safety and Efficacy. The
Beta-Cath(TM) System is in an early stage of clinical testing, and there can be
no assurance as to when, if ever, its safety and efficacy in reducing the
frequency of restenosis will be demonstrated. The Company is conducting a
randomized, triple-masked, placebo-controlled, multicenter, human clinical trial
under an Investigational Device Exemption ("IDE") granted by the U.S. Food and
Drug Administration ("FDA") to determine the clinical safety and efficacy of the
Beta-Cath(TM) System for use in coronary arteries. The Company anticipates
completing enrollment in this pivotal clinical trial by March 31, 1999. Various
factors, including difficulties in enrolling patients or scheduling physicians,
could delay completion for an indeterminate amount of time.
The multicenter trial will require the treatment of a statistically significant
number of patients, and clinical follow-ups of such patients after eight months.
It is only after completion of these trials that the Company would apply to the
FDA for the regulatory approval required to commence marketing of the
Beta-Cath(TM) System in the U.S. Subsequent experience may uncover unforeseen
problems with the therapy which could require removal of the product from the
market or additional testing. There can be no assurance that the Beta-Cath(TM)
System or any of the Company's other products will prove to be safe and
effective in clinical trials or ultimately will be approved for marketing by the
United States or foreign regulatory authorities. The Company does not expect to
submit an application for pre-market approval ("PMA") for its Beta-Cath(TM)
System until the first quarter of 2000, and there can be no assurance that the
Company will ever submit a PMA application or that, if submitted, such PMA
application will be approved by the FDA. If the Beta-Cath(TM) System does not
prove to be safe and effective in clinical trials, the Company's
12
<PAGE>
business, financial condition and results of operations will be materially
adversely affected and could result in cessation of the Company's business. In
addition, the clinical trials may identify significant technical or other
obstacles to be overcome prior to obtaining necessary regulatory approvals. Even
if such obstacles are identified and overcome, commercialization of the
Beta-Cath(TM) System may be delayed.
Limited Sales, Marketing and Distribution Experience. At present the Company has
no sales and a limited marketing capability. The Company intends to sell its
products both inside the United States and in the key European markets directly.
There can be no assurance that the Company will be able to recruit and train
adequate sales and marketing personnel to successfully commercialize the
Beta-Cath(TM) System in the key markets of Europe and the United States. The
Company intends to select one or more established market leaders in the
radioisotope business to inventory and deliver the radiation sources and provide
related training, testing and support services to hospitals in both the United
States and international markets. The inability to recruit or retain one or more
such entities for this purpose could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on a Key Supplier. The Company currently purchases all radiation
source materials from a single supplier. The Company believes that because of
the technical expertise and capital investment required to manufacture the
radiation source materials, it could be extremely difficult and expensive to
find an alternate source of supply. Any failure or disruption in the ability of
the supplier to provide the radiation source materials could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
Fluctuations in Operating Results. The Company's results of operations may
fluctuate significantly from quarter to quarter and will depend upon numerous
factors, including product development efforts, actions relating to regulatory
and reimbursement matters, progress of clinical trials, the extent to which the
Company's products gain market acceptance, and competition.
Possible Volatility of Stock Price. The stock market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Company's Common Stock. In
addition, the market price of the shares of Common Stock is likely to be highly
volatile. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations, clinical results, or new products by
the Company or its competitors, FDA and international regulatory actions,
actions with respect to reimbursement matters, developments with respect to
patents or proprietary rights, public concern as to the safety and efficacy of
products developed by the Company or others, changes in health care policy in
the United States and internationally, changes in stock market analyst
recommendations regarding the Company, other medical device companies or the
medical device industry generally, and general market conditions may have a
significant effect on the market price of the Common Stock.
Product Development. The focus of the Company's current development efforts is
to design future generation components of the Beta-Cath(TM) System. The medical
device industry is characterized by rapid and significant technological change.
Therefore, the Company's future success will depend in a large part on the
Company's ability to continue to respond to such changes, as well as expand the
applications for which its products are used, through the timely development and
successful introduction of enhanced and new versions of its Beta-Cath(TM)
System. Product research and development will require substantial
13
<PAGE>
expenditures and will be subject to inherent risks, and there can be no
assurance that any new product introduced will receive regulatory approval or
will be commercially successful.
Highly Competitive Market; Risk of Alternative Therapies. Competition in the
medical device industry, and specifically the market for cardiovascular devices,
is intense. Many companies are developing devices and therapies to improve the
outcome of coronary revascularization procedures and to reduce the frequency of
restenosis, such as coronary stents. Other companies have various radiation
therapy products under development to reduce restenosis. In addition, drugs,
gene therapy and other minimally invasive catheter-based procedures are
currently being developed. Many of the Company's competitors and potential
competitors have substantially greater financial resources than the Company and
also have greater resources and expertise in the areas of research and
development, obtaining regulatory approvals, manufacturing and marketing. There
can be no assurance that the Company's competitors will not succeed in
developing, marketing and distributing technologies and products that are more
effective than those developed and marketed by the Company or that would render
the Company's technology and products obsolete or noncompetitive. Additionally,
there is no assurance that the Company will be able to compete effectively
against such competitors in terms of manufacturing, marketing and sales.
Patents and Proprietary Technology. The medical device industry has been
characterized by extensive litigation regarding patents and other intellectual
property rights and companies in the medical device industry have employed
intellectual property litigation to gain a competitive advantage. There can be
no assurance that the Company will not become subject to patent infringement
claims or litigation or interference proceedings declared by the USPTO to
determine the priority of inventions. The defense and prosecution of
intellectual property suits, USPTO interference proceedings and related legal
and administrative proceedings are both costly and time consuming. Litigation
may be necessary to enforce patents issued to the Company, to protect trade
secrets or know-how owned by the Company or to determine the enforceability,
scope and validity of the proprietary rights of others. Any litigation or
interference proceedings will result in substantial expense to the Company and
significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation or interference proceedings to
which the Company may become a party could subject the Company to significant
liabilities to third parties or require the Company to seek licenses from third
parties or require the Company to redesign its products or processes to avoid
infringement or prevent the Company from selling its products in certain
markets, if at all. Although patent and intellectual property disputes regarding
medical devices have often been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial and
could include ongoing royalties. Furthermore, there can be no assurance that the
necessary licenses would be available to the Company on satisfactory terms, if
at all, or that the Company could redesign its products or processes to avoid
infringement. Any adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
Government Regulation. Clinical testing, manufacture, promotion and sale of the
Company's products are subject to extensive regulation by numerous governmental
authorities in the United States, principally the FDA, and corresponding foreign
regulatory agencies. The Federal Food, Drug, and Cosmetic Act ("FDC Act"), and
other federal and state statutes and regulations govern or influence the
testing, manufacture, labeling, advertising, distribution and promotion of drugs
and devices. Noncompliance with applicable requirements can result in fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant premarket clearance
or premarket
14
<PAGE>
approval for devices, refusal to authorize the marketing of products or to allow
the Company to enter into government supply contracts, and criminal prosecution.
The Company's Beta-Cath(TM) System is regulated as a Class III medical device
for which FDA approval of a PMA application must be obtained prior to U.S.
commercial sales. Failure to receive or delays in receipt of FDA clearances or
approvals could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not expect to
submit an application for pre-market approval ("PMA") for its Beta-Cath(TM)
System until the first quarter of 2000, and there can be no assurance that the
Company will ever submit a PMA application or that, if submitted, such PMA
application will be approved by the FDA.
Sales of medical devices outside of the United States are subject to
international regulatory requirements that vary from country to country. The
time required to obtain approval for sale internationally may be longer or
shorter than that required for FDA approval, and the requirements may differ.
The European Union ("EU") has promulgated rules which require that medical
products must first receive the CE mark, an international symbol of adherence to
quality assurance standards and compliance with applicable European medical
device directives, prior to their being available for sale within the EU. The
Company received the CE mark certification for the Beta-Cath(TM) System on
August 24, 1998.
Because the Beta-Cath(TM) System uses radiation sources, its manufacture,
distribution, transportation, import/export, use and disposal will also be
subject to federal, state and/or local laws and regulations relating to the use
and handling of radioactive materials. Specifically, even if approval of a PMA
application is obtained, approval by the U.S. Nuclear Regulatory Commission
("NRC"), or an equivalent state agency, of the company's radiation sources for
certain medical uses will be required to distribute commercially the radiation
sources to licensed recipients in the United States. In addition, the Company
and/or its supplier of radiation sources must obtain a license from the NRC to
commercially distribute such radiation sources as well as to comply with all
applicable regulations. In addition, hospitals and physicians may be required to
obtain or expand their licenses to use and handle Strontium 90 radiation prior
to receiving radiation sources for use in the Beta-Cath(TM) System. Comparable,
or perhaps more stringent, requirements and/or approvals regulating radiation
are required in markets outside the United States, including Europe. If any of
the foregoing approvals are significantly delayed or not obtained, the Company's
business, financial condition and results of operations could be materially
adversely affected.
15
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
10.19 Lease Agreement dated October 23, 1998 between Registrant and Weeks
Realty, L.P., for facility located at 3890 Steve Reynolds Boulevard,
Norcross, Georgia.
27 Financial data schedule
(b) The Company filed a Form 8-K on August 17, 1998 announcing the final six
month summary results of its feasibility clinical trial, the Beta Energy
Restenosis Trial (BERT).
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVOSTE CORPORATION
November 5, 1998 /s/ Thomas D. Weldon
- -------------------- -----------------------------------------
Date Thomas D. Weldon
Chairman & Chief Executive Officer
November 5, 1998 /s/ David N. Gill
- -------------------- -----------------------------------------
Date David N. Gill
Vice President - Finance,
Chief Operating Officer
and Chief Financial Officer
(Principal Financial & Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Exhibit Description Number
- ------ ------------------- ------
10.19 Lease Agreement dated October 23, 1998 between
Registrant and Weeks Realty, L.P., for facility
located at 3890 Steve Reynolds Boulevard,
Norcross, Georgia. 19-47
27 Financial data schedule 48
EXHIBIT 10.19
COVER PAGE
The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein.
LANDLORD: WEEKS REALTY, L.P., a Georgia limited partnership, with its
principal office located at 4497 Park Drive, Norcross, Georgia
30093
TENANT: NOVOSTE CORPORATION, a corporation duly organized and existing
under the laws of the State of Florida.
LEASED
PREMISES: (a) Address: 3890 Steve Reynolds Boulevard
Norcross, GA 30093
(b) Suite: N/A
(c) Rentable Area: 48,800 square feet
(d) Pro Rata Share: 100%
(e) Project: Gwinnett Pavilion
TERM: Five (5) years
COMMENCEMENT DATE: December 1, 1998
TERMINATION DATE: November 30, 2003
BASE RENT
(PER YEAR): $390,400.00
BASE YEAR: 1999
SECURITY DEPOSIT: $6,159.00
TENANT'S AGENT: Ken Ashley
Cushman & Wakefield
<PAGE>
NOVOSTE CORPORATION
LEASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
----
1 LEASED PREMISES ........................................................1
2 TERM.....................................................................1
3 RENTAL...................................................................1
4 DELAY IN DELIVERY........................................................2
5 USE OF LEASED PREMISES...................................................2
6 UTILITIES................................................................3
7 ACCEPTANCE OF PREMISES...................................................3
8 ALTERATIONS, MECHANICS' LIENS............................................3
9 QUIET CONDUCT/QUIET ENJOYMENT............................................4
10 FIRE INSURANCE, HAZARDS..................................................4
11 LIABILITY INSURANCE......................................................5
12 INDEMNIFICATION..........................................................5
13 WAIVER OF CLAIMS.........................................................5
14 REPAIRS..................................................................6
15 SIGNS, LANDSCAPING.......................................................6
16 ENTRY BY LANDLORD........................................................6
17 TAXES AND INSURANCE INCREASE.............................................7
18 ABANDONMENT..............................................................8
19 DESTRUCTION..............................................................8
<PAGE>
20 ASSIGNMENT AND SUBLETTING................................................9
21 INSOLVENCY OF TENANT.....................................................9
22 BREACH BY TENANT.........................................................9
23 ATTORNEYS' FEES/COLLECTION CHARGES.......................................10
24 CONDEMNATION.............................................................10
25 NOTICES..................................................................11
26 WAIVER...................................................................11
27 EFFECT OF HOLDING OVER...................................................11
28 SUBORDINATION............................................................12
29 ESTOPPEL CERTIFICATE.....................................................12
30 PARKING..................................................................12
31 MORTGAGEE PROTECTION.....................................................12
32 PROTECTIVE COVENANTS.....................................................13
33 RELOCATION...............................................................13
34 BROKERAGE COMMISSIONS....................................................13
MISCELLANEOUS PROVISIONS.....................................................13
EXHIBITS:
EXHIBIT "A": Site Plan
EXHIBIT "B": Floor Plan of the Leased Premises
EXHIBIT "C": Tenant's Acceptance of Premises
EXHIBIT "D": Subordination, Non-disturbance and
Attornment Agreement
EXHIBIT "E": Special Stipulations
<PAGE>
STATE OF GEORGIA
GWINNETT COUNTY
This Lease Agreement is made this ______ day of ____________, 1998, by and
between WEEKS REALTY, L.P., a Georgia limited partnership, hereinafter referred
to as "Landlord", and NOVOSTE CORPORATION, hereinafter referred to as "Tenant".
LEASED PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as approximately 48,800 rentable square feet of office/warehouse at 3890 Steve
Reynolds Boulevard, Norcross, Georgia 30093, Gwinnett County, in Gwinnett
Pavilion, as shown on the plan attached hereto as Exhibit "A" and by reference
incorporated herein. The building in which the Leased Premises are located is
herein referred to as the "Building"; and the real property on which the
building is situated is herein referred to as the "Land".
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of Five (5)
years, commencing on December 1, 1998, and continuing until midnight on November
30, 2003.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to Landlord,
without offset or abatement, the sum of
December 1, 1998 - November 30, 2001 $32,533.33/month $390,400.00/year
December 1, 2001 - November 30, 2002 $33,834.67/month $406,016.00/year
December 1, 2002 - November 30, 2003 $35,176.67/month $422,120.00/year
on or before the first day of each calendar month beginning on December 1, 1998
and thereafter for the remainder of the term, together with any other additional
rental as hereinafter set forth. Tenant shall pay interest at a rate of twelve
percent (12%) per annum on all late payments of rent. If the Lease shall
commence on any date other than the first day of a calendar month, or end on any
date, other than the last day of a calendar month, rent for such month shall be
prorated. Tenant has deposited with Landlord, upon delivery of this Lease
Agreement, an amount equal to Thirty-Two Thousand Five Hundred Thirty-Three and
33/100 ($32,533.33) Dollars, which to be applied as first month's Base Rental
Landlord shall hold an amount equal to Six Thousand One Hundred Fifty-Nine and
no/100 ($6,159.00) Dollars from Tenant's previous lease agreement, and upon
execution of this Lease, shall apply said amount to be held as a refundable
security deposit for this Lease. Landlord may apply all or any part of the
security deposit to cure
<PAGE>
any default by Tenant hereunder and Tenant shall promptly restore to the
security deposit all amounts so applied upon invoice therefor. If Tenant shall
fully perform each provision of this Lease, any portion of the security deposit
which has not been appropriated by Landlord in accordance with the provisions
hereof shall be returned to Tenant, without interest, within thirty (30) days
after the expiration of the term of this Lease.
3.02 The rental provided in paragraph 3.01 "Rental" above, includes an
allowance ("Allowance") in the amount of $4.10 per square foot, not to exceed
$200,000.00 in the Leased Premises for the construction of tenant improvements
on the basis set forth in the plans and specifications attached, or to be
attached, hereto in Exhibit "B". Landlord shall submit to Tenant an estimate of
Landlord's tenant improvement cost ("Landlord's Estimate of Costs") for Tenant's
review and approval. Tenant will be deemed to have approved and accepted
Landlord's Estimate of Costs, unless Tenant shall have, within ten (10) calendar
days from receipt of the same, in writing, questioned or objected to costs to be
included as tenant improvement costs. If the total of the approved Landlord's
Estimate of Costs shall be greater than the Allowance, then Tenant shall pay to
Landlord such excess by cash payment within thirty (30) days after approval of
Landlord's Estimate of Costs and invoice, as hereafter provided. If the costs of
construction of the tenant improvements exceeds Landlord's Estimate of Costs for
reasons other than changes or delays initiated by Tenant, then Tenant shall not
be responsible for such excess costs.
3.03 In addition to the Base Rental, Tenant agrees to pay Landlord as
additional rental, its pro rata share of the amounts described in subparagraphs
(a) and (b) below. Each year during the term hereof, Landlord shall give Tenant
written notice of its estimate of the amount of common area maintenance charges
and common area utility charges (collectively "Charges") for the Leased Premises
for the calendar year. Tenant shall, thereafter, during that calendar year, pay
to Landlord one-twelfth (1/12) of the amount set forth in said statement at such
time as its monthly installments of Base Rental hereunder are due and payable.
At such time as Landlord is able to determine the actual Charges for such
calendar year, Landlord shall deliver to Tenant a statement thereof and in the
event the estimated Charges differ from the actual Charges, any adjustment
necessary shall be made to additional rental payments next coming due under this
paragraph. If Tenant has paid more than ten percent (10%) in excess of the
actual amount due from Tenant, Landlord shall pay interest on the overpayment,
and Landlord shall credit such excess against the next additional rent payments
coming due under this paragraph.
(a) Landlord agrees to maintain those areas around the Building and in the
Project, including parking areas, planted areas, signs and landscaped areas
which are from time to time designated by Landlord. Tenant agrees to pay to
Landlord as additional rental all ground maintenance charges and other common
area charges and expenses for the Building and the Land ("CAM Charges"). The
term "grounds maintenance" shall include, without limitation, all landscaping,
planting, lawn and grounds care, all repairs and maintenance to the grounds,
signs and other common areas
<PAGE>
around the Building and in the Project and to all sidewalks, driveways, loading
areas and parking areas. CAM Charges shall not include items of a capital
nature.
(b) In the event any utilities furnished to the Building or the Leased
Premises are not separately metered, Tenant shall pay to Landlord, as additional
rental, the cost of the gas, water, electricity, fuel, irrigation costs, light
and heat, garbage collection services and for all other sanitary services
rendered to the Leased Premises used by Tenant.
3.04 Tenant agrees to pay as additional rent to Landlord, upon demand, its
pro rata share of any utility surcharges, or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or regulations,
or interpretations thereof, promulgated by any Federal, State, Municipal or
local governmental authorities in connection with the use or occupancy of the
Leased Premises not including penalties and late fees.
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever except gross negligence or
willful misconduct, cannot deliver possession of the Leased Premises to Tenant
at the commencement of the term of this Lease, this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, but in that event there shall be a proportionate reduction
of rent covering the period between the commencement of the term and the time
when Landlord can deliver possession. If delay is longer than three (3) months,
Landlord will provide Tenant such space (not exceeding in area the Leased
Premises) as Landlord may have available, until the Leased Premises can be
completed, at no charge to Tenant. The term of this Lease shall be extended by
such delay.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, development and testing of medical devices,
warehousing and distribution, showroom and offices and for no other purpose or
purposes, without Landlord's prior written consent. Tenant shall promptly comply
at its sole expense with all laws, ordinances, orders, and regulations affecting
the Leased Premises and their cleanliness, safety, occupation and use. Tenant
shall not do or permit anything to be done in or about the Leased Premises that
will in any way increase the fire insurance premium upon the building. Tenant
will not perform any act or carry on any practices that may injure the building
or be a nuisance or menace to tenants of adjoining premises. Tenant shall not
cause, maintain or permit any outside storage on or about the Leased Premises,
including pallets or other refuse. The rear loading areas of the Tenant's unit
must be clean and unobstructed. On or before the Commencement Date, Tenant shall
take possession of, and, thereafter, continuously occupy the Leased Premises
during the term of this Lease, and operate thereon the normal business
operations of Tenant.
5.02 Tenant shall, at Tenant's sole cost and expense, comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to
<PAGE>
Tenant's operations at, on or within, or to Tenant's use and occupancy of, the
Leased Premises. Tenant shall not (either with or without negligence) cause or
permit the escape, disposal or release of any biologically or chemically active
or other hazardous substances, or materials. Tenant shall not allow the storage
or use of such substances or materials in any manner not sanctioned by law or by
the highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Project any such
materials or substances except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and
the regulations adopted under these acts. If any governmental agency shall ever
require testing to ascertain whether or not there has been any release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Leased Premises. In addition, Tenant shall execute affidavits,
representations and the like from time to time at Landlord's request concerning
Tenant's best knowledge and belief regarding the presence of hazardous
substances or materials on the Leased Premises. In all events, Tenant shall
indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the expiration or earlier termination of the
lease term.
5.03 Landlord represents and warrants to the best of its knowledge and
belief there are no hazardous substances currently located on the Leased
Premises.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in the
supply of any utilities unless the interruption in supply of utilities is caused
by the negligence of Landlord, its agents, servants or employees (but Landlord
shall not be responsible for the actions of independent contractors). In the
event Landlord is responsible for an interruption in the supply of utilities as
provided herein, and such interruption adversely affects Tenant's ability to
conduct its business in the Leased Premises for more than two consecutive
business days, Tenant shall be entitled to an abatement of base rental for each
day after the second business day during which the interruption continues as its
sole remedy for such interruption. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of any utility facilities
and that if any equipment installed by Tenant shall require additional utility
facilities, the same shall be installed by Tenant at Tenant's expense in
accordance with plans and specifications approved in writing by Landlord. Tenant
shall be solely responsible for and shall pay all charges for use or consumption
of sanitary sewer, water, gas, electricity and any other utility services
serving the Leased Premises. In the event Landlord determines that it is
advisable to separately meter any utility services provided to the Leased
Premises, Landlord shall
<PAGE>
have the right to install a sub-meter and bill Tenant for the actual cost
thereof, which shall be paid to Landlord within fifteen (15) days following
billing.
ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant, except for latent
defects and/or hazardous materials. Upon delivery of possession of the Leased
Premises to Tenant, Tenant agrees to execute and deliver to Landlord a Tenant's
Acceptance of Premises, in the form attached hereto as Exhibit "C".
ALTERATIONS, MECHANICS' LIENS
8.01 Structural alterations may not be made to the Leased Premises without
prior written consent of Landlord, and any alterations of the Leased Premises
excepting movable furniture and trade fixtures shall at Landlord's option become
part of the realty and belong to Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord gives
written consent to such alterations, at Landlord's option, Tenant shall contract
with a contractor approved by Landlord for the construction of such alterations.
8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions of
this Lease, and the Leased Premises are not damaged by such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear only excepted.
Tenant shall keep the Leased Premises, the building and property in which the
Leased Premises are situated free from any liens arising out of any work
performed for, materials furnished to, or obligations incurred by Tenant. All
such work provided for above, shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant shall give Landlord written
notice five (5) days prior to employing any laborer or contractor to perform
work resulting in an alteration of the Leased Premises so that Landlord may post
a notice of non-responsibility.
QUIET CONDUCT/QUIET ENJOYMENT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.
9.02 So long as Tenant is not in default in the payment of rent, or other
charges or in the performance of any of the other terms, covenants, or
conditions of the Lease,
<PAGE>
Tenant shall not be disturbed by Landlord or anyone claiming by, through or
under Landlord in Tenant's possession, enjoyment, use and occupancy of the
Leased Premises during the original or any renewal term of the Lease or any
extension or modification thereof.
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the Leased Premises,
nor acts done which might increase the existing rate of insurance upon the
building or cause the cancellation of any insurance policy covering the
building, or any part thereof, nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the Standard form of fire insurance policies. Landlord hereby represents and
warrants that Tenant's current use of the Leased Premises shall not increase the
existing rate of insurance upon the Building or cause the cancellation of any
insurance policy covering the Building, or any part thereof. Tenant shall, at
its sole cost and expense, comply with any and all requirements pertaining to
the Leased Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance, covering the
Leased Premises, building and appurtenances.
10.02 Tenant shall maintain in full force and effect on all of its
inventory, fixtures and equipment in the Leased Premises a policy or policies of
fire and extended coverage insurance with standard coverage endorsement to the
extent of at least eighty percent (80%) of their insurable value. During the
term of this Lease the proceeds from any such policy or policies of insurance
shall be used for the repair or replacement of the fixtures, and Landlord will
sign all documents necessary or proper in connection with the settlement of any
claim or loss by Tenant. Landlord will not carry insurance on Tenant's
possessions. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect.
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord public liability insurance for the benefit of
Landlord and Tenant jointly against liability for bodily injury and property
damage in the amount of not less than Three Million Dollars ($3,000,000.00) in
respect to injuries to or death of more than one person in any one occurrence,
in the amount of not less than One Million Dollars ($1,000,000.00) in respect to
injuries to or death of any one person, and in the amount of not less than One
Million Dollars ($1,000,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably indicated by
circumstances from time to time existing. Tenant shall furnish Landlord with a
certificate of such policy within thirty (30) days of the commencement date of
this Lease and whenever required shall satisfy Landlord that such policy is in
full force and effect. Such policy shall name Landlord as an additional insured
and shall be primary and non-contributing with any insurance carried by
Landlord. The policy shall contain a contractual liability endorsement. The
policy shall further provide that it shall not be canceled or altered without
twenty (20) days prior written notice to Landlord.
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INDEMNIFICATION
12.01 Tenant shall indemnify and hold harmless Landlord against and from
any and all claims arising from Tenant's use of the Leased Premises (other than
those arising solely from negligence or intentional misconduct of Landlord or
its agents or employees), or the conduct of its business or from any activity,
work, or thing done, permitted or suffered by the Tenant in or about the Leased
Premises, and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act, neglect, fault or omission of the Tenant, or of its
agents or employees, and from and against all costs, reasonable attorney's fees,
expenses and liabilities actually incurred in or about such claim or any action
or proceeding brought relative thereto and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel, chosen by Tenant
and who is reasonably acceptable to Landlord. Landlord acknowledges that
Tenant's insurance company counsel shall be sufficient for purposes of this
Section 12.01. Tenant, as a material part of the consideration to Landlord,
hereby assumes all risk of damage to property or injury to persons in or about
the Leased Premises from any cause whatsoever except that which is caused by the
failure of Landlord to observe any of the terms and conditions of this Lease
where such failure has persisted for an unreasonable period of time after
written notice of such failure, and Tenant hereby waives all claims in respect
thereof against Landlord.
12.02 Landlord shall indemnify Tenant and hold Tenant harmless against and
from all claims arising from the negligence or willful misconduct of Landlord,
its agents, employees or contractors, with respect to the Leased Premises that
is not insured against or required to be insured against under the insurance
policies Tenant is required to maintain under this Lease.
12.03 The obligations of Landlord and Tenant under this paragraph arising
by reason of any occurrence taking place during the term of this Lease shall
survive the termination or expiration of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered to
Landlord, hereby waives all claims against Landlord for damages to goods, wares
and merchandise in, upon or about the Leased Premises and for injury to Tenant,
its agents, employees, invitees, or third persons in or about the Leased
Premises from any cause arising at any time, except as provided in Sections
12.01 and 12.02 above.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls and
roofs which Landlord agrees to repair) including by way of illustration and not
by way of limitation all
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windows, and skylights, doors, any store front and the interior of the Leased
Premises, including all plumbing, heating, air conditioning, sewer, electrical
systems and all fixtures and all other similar equipment serving the Leased
Premises in good and sanitary order, condition, and repair. Tenant shall
maintain, but shall not be responsible to replace items of a capital nature,
except the HVAC system. Tenant shall be responsible for all pest control within
the Leased Premises, including, but not limited to the eradication of any ants
or termites should infestation be observed during the term of the Lease. Tenant
shall, at its sole cost, keep and maintain all utilities, fixtures and
mechanical equipment used by Tenant in good order, condition, and repair. All
windows shall be washed and cleaned as often as necessary to keep them clean and
free from smudges and stains. In the event Tenant fails to maintain the Leased
Premises as required herein or fails to commence repairs (requested by Landlord
in writing) within thirty (30) days after such request, or fails diligently to
proceed thereafter to complete such repairs, Landlord shall have the right in
order to preserve the Leased Premises or portion thereof, and/or the appearance
thereof, to make such repairs or have a contractor make such repairs and charge
Tenant for the cost thereof as additional rent, together with interest at the
rate of twelve percent (12%) per annum from the date of making such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations, and
exterior walls of the Leased Premises except repairs rendered necessary by the
negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of Leased Premises and shall be under no obligations to
inspect said Leased Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to it which Landlord is required to
repair, and Landlord shall move with reasonable diligence to repair such item.
Failure to report such defects shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such defects.
14.03 Prior to Tenant's occupancy, Landlord will inspect the heating,
ventilation and air conditioning equipment, certify that it is in good working
order and not beyond its useful life and make any necessary repairs or
replacements. Tenant shall obtain upon occupancy and keep current during the
lease term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall be
between Tenant and a dealer-authorized company acceptable to Landlord, and shall
at a minimum provide for an equipment check and tune-up service each spring and
fall, and filter and lubrication service every three months. A copy of said
contract shall be provided to Landlord, as well as any modification, extension,
renewal or replacement thereof.
14.03 Tenant may relocate its new air conditioning units currently
installed in 4350 International Boulevard to the Leased Premises. Tenant will
make all roof and structural repairs at 4350 International Boulevard associated
with the removal of such air conditioning units.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and Tenant
shall make no alterations or additions to the landscaping. Landlord shall have
the right to approve
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the placing of signs and the size and quality of the same. Tenant shall place no
exterior signs on the Leased Premises without the prior written consent of
Landlord. Any signs not in conformity with the Lease may be immediately removed
by Landlord.
ENTRY BY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times and with reasonable advance notice for
the purpose of inspecting the same or for the purpose of maintaining the
building, or for the purpose of making repairs, alterations, or additions to any
portion of the building, including the erection and maintenance of such
scaffolding, canopies, fences and props as may be required, or for the purpose
of posting notices of non-responsibility for alterations, additions, or repairs,
or for the purpose of showing the Leased Premises to prospective tenants, or
placing upon the building any usual or ordinary "for sale" signs, without any
rebate of rent and without any liability to Tenant for any loss of occupation or
quiet enjoyment of the Leased Premises thereby occasioned; and shall permit
Landlord at any time within six (6) months prior to the expiration of this
Lease, to place upon the Leased Premises any usual or ordinary "to let" or "to
lease" signs. For each of the aforesaid purposes, Landlord shall at all times
have and retain a key with which to unlock all of the exterior doors about the
Leased Premises but will not enter without prior notice. Landlord agrees to
protect any and all of Tenant's proprietary information from third party
invitees in connection with said entry.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency any and all taxes, assessments,
license fees, and public charges levied, assessed, or imposed and which become
payable during the Lease upon Tenant's fixtures, furniture, appliances and
personal property installed or located in the Leased Premises.
17.02 Tenant shall pay, as additional rental during the term of this Lease
and any extension or renewal thereof, the amount by which all taxes (as herein
defined) for each tax year exceeds all taxes for the tax year. In the event the
Leased Premises are less than the area of the entire property assessed for such
taxes for any such tax year, then the tax for any such year applicable to the
Leased Premises shall be determined by proration on the basis that the Leased
Premises bears to the of the entire property assessed. The term "taxes" shall
include all ad valorem taxes, special assessments, and governmental charges
assessed against the Building or the Land; and such term shall also include any
reasonable expenses, including fees and disbursements of attorneys, tax
consultants, arbitrators, appraisers, experts and other witnesses, incurred by
Landlord in contesting any taxes or the assessed valuation of all or any part of
the Building or the Land. If the final year of the lease term fails to coincide
with the tax year, then any excess for the tax year during which the term ends
shall be reduced by the pro rata part of such tax year beyond the lease term.
The agent's commission shall not apply to any such additional rental resulting
from the provisions of this paragraph.
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17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so-called sales tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes of
Landlord shall be payable by Tenant). Such taxes shall be due and payable at the
same time as and in addition to each payment of rent.
17.04 Commencing in the year 2000 and during each remaining year of the
lease term or any extension or renewal thereof, in the event that the insurance
premiums payable by the Landlord for insurance coverage on the property are
increased, whether such increase is due to an increase in the valuation of the
building, or in the applicable rate of insurance, then Tenant agrees to pay
Landlord as additional rental, the increase in said insurance premiums over the
base amount paid in the year 1999. The term "insurance" shall include all fire
and extended coverage insurance on the Building and all liability insurance
coverage on the common areas of the Building, and the grounds, sidewalks,
driveways and parking areas on the Land, together with such other insurance
coverages, including, but not limited to, rent interruption insurance, as are
from time to time obtained by Landlord. If during the final year of the Lease,
or any extension or renewal thereof, the term does not coincide with the year
upon which the insurance rate is determined, the increase in premiums for the
portion of that year shall be prorated according to the number of months during
which Tenant is in possession of the Leased Premises.
17.05 On or about January 1 of each calendar year during the term of this
Lease, Landlord shall provide Tenant with a good faith estimate of the amount by
which taxes and insurance will exceed the base amounts during such calendar
year. Tenant shall thereafter pay one-twelfth (1/12) of its pro rata share of
such increase at such time as its monthly installments of Base Rental hereunder
are due and payable. When the actual bills have been received by Landlord,
Landlord shall notify Tenant of the actual taxes and insurance for such calendar
year. If Tenant has paid more than ten percent (10%) in excess of the actual
amount due from Tenant, Landlord shall pay interest on the overpayment and ,
Landlord shall credit such excess against the next additional rent payments
coming due; if Tenant has not paid enough, Tenant shall pay the remainder to
Landlord within fifteen (15) days following receipt of a statement from
Landlord.
17.06 The provisions of paragraphs 17.01, 17.02, 17.03, 17.04 and 17.05
hereof shall survive the expiration or earlier termination of this Lease.
ABANDONMENT
18.01 Tenant shall not vacate nor abandon the Leased Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or surrender
the Leased Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Leased Premises shall, at
the option of the Landlord, be deemed abandoned and be and become the property
of Landlord.
<PAGE>
DESTRUCTION
19.01 If the Leased Premises or any portion thereof are destroyed by
storm, fire, lightning, earthquake or other casualty, Tenant shall immediately
notify Landlord. In the event the Leased Premises cannot, in Landlord's
reasonable judgment, be restored within one hundred eighty (180) days of the
date of such damage or destruction, this Lease shall terminate as of the date of
such destruction, and all rent and other sums payable by Tenant hereunder shall
be accounted for as between Landlord and Tenant as of that date. Landlord shall
notify Tenant within thirty (30) days of the date of the damage or destruction
whether the Leased Premises can reasonably be restored within one hundred eighty
(180) days. If this Lease is not terminated as provided in this Paragraph,
Landlord shall, to the extent insurance proceeds payable on account of such
damage or destruction are available to Landlord (with the excess proceeds
belonging to Landlord), within a reasonable time, repair, restore, rebuild,
reconstruct or replace the damaged or destroyed portion of the Leased Premises
to a condition substantially similar to the condition which existed prior to the
damage or destruction. Provided, however, Landlord shall only be required to
repair, restore, rebuild, reconstruct and replace the Landlord's Work shown on
Exhibit "B", and Tenant shall, at its sole cost and expense, upon completion of
the Landlord's Work, repair, restore, rebuild, reconstruct and replace, as
required, any and all improvements installed in the Leased Premises by Tenant
and all trade fixtures, personal property, inventory, signs and other contents
in the Leased Premises, and all other repairs not specifically required of
Landlord hereunder, in a manner and to at least the condition existing prior to
the damage. Tenant's obligation to pay Base Rent shall abate until Landlord has
repaired, restored, rebuilt, reconstructed or replaced the Leased Premises, as
required herein, in proportion to the part of the Leased Premises which are
unusable by Tenant. If the damage or destruction is due to the act, neglect,
fault or omission of Tenant, there shall be no rent abatement except to the
extent of rent loss insurance. In the event of any dispute between Landlord and
Tenant relative to the provisions of this paragraph, they may each select an
arbitrator, the two arbitrators so selected shall select a third arbitrator and
the three arbitrators so selected shall hear and determine the controversy and
their decision thereon shall be final and binding on both Landlord and Tenant
who shall bear the cost of such arbitration equally between them. Landlord shall
not be required to repair any property installed in the Leased Premises by
Tenant. Tenant waives any right under applicable laws inconsistent with the
terms of this paragraph and in the event of a destruction agrees to accept any
offer by Landlord to provide Tenant with comparable space within the project in
which the Leased Premises are located on the same terms as this Lease.
Notwithstanding the provisions of this paragraph, if any such damage or
destruction occurs within the final two (2) years of the term hereof, then
Landlord, in its sole discretion, may, without regard to the aforesaid 180-day
period, terminate this Lease by written notice to Tenant.
ASSIGNMENT AND SUBLETTING
20.01 Landlord shall have the right to transfer and assign, in whole or in
part its rights and obligations in the building and property that are the
subject of this Lease.
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Tenant shall not assign this Lease or sublet all or any part of the Leased
Premises without the prior written consent of the Landlord, which consent shall
not be unreasonably withheld or delayed. In the event of any assignment or
subletting, Tenant shall nevertheless at all times, remain fully responsible and
liable for the payment of the rent and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. If all or
any part of the Leased Premises are then assigned or sublet, Landlord, in
addition to any other remedies provided by this Lease or provided by law, may at
its option, collect directly from the assignee or subtenant all rents becoming
due to Tenant by reason of the assignment or sublease, and Landlord shall have a
security interest in all properties on the Leased Premises to secure payment of
such sums. Any collection directly by Landlord from the assignee or subtenant
shall not be construed to constitute a novation or a release of Tenant from the
further performance of its obligations under this Lease. In the event that
Tenant sublets the Leased Premises or any part thereof, or assigns this Lease
and at any time receives rent and/or other consideration which exceeds that
which Tenant would at that time be obligated to pay to Landlord, Tenant shall
pay to Landlord 100% of the gross excess in such rent as such rent is received
by Tenant and 100% of any other consideration received by Tenant from such
subtenant in connection with such sublease or, in the case of any assignment of
this Lease by Tenant, Landlord shall receive 100% of any consideration paid to
Tenant by such assignee in connection with such assignment. In addition, should
Landlord agree to an assignment or sublease agreement, Tenant will pay to
Landlord on demand the sum of $500.00 to partially reimburse Landlord for its
costs, including reasonable attorneys' fees, incurred in connection with
processing such assignment or subletting request.
20.02 Notwithstanding the foregoing, Tenant may freely transfer and assign
this Lease or sublet all or any portion of the Leased Premises (i) to any
affiliate or subsidiary of Tenant or (ii) in connection with any merger,
consolidation or sale of assets of Tenant, without having to obtain any consent
or approval of Landlord; provided, however, that any such assignment or
subletting shall not result in Tenant being released or discharged from any
liability under this Lease except to the extent Tenant ceases to exist following
any such merger or consolidation. Tenant shall provide Landlord with written
notice of such assignment or subletting prior to or promptly following the
effective date of such assignment or subletting.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a trustee to take possession of all or
substantially all of the assets of Tenant, or (b) a general assignment by Tenant
for the benefit of creditors, or (c) any action taken or suffered by Tenant
under any insolvency or bankruptcy act shall, if any such appointments,
assignments or action continues for a period of thirty (30) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election without notice,
terminate this Lease and in that event be entitled to immediate possession of
the Leased Premises and damages as provided below.
<PAGE>
BREACH BY TENANT
22.01 In the event of a default, Landlord in addition to any and all other
rights or remedies that it may have hereunder, at law or in equity shall have
the right to either terminate this Lease or from time to time, without
terminating this Lease relet the Leased Premises or any part thereof for the
account and in the name of Tenant or otherwise, for any such term or terms and
conditions as Landlord in its sole discretion may deem advisable with the right
to make reasonable alterations and repairs to the Leased Premises. Tenant shall
pay to Landlord, as soon as ascertained, the costs and expenses actually
incurred by Landlord in such reletting or in making such reasonable alterations
and repairs. Should such rentals received from time to time from such reletting
during any month be less than that agreed to be paid during that month by Tenant
hereunder, the Tenant shall pay such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly.
22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may immediately or at any time thereafter terminate this
Lease, and this Lease shall be deemed to have been terminated upon receipt by
Tenant of notice of such termination; upon such termination Landlord shall
recover from Tenant all damages that Landlord may suffer by reason of such
termination including, without limitation, all arrearages in rentals, costs,
charges, additional rentals, and reimbursements, the cost (including court costs
and attorneys' fees actually incurred) of recovering possession of the Leased
Premises, the actual or estimated (as reasonably estimated by Landlord) cost of
any alteration of or repair to the Leased Premises which is necessary or proper
to prepare the same for reletting and, in addition thereto, Landlord shall have
and recover from Tenant the difference between the present value (discounted at
a rate per annum equal to the discount rate of the Federal Reserve Bank of
Atlanta at the time the Event of Default occurs) of the rental to be paid by
Tenant for the remainder of the lease term, and the present value (discounted at
the same rate) of the rental for the Leased Premises for the remainder of the
lease term, taking into account the cost, time and other factors necessary to
relet the Leased Premises; provided, however that such payment shall not
constitute a penalty or forfeiture, but shall constitute full liquidated damages
due to Landlord as a result of Tenant's default. Landlord and Tenant acknowledge
that Landlord's actual damages in the event of a default by Tenant under this
Lease will be difficult to ascertain, and that the liquidated damages provided
above represent the parties' best estimate of such damages. The parties
expressly acknowledge that the foregoing liquidated damages are intended not as
a penalty, but as full liquidated damages, as permitted by Section 13-6-7 of the
Official Code of Ga. Annotated.
ATTORNEY'S FEES
23.01 If Landlord and Tenant litigate any provision of this Lease or the
subject matter of this Lease, the unsuccessful litigant will pay to the
successful litigant all costs and expenses, including reasonable attorneys' fees
and court costs, actually incurred by
<PAGE>
the successful litigant at trial and on any appeal. If, without fault, either
Landlord or Tenant is made a party to any litigation instituted by or against
the other, the other will indemnify the faultless one against all loss,
liability, and expense, including reasonable attorneys' fees and court costs,
incurred by it in connection with such litigation.
CONDEMNATION
24.01 If, at any time during the term of this Lease, title to the entire
Leased Premises should become vested in a public or quasi-public authority by
virtue of the exercise of expropriation, appropriation, condemnation or other
power in the nature of eminent domain, or by voluntary transfer from the owner
of the Leased Premises under threat of such a taking then this Lease shall
terminate as of the time of such vesting of title, after which neither party
shall be further obligated to the other except for occurrence antedating such
taking. The same results shall follow if less than the entire Leased Premises be
thus taken, or transferred in lieu of such a taking, but to such extent that it
would be legally or commercially impossible or impractical for Tenant to occupy
the portion of the Leased Premises remaining, and impossible for Tenant to
reasonably conduct his trade or business therein.
24.02 Should there be such a partial taking or transfer in lieu thereof,
but not to such an extent as to make such continued occupancy and operation by
Tenant an impossibility, then this Lease shall continue on all of its same terms
and conditions subject only to an equitable reduction in rent proportionate to
such taking.
24.03 In the event of any such taking or transfer, whether of the entire
Leased Premises, or a portion thereof, it is expressly agreed and understood
that all sums awarded, allowed or received in connection therewith shall belong
to Landlord, and any rights otherwise vested in Tenant are hereby assigned to
Landlord, and Tenant shall have no interest in or claim to any such sums or any
portion thereof, whether the same be for the taking of the property or for
damages, or otherwise. Nothing herein shall be construed, however, to preclude
Tenant from prosecuting any claim directly against the condemning authority for
loss of business, moving expenses, damage to, and cost of, trade fixtures,
furniture and other personal property belonging to Tenant; provided, however,
that Tenant shall make no claim which shall diminish or adversely affect any
award claimed or received by Landlord.
NOTICES
25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be sufficiently
given and served upon the other party, (i) by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
requiring signed receipt; (iii) by delivering the same in person to such party;
or (iv) by prepaid telegram, telecopy or telex with delivery of an original copy
of any such notice delivered pursuant to (ii) or (iii) above to be received no
later than the
<PAGE>
next business day. Notice personally delivered or sent by courier service,
telegram, telecopy or telex shall be effective upon receipt. Any notice mailed
in the foregoing manner shall be effective three (3) business days after its
deposit in the United States mail. Either party may change its address for
notices by giving notice to the other as provided above. For purposes of notice,
the addresses of the parties shall be as follows:
(a) To Tenant at the Leased Premises;
(b) To Landlord, addressed to Landlord at 4497 Park Drive, Norcross,
Georgia 30093, with a copy to such other place as Landlord may from
time to time designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant, or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises after
the expiration of the lease term and without executing a new lease, then such
holding over shall be construed as a tenancy from month to month, subject to all
the conditions, provisions, and obligations of this Lease insofar as the same
are applicable to a month to month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be 150% of the rent payable pursuant
to subparagraph 3.01.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any ground
lease, first priority mortgage, first priority deed of trust, or first priority
security deed now or hereafter placed upon the real property of which the Leased
Premises are a part and to any and all advances made on the security thereof and
to all renewals, modifications, consolidations, replacements and extensions
thereof.
28.02 Tenant agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any such ground lease,
mortgage, deed of trust, or security deed, as the case may be, including
specifically a subordination, non-disturbance and attornment agreement
substantially in the form hereto attached as Exhibit "D", and failing to do so
within ten (10) days after written demand, does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's name,
place and stead, to do so. If requested to do so, Tenant agrees to attorn to
<PAGE>
any person or other entity that acquires title to the real property encompassing
the Leased Premises, whether through judicial foreclosure, sale under power, or
otherwise, and to any assignee of such person or other entity. Landlord
represents that it is not currently in default under any existing mortgage or
ground lease.
ESTOPPEL CERTIFICATE
29.01 Upon twenty (20) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the first day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating but not limited to
the following: (i) the commencement date of this Lease; (ii) the space occupied
by Tenant hereunder; (iii) the expiration date hereof; (iv) a description of any
renewal or expansion options; (v) the amount of rental currently and actually
paid by Tenant under this Lease; (vi) the nature of any default or claimed
default hereunder by Landlord and (vii) that Tenant is not in default hereunder
nor has any event occurred which with the passage of time or the giving of
notice would become a default by Tenant hereunder.
PARKING
30.01 Tenant shall be entitled to utilize the parking facilities located
on the Land. Tenant agrees to park all Tenant's trucks in the parking spaces
provided at the rear of the building. "Parking" as used herein means the use by
Tenant's employees, its visitors, invitees, and customers for the parking of
motor vehicles for such periods of time as are reasonably necessary in
connection with use of and/or visits to the Leased Premises. No vehicle may be
repaired or serviced in the parking area and any vehicle deemed abandoned by
Landlord will be towed from the project and all costs therein shall be borne by
the Tenant. No area outside of the Leased Premises shall be used by Tenant for
storage without Landlord's prior written permission. There shall be no parking
permitted on any of the streets or roadways located in Gwinnett Pavilion.
MORTGAGEE PROTECTION
31.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
PROTECTIVE COVENANTS
32.01 This Lease is subject to the Protective Covenants of Gwinnett
Pavilion, and to such rules and regulations as may hereafter be adopted and
promulgated. In addition, Tenant shall comply with all covenants, restrictions
and other matters of record in the deed records of the county in which the
Leased Premises are located which affect or encumber the Leased Premises, the
Building or the Land.
<PAGE>
RELOCATION
33.01 Intentionally deleted.
BROKERAGE COMMISSIONS
34.01 Tenant's Agent and Landlord's Agent (collectively, "Agent") shall
each be entitled to receive a commission in the amounts, and upon the terms and
conditions, contained in a commission agreement between Landlord and such
parties.
34.02 Tenant warrants and represents to Landlord that, other than Agent,
no other party is entitled, as a result of the actions of Tenant, to a
commission or other fee resulting from the execution of this Lease; and in the
event Tenant extends or renews this Lease, or expands the Leased Premises, and
Tenant's Agent is entitled to a commission under the above-referenced commission
agreement, Tenant shall pay all commissions and fees payable to any party (other
than Tenant's Agent) engaged by Tenant to represent Tenant in connection
therewith. Landlord warrants and represents to Tenant that, except as set forth
above, no other party is entitled, as a result of the actions of Landlord, to a
commission or other fee resulting from the execution of this Lease. Landlord and
Tenant agree to indemnify and hold each other harmless from any loss, cost,
damage or expense (including reasonable attorneys' fees) incurred by the
nonindemnifying party as a result of the untruth or incorrectness of the
foregoing warranty and representation, or failure to comply with the provisions
of this subparagraph.
34.03 Tenant's Agent is representing Tenant in connection with this Lease,
and is not representing Landlord. Landlord's Agent, or employees of Landlord or
its affiliates, are representing Landlord and are not representing Tenant.
34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when required by
the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and the word "person" shall include
corporation, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
B. The headings or titles to paragraphs of this Lease are for convenience
only and shall have no effect upon the construction or interpretation of any
part of this Lease.
<PAGE>
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by agreement in writing signed by all parties to this Lease.
D. Where the consent of a party is required, such consent will not be
unreasonably withheld.
E. This Lease shall create the relationship of Landlord and Tenant between
Landlord and Tenant; no estate shall pass out of Landlord; Tenant has only a
usufruct, not subject to levy and/or sale and not assignable by Tenant except as
provided in paragraph 20.01 hereof.
F. Except as otherwise expressly stated, each payment required to be made
by Tenant shall be in addition to and not in substitution for other payments to
be made by Tenant.
G. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
H. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or payment of
rent shall be deemed an accord and satisfaction. Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
installment or payment of rent, or pursue any other remedies available to
Landlord.
I. Subject to paragraph 20, the terms and provisions of this Lease shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant. In the event of
any conveyance by Landlord of its interest in and to the Leased Premises, the
Building or the Land, all obligations under this Lease of the conveying party
shall cease and Tenant shall thereafter look solely to the party to whom the
Leased Premises were conveyed for performance of all of Landlord's duties and
obligations under this Lease.
J. Tenant acknowledges and agrees that Landlord shall not provide guards
or other security protection for the Leased Premises and that any and all
security protection shall be the sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Time is of the essence of each term and provision of this Lease.
M. Tenant shall not record this Lease or a memorandum thereof without the
written consent of Landlord. Upon the request of Landlord, Tenant shall join in
the execution of a memorandum or so-called "short form" of this Lease for the
purpose of
<PAGE>
recordation. Said memorandum or short form of this Lease shall describe the
parties, the Leased Premises and the lease term, and shall incorporate this
Lease by reference.
N. Landlord's liability for performance of its obligations under the terms
of this Lease shall be limited to its interest in the Leased Premises.
O. Special Stipulations are attached hereto as Exhibit "E" and by
reference incorporated herein.
(SIGNATURES CONTAINED ON FOLLOWING PAGE)
<PAGE>
IN WITNESS WHEREOF, the parties hereto who are individuals have set their
hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
Signed, sealed and delivered LANDLORD:
as to Landlord, in the
presence of: WEEKS REALTY, L.P.,
a Georgia limited partnership
___________________________ By: Weeks GP Holdings, Inc.
a Georgia corporation,
its sole general partner
___________________________
Notary Public By:____________________________
Name:__________________________
Its:___________________________
Signed, sealed and delivered TENANT:
as to Tenant, in the presence
of: NOVOSTE CORPORATION
By:____________________________
___________________________
Name:__________________________
___________________________ Its:___________________________
Notary Public
ATTEST:
By:____________________________
Name:__________________________
Its:___________________________
(Corporate Seal)
<PAGE>
EXHIBIT "C"
ACCEPTANCE OF PREMISES
Tenant: ____________________________________________________
Landlord: ____________________________________________________
Date Lease Signed: _____________________________________________
Term of Lease: _____________________________________________
Address of Leased Premises: Suite ______ containing approximately______________
square feet, located at
_________________________________________________________
_________________________________________________________
Commencement Date: _________________________________________
Expiration Date: _________________________________________
The above described premises are accepted by Tenant as suitable for the purpose
for which they were let. The above described lease term commences and expires on
the dates set forth above. Tenant acknowledges that it has received from
Landlord ________ number of keys to the Leased Premises. It is understood that
there is a punch list which will be completed after move-in and will be an
exhibit to the Tenant Estoppel.
TENANT LANDLORD
________________________________ __________________________________
(Type Name of Tenant) (Type Name of Landlord)
By: ____________________________ By: ______________________________
(Signature) (Signature)
________________________________ __________________________________
(Type Name and Title) (Type Name and Title)
<PAGE>
EXHIBIT "D"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made as of the ___ day of __________, 19__, between with
offices at __________________________ ("Tenant") and __________________________
(herein, together with its successors, transferees and assigns, the
"Mortgagee");
W I T N E S S E T H:
WHEREAS, Mortgagee is about to or has heretofore granted to
__________________ , a Georgia limited partnership (the "owner") a first
mortgage loan, which loan is secured by a security deed (herein "Mortgage")
dated as of _______ , 199_ and duly recorded on _______, 199_ in the land
records of Gwinnett County, Georgia; and
WHEREAS, the Mortgage is to be a first and prior lien upon the Owner's fee
estate in the real property described in Exhibit "A" annexed hereto ("Mortgaged
Premises"); and
WHEREAS, Tenant is occupying a portion of the Mortgaged Premises under a
lease dated as of _______ , 199_ in which Owner is Landlord (the "Lease")
covering that portion of the Mortgaged Premises therein more particularly
described (the "Leased Premises"); and
WHEREAS, Tenant desires to be assured of its continued and undisturbed
occupancy of the Leased Premises should the Mortgage be foreclosed or the
Mortgaged Premises sold pursuant to any power of sale contained therein and
Mortgagee is agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and in further consideration of the sum of ONE DOLLAR ($1.00) each to
the other in hand paid, the receipt whereof is hereby acknowledged, Tenant and
Mortgagee mutually covenant and agree as follows:
FIRST: The Lease and all of Tenant's rights, interest and estate therein
and thereunder are hereby made subject and subordinate to the lien of the
Mortgage and to any extensions, renewals, replacements, modifications, additions
or consolidations thereof and to all rights, title and interest of Mortgagee and
its successors and assigns therein and thereunder.
SECOND: In the event, however, proceedings shall ever be instituted by
Mortgagee to foreclose or liquidate the Mortgage, the Tenant's possession of its
leased portion of the Mortgaged Premises shall not be disturbed by the
foreclosure proceedings
<PAGE>
and the Mortgaged Premises shall be sold at any foreclosure sale subject to
Tenant's possession on condition that:
(a) there shall be, at the time of commencement of foreclosure
proceedings, as well as all subsequent times, no default by Tenant
in the due and timely observance and performance of any covenant and
agreement in the Lease to be observed and performed by Tenant; and
(b) the Tenant shall not have entered into any agreement modifying any
term, condition or agreement of the Mortgagee-approved Lease without
the prior written consent of Mortgagee.
THIRD: Tenant shall attorn to Mortgagee while Mortgagee is in possession
of the Mortgaged Premises, or to a Receiver appointed in any action or
proceeding to foreclose the Mortgage. In the event of the completion of
foreclosure proceedings and sale of the Mortgaged Premises or in the event the
Mortgagee should otherwise acquire possession of the Mortgaged Premises, the
Tenant will promptly upon demand attorn to the purchaser at the foreclosure sale
or to the Mortgagee, as the case may be, and will recognize such purchaser or
the Mortgagee as the Tenant's landlord. The Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the Mortgagee or
the purchaser at the foreclosure sale, as the case may be, any instrument which
may be necessary or appropriate to such successor landlord to evidence such
attornment. The Tenant shall, upon demand of the Mortgagee or any Receiver or
purchaser at the foreclosure sale, pay to the Mortgagee or to such Receiver or
purchaser, as the case may be, all rental monies then due or as they thereafter
become due.
FOURTH: Upon the attornment provided for in preceding Paragraph THIRD the
Tenant's occupancy shall thereafter be in full force and effect as under a
direct Lease between Mortgagee, the Receiver or the purchaser at the foreclosure
sale, as the case may be, and Tenant. It is specifically understood and agreed
that Mortgagee or any such Receiver or purchaser shall not be:
(a) liable for any act, omission, negligence or default of any prior
landlord, or
(b) subject to any offsets, claims or defenses which Tenant might have
against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might have paid
for more than one month in advance to any prior landlord; or
(d) bound by any amendment or modification of the Lease made without the
prior written consent of the Mortgagee.
<PAGE>
FIFTH: On and after the date Tenant in good standing attorns to Mortgagee
or any Receiver or subsequent owner in pursuance of its agreement herein set
forth, Mortgagee, the Receiver or such subsequent owner will undertake and
perform all subsequent obligations of the Landlord as set forth in the Lease for
the benefit of and undisturbed occupancy of Tenant under the Lease.
SIXTH: Tenant agrees it will not amend, modify nor abridge the Lease in
any way, nor cancel or surrender the same without prior written approval of the
Mortgagee other than by reason of a continued uncured material default of the
landlord under the Lease, nor will the Lease ever merge into the fee in the
event that Mortgagee acquires fee title to the Mortgaged Premises.
SEVENTH: Any notices or other communication to be given hereunder by
either party shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if sent by registered or certified mail with
return receipt requested to the other party hereto at its address above stated
or such other address of which written notification has been timely given to the
other party.
EIGHTH: Mortgagee has and shall have the continuing right to execute and
record in the Land Records of Gwinnett County, Georgia at any time, in its
unilateral discretion, a Declaration of Subordination for the purpose of thereby
subordinating its rights, title and interest in and under the Mortgage to the
rights, title and interest of Tenant under the Lease. Such Declaration of
Subordination shall, at Mortgagee's election, operate, function and be in full
force and effect for whatever period of time Mortgagee declares therein that it
shall be in force not exceeding the term of the Lease and any extensions thereof
and the said Declaration may be voided unilaterally by Mortgagee when it so
elects.
NINTH: Tenant waives any and all rights it may have to execute and record
after the date hereof any document purporting to again or further subordinate
its right, title or interest under the Lease to the lien of either the Mortgage
or any other mortgage or deed of trust or any ground lease or any agreement
modifying or amending the Mortgage except with the written consent of Mortgagee.
TENTH: This Agreement cannot be changed orally but only in writing signed
by both parties hereto.
ELEVENTH: This Agreement may be recorded by either party at its own
expense in the Land Records of Gwinnett County, Georgia whenever, in its sole
discretion, either party elects so to do.
<PAGE>
TWELFTH: All of the terms, covenants and conditions hereof shall run with
the Mortgaged Premises and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, acknowledged and delivered the day and year first above written.
SIGNED, SEALED AND DELIVERED TENANT:
in the presence of:
___________________________
___________________________ BY:_____________________________
MORTGAGEE:
___________________________ BY:_____________________________
___________________________
The undersigned Owner of the leased and mortgaged premises hereby consents
to the foregoing Agreement and agrees to be bound by and subject to the terms
thereof.
BY:_____________________________
<PAGE>
EXHIBIT "E"
SPECIAL STIPULATIONS
Option to terminate:
Effective as of the end of the thirty-sixth (36) month of the lease term,
Tenant has the option to terminate this Lease Agreement, provided that Tenant
provides Landlord with written notice of its intention to terminate at least 90
days prior to the termination date and provided that Tenant pays to Landlord a
sum equal to three (3) month's base rental as set forth in paragraph 3.01
hereof, and payments of all unamortized tenant improvements, and commissions due
to Broker. It is hereby acknowledged that any such amount required to be paid by
Tenant in connection with such early termination is not a penalty but a
reasonable estimate of the loss that would be incurred by Landlord as a result
of such early termination of this Lease and, in that regard, constitutes
liquidated damages with respect to such loss.
In no event shall Tenant be entitled to exercise any rights under this
Section at any time during which either (i) Tenant is in default, or an event of
default exists with respect to Tenant, under this Lease, or (ii) this Lease is
not in full force and effect; and any purported exercise by Tenant of its
cancellation rights hereunder that is not made in strict and timely accordance
herewith or that is made at a time when Tenant is in default hereunder shall be
void and of no force or effect whatsoever.
On or prior to the termination date, Tenant will surrender possession of
the Leased Premises to Landlord in accordance with the provisions of this Lease
as if the termination date were the expiration date of this Lease.
<TABLE> <S> <C>
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0
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