<PAGE>
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission file number: 333-53841
WAM!NET Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-1795247
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
655 Lone Oak Drive
Eagan, Minnesota 55121
(Address of principal executive offices)
(Zip Code)
(651) 256-5100
(Registrant's telephone number, including area code)
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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of October 31, 1999 there were 9,297,427 shares of the Corporation's Common
Stock, par value $.01 per share, outstanding.
Total number of pages in this report: 21
<PAGE>
WAM!NET Inc.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Part I--Financial Information
Page
No.
---
<S> <C>
Item 1--Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited)
and December 31, 1998............................................................. 3
Consolidated Statements of Operations for the three and nine months in the periods
ended September 30, 1999 and 1998 (unaudited)..................................... 5
Consolidated Statements of Cash Flows for the nine months in the periods ended
September 30, 1999 and 1998 (unaudited)........................................... 6
Notes to Consolidated Financial Statements (unaudited).............................. 8
Item 2--Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 9
Item 3--Quantitative and Qualitative Disclosures About Market Risk......................... 16
Part II--Other Information
Item 2--Changes in Securities and Use of Proceeds.......................................... 17
Item 6--Exhibits and Reports on Form 8-K................................................... 17
Signature -- ................................................................................... 18
Exhibit Index-- ................................................................................... 19
</TABLE>
-2-
<PAGE>
Part I--FINANCIAL INFORMATION
Item 1--Financial Information
WAM!NET Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .......................................... $ 31,919 $ 6,272
Accounts receivable, net of allowance of $880 and $430, respectively 5,138 3,466
Inventory .......................................................... 1,572 1,534
Prepaid expenses and other current assets .......................... 3,983 3,187
-------- --------
Total current assets .......................................... 42,612 14,459
Property and equipment:
Building and land .................................................. 39,742 605
Network equipment .................................................. 66,613 50,907
Other support equipment ............................................ 21,714 18,046
Furniture and fixtures ............................................. 4,403 2,802
Leasehold improvements ............................................. 4,634 6,506
-------- --------
137,106 78,866
Accumulated depreciation ........................................... 33,374 16,399
-------- --------
103,732 62,467
Goodwill, net of accumulated amortization of $10,266 and $5,308,
respectively ................................................... 22,714 27,734
Deferred financing charges, net of accumulated amortization of
$9,637 and $5,959, respectively ................................ 19,549 20,183
Other assets ....................................................... 628 616
-------- --------
Total assets .................................................. $189,235 $125,459
======== ========
</TABLE>
-3-
<PAGE>
WAM!NET Inc.
Consolidated Balance Sheets (continued)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------- ----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable ............................................. $ 17,710 $ 17,098
Accrued salaries and wages ................................... 3,580 4,801
Accrued expenses ............................................. 6,376 3,176
Current portion of equipment financing ....................... 8,023 5,324
--------- ---------
Total current liabilities ............................... 35,689 30,399
Long-term debt:
Subordinated notes payable ................................... 28,779 27,403
Notes payable ................................................ 38,000 --
Line of credit ............................................... 27,708 24,000
Equipment financing .......................................... 14,490 13,536
13.25% Senior Discounted Notes ............................... 152,987 138,975
Redeemable Preferred Stock, Class A, $10.00 par value:
Authorized shares--115,206
Issued and outstanding shares--115,206 and 100,000 at
September 30, 1999 and December 31, 1998 ............. 1,152 1,000
Shareholders' deficit:
Convertible Preferred Stock, Class B, $.01 par value:
Authorized, issued and outstanding--5,710,425 and 0 ..... 57 --
Convertible Preferred Stock, Class C, $.01 par value:
Authorized, issued and outstanding--878,527 and 0 ....... 9 --
Convertible Preferred Stock, Class D $.01 par value:
Authorized, issued and outstanding--2,196,317 and 0 ..... 22 --
Undesignated shares, $.01 par value--1,099,525
Common Stock, $.01 par value:
Authorized shares--490,000,000
Issued and outstanding shares--9,297,427 and 9,288,194 at
September 30, 1999 and December 31, 1998 ............. 93 93
Additional paid-in capital ................................... 156,600 54,302
Accumulated deficit .......................................... (265,870) (164,387)
Other accumulated comprehensive income (loss) ................ (481) 138
--------- ---------
Total shareholders' deficit .................................. (109,570) (109,854)
--------- ---------
Total liabilities and shareholders' deficit .................. $ 189,235 $ 125,459
========= =========
</TABLE>
See accompanying notes.
-4-
<PAGE>
WAM!NET Inc.
Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net service revenue .................................... $ 4,787 $ 1,782 $ 11,861 $ 4,256
Software and hardware sales ............................ 2,029 3,739 5,622 8,480
----------- ----------- ----------- -----------
Total revenue .......................................... 6,816 5,521 17,483 12,736
Operating expenses:
Network communications ................................. 6,766 4,602 19,489 11,502
Cost of software and hardware .......................... 823 1,155 2,220 2,631
Network operations and development ..................... 6,448 11,628 17,222 23,994
Selling, general and administrative .................... 9,581 9,956 30,952 33,058
Depreciation and amortization .......................... 8,851 5,328 24,908 11,353
----------- ----------- ----------- -----------
32,469 32,669 94,791 82,538
----------- ----------- ----------- -----------
Loss from operations ................................... (25,653) (27,148) (77,308) (69,802)
Other income (expense):
Interest income ................................... 90 464 520 1,612
Interest (expense) ................................ (7,987) (6,293) (25,479) (15,787)
Other income ...................................... 508 718 783 783
----------- ----------- ----------- -----------
Net loss ............................................... $ (33,042) $ (32,259) $ (101,484) $ (83,194)
Less preferred dividends ............................... (1,800) (18) (4,105) (52)
----------- ----------- ----------- -----------
Net loss applicable to common stock .................... $ (34,842) $ (32,277) $ (105,589) $ (83,246)
=========== ----------- =========== -----------
Net loss applicable per common share - basic and diluted $ (3.75) $ (3.74) $ (11.36) $ (9.65)
=========== =========== =========== ===========
Weighted average number of common shares outstanding ... 9,296,339 8,627,889 9,296,339 8,627,889
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
-5-
<PAGE>
WAM!NET Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Operating activities
Net loss .................................................................. $(101,484) $ (83,194)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................ 24,908 11,544
Noncash interest expense, including related warrants values .......... 21,864 12,719
Loss on disposal of property and equipment ........................... 1,354 69
Value of stock options issued to employees and consultants ........... 145 12,492
Changes in operating assets and liabilities:
Accounts receivable ............................................. (1,671) 329
Prepaid expenses and other assets ............................... (806) (3,380)
Accounts payable ................................................ 612 8,427
Accrued expenses ................................................ 646 3,846
Income Taxes .................................................... -- (1,360)
--------- ---------
Net cash used in operating activities ..................................... (54,432) (38,508)
Investing activities
Purchases of property and equipment ....................................... (22,609) (38,598)
Purchase of 4-Sight and Freemail (net of cash acquired) ................... (250) (16,350)
--------- ---------
Net cash used in investing activities ..................................... (22,859) (54,948)
Financing activities
Proceeds from exercise of stock options ................................... 5 11
Net proceeds from sale of convertible preferred stock ..................... 59,498 --
Proceeds from 13.25% Senior Discount Notes ................................ -- 120,626
Proceeds from line of credit .............................................. 13,397 5,203
Payments on line of credit ................................................ (10,000) (24,003)
Net proceeds from notes payable ........................................... 36,765 --
Proceeds from equipment financing ......................................... 8,347 14,274
Payments on equipment financing ........................................... (4,756) (3,465)
Capitalized financing costs ............................................... -- (2,098)
--------- ---------
Net cash provided by financing activities ................................. 103,256 110,548
Effect of foreign currencies on cash ...................................... (318) 260
--------- ---------
Increase (decrease) in cash and cash equivalents .......................... 25,647 17,352
Cash and cash equivalents at beginning of period .......................... 6,272 274
--------- ---------
Cash and cash equivalents at end of period ................................ $ 31,919 $ 17,626
========= =========
</TABLE>
See accompanying notes.
-6-
<PAGE>
WAM!NET Inc.
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
Supplemental schedule of noncash financing activities
Conversion of accrued dividends to preferred stock .................. 152 --
Issuance of convertible preferred stock in exchange for land,
building and furniture & fixtures ................................. 40,000 --
Warrant valuation reclassed to deferred charges from line of credit . -- 4,104
Value of interest cost assigned to warrants ......................... 4,297 --
Accumulated and unpaid dividends .................................... 47 52
Issuance of common stock relating to acquisition .................... -- 20,000
Conversion of convertible subordinated debenture for common stock ... -- 25
Supplemental schedule of cash flow information
Cash paid for interest .............................................. $ 3,230 $ 1,654
</TABLE>
See accompanying notes.
-7-
<PAGE>
WAM!NET INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared by WAM!NET
Inc. ("We," "us," "our") without audit and reflect all adjustments (consisting
only of normal and recurring adjustments and accruals) which are, in the opinion
of management, necessary to present a fair statement of the results for the
interim periods presented. The statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of regulation S-X, but omit
certain information and footnote disclosures necessary to present the statements
in accordance with generally accepted accounting principles. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for the full fiscal year. These financial statements
should be read in conjunction with our audited Consolidated Financial Statements
for the year ended December 31, 1998. The December 31, 1998 balance sheet was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. Certain amounts for the
prior year have been reclassified to conform to current year presentation.
2. Consolidation
The consolidated financial statements include our accounts and our wholly-owned
subsidiaries: FreeMail, Inc., NetCo Communications of Canada, Inc., WAM!NET
Japan KK and WAM!NET U.K. Limited (formerly 4-Sight Limited). All intercompany
transactions have been eliminated.
3. Preferred Stock
In January 1999, we issued the 1999 MCI WorldCom Convertible Note and in January
1999 and March 1999, we borrowed $10.0 million and $15.0 million, respectively.
The 1999 MCI WorldCom Convertible Note was converted into 2,196,317 shares of
our Class D Convertible Preferred Stock, par value $.01 per share (the "Class D
Preferred Stock"), immediately prior to the closing of the Silicon Graphics,
Inc. investment discussed below ("SGI Investment"). In connection with the MCI
WorldCom Convertible Note, we issued warrants to MCI WorldCom to purchase a
total of 350,000 shares of Common Stock. The warrants have an exercise price of
$.01 and are exercisable from April 30, 1999 until April 30, 2004.
In March 1999, we entered into the SGI Investment, providing for the purchase by
SGI of 5,710,425 shares of our Class B Convertible Preferred Stock, par value
$.01 per share (the "Class B Preferred Stock"), and 878,527 shares of our Class
C Convertible Preferred Stock, par value $.01 per share (the "Class C Preferred
Stock"). The holders of a majority of the Class B Preferred Stock have the right
to designate one member of our Board of Directors. The aggregate consideration
received by us for the Class B Preferred Stock and the Class C Preferred Stock
was $75 million, of which $35 million was paid in cash and $40 million was paid
by transfer to us of a corporate campus facility. The Class B Preferred Stock
and the Class C Preferred Stock will be convertible on a one-to-one basis into
Common Stock (subject to anti-dilution adjustments) and will have the right to
vote with the Common Stock, on an as-converted basis, as a single class. The
Class B Preferred Stock and Class C Preferred Stock are convertible immediately
following the issuance date and 18 months following the issuance date,
respectively. The shares of convertible Common Stock into which the Class B
Preferred Stock and the Class C Preferred Stock are subject to certain
registration rights.
-8-
<PAGE>
Sale Leaseback
On September 30, 1999, we entered into a Purchase and Sale Agreement and Escrow
Instructions together with a Net Lease Agreement or Memorandum of Lease
(collectively, "The Sale/Lease Back Agreement") with CCPRE-Eagan, LLC, ("CCPRE")
a Delaware Limited Liability Company, and an affiliate of Chase Bank, New York.
Pursuant to the Sale/Lease Back Agreement, we conveyed our corporate
headquarters facility, including land, building and personal property to CCPRE
for a total purchase price of $38 million. Under the Sale/Lease Back Agreement,
we agreed to lease the facility from CCPRE for a term of 20 years with three
five-year options at a minimum monthly rent increasing from $481,000 per month
during the first year of the initial term to $959,000 per month during the last
year of the initial term. We also agreed to pay all taxes, assessments,
utilities and other governmental charges. Under the Sale/Lease Back Agreement,
we may repurchase the corporate headquarters facility on the 24th or 36th month
anniversary of the agreement. The Sale/Lease Back Agreement entitles CCPRE to
require us to repurchase our corporate headquarters facility at any time
following the 36th month anniversary of the Agreement for the sum $41.8 million,
less the amount of certain payments made under the lease. As additional
consideration for the Sale/Lease Back Agreement, we issued Chase Capital
Partners ten-year warrants to purchase 325,000 shares of common stock at an
initial exercise price of $12.00 per share. The initial exercise price is
subject to antidilution adjustments. The warrant agreement entitles the holder
to require us to repurchase shares issued upon exercise of the warrant if we
elect to repurchase our corporate headquarters facility prior to an initial
public offering of our common stock, at a per share purchase price equal to 92%
of fair market value determined by appraisal. In connection with the warrant
agreement, Chase Capital Partners entered into agreements with MCI WorldCom and
SGI entitling the holder of the warrants to include a portion of the warrants,
or shares issuable upon exercise, in any transaction occurring prior to our
initial public offering in which either MCI WorldCom or SGI sold 10% or more of
its ownership of our securities.
Item 2--Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis is based on the historical
results of WAM!NET Inc. ("We," "us" "our") and should be read in conjunction
with our Financial Statements included herein. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements.
Overview
We offer a suite of electronic data delivery services including our
Direct Service, On-Ramp Service and Internet Gateway Services. Our initial focus
through 1998 was our Direct Service. This is our fastest, most secure and most
reliable transport service, that includes installation of equipment on our
customer's premises and provision of telephone service connecting the equipment
to our network. This service provides direct, guaranteed and managed access and
transport over our private network. Customers choose from a variety of
capacities, speeds and throughput levels to meet their requirements. We released
our On-Ramp Service in Europe during the first quarter of 1999 and in North
America during the second quarter of 1999. Our On-Ramp service allows customers
to connect to our network using software we provide, an ISDN card, which we also
offer, and a dial-up ISDN or similar telephone service which our customer
obtains. We introduced our Internet Gateway Service to our Direct Service
customers in the third quarter of 1999. Internet Gateway service allows
connection to our network over the Internet. Both On-Ramp and Internet Gateway
services are targeted to facilitate growth in the number and size of workflow
groups by permitting connectivity at lower costs commensurate with lower
capacity needs for smaller users who are often key participants in workflow. At
September 30, 1999, we had over 5,000 subscribers using our data delivery
services.
-9-
<PAGE>
Revenues.
Service revenue. Our service revenue is directly related to customer
traffic through our global private network which is related to the number of,
and degree of utilization by, workflow groups who connect among themselves
through our network. Our service revenue is derived primarily from annual or
multi-year service contracts, many of which have automatic renewal or extension
provisions. These contracts generally include a minimum monthly fee and
additional charges for usage that exceeds an included monthly minimum. We
currently offer our services at scaled minimum usage fees, which typically range
for Direct Service from $650 per month to $4,000 per month, and for On-Ramp
Service from $45 per month to $360 per month. Our Internet Gateway is priced
primarily on a per-megabyte basis. We begin to earn service revenue from Direct
Service customers following installation of equipment and service at a
customer's premises, which typically lags contract signing by 60 to 90 days. We
begin to earn service revenue from our other services upon contract signing
and/or usage. We began to record revenue from our On-Ramp Service in March 1999,
and began to record revenue from Internet Gateway Service in September of 1999.
We expect to introduce our initial WAM!BASE(R) data storage services during the
first quarter of 2000.
Software and hardware sales. Revenue from software and hardware sales
resulted primarily from the sale of 4-Sight ISDN Manager(TM) software and ISDN
cards. In addition, our On-Ramp Service customers may choose to make a single
upfront payment and purchase software instead of paying monthly service fees
under contracts for the use of our On-Ramp software. In both cases these
purchases appear as software and hardware sales in our revenue. We expect
revenue from software and hardware sales to decline upon completion of the
long-term contracts for 4-Sight ISDN Manager(TM) and ISDN cards.
No single customer accounted for more than 5% of our revenues for the
nine month period ended September 30, 1999 on a consolidated basis.
Operating Expenses.
Network communications. Network communications expense represents the
largest direct cost associated with providing our Direct Service. Network
communications expense includes both the costs of the high bandwidth, backbone
carrier services interconnecting our global infrastructure of network operation
and data storage centers and distribution hubs as well as the costs of local
loop telephone circuits connecting our network access devices from a customer's
premises to the nearest distribution hub. Local telephone circuit connections
provided by local exchange carriers account for the substantial majority of
these charges, with significant differences between urban and rural connection
costs. National and international carrier service, accounts for the balance of
these charges. Network communication expense is generally a fixed monthly cost
per circuit. We expect that network communications expense will increase as our
network expands; however, we expect that the cost of these expenses as a
percentage of revenue will decline with increasing utilization of our network.
We also believe that growing competition among telephony and communications
providers may reduce the cost of local telephone circuit and backbone
connections. We actively seek to obtain and deploy technologies that will reduce
the costs of local telephone circuit connections, such as wireless technologies,
remote dial-up capabilities and DSL. We also intend to use our network
management tools to optimize the use of existing and planned network capacity as
volume increases and traffic patterns begin to emerge. We continue to incur
substantial network communication expense as we deploy our network and related
services and applications globally; however, we expect the network
communications expense as a percentage of revenue to decline.
Software and hardware. Software and hardware expense reflects the costs
of software and hardware sold.
Network operations and development. Network operations and development
expense represents costs directly associated with developing, maintaining,
managing and servicing our global private network and expanding our service
offerings. These costs include direct labor, vendor service fees,
point-of-presence charges and research and development charges, which are often
incurred in advance of receiving revenue. Our currently installed
-10-
<PAGE>
network operation centers account for the substantial majority of these direct
labor and operating costs. Most of the costs associated with the development of
new services and applications, such as WAM!BASE(R), WAM!PROOF(R), On-Ramp and
Internet Gateway, are accounted for as network operations expenses and are
incurred in advance of receiving revenue. We expect that network operations
costs will increase as our network expands; however, the cost of network
operations as a percentage of revenue is expected to decline.
Selling, general and administrative. Our selling expense consists
primarily of the salaries and commissions of our direct sales force and our
global marketing groups, commissions for channel partners, and the costs of
ongoing marketing activities such as promotions and channel development. Our
sales and marketing efforts through the end of 1998 were primarily intended to
create awareness of our services, stimulate trial use and induce integration
into customer workflow. With the growth of our installed customer base, we began
in 1999 integrating our services into our customers' workflow and expanding the
size and number of workflow groups with our more affordable On-Ramp and Internet
Gateway connectivity options. We expect to continue to incur significant sales
and marketing expenses in order to obtain increased penetration in our markets
and to generate increased traffic among existing customers.
Our general and administrative expense includes administrative
salaries, related overhead and professional service fees. These costs reflect
expenditures related to the rapid growth and expansion of our administrative
infrastructure necessary to manage our globally expanding operations, and
professional service fees for financing activities, contract negotiations and
acquisitions. We continue to incur general and administrative expenses as we
continue to deploy our network and related services and applications globally;
however, we expect the cost of general and administrative expenses as a
percentage of revenue to decline.
Depreciation and amortization. We retain ownership of the customer
premise equipment and most of the hardware and software necessary for our
customers to use our services on a turn-key basis. Depreciation and amortization
expense includes depreciation of this hardware and software as well as the
equipment located in our distribution hubs and network operation and data
storage centers. We also amortize certain costs relating to the acquisitions of
4-Sight and Freemail, which we acquired using the purchase method of accounting.
We anticipate additional capital investments in our network infrastructure
commensurate with customer demand and market opportunity. As a result, we
anticipate that depreciation and amortization expense will continue to increase
in future periods as we continue to purchase equipment and expand operations;
however, we expect depreciation and amortization expense as a percentage of
revenue to decline.
Results of Operations
Three and Nine Month Periods Ended September 30, 1999 Compared with Three and
Nine Month Period Ended September 30, 1998
Revenues.
Net Service revenue. Net Service revenue for the three month period
ended September 30, 1999 was $4.8 million, compared to $1.8 million for the
three month period ended September 30, 1998, an increase of $3.0 million, or
166.7%. Net Service revenue for the nine month period ended September 30, 1999
was $11.9 million, compared to $4.3 million for the nine month period ended
September 30, 1998, an increase of $7.6 million, or 176.7%. This increase in
revenue during each current period was primarily due to growth in the number of
customers purchasing Direct Services and On-Ramp Services, increased utilization
by customers, and price increases in monthly fees.
Software and hardware sales. Revenues from software and hardware sales
for the three month period ended September 30, 1999 were $2.0 million, compared
to $3.7 million for the three month period ended September 30, 1998 a decrease
of $1.7 million or 45.9%. Revenues from software and hardware sales for the nine
month period ended September 30, 1999 were $5.6 million, compared to $8.5
million for the nine month period ended September 30, 1998, a decrease of $2.9
million, or 34.1%. The decrease in each current period is due to our
-11-
<PAGE>
migration from sales of 4-Sight software and hardware as stand-alone products to
sales of service contracts, partially offset by software purchases associated
with On-Ramp Service agreements.
Total Revenue. Total revenue for the three month period ended September
30, 1999 was $6.8 million, compared to $5.5 million for the three month period
ended September 30, 1998, an increase of $1.3 million, or 23.6%. Total revenue
for the nine month period ended September 30, 1999 was $17.5 million, compared
to $12.8 million for the nine month period ended September 30, 1998, an increase
of $4.7 million, or 36.7%. Increased service revenue during each period was
partially offset by decreases in hardware and software sales, as described
above.
Operating Expenses.
Network communications. Network communications expense for the three
month period ended September 30, 1999 was $6.8 million, compared to $4.6 million
for the three month period ended September 30, 1998, an increase of $2.2
million, or 47.8%. Network communications expenses for the nine month period
ended September 30, 1999 were $19.5 million, compared to $11.5 million for the
nine month period ended September 30, 1998, an increase of $8.0 million, or
69.6%. The increase in each current period resulted from increased costs for
local loop connections related to growth in the number of our Direct Service
customers, and from expenses on network coverage through installation of
additional hubs for domestic and foreign network operations. The average monthly
communications expense per Direct Service customer installation decreased
overall 13.5% during each of the current periods. This trend reflects more
efficient use of our backbone as we add more Direct Service customers to our
network, a beneficial shift in the geographic mix of our customers, and
generally declining costs of backbone capacity and North American local loop
connections. These trends were partially offset by growth in our Direct Service
customer base in Europe, where local loop costs are generally higher than in
North America.
Software and hardware. The cost of software and hardware for the three
month period ended September 30, 1999 was $0.8 million, compared to $1.2 million
for the three month period ended September 30, 1998, a decrease of $0.4 million,
or 33.3%. The cost of software and hardware for the nine month period ended
September 30, 1999, was $2.2 million, compared to $2.6 million for the nine
month period ended September 30, 1998, a decrease of $0.4 million, or 15.4%.
This decrease reflects the decline in software and hardware sales as described
above.
Network operations and development. Network operations and development
expense for the three month period ended September 30, 1999 was $6.4 million,
compared to $11.6 million for the three month period ended September 30, 1998, a
decrease of $5.2 million, or 44.8%. Network operations and development expense
for the nine month period ended September 30, 1999 was $17.2 million, compared
to $24.0 million for the nine month period ended September 30, 1998, a decrease
of $6.8 million, or 28.3%. The decrease in each current period was primarily due
to completion of On-Ramp development and the termination of associated
development costs, partially offset by costs incurred for establishing our
network operations center in Belgium and deploying our network in Europe. This
category of expense also includes one-time costs related to the acquisition of
4-Sight in March 1998, and costs for development of On-Ramp, Internet Gateway
and WAM!BASE which were incurred during 1998 and 1999. We anticipate a lower
level of development costs for continuing Internet Gateway and WAM!BASE
development in future periods.
Selling, general and administrative. Selling, general and
administrative expense for the three month period ended September 30, 1999 was
$9.6 million, compared to $10.0 million for the three month period ended
September 30, 1998, a decrease of $0.4 million, or 4.0%. Selling, general and
administrative expense for the nine month period ended September 30, 1999 was
$31.0 million, compared to $33.1 million for the nine month period ended
September 30, 1998, a decrease of $2.1 million, or 6.3%. This decrease is due to
a one-time $11.5 million non-cash compensation charge relating to the vesting of
option contracts held by certain of our officers that occurred in the period
ended September 30, 1998, partially offset by costs incurred following the
acquisition of 4-Sight in March, 1998 and by increases in other selling, general
and administrative expenses associated with expanded operations during the
current nine month period. After adjusting for the one-time charge during 1998,
-12-
<PAGE>
recurring selling, general and administrative expense during the nine month
period ended September 30, 1999 increased $9.4 million, or 43.5% over the
comparable adjusted amount for the nine month period ended September 30, 1998.
The increase was primarily due to (i) expansion of our European sales force,
partially offset by reductions and realignments in our North American sales
force, (ii) increased marketing expense for trade show attendance associated
with new service promotions and (iii) increased costs associated with the
restructuring of our executive and administrative management team to support our
new sales and marketing focus. Management expects selling, general and
administrative expense will continue to decline as a percentage of revenue.
Depreciation and amortization. Depreciation and amortization for the
three month period ended September 30, 1999 was $8.9 million, compared to $5.3
million for the three month period ended September 30, 1998, an increase of $3.6
million, or 67.9%. Depreciation and amortization for the nine month period ended
September 30, 1999 was $24.9 million, compared to $11.4 million for the nine
month period ended September 30, 1998, an increase of $13.5 million, or 118.4%.
This increase in each current period is primarily due to depreciation of
additional network and related equipment purchased for network expansion during
1998 and 1999.
Interest income. Interest income for the three month period ended
September 30, 1999 was $0.1 million, compared to $0.5 million for the three
month period ended September 30, 1998, a decrease of $0.4 million, or 80.0%.
Interest income for the nine month period ended September 30, 1999 was $0.5
million, compared to $1.6 million for the nine month period ended September 30,
1998, a decrease of $1.1 million, or 68.8%. The decrease in interest income in
each current period was primarily due to the decrease in our average monthly
balance of cash and cash equivalents during the period.
Interest expense. Interest expense for the three month period ended
September 30, 1999 was $8.0 million, compared to $6.3 million for the three
month period ended September 30, 1998, an increase of $1.7 million, or 27.0%.
Interest expense for the nine month period ended September 30, 1999 was $25.5
million, compared to $15.8 million for the nine month period ended September 30,
1998, an increase of $9.7 million, or 61.4%. The increase was primarily due to
(i) the increase in long-term unsecured debt we incurred during 1998 to fund our
operations and to acquire 4-Sight, consisting primarily of our 13.25% senior
discounted notes due 2005 (the "1998 Notes") in the accreted principal amount of
$153.0 million at September 30, 1999, and (ii) the increase in equipment
financing. In the nine month period ended September 30, 1999 we also incurred
interest expense (i) in the amount of $2.8 million in connection with the 13.25%
subordinated unsecured convertible note, which converted into equity in March
1999, and (ii) in the amount of $6.5 million representing financing costs
including the current portion of the attributed cost incurred for the issuance
of warrants in connection with certain financing transactions, including our
13.25% senior discount notes.
Other income. Other income for the three month period ended September
30, 1999 was $0.5 million, compared to $0.7 million for the three month period
ended September 30, 1998, a decrease of $0.2 million, or 28.6%. %. Other income
for the nine month period ended September 30, 1999 was $0.8 million, compared to
$0.8 million for the nine month period ended September 30, 1998. The 1999 other
income primarily reflects receipt of rental income received from SGI in
connection with our lease to SGI in June, 1999 of a portion of the corporate
campus facility in Eagan which we purchased from SGI in March, 1999. This income
was partially offset by our continuing rental obligations for vacated
facilities.
Net loss. Our net loss of $33.0 million for the three month period
ended September 30, 1999 increased $0.7 million, or 2.2%, compared to a net loss
of $32.3 million for the three month period ended September 30, 1998. Our net
loss of $101.5 million for the nine month period ended September 30, 1999,
increased $18.3 million, or 22.0%, compared to a net loss of approximately $83.2
million for the nine month period ended September 30, 1998. This increase is
related to expenses associated with the continuing operation, deployment and
marketing of our network and network services, for the expansion of European
operations, for increased depreciation and amortization over a larger equipment
base and for increased interest expense.
-13-
<PAGE>
Liquidity and Capital Resources
Since inception, we have incurred net losses and experienced negative
cash flow. We expect to continue to operate at a net loss and experience
negative cash flow for the foreseeable future. Our ability to achieve
profitability and positive cash flow from operations will depend on our ability
to grow our revenue substantially and achieve other operating efficiencies.
For the nine month period ended September 30, 1999, we used $54.4
million of net cash in operating activities primarily for operating expenses,
including network communications, salaries, travel, consulting and legal
expense. During that period we used $22.6 million of net cash in investing
activities primarily for the expansion of our network and storage
infrastructure. Since January 1, 1999, we have obtained $103.3 million of net
cash proceeds from financing activities, consisting of $36.8 million from the
sale leaseback of our building and land, $59.5 million from the issuance of
short-term debt and preferred stock to MCI WorldCom and SGI, and $7.0 million
from other net borrowings under credit facilities and equipment financing
arrangements. The increase of $39.0 million in our building and land assets
during the period result from our acquisition of the SGI corporate campus
facility in March 1999 in exchange for the issuance of our preferred stock.
Changes in other asset and liability balances during the recent nine month
period related to timing of expense recognition.
On January 13, 1999, we issued the 1999 MCI WorldCom convertible note
in the principal amount of $25.0 million due August 28, 1999. Under the 1999 MCI
WorldCom convertible note we borrowed $10.0 million on January 13, 1999 and
$15.0 million on March 4, 1999. Also, on that date, we consummated the SGI
investment pursuant to which SGI purchased 5,710,425 shares of Class B
convertible preferred stock and 878,527 shares of our Class C convertible
preferred stock for aggregate net cash proceeds of $35.0 million and $40.0
million by way of transfer to us of SGI's corporate campus facility in Eagan,
Minnesota. Immediately prior to the closing of our transaction with SGI, the
1999 MCI WorldCom convertible note was converted into 2,196,317 shares of Class
D convertible preferred stock. In connection with the issuance of the 1999 MCI
WorldCom convertible note, we also issued warrants to MCI WorldCom to purchase
150,000 and 200,000 shares of common stock at an exercise price of $.01 per
share after April 30, 1999 and exercisable until April 30, 2004.
Effective June 1, 1999 we amended our 1997 agreement for the
acquisition of Freemail to change the amount and rate of payment of contingent
consideration due to the former Freemail shareholders. We have decreased the
amount payable from $3.0 million cash to $2.0 million, payable $1.0 million in
cash and $1.0 million in shares of our common stock at fair market value. The
rate of payment has also been changed from 5% of revenue from a selected class
of customers to 5% of our total collected revenue, calculated quarterly. In
accordance with this amendment, the first payment was made by October 30, 1999,
for the quarter ended September 30, 1999.
On July 16, 1999, we entered into a $20.0 million, two year credit
facility with Foothill Capital Corporation. The credit facility contains a $10.0
million term loan which was repaid from the proceeds of the sale/License
Agreement with CCPRE Eagan, LLC. The remainder of the facility is a revolving
credit facility under which Foothill will lend us up to an additional $10.0
million based upon a borrowing base consisting of our recurring billings and
collections from its U.S. customers. Amounts outstanding under the credit
facility incur interest at the Wells Fargo Bank reference rate plus 1.75%
(currently 9.75% per year). The credit facility is secured by a lien on certain
unencumbered and lienable assets. The credit facility requires us to obtain
certain minimum gross margins, specified levels of network access device
installations and minimum EBITDA for the quarter ending September 30, 1999, and
for each quarter thereafter until maturity. It also provides for annual limits
on the amount of our capital expenditures. Foothill has agreed under certain
circumstances to subordinate or release its lien on equipment to permit us to
obtain equipment financing from third parties. The credit facility is
automatically renewable at maturity until cancelled in accordance with its
terms. We have currently borrowed approximately $4.0 million under the credit
facility.
On September 30, 1999, we entered into a Purchase and Sale Agreement and Escrow
Instructions together with a Net Lease Agreement or Memorandum of Lease
(collectively, "The Sale/Lease Back Agreement") with CCPRE-Eagan,
-14-
<PAGE>
LLC, ("CCPRE") a Delaware Limited Liability Company, and an affiliate of Chase
Bank, New York. Pursuant to the Sale/Lease Back Agreement, we conveyed our
corporate headquarters facility, including land, building and personal property
to CCPRE for a total purchase price of $38 million. Under the Sale/Lease Back
Agreement, we agreed to lease the facility from CCPRE for a term of 20 years
with three five-year options at a minimum monthly rent increasing from $481,000
per month during the first year of the term to $959,000 per month during the
last year of the initial term. We also agreed to pay all taxes, assessments,
utilities and other governmental charges. Under the Sale/Lease Back Agreement,
we may repurchase the corporate headquarters facility on the 24th or 36th month
anniversary of the agreement. The Sale/Lease Back Agreement entitles CCPRE to
require us to repurchase our corporate headquarters facility at any time
following the 36th month anniversary of the Agreement for the sum $41.8 million,
less the amount of certain payments made under the lease. As additional
consideration for the Sale/Lease Back Agreement, we issued Chase Capital
Partners ten-year warrants to purchase 325,000 shares of common stock at an
initial exercise price of $12.00 per share. The initial exercise price is
subject to antidilution adjustments. The warrant agreement entitles the holder
to require us to repurchase shares issued upon exercise of the warrant if we
elect to repurchase our corporate headquarters facility prior to an initial
public offering of our common stock, at a per share purchase price equal to 92%
of fair market value determined by appraisal. In connection with the warrant
agreement, Chase Capital Partners entered into agreements with MCI WorldCom and
SGI entitling the holder of the warrants to include a portion of the warrants,
or shares issuable upon exercise, in any transaction occurring prior to our
initial public offering in which either MCI WorldCom or SGI sold 10% or more of
its ownership of our securities.
Our ability to continue to fund our operating losses as we expand our
business depends on our ability to obtain additional sources of financing. We
expect that our available operating capital as of October 31, 1999, as evidenced
by cash, cash equivalent investments, and availability under existing credit
facilities, together with borrowings under facilities from financial
institutions with whom we are currently negotiating, will be sufficient to fund
our operating losses, capital expenditures, lease payments and working capital
requirements for the remainder of our current fiscal year. We are seeking
additional financing through long- and short-term financing from banks,
financial institutions, and vendors and the issuance of our equity securities.
If additional sources of funding cannot be obtained during the course of our
fiscal year ending December 31, 1999, due to a constraint of available operating
capital, we will be required to significantly slow our global market
penetration, network growth and product development. In addition, should we be
unable to generate cash from operating or investing activities to fund our
operations and network growth during 1999, management expects that it would
implement plans to reduce cash expenditures. The reduction of cash expenditures
would have a material adverse effect on our global revenue and network expansion
plans. We believe that the most evident and clearly measurable impact resulting
from these reductions would be a significant decrease of installed network
customers for the year ending December 31, 1999. A material reduction in the
base of installed customers would slow the growth of our recurring revenue
stream, which is dependent upon customer utilization of our excess network
capacity. Reductions in network utilization would directly impact our network
revenue and could ultimately defer overall profitability of our service and
products. Another possible impact of the above outlined expenditure reductions
would be potentially material delays in software product development, the impact
of which could further erode customer retention and network utilization.
Year 2000 Compliance
The Year 2000 issue is the result of computer-controlled systems using
two digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. As for many other companies, this year
2000 computer issue poses a potential risk for us as a user of information
systems in the operation of our business, as a provider of managed, high-speed,
digital data delivery network service and the related computer technology and
software to customers, and as a customer of other organizations whose operations
may be affected by year 2000 compliance issues.
Our State of Readiness. We have completed an assessment of our core
business information systems, many of which are provided by outside suppliers,
for year 2000 readiness and are extending that review to include a variety
-15-
<PAGE>
of other information systems and related business processes used in our
operations. We have implemented necessary changes to critical systems, and
successfully tested them. We are also assessing the possible effect on our
operations of the year 2000 readiness of critical suppliers of products and
services. These include not just suppliers of components but also our
outsourcing partners in manufacturing as well as suppliers of basic utilities.
Our reliance on key suppliers, and therefore on the proper functioning of their
information systems and software, is increasing, and there can be no assurance
that another company's failure to address year 2000 issues could not have a
material adverse effect on our business, financial condition and results of
operation. Although our assessment is ongoing, we currently believe that
resolving these matters will not have a material adverse effect on our business,
financial condition and results of operations.
Costs. We have not incurred material historical costs for year 2000
awareness, inventory assessment, analysis, conversion, testing or contingency
planning. We believe that we are unlikely to experience a material adverse
impact on our business, financial condition or results of operations due to year
2000 compliance issues.
Potential Risks. We could face substantial claims by customers or loss
of revenue due to service interruptions, inability to fulfill contractual
obligations or to bill customers accurately and on a timely basis, and increased
expenses associated with litigation, stabilization of operations following
critical system failures and the execution of contingency plans. We could also
experience an inability by customers and others to pay, on a timely basis or at
all, obligations owed to us. Under these circumstances, the adverse effects
would be material, although not quantifiable at this time. Further, the
cumulative effect of these failures could have a substantial adverse effect on
the economy, domestically and internationally. The adverse effects of a domestic
or global recession or depression also could be material, although not
quantifiable at this time. We will continue to monitor business conditions to
assess and quantify material adverse effects, if any, that may result from the
year 2000 problem.
Item 3--Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Rates. For the nine month period ending
September 30 ,1999, our revenues originating outside the U.S. were 36% of total
revenues. Currently, we do not employ currency hedging strategies to reduce the
risks associated with the fluctuation of foreign currency exchange rates. All of
our contracts are denominated in U.S. dollars except for those contracts entered
into by our foreign subsidiaries which are denominated in local currency. We are
unable to determine what effect, if any, the adoption and use of the Euro will
have in the future on our business, operating results, liquidity and financial
condition.
Our international business is subject to risks typical of an
international business, including, but not limited to: differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility. Accordingly,
our future results could be materially adversely impacted by changes in these or
other factors.
Interest Rates. We invest cash in a variety of financial instruments,
including bank time deposits and fixed rate obligations of governmental entities
and agencies. These investments are denominated in U.S. dollars. Cash balances
in foreign currencies overseas are operating balances and are invested in
short-term time deposits of the local operating bank.
Investments in fixed rate interest earning instruments carry a degree
of interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. Due in part to these
factors, our future investment income may fall short of expectations due to
changes in interest rates, or we may suffer losses in principal if forced to
sell securities which have seen a decline in market value due to changes in
interest rates. Our investment securities are held for purposes other than
trading.
We are exposed to market risk from changes in the interest rates on
certain of our outstanding debt. The outstanding loan balance under the
revolving credit facility bears interest at a variable rate based on prevailing
short-term interest rates in the U.S. and Europe. Based on the average
outstanding bank debt for the year ended December 31, 1998, a 100 basis point
change in interest rates would not change interest expense by a material amount.
For fixed rate debt such as our 13.25% senior discount notes, interest rate
changes affect its fair market value, but do not impact earnings or cash flows.
-16-
<PAGE>
Part II--OTHER INFORMATION
Item 2--Changes in Securities and Use of Proceeds
(c) The information required by this Item 2 of Part II has been
previously reported in Item 2 of Part I of this Form 10-Q, and is incorporated
herein by reference. For a complete discussion of the transactions involving
recent sales of unregistered securities of the Company please see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The sale and purchase of the 1999 MCI WorldCom Note and the conversion
thereof into the Class D Preferred Stock and the sale and purchase of the Class
B Preferred Stock, the Class C Preferred Stock and the 1999 MCI WorldCom
Warrants were exempt from the registration requirements of Section 5 of the
Securities Act of 1933 (the "Securities Act") pursuant to the provisions of
Section 4(2) of the Securities Act.
The issuance of warrants to Chase Capital Partners in connection with
the Sale/Lease Back agreement was exempt from the registration requirements of
Section 5 of the Securities Act of 1933 (the "Securities Act") pursuant to the
provisions of Section 4(2) of the Securities Act.
Item 6--Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
On October 8, 1999, we filed a Report on Form 8-K relating to the
transaction with Chase Capital Partners and CCPRE-Eagan, LLC, and also reporting
the resignation of certain directors.
-17-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed by the
undersigned thereunto duly authorized.
WAM!NET Inc.
Date: November 5 , 1999
By: /s/ Terri F. Zimmerman
-----------------------------
Terri F. Zimmerman
Chief Financial Officer
-18-
<PAGE>
EXHIBIT INDEX
Item
Number Description
- ------ -----------
2.1 (1) Agreement for the Sale and Purchase of the entire issued share
capital of WAM!NET U.K. Limited dated February 11, 1998, among the
Company, WAM!NET (UK) Limited and the Selling Shareholders listed
therein.
2.2 (1) Agreement and Plan of Reorganization dated December 17, 1997 by and
among NetCo Communications Corporation, NetCo Acquiring Corporation,
FreeMail, Inc. and the shareholders listed therein.
2.3 (4) June 1, 1999 Amendment to the Agreement and Plan of Reorganization
dated December 17, 1997 by and among WAM!NET Inc. (formerly NetCo
Communications Corporation), NetCo Acquiring Corporation, FreeMail,
Inc. and the shareholders listed therein.
3.1 (1) Amended and Restated Articles of Incorporation of the Company.
3.2 (1) By-Laws of the Company.
4.1 (1) Indenture dated as of March 5, 1998, between the Company, as Issuer,
and First Trust National Association, as Trustee.
4.2a (1) Certificate for the Rule 144A Original Notes ($200,000,000).
4.2b (1) Certificate for the Rule 144A Original Notes ($8,030,000).
4.3 (1) Certificate for the Regulation S Original Notes.
4.4 (1) Certificate for the Rule 144A Warrants.
4.5 (1) Certificate for the Regulation S Warrants.
4.6a (1) Rule 144A Unit Certificate. (200,000 Units)
4.6b (1) Rule 144A Unit Certificate. (8,030 Units)
4.7 (1) Certificate for the Regulation S Units.
4.8 (1) Form of Certificate for the Exchange Notes (incorporated herein by
reference and included in Exhibit 4.1 to the Company's Registration
Statement on Form S-4 filed with Securities and Exchange Commission
on May 28, 1998).
4.9 (1) Common Stock Certificate.
4.10 (1) Registration Rights Agreement, dated March 5, 1998, among the
Company and Merrill Lynch Pierce, Fenner & Smith Incorporated,
Credit Suisse First Boston Corporation and First Chicago Capital
Markets, Inc.
4.11 (1) Common Stock Registration Rights Agreement, dated as of March 5,
1998, among the Company, WorldCom Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Credit Suisse First Boston Corporation
and First Chicago Capital Markets, Inc.
4.12 (1) Warrant Agreement, dated as of March 5, 1998, by and between the
Company and First Trust National Association, as Warrant Agent, to
purchase common stock of the Company.
4.13 (2) Certificate Representing 100,000 Shares of Class A Preferred Stock
of the Company issued to WorldCom Inc. on December 16, 1996
(Incorporated herein by reference to exhibit 10.5 of the Company's
Registration Statement on Form S-4 (File No. 333-53841) filed with
the Securities and Exchange Commission on May 28, 1998).
4.14 (2) Warrants to purchase 4,157,500 Shares of Common Stock of the Company
exercisable on or before December 31, 2000, issued to WorldCom Inc.
on December 16, 1996 (Incorporated herein by reference to exhibit
10.6 of the Company's Registration Statement on Form S-4 (File No.
333-53841) filed with the Securities and Exchange Commission on May
28, 1998).
4.15 (2) Certificate for 13.25% Subordinated Unsecured Convertible Note due
August 28, 2005 ($25,000,000 Note) issued to MCI WorldCom, Inc. on
January 13, 1999.
4.16 (2) Certificate for 1,679,234 Class A Warrants and 2,840,967 Class B
Warrants to purchase Common Stock of the Company, issued to WorldCom
Inc. on September 26, 1997 (Incorporated herein by reference to
exhibit 10.9 of the Company's Registration Statement on Form S-4
(File No. 333-53841) filed with the Securities and Exchange
Commission on May 28, 1998).
-19-
<PAGE>
4.17 (2) Subordinate Unsecured Convertible Note and Warrant Purchase
Agreement between the Company and MCI WorldCom, Inc. dated January
13, 1999.
4.18 (2) Preferred Stock Purchase Agreement by and between the Company and
Silicon Graphics, Inc. dated as of March 3, 1999.
4.19 (2) Certificate for 150,000 Warrants to purchase shares of Common Stock
for the purchase price of $.01 per share dated January 13, 1999.
4.20 (2) Certificate of Designation of Rights and Preferences of Class A
Preferred Stock of the Company filed with the Secretary of State of
the State of Minnesota on March 4, 1999, as corrected and filed with
the Secretary of State of this State of Minnesota on March 5, 1999.
4.21 (2) Certificate of Designation of Rights and Preferences of Class B
Convertible Preferred Stock of the Company filed with the Secretary
of State of the State of Minnesota on March 4, 1999.
4.22 (2) Certificate of Designation of Rights and Preferences of Class C
Convertible Preferred Stock of the Company filed with the Secretary
of State of the State of Minnesota on March 4, 1999.
4.23 (2) Certificate of Designation of Rights and Preferences of Class D
Convertible Preferred Stock of the Company filed with the Secretary
of State of the State of Minnesota on March 4, 1999.
4.24 (2) Certificate representing 115,206 shares of Class A Preferred Stock
of the Company issued to MCI WorldCom. Inc. on March 4, 1999.
4.25 (2) Certificate representing 5,710,425 shares of Class B Convertible
Preferred Stock of the Company issued to Silicon Graphics, Inc. on
March 4, 1999.
4.26 (2) Certificate representing 878,527 shares of Class C Convertible
Preferred Stock of the Company issued to Silicon Graphics, Inc. on
March 4, 1999.
4.27 (2) Certificate representing 2,196,317 shares of Class D Convertible
Preferred Stock of the Company issued to MCI WorldCom. Inc. on March
4, 1999.
4.28 (2) Stockholders Agreement by and among the Company, Silicon Graphics,
Inc. and MCI WorldCom, Inc. dated as of March 4, 1999.
4.29 (2) Class A Preferred Stock Exchange Agreement by and between the
Company and MCI WorldCom, Inc. dated as of March 4, 1999.
4.30 (2) Class D Preferred Stock Conversion Agreement by and between the
Company and MCI WorldCom, Inc. dated as of March 4, 1999.
10.1 (1) Credit Agreement among the Company, the Lending Institutions party
thereto, as Lenders, The First National Bank of Chicago, as Agent,
dated as of September 26, 1997.
10.2 (1) Ten Percent Convertible Note Purchase Agreement between the Company
and WorldCom Inc. dated September 12, 1996 ($5,000,000 Note).
10.3 (1) Preferred Stock, Subordinated Note and Warrant Purchase Agreement
between the Company and WorldCom Inc. dated November 14, 1996.
10.4 (1) $28,500,000 Seven Percent Subordinated Note due December 31, 2003,
payable to WorldCom Inc.
10.5 Intentionally omitted.
10.6 Intentionally omitted.
10.7 (1) Right of Refusal Agreement Among WorldCom Inc., Edward Driscoll III
and Allen L. Witters dated December 16, 1996.
10.8 (1) Guaranty Agreement dated September 26, 1997, by and between the
Company and WorldCom Inc.
10.9 Intentionally omitted.
10.10 (1) Sublease dated September 24, 1997 between the Company and 1250895
Ontario Limited, relating to the property located at 6100 110th
Street West, Bloomington, Minnesota.
10.11 (1) Service Provision Agreement dated as of July 18, 1997, by and
between the Company and Time Inc.
10.12 (1) Standby Agreement dated as of July 19, 1997 by and between WorldCom
Inc. and Time Inc.
10.13 (1) Employment Agreement dated as of November 14, 1996, by and between
the Company and Edward J. Driscoll III.
10.14 (1) Employment Agreement dated as of November 14, 1996, by and between
the Company and Allen Witters.
10.15 (1) Employment Agreement dated as of April 16, 1996, by and between the
Company and James R. Clancy.
-20-
<PAGE>
10.16 (1) Employment Agreement dated as of May 10, 1995, as amended, by and
between the Company and Mark Marlow.
10.17 (1) Agreement dated February 11, 1998 between the Company and WorldCom,
Inc. modifying certain terms of the (i) 10% Convertible Subordinated
Note, due September 30, 1999, (ii) 7% Subordinated Note, due
December 31, 2003, and (iii) 100,000 shares of Series A Preferred
Stock, all of which are held by MCI WorldCom, Inc. (incorporated
herein by reference to exhibit No. 4.17 to the Company's
Registration Statement on Form S-4 (File No. 333-53841) filed with
the Securities and Exchange Commission on May 28, 1998)
10.18 (1) 1994 Stock Option Plan
10.19 (1) Amended and Restated 1994 Stock Option Plan
10.20 (1) 1998 Combined Stock Option Plan.
10.21 (1) Agreement dated June 5, 1997 between the Company and WorldCom, Inc.
regarding data services provided by WorldCom, Inc. to the Company.
10.22 (3) Preferred Provider Agreement by and between the Company and Silicon
Graphics, Inc., dated as of March 4, 1999 (portions of this exhibit
have been omitted pursuant to a request for confidential treatment
and have been filed with the Securities Commission under separate
cover).
10.23 (2) Sale and Purchase Agreement by and between Silicon Graphics, Inc.,
on behalf of itself and its wholly-owned subsidiary, Cray Research,
L.L.C., and the Company dated as of March 4, 1999.
10.24 (2) Lease by and between the Company and Silicon Graphics, Inc. on
behalf of itself and its wholly-owned subsidiary, Cray Research,
L.L.C., with respect to the Company's corporate campus facility
located in Eagan, Minnesota dated as of March 4, 1999.
10.25 (2) Employment Agreement dated January 1, 1998 by and between John R.
Kauffman and the Company.
10.26 (2) Employment Agreement dated November 3, 1997 by and between David T.
Ottinger and the Company.
10.27 (4) Loan and Security Agreement dated July 16, 1999, by and between
Foothill Capital Corporation and the Company.
10.28 * Purchase and Sale Agreement and Escrow Instructions dated September
30, 1999, between the Company and CCPRE-Eagan, LLC.
10.29 * Amendment Number One to Purchase and Sale Agreement and escrow
Instructions dated September 30, 1999, between the Company and
CCPRE-Eagan, LLC.
10.30 * Net Lease dated September 30, 1999 between the Company and
CCPRE-Eagan, LLC
27.1 * Financial Data Schedule.
- ----------------
(1) Incorporated herein by reference to the Company's Registration Statement
on Form S-4 (File No. 333-53841), filed with the SEC on May 28, 1998.
(2) Incorporated herein by reference to the Company's Annual Report on Form
10-K, filed with the SEC on March 31, 1999.
(3) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q filed with the SEC on May 17, 1999.
(4) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q filed with the SEC on August 4, 1999.
* Filed herein.
-21-
<PAGE>
Exhibit 10.28
================================================================================
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
BETWEEN
WAM!NET INC.
AND
CCPRE-EAGAN, LLC
================================================================================
<PAGE>
THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this "Agreement")
---------
is dated as of September __, 1999, and entered into between WAM!NET INC., a
Minnesota corporation ("Seller"), and CCPRE-EAGAN, LLC, a Delaware limited
------
liability company ("Purchaser").
---------
PRELIMINARY STATEMENT
For and in consideration of the mutual promises and undertakings contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Purchaser hereby covenant and agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
-----------
For the purpose of this Agreement, the following terms shall have the
respective meanings indicated:
"Additional Deposit" - as defined in Section 3.2(b).
------------------ --------------
"Building" - the office/data center building located on the Operating
--------
Parcel, which building consists of approximately 480,724 net rentable square
feet.
"Casualty" - as defined in Section 13.1.
-------- ------------
"Casualty Notice" - as defined in Section 13.1.
--------------- ------------
"Casualty Termination Notice" - as defined in Section 13.1.
--------------------------- ------------
"Closing" - as defined in Section 8.1.
------- -----------
"Closing Date" - as defined in Section 8.1.
------------ -----------
"Closing Statement" - the closing statement required under the
-----------------
provisions of Article 9.
---------
"Code" - as defined in Section 8.2(a)(xii).
---- -------------------
"Condemnation Notice" - as defined in Section 13.2.
------------------- ------------
"Construction Drawings" - all drawings in Seller's possession or
---------------------
control used in preparing the Plans and Specifications.
"Contracts" - the contracts entered into by Seller or, if in Seller's
---------
possession, any predecessor in interest for the operation of the Property more
particularly described in Schedule A-1 attached hereto.
------------
1.
<PAGE>
"Deed" - as defined in Section 8.2(a)(i).
---- -----------------
"Development Agreements" - those agreements relating to the
----------------------
development of the Operating Parcel and the potential development of the Vacant
Parcel into a 500,000 square foot (+/-) office/data center which agreements are
listed in Exhibit I attached hereto.
---------
"Due Diligence Approval Date" - the date on which Purchaser has
---------------------------
approved all inspections, reports and other due diligence with respect to the
Property which in no event shall be later than the end of the Inspection Period.
"Encumbrances" - mortgages, security interests, pledges, claims,
------------
charges, judgments, easements, rights of way, squatter's rights, restrictions,
encroachments, leases, occupancies, tenancies, covenants, conditions, options,
preemptive purchase rights or any other encumbrances whatsoever.
"Environmental Requirements" - collectively, the Resource Conservation
--------------------------
and Recovery Act (also known as the Solid Waste Disposal Act), the Comprehensive
Environmental Response, Compensation and Liability Act, the Superfund Amendments
and Reauthorization Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Uniform Safety Act, the Clean Air Act, the Clean Water
Act, the Emergency Planning and Community Right-to-Know Act, the Hazard
Communication Standard, 29 CFR 1910.1200 and other similar Legal Requirements,
all as amended to date, and all orders, contractual obligations and common laws,
in each case relating to particulate emissions, pollution, Hazardous Substance
and effluent discharges, the protection of the environment or the health and
safety of workers or the general public.
"Environmental Survey" - Report dated August 25, 1999 by IVI
--------------------
Environmental, Inc., IVI Project No. E9084530.
"Escrow Agent" - Commonwealth Land Title Insurance Company, 255 Park
------------
Square Court, 400 Sibley Street, St. Paul, Minnesota 55101; however, prior to
making the Initial Deposit, Purchaser shall have the option of using New York
Land Services ("NYLS") as the Escrow Agent if Purchaser provides to Seller an
agreement acceptable to Seller in Seller's reasonable discretion from
Commonwealth Land Title Insurance Company guaranteeing NYLS' performance and
obligations as Escrow Agent. The address of NYLS is as follows:
630 Third Avenue - 5th Floor
New York, NY 10017
Phone: (212) 490-2277
Fax: (212) 490 8012
"Excluded Contracts" - those contracts listed on Schedule A-2 attached
------------------ ------------
hereto.
"Excluded Permits" - the non-transferable Permits in connection with
----------------
the operation of the Property, all as listed on Schedule B attached hereto.
----------
2.
<PAGE>
"Financial Statements" - the following financial information: (a)
--------------------
monthly operating statements for the current calendar year and statements of
income and expense for the calendar years 1997 and 1998 prepared by Seller and
(b) a copy of the budget for the Property for the current fiscal year.
"Governmental Approvals" - as defined in Article 11(d).
---------------------- -------------
"Governmental Authority" - any court or Federal, State, municipal or
----------------------
other governmental authority, department, commission, board, agency or
instrumentality, or any employee or agent thereof (whether legislative,
executive or judicial).
"Hazardous Substances" - as defined in Section 5.1(p).
--------------------
"Improvements" - the buildings, structures (surface and subsurface)
------------
and other improvements, including, without limitation, such fixtures as shall
constitute real property, located on the Land.
"Initial Deposit" - as defined in Section 3.2(a).
--------------- --------------
"Inspection Period" - as defined in Article 4.
----------------- ---------
"Land" - collectively, the Operating Parcel and the Vacant Parcel.
----
"Legal Requirements" - as defined in Section 5.1(m).
------------------ --------------
"Master Lease" - the lease relating to the Real Property to be entered
------------
into between Purchaser, as landlord, and Seller, as tenant, which lease shall
contain the terms and provisions set forth on Exhibit G attached hereto and such
---------
other terms and provisions as are mutually agreed to by Purchaser and Seller.
"New Title Objections" - as defined in Section 7.1(b).
-------------------- --------------
"Notices" - as defined in Article 15.
------- ----------
"Operating Parcel" - that estate, tract or parcel of land being more
----------------
particularly described on Exhibit A-1 attached hereto and incorporated herein by
-----------
reference and appurtenant easements thereto, together with all of Seller's
right, title and interest in and to all easements, rights of way, strips and
gores of land, tenements, hereditaments and appurtenances, reversions,
remainders, privileges, licenses and other rights and benefits belonging to,
running with or in any way relating thereto, and together with all right, title
and interest of Seller in and to any land lying in the bed of any street, road
or highway, open or proposed, in front of, abutting or adjoining the Operating
Parcel.
"Permits" - all licenses, franchises and permits held by Seller and
-------
used in or relating to the ownership, occupancy or operation of any part of the
Property including, but not limited to, parking.
3.
<PAGE>
"Permitted Encumbrances" - as defined in Section 5.1(f).
---------------------- --------------
"Personal Property" - the tangible personal property of Seller located
-----------------
on and used in connection with the management of the Land and/or the
Improvements, including, but not limited to, the property listed on Schedule C
----------
attached hereto, but excluding, without limitation, the computer equipment and
other equipment and other personal property used in the operation of the
business of Seller and/or any other occupant of the Property or any part
thereof.
"Plans and Specifications" - all of the "as built" plans and
------------------------
specifications utilized in the construction of the Improvements (including
driveways, walkways, landscaping and mechanical and electrical systems) in
Seller's possession or control.
"Property" - the following property:
--------
(a) the Land;
(b) the Improvements;
(c) the Personal Property;
(d) all right title and interest of Seller to all
indemnifications from Cray Research, LLC, a Delaware limited liability company
and Silicon Graphics, Inc., a Delaware corporation, under its Sale and Purchase
Agreement dated March 3, 1999 (the "SGI Purchase Agreement"), regarding the Real
Property (among other things), if and to the extent such indemnifications are
assignable;
(e) all right, title and interest of Seller (to the extent
assignable) under the Contracts, Warranties and Permits; and
(f) the Records and Plans.
"Purchase Price" - as defined in Section 3.1.
-------------- -----------
"Records and Plans" - all non-proprietary books, records and documents
-----------------
maintained by Seller, or compiled by or at the request of Seller, and in the
possession or control of Seller specifically relating to the development,
management, occupancy, maintenance or leasing of the Property, including,
without limitation, (i) the Financial Statements, (ii) the Construction
Drawings, (iii) the Plans and Specifications and (iv) the Development
Agreements. For purposes hereof, "non-proprietary" shall be deemed to mean
books, records and documents that do not relate to the internal operation or
management of Seller, as distinguished from the Property.
"Real Property" - the Land and the Improvements.
-------------
"Security Deposit" as defined in Section 5.1(g).
---------------- --------------
4.
<PAGE>
"SGI Lease" - the lease dated as of March 4, 1999, between Seller, as
---------
landlord, and Silicon Graphics, Inc., as tenant, relating to the Operating
Parcel.
"Survey"- the survey dated as of February 19, 1999 and revised as of
------
March 2, 1999 and July 9, 1999, prepared by BRW.
"Tenant" - Silicon Graphics, Inc.
------
"Title Commitment" - as defined in Section 7.1(a).
---------------- --------------
"Title Company" - the title company selected by Purchaser to issue the
-------------
Title Commitment.
"Title Endorsements" - those endorsements set forth in Exhibit J
------------------ ---------
attached hereto to be issued by the Title Company.
"Title Objections" - as defined in Section 7.1(a).
---------------- --------------
"Vacant Parcel" - that estate, tract or parcel of land being more
-------------
particularly described on Exhibit A-2 attached hereto and incorporated herein by
-----------
reference and appurtenant easements thereto, together with all of Seller's
right, title and interest in and to all easements, rights of way, strips and
gores of land, tenements, hereditaments and appurtenances, water and mineral
rights, reversions, remainders, privileges, licenses and other rights and
benefits belonging to, running with or in any way relating thereto, and together
with all right, title and interest of Seller in and to any land lying in the bed
of any street, road or highway, open or proposed, in front of, abutting or
adjoining the Land.
"Violations" - as defined in Section 7.2(a).
---------- --------------
"Warranties" - the warranties for the benefit of Seller described in
----------
Schedule D attached hereto.
- ----------
"Warrant Agreement" - the agreement pursuant to which Seller shall
-----------------
issue 325,000 warrants in Seller to Purchaser, which agreement shall contain the
terms and provisions set forth on Exhibit H attached hereto and such other terms
---------
and provisions as are agreed to by Seller and Purchaser.
"Warrants" - the warrants issued to Seller pursuant to the Warrant
--------
Agreement.
1.2 References.
----------
Except as otherwise specifically indicated, all references to Article and
Section numbers refer to Articles and Sections of this Agreement, and all
references to Schedules and Exhibits refer to the Schedules and Exhibits
attached hereto. The words "herein," "hereof," "hereunder," "hereinafter," and
words of similar import refer to this Agreement as a whole and not to any
particular Article or Section hereof. Captions used herein are for convenience
only and shall not be used to construe the meaning of any part of this
Agreement.
5.
<PAGE>
ARTICLE II
SALE AND PURCHASE
2.1 Sale and Purchase.
-----------------
Purchaser shall purchase the Property from Seller, and Seller shall sell,
convey, transfer and assign the Property to Purchaser, subject to and in
accordance with the terms and conditions of this Agreement.
2.2 Liabilities Not Being Assumed.
-----------------------------
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, PURCHASER IS NOT ASSUMING
ANY LIABILITIES OR OBLIGATIONS (FIXED OR CONTINGENT, KNOWN OR UNKNOWN, MATURED
OR UNMATURED) OF SELLER WHETHER OR NOT ARISING OUT OF OR RELATING TO THE
PROPERTY OR ANY OTHER BUSINESS OF SELLER, ALL OF WHICH LIABILITIES AND
OBLIGATIONS SHALL AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY
OF SELLER.
ARTICLE III
PURCHASE PRICE AND DOWN PAYMENTS
3.1 Purchase Price.
--------------
The purchase price for the Property shall be an amount equal to Thirty-
Eight Million and 00/100 Dollars ($38,000,000.00) (the "Purchase Price") to be
--------------
allocated among the following categories of Property:
(a) the Land;
(b) the Improvements; and
(c) the Personal Property.
The allocations shall be agreed upon between Seller and Purchaser on
or before the Closing. The balance of the Purchase Price (other than the
Initial and Additional Deposits) shall be payable at the Closing.
3.2 Downpayments.
------------
(a) Within three days after the execution of this Agreement,
Purchaser shall deposit with the Escrow Agent an amount equal to Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00) (the "Initial Deposit") as a
---------------
downpayment against the Purchase Price and to secure the performance of
Purchaser's obligations under this Agreement, which funds shall be held and
invested by the Escrow Agent pursuant to the terms of this Agreement. Upon
receipt of the Initial Deposit, the Escrow Agent shall immediately invest the
Initial Deposit in a money
6.
<PAGE>
market account or a certificate of deposit, so long as such funds are deposited
in a federally insured lending institution; provided, however, that the Escrow
-------- -------
Agent shall invest the Initial Deposit only in such manner as will allow the
Escrow Agent to regain control of the Initial Deposit within three (3) days
after notice and demand. Prior to the termination of this Agreement, all
interest accruing on the Initial Deposit will belong to the party entitled to
the Initial Deposit. At the Closing, the Initial Deposit and any interest
thereon shall be credited to the Purchase Price.
(b) Within one (1) day after the Due Diligence Approval Date,
Purchaser shall deposit an additional amount equal to One Million and 00/100
Dollars ($1,000,000.00) (the "Additional Deposit") with the Escrow Agent as an
------------------
additional downpayment against the Purchase Price and to further secure the
performance of the Purchaser's obligations under this Agreement, which funds
shall be held and invested by the Escrow Agent in accordance with the provisions
of Section 3.2(a) above and interest accruing thereon shall belong to the party
--------------
entitled to interest on the Initial Deposit. At the Closing, the Additional
Deposit and any interest thereon shall be credited to the Purchase Price.
(c) EXCEPT AS SET FORTH IN SECTION 3.2(d), BELOW, IF THIS AGREEMENT IS
TERMINATED OR IF THE TRANSACTION CONTEMPLATED HEREBY DOES NOT CLOSE FOR ANY
REASON OTHER THAN (a) SELLER'S WILLFUL DEFAULT OF A MATERIAL PROVISION HEREOF OR
(b) A TERMINATION OF THIS AGREEMENT BY PURCHASER UNDER SECTION 7.4 OR UNDER
-----------
ARTICLE 4 OR 13, THEN THE PARTIES AGREE THAT SELLER SHALL RETAIN THE AGGREGATE
- --------- --
AMOUNT OF THE INITIAL DEPOSIT AND THE ADDITIONAL DEPOSIT (IF MADE) AND ANY
INTEREST THEREON. SUCH AMOUNT IS TO BE RETAINED AS LIQUIDATED DAMAGES AND NOT
AS A PENALTY, WHICH AMOUNT THE PARTIES AGREE IS A REASONABLE SUM CONSIDERING ALL
OF THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE RELATIONSHIP OF THE SUM TO THE RANGE OF HARM TO SELLER THAT
REASONABLY COULD BE ANTICIPATED, SELLER'S ANTICIPATED USE OF THE PROCEEDS OF
SALE, AND THE FACT THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO FIX
ACTUAL DAMAGES. SELLER'S SOLE REMEDY SHALL BE THE RETENTION OF THE INITIAL
DEPOSIT AND THE ADDITIONAL DEPOSIT (IF MADE).
(d) If Purchaser terminates this Agreement by not later than the Due
Diligence Approval Date, then the Initial Deposit and any interest thereon shall
be returned to Purchaser.
ARTICLE IV
INSPECTION BY PURCHASER
(a) Commencing on the date of this Agreement, Purchaser shall have
until August 29, 1999 (the "Inspection Period"), to physically inspect, and to
-----------------
cause one or more inspectors, appraisers, engineers, lenders, employees or other
contractors of Purchaser to physically inspect, the Real Property, which
inspection shall be conducted without unreasonably
7.
<PAGE>
interfering with the management, operation, use or maintenance of any portion of
the Property by Seller and its respective tenants, agents, contractors and
employees. Purchaser shall make such inspections in good faith and with due
diligence. All inspection fees, appraisal fees, engineering fees and other costs
and expenses of any kind incurred by Purchaser relating to such inspections of
the Real Property shall be the sole responsibility of Purchaser subject to the
provisions of Section 17.26 hereof. Seller shall cooperate in all reasonable
respects in permitting Purchaser to make and conduct such inspections and Seller
shall have the right to have a representative present at the time of each such
inspection. Purchaser shall notify the Seller (which notice may be telephonic)
not less than two (2) business days in advance of scheduling any inspection of
the Real Property. In making any inspection hereunder, Purchaser will treat, and
Purchaser will cause its inspectors, appraisers, engineers, employees and
contractors to treat, all information obtained by Purchaser or them pursuant to
or as a result of any inspection of the Real Property made hereunder as strictly
confidential and proprietary. Information provided or obtained from Seller shall
continue to be deemed owned by Seller. Seller and Purchaser agree that, in the
event of any alteration of the Real Property or portion thereof by Purchaser or
any one or more of its inspectors, engineers, employees or contractors,
Purchaser shall immediately restore any such Real Property to substantially the
same condition as the same existed immediately prior to Purchaser's entry
thereon. Purchaser agrees to indemnify, defend (with counsel acceptable to
Seller), and hold Seller and its respective tenants, agents, contractors and
employees harmless from and against any and all liens, claims, liabilities or
damages (including, but not limited to, reasonable attorneys' fees) sustained by
them which result from or arise out of any inspections of the Real Property made
or conducted by Purchaser or its inspectors, appraisers, engineers, employees or
contractors. Such indemnity and hold harmless agreement shall survive the
Closing or any termination of this Agreement and shall not be merged therein. In
the event Purchaser, in its sole and absolute discretion, decides not to proceed
with the transaction contemplated by this Agreement, Purchaser may elect to
terminate this Agreement by delivering written notice thereof to Seller no later
than 5:00 p.m., Eastern Daylight Time, on or before August 29, 1999, whereupon,
except as otherwise provided in this Article 4, the parties shall have no
---------
further liabilities, rights or obligations under this Agreement, except as
expressly provided in this Agreement, and the Initial Deposit and the Additional
Deposit, together with interest thereon, shall be returned to Purchaser within
three (3) business days after Seller's receipt of Purchaser's termination
notice.
(b) Seller agrees to make available to Purchaser and Purchaser's
representatives, agents and designees, at any time during normal business hours,
after reasonable notice from Purchaser, all books, records and files relating to
the operation of the Property, including, but not limited to, all Books and
Records, Contracts, Development Agreements, the SGI Lease and the Permits.
Seller shall make available to Purchaser, and Purchaser shall be entitled to
communicate directly with, any consultant or other persons engaged by Seller in
connection with the operation of the Property.
(c) At the Closing, Purchaser shall promptly provide to Seller true
and complete copies of all surveys, plans, reports, assessments, investigations,
inspections, tests, examinations and other due diligence materials obtained or
prepared by, for or on behalf of Purchaser in connection with any part of the
Property or this transaction ("Purchaser's Reports").
8.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Seller's Representations and Warranties.
---------------------------------------
Seller hereby represents and warrants as follows:
(a) Seller is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Minnesota. Seller has all
requisite power and authority to own and operate the Property in the manner it
is currently being operated.
(b) Seller has all requisite power and authority to execute and
deliver this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been, and the
documents contemplated to be executed in connection herewith will be, duly and
validly authorized by all necessary action on the part of Seller. This
Agreement has been, and the documents contemplated to be executed in connection
herewith will be, duly and validly executed and delivered by Seller and
constitute, and when so executed and delivered will constitute, the legal, valid
and binding obligation of Seller, enforceable in accordance with their terms,
subject to the effect of bankruptcy, insolvency and similar laws affecting the
rights of contracting parties generally. No action by any Governmental
Authority is necessary to make this Agreement a valid instrument binding upon
Seller in accordance with its terms.
(c) The execution, delivery and performance of this Agreement and the
other documents contemplated to be executed in connection herewith, the
consummation of the transactions contemplated hereby and thereby and the
compliance with the provisions hereof and thereof by Seller do not and will not:
(i) conflict with or violate any provisions of the organizational documents of
Seller; (ii) subject to obtaining the consents set forth on Schedule 5.1(d),
---------------
result in the material breach of the terms of, constitute a material default
under, materially conflict with, result in, or constitute grounds for, the
termination or alteration of, or result in the acceleration of the performance
required by the terms of, any Contract, Development Agreement, Permit or other
instrument to which Seller is a party or by which Seller or its properties
(including the Property) is bound or affected, or result in the creation of any
Encumbrance, other than a Permitted Encumbrance, upon the Property; or (iii)
violate, result in the breach of, or conflict with, any Legal Requirements
applicable to Seller or the Property.
(d) Except as set forth on Schedule 5.1(d), no material consent,
---------------
waiver, authorization or approval from, or filing of any notice or report with,
any Governmental Authority or other person or entity is necessary in connection
with the execution, delivery or performance by Seller of this Agreement or the
documents or transactions contemplated hereby.
(e) Seller is not a "foreign person" within the meaning of Section
1445 of the Internal Revenue Code of 1986 (the "IRC"). The sale transaction
---
herein contemplated is not subject to Section 897 of the IRC or to the
withholding requirements of Section 1445 of the IRC.
9.
<PAGE>
(f) Seller has (x) good and marketable fee title to the Real Property,
free and clear of all Encumbrances, other than those items listed on Schedule
--------
5.1(f) attached hereto (collectively, the "Permitted Encumbrances"), (y)
- ------ ----------------------
unencumbered ownership of the Personal Property, free and clear of all
Encumbrances other than the Permitted Encumbrances and (z) the unconditional
right to sell the Property to the Purchaser.
(g) There are no occupancy leases, lettings, license agreements or
tenancies affecting the Real Property or any portion thereof except for (i) the
SGI Lease and (ii) an oral agreement with the Minnesota High Tech Association,
terminable at will, to occupy less than 1,000 square feet of office space in the
building on the Real Property known as Building E, and there are no other
written or oral promises, understandings, agreements or commitments between
Seller or, to the best of Seller's knowledge, any predecessor of Seller and any
tenant or other person or entity permitting the use or occupancy of the Real
Property or any portion thereof. Except as set forth in the SGI Lease, Tenant
has not received or is entitled to receive any abatement of rent, offset, free-
rent, bonus or other incentive. Seller is not holding a security deposit (the
"Security Deposit") as of the date of this Agreement. The SGI Lease is in full
force and effect, and neither the Seller nor, to Seller's knowledge, Tenant is
in default thereunder, and there are no outstanding written notices asserting
any such default. To Seller's knowledge, there do not exist any outstanding or
unsatisfied obligations for Seller to perform any tenant improvement work or
other landlord work or to provide any other benefits, concessions or other
incentives to Tenant. There have been no prepayments of rent more than one
month in advance, and, except as set forth in the SGI Lease, there are no sums
to be credited to Tenant by reason of any alterations, rental allowances,
reductions in rent or for any free or reduced rental periods. There are no
brokers or agents entitled to receive any of the rents payable under the SGI
Lease or any commission, finder's fee or other fee or payment on account of the
SGI Lease, or any modification, extension, renewal or expansion thereof. Seller
has the full right to collaterally assign the SGI Lease to Purchaser at Closing.
(h) Seller has not received notice from any insurance company, bonding
company, tenant, governmental authority or other Person, of any defects or
inadequacies in the Real Property, or any part thereof, which would adversely
affect the insurability of the same or cause the imposition of extraordinary
premiums or charges thereon or of any termination or threatened termination of
any policy of insurance or bond.
(i) Seller has no knowledge of pending or proposed condemnation
proceedings affecting the Real Property or any portion thereof.
(j) The Real Property is comprised of one (1) or more parcels, each of
which constitutes a separate tax lot and does not constitute a portion of any
other tax lot not part of the Real Property.
(k) To Seller's knowledge, there are no pending or proposed special or
other assessments for public improvements or otherwise affecting the Real
Property, and to Seller's knowledge there are no contemplated public
improvements to the Real Property that may result in such special or other
assessments.
10.
<PAGE>
(l) Seller has not commenced any proceedings which are pending for the
reduction of the assessed valuation of the Real Property or any portion thereof.
The Real Property is not subject to any real estate tax abatement or real estate
tax exemption.
(m) Seller has not received any notice which has not been cured that
any Governmental Authority considers the construction or completion of the Real
Property or the operation or use of the same to have violated any laws,
ordinances, rules, regulations or orders (including, without limitation, those
relating to zoning, building, fire, health and safety and environmental control
and protection) of any Governmental Authority, bearing on the construction,
operation or use of the Real Property or any part thereof by Seller in effect
prior to the date of Closing (collectively, the "Legal Requirements"), or that
------------------
an investigation has been commenced or is contemplated respecting any such
possible violation.
(n) Except as set forth on Schedule 5.1(n), Seller has no knowledge,
---------------
nor has Seller received any notice of any litigation, claim, action or
proceeding, actual or threatened, by any organization, person, individual or
Governmental Agency which would materially and adversely affect the use,
occupancy or value of the Property or any part thereof or which otherwise
relates to the Property.
(o) Seller has not (i) made a general assignment for the benefit of
creditors; (ii) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by its creditors; (iii) suffered the
appointment of a receiver to take possession of all or substantially all of its
assets; (iv) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (v) admitted in writing its inability to pay
its debts as they come due; or (vi) made an offer of settlement, extension or
composition to its creditors generally.
(p) To Seller's knowledge, except as otherwise set forth, referred to
or disclosed in the Environmental Survey and/or on Schedule 5.1(p): (1) no
---------------
toxic or hazardous substances or wastes, pollutants, or contaminants (including,
without limitation, asbestos, urea formaldehyde, the group of organic compounds
known as polychlorinated biphenyls, petroleum products including gasoline, fuel
oil, crude oil, and various constituents of such products, and any hazardous
substance (collectively "Hazardous Substances") as defined in any Environmental
Requirements have been generated, treated, stored, released, or disposed of, or
otherwise placed, deposited in, or located on the Real Property by Seller, or
any party controlling, under common control of, or controlled by, Seller in
violation of Environmental Requirements; (2) no activity has been undertaken on
the Real Property by Seller, or any party controlling, under common control of,
or controlled by, Seller; that would cause or contribute to (a) the Property
becoming a treatment, storage, or disposal facility within the meaning of the
Environmental Requirements, (b) a release or threatened release of toxic or
hazardous wastes or substances, pollutants, or contaminants, from the Real
Property within the Environmental Requirements, or (c) the discharge of
pollutants or effluents into any water source or system, the dredging or filling
of any waters, or the discharge into the air of any emissions that would require
a permit under any Environmental Requirements; (3) no substances or conditions
exist in or on the Real Property that may support a claim or cause of action
under any Environmental Requirements; (4) no above-ground or underground tanks
are located in or about the Real Property or have been located under, in, or
about the Real Property and have subsequently been removed or filled; and
11.
<PAGE>
(5) to the extent storage tanks exist on or under the Real Property, such
storage tanks have been duly registered with all appropriate regulatory and
governmental bodies and otherwise are in compliance with applicable
Environmental Requirements.
(q) To Seller's knowledge, true, complete and correct copies of all
instruments (including all amendments) set forth or described in the Schedules
and Exhibits to this Agreement have been delivered or made available to
Purchaser; however, to the extent such instruments were provided to Seller by
SGI or any other third party, the foregoing representation by Seller regarding
the copies being true, complete and correct is limited to the best of Seller's
knowledge. With respect to such instruments, to Seller's knowledge: (i) Seller
has substantially complied with all material provisions of such instruments and,
to the best of Seller's knowledge, no party thereto is in material default under
them; (ii) to the best of Seller's knowledge, all such instruments are in full
force and effect and Seller does not know of any condition that exists or event
that has occurred which constitutes, or which, with the passage of time or the
giving of notice, or both, would constitute, a material default thereunder or
would excuse performance by any party thereto; and (iii) Seller is not in
default in the payment of the monetary obligations of Seller under such
instruments.
(r) Except for this Agreement, the SGI Lease, and applicable Permitted
Encumbrances, Seller has not entered into any other agreement, commitment,
option, right of first refusal or any other agreement, whether oral or written,
with respect to the purchase, assignment or transfer of all or any portion of
the Property which is currently in effect.
(s) Seller has not granted to any person any right or option to
acquire all or any portion of the Property or any life estate in or with respect
to any part of the Property, and Seller has no knowledge that any person holds
or have been granted any right or option to acquire all or any portion of the
Property or any interest therein.
(t) To Seller's knowledge, no default or breach exists under any of
the covenants, conditions, restrictions, rights of way or easements, if any,
affecting all or any portion of the Property which are to be performed or
complied with by the owner of the Property.
(u) To Seller's knowledge, all Contracts of the Seller are in full
force and effect. To Seller's knowledge, there are no Contracts necessary for
the operation of the Property other than those set forth in Schedule A-1 hereto.
------------
(v) To Seller's knowledge, there are no unrecorded contracts, leases,
private restrictions or agreements with any public authority that do not appear
in the Title Commitment and that will adversely affect the present or future
uses that may be made of the Real Property.
(w) To Seller's knowledge, except as otherwise set forth, referred to
or disclosed in the SGI Purchase Agreement, there are no existing violations of
Title III of the American With Disabilities Act of 1990 (the "ADA") and the ADA
Accessibility Guidelines for Buildings and Facilities (the "Guidelines") at the
Real Property.
(x) Attached hereto as Exhibit K is a copy of Financial Statements.
---------
12.
<PAGE>
(y) To Seller's knowledge, (i) there are no wells on the Real Property
and (ii) sewage generated at the Real Property goes to a facility permitted by
the Minnesota Pollution Control Agency. Seller does not know whether there is
an abandoned individual sewage treatment system on the Real Property.
As used in this Agreement, "to Seller's knowledge," "to the best of
Seller's knowledge," and similar statements shall mean only the actual,
knowledge and of Mark Marlow, in his capacity as Director of Finance of Seller,
without inquiry or investigation.
5.2 Survival.
--------
The foregoing representations and warranties shall survive the Closing
until February 15, 2000. If written notice of a claim has been given prior the
expiration of the applicable representations and warranties, then (i) the
relevant representations and warranties shall survive as to such claim until the
claim has been finally resolved, and (ii) Seller shall indemnify Purchaser, its
successors and assigns against, and hold Purchaser harmless from, any expenses
or damages, including reasonable attorneys' fees, incurred by Purchaser and
caused by the breach of any of the above representations and warranties. In no
event, however, shall Seller have any liability to Purchaser for incidental,
consequential, special or punitive damages arising from the breach of any such
representations and warranties. Notwithstanding the foregoing, in the event of
a breach of the representation and warranty made in Section 5.1(f), Purchaser's
rights and remedies shall be limited to the rights and remedies provided in
Article 7 of this Agreement, except to the extent such breach relates to actual
fee ownership of the Property.
5.3 As Is.
-----
except as otherwise expressly set forth in this Agreement and in the
other documents and instruments executed in connection herewith, and unless this
Agreement is terminated pursuant to the terms and provisions hereof, purchaser
shall take title to the Property "as is" and "with all faults" in its present
physical condition, subject to reasonable use and normal depreciation between
the date hereof and the Closing Date. purchaser agrees that it has obtained or
shall obtain, at Purchaser's sole cost and expense, all such Purchaser's Reports
it desires or otherwise deems appropriate regarding the Property. Except as
explicitly set forth in this Agreement, such sale shall be without
representation or warranty of any kind, express or implied, and Seller, for
Seller, Seller's agents, attorneys, representatives, successors and assigns,
hereby disclaims and renounces any other representation or warranty.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1 Purchaser's Representations and Warranties.
------------------------------------------
Purchaser hereby represents and warrants as follows:
13.
<PAGE>
(a) Purchaser is a limited liability company, duly organized, validly
existing under the laws of the State of Delaware and in good standing.
Purchaser has full power and authority to enter into this Agreement and to do
all other acts required hereunder.
(b) Purchaser has all requisite power and authority to execute and
deliver this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been, and the
documents contemplated hereby will be, duly executed and delivered by Purchaser
and constitute, and when so executed and delivered will constitute, the legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their terms, subject to the effect of bankruptcy, insolvency and
similar laws affecting the rights of contracting parties generally. This
Agreement has been, and the documents contemplated to be executed in connection
herewith will be, duly and validly authorized by all necessary action on the
part of Purchaser. No action by any Governmental Authority is necessary to make
this Agreement a valid instrument binding upon Purchaser in accordance with its
terms.
(c) No consent, approval, order or authorization of any governmental
authority on the part of Purchaser is required in connection with the execution
and delivery of this Agreement and closing and consummation of the transaction
herein contemplated.
(d) The execution, delivery and performance of this Agreement and the
other documents contemplated to be executed in connection herewith, the
consummation of the transactions contemplated hereby and thereby and the
compliance with the provisions hereof and thereof by Purchaser do not and will
not: (i) conflict with or violate any provisions of the organizational
documents of Purchaser; (ii) result in the material breach of the terms of,
constitute a material default under, materially conflict with, result in, or
constitute grounds for, the termination or alteration of, or result in the
acceleration of the performance required by the terms of, any agreement or other
instrument to which Purchaser is a party or by which Purchaser or its properties
is bound or affected; or (iii) violate, result in the breach of, or conflict
with, any Legal Requirements applicable to Purchaser.
6.2 Survival.
--------
THE FOREGOING REPRESENTATIONS AND WARRANTIES SHALL SURVIVE THE CLOSING UNTIL THE
FIRST ANNIVERSARY THEREOF. IF WRITTEN NOTICE OF A CLAIM HAS BEEN GIVEN PRIOR TO
THE EXPIRATION OF THE APPLICABLE REPRESENTATIONS AND WARRANTIES, THEN (I) THE
RELEVANT REPRESENTATIONS AND WARRANTIES SHALL SURVIVE AS TO SUCH CLAIM UNTIL THE
CLAIM HAS BEEN FINALLY RESOLVED, AND (II) PURCHASER SHALL INDEMNIFY SELLER, ITS
SUCCESSORS AND ASSIGNS AGAINST, AND HOLD SELLER HARMLESS FROM, ANY EXPENSES OR
DAMAGES, INCLUDING REASONABLE ATTORNEYS' FEES, INCURRED BY SELLER AND CAUSED BY
THE BREACH OF ANY OF THE ABOVE REPRESENTATIONS AND WARRANTIES. IN NO EVENT,
HOWEVER, SHALL PURCHASER HAVE ANY LIABILITY TO SELLER FOR INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES
14.
<PAGE>
ARISING FROM THE BREACH OF ANY SUCH REPRESENTATIONS AND WARRANTIES.
ARTICLE VII
TITLE AND SURVEY MATTERS
7.1 Objections to Title.
-------------------
(a) Purchaser shall, within ten (10) days after the date hereof, order
a commitment for title insurance with respect to the Real Property (the "Title
-----
Commitment"). No later than the end of the Inspection Period, Purchaser shall
- ----------
notify Seller as to any defect in marketability of title which appears in the
Title Commitment (or any update thereof) received by Purchaser and which is not
a Permitted Encumbrance (collectively, the "Title Objections"). The failure of
----------------
Purchaser to notify Seller of any Title Objections prior to the expiration of
the Inspection Period shall be deemed approval by Purchaser of all matters set
forth in the Title Commitment. Likewise, to the extent Purchaser does properly
notify Seller of any Title Objections, all matters set forth in the Title
Commitment that are not included as Title Objections shall be deemed approved by
Purchaser.
(b) If, after the expiration of the Inspection Period but prior to the
Closing Date, additional title exceptions arise which were not set forth in the
Title Commitment, Purchaser shall notify Seller, within five (5) days after its
notification thereof or by the Closing Date (whichever is sooner), of any
objections that Purchaser may have to such additional exceptions (the "New Title
---------
Objections"). The failure of Purchaser to so notify Seller of any such New
- ----------
Title Objections shall be deemed approval by Purchaser of all matters set forth
on the Title Commitment other than the Title Objections. All of the matters set
forth in the Title Commitment approved, waived by Purchaser or deemed approved
by Purchaser shall also be included as "Permitted Encumbrances" for all purposes
----------------------
under this Agreement.
(c) Seller shall, at Seller's sole cost and expense, at or prior to
the Closing, cause the removal of any liens securing the payment of money
resulting from the actions or inactions of Seller (except that any liens for non
delinquent taxes or non delinquent assessments may remain of record, provided
that Seller pay to Purchaser at the Closing, Seller's pro rata share of any such
taxes and assessments). Subject to the provisions of Section 7.4, Seller shall
-----------
use commercially reasonable efforts to cause the removal of any other Title
Objections or New Title Objections. Seller shall be entitled to a reasonable
adjournment of the Closing Date, but not more than thirty (30) days, in order to
cure any Title Objections or New Title Objections.
(d) At the Closing, Seller shall cooperate with any reasonable
requests by Purchaser to deliver to the Title Company a customary seller's
affidavit regarding leases, mechanics liens, and other matters of title
affecting the Real Property in order for the Title Company to issue its title
policy.
15.
<PAGE>
7.2 Violations.
----------
(a) As used in this Agreement, "Violations" shall mean any violations
----------
of any Legal Requirement noted or issued with respect to the Real Property by
any Governmental Agency having jurisdiction over or affecting the Real Property.
(b) No later than the end of the Inspection Period, Purchaser shall
notify Seller of any outstanding Violations noted or issued in the Title
Commitments. If, after the expiration of the Inspection Period but prior to the
Closing Date, additional violations arise which were not set forth in the Title
Commitment, Purchaser shall notify Seller, within five (5) days after its
notification thereof or by the Closing Date (whichever is sooner), of any new
violations (the "New Violations"). The failure of Purchaser to so notify Seller
--------------
of any such New Violations shall be deemed approval by Purchaser of such
Violations. Subject to the provisions of Section 7.4, Seller shall use
-----------
commercially reasonable efforts to cause the Violations and New Violations to be
removed prior to Closing; provided that if such removal has not been completed
-------- ----
prior to the Closing, Purchaser shall have the option to either (i) terminate
this Agreement prior to the Closing Date by written notice to Seller to that
effect, or (ii) waive the Violations and New Violations and proceed to close
pursuant to the terms hereof, in which case such Violations and New Violations
shall be deemed approved by Purchaser for all purposes, including but without
limitation, under this Agreement and under the Master Lease.
(c) Seller, upon written request from Purchaser, shall furnish to
Purchaser authorization to make any necessary searches for purposes of
determining whether notes or notices of Violations or New Violations have been
noted or issued with respect to the Real Property.
7.3 Survey.
------
Seller has delivered to Purchaser a true, complete and correct copy of the
Survey. At the Closing, Seller shall deliver to Purchaser and/or the Title
Company, an affidavit with respect to any changes at the Real Property since the
date of the Survey.
7.4 Curing Objections to Title and Violations.
-----------------------------------------
(a) Notwithstanding the provisions of Sections 7.1(c) and 7.2(b), if
--------------- ------
the cost to remove or correct any Title Objections or New Title Objections
(other than Title Objections or New Title Objections relating to liens securing
the payment of money resulting from the actions or inactions of Seller) or to
comply with any Violations and New Violations, as determined by Seller shall
exceed $25,000.00 (not including any sums required to remove any voluntarily
granted liens securing the payment of money), Seller shall have the right to
cancel this Agreement, in which event Seller shall so notify Purchaser and
Purchaser may elect by notice to Seller (given on the earlier of the Closing
Date or five (5) days from receipt of notice from Seller) (i) not to accept such
title as Seller is able to convey, whereupon this Agreement shall terminate, the
Initial Deposit and the Additional Deposit (if made) shall be returned to
Purchaser and neither party shall have any further rights or obligations
hereunder or (ii) to accept such title as Seller is able to convey and to accept
the Property subject to all Violations and New
16.
<PAGE>
Violations, with no adjustment to the Purchase Price. If Purchaser fails to make
the election provided for in the preceding sentence, then Purchaser shall be
deemed to have elected to proceed to close the transactions contemplated
hereunder.
(b) Seller, in lieu of satisfying any Encumbrances affecting the
Property, may deposit with the Title Company such amount of money, or deliver to
the Title Company such instruments of indemnification, as may be sufficient to
induce it to insure against collection of such liens or encumbrances, including
interest and penalties, out of the Real Property, in which event such liens and
encumbrances shall not constitute objections to title.
ARTICLE VIII
THE CLOSING
8.1 Closing.
-------
Subject to extensions authorized by both Seller and Purchaser in writing,
and subject to the satisfaction or waiver of the conditions set forth in Article
-------
10 hereof, the closing of the transactions contemplated hereunder (the
- --
"Closing") shall take place on or before September 3, 1999, or on such earlier
-------
date as the parties shall mutually approve (the "Closing Date"), at the offices
------------
of Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Norwest Financial Center, 7900
Xerxes Avenue South, Bloomington, Minnesota 55431, or the offices of Purchaser's
lender or its counsel.
8.2 Deliveries at Closing.
---------------------
(a) At the Closing, Seller shall deliver, or cause to be delivered, to
Purchaser the following:
(i) a fully executed and acknowledged limited warranty deed (the
"Deed") with covenants against grantor's acts with respect to the Real
----
Property in the form attached hereto as Exhibit B;
---------
(ii) a fully executed bill of sale in the form attached hereto as
Exhibit C transferring to Purchaser the Personal Property;
---------
(iii) a fully executed assignment and assumption agreement in
the form attached hereto as Exhibit D conveying and transferring to
---------
Purchaser all of Seller's right, title and interest in, to and under the
Contracts, the Development Agreements, the Permits and the Warranties
(other than Excluded Contracts and Excluded Permits);
(iv) intentionally omitted.
(v) a fully executed estoppel certificate from Tenant
substantially in the form attached hereto as Exhibit F;
---------
17.
<PAGE>
(vi) fully executed counterparts of any and all required
transfer tax forms;
(vii) the originals of any of the following that are (aa) not
public record and (bb) in Seller's possession: all Permits, the
Development Agreements, and governmental approvals, if any, including,
without limitation, the building permit and the final certificates of
occupancy for the Improvements, issued by the appropriate governmental
authority. If delivery of an original is impossible because such original
is required to be posted at the Property or held by Governmental
Authorities, delivery of an exact duplicate shall be permitted, or Seller
may furnish to Purchaser other evidence reasonably satisfactory to
Purchaser that such permits have been obtained and are in full force and
effect;
(viii) the Records and Plans and all surveys and maps relating
to the Property, if in the possession of Seller;
(ix) Intentionally omitted.
(x) the originals of all Contracts and Warranties then in
effect;
(xi) Intentionally omitted.
(xii) an affidavit certifying that Seller is not a "foreign
person" within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"), that the transaction contemplated hereby does not constitute
----
a disposition of a United States real property interest by a foreign
person, and that, at the Closing, Seller will not be subject to the
withholding requirements of Section 1445 of the Code;
(xiii) a certificate of Seller confirming that the
representations and warranties made by Seller herein are true and correct
in all material respects as of the Closing Date;
(xiv) a customary owner's affidavit of title certifying as to
those matters as will typically enable the Title Company to issue to
Purchaser an extended coverage title insurance policy and to enable the
Title Company to issue a pro forma policy of title insurance or binding
marked-up commitment with an effective date as of the recording of the
Deed, and such other affidavits and indemnities, if any, as are customarily
delivered by sellers of real property in Minnesota;
(xv) certified copies of the resolutions of Seller's board of
directors and/or shareholders (as applicable), approving this Agreement,
the Master Lease, the Warrant Agreement and all other agreements
contemplated hereby and thereby and the consummation of the transactions
contemplated hereby and thereby;
(xvi) an officer's certificate certifying Seller's articles of
incorporation and by-laws and the incumbency of each officer of Seller
executing this Agreement, the
18.
<PAGE>
Master Lease, the Warrant Agreement or any other agreement or instrument
contemplated hereby or thereby;
(xvii) such other evidence as Purchaser may reasonably request
confirming Seller's authority to execute and deliver the documents required
of it;
(xviii) a fully executed counterpart of the Master Lease;
(xix) a fully executed counterpart of the Warrant Agreement;
(xx) the Warrants; and
(xxi) any other documents and other items required by this
Agreement to be delivered by Seller.
The above instruments of assignment, transfer and conveyance will run
directly from Seller to Purchaser, will vest all of the Property in Purchaser
(subject to Permitted Encumbrances), and shall be duly recorded to the extent
required.
(b) At the Closing, Purchaser shall deliver, or cause to be
delivered, the following to Seller, at its sole cost and expense:
(i) balance of the full Purchase Price;
(ii) such evidence as Seller may reasonably request confirming
Purchaser's authority to execute and deliver the documents required of it;
(iii) a certificate of Purchaser confirming that the
representations and warranties made by Purchaser herein are true and
correct in all material respects as of the Closing Date;
(iv) fully executed counterparts of the assignment and
assumption agreements required to be delivered by Seller;
(v) a fully executed counterpart of the Master Lease; and
(vi) a fully executed counterpart of the Warrant Agreement.
(vii) any other documents or other items required by this
Agreement to be delivered by Purchaser.
8.3 Closing Costs.
-------------
Purchaser shall be responsible for the costs of preparation of the Title
Commitment and the Title Policy (which costs shall include title examinations
and search fees and other costs incidental to the preparation of the Title
Commitment and Title Policy), as well as the actual title insurance premiums and
for the cost of any endorsements requested by Purchaser. Seller shall be
responsible for the cost of the Survey. All deed or other similar taxes payable
upon recording the
19.
<PAGE>
Deed, all recording fees and any and all sales and transfer taxes shall be paid
in equal shares by Purchaser and Seller. Any fees and expenses of the Escrow
Agent shall also be paid in equal shares by Purchaser and Seller.
8.4 Reporting.
---------
Seller and Purchaser acknowledge that Section 6045(e) of the United States
Internal Revenue Code and the regulations promulgated thereunder (collectively,
the "Reporting Requirements") require an informational return to be made to the
United States Internal Revenue Service, and a statement to be furnished to the
Seller, in connection with the Closing.
(a) The Title Company is hereby designated by Seller and Purchaser as
the "Reporting Person" (as defined in the Reporting Requirements) with respect
of the Closing. The Title Company shall perform all duties that are required by
the Reporting Requirements to be performed by the Reporting Person for the
Closing.
(b) Seller and Purchaser shall furnish to the Title Company, in a
timely manner, any information requested by the Title Company and necessary for
the Title Company to perform its duties as Reporting Person for the Closing.
(c) Seller agrees to furnish to Title Company Seller's correct
taxpayer identification number. Seller acknowledges that any failure by Seller
to provide the Title Company with Seller's correct taxpayer identification
number may subject Seller to civil or criminal penalties imposed by law.
Accordingly, Seller hereby certifies under penalty of perjury, that Seller's
correct taxpayer identification number is 41-1795247.
(d) The State of Minnesota Certificate of Real Estate Value requires
Purchaser's taxpayer identification number. Purchaser hereby certifies under
penalty of perjury that Purchaser's correct taxpayer identification number is
13-4078215.
ARTICLE IX
ADJUSTMENTS AND PRORATIONS; CLOSING STATEMENTS
9.1 Adjustments and Prorations.
--------------------------
The following matters and items shall be apportioned between the parties
hereto on an accrual basis as of 11:59 p.m. local time on the date Immediately
Preceding the closing date (the "Cut-off Time"):
(a) Credit for Interest. Purchaser shall receive a credit at the
-------------------
Closing in an amount equal to the interest earned on the Initial and Additional
Deposits described in Section 3.2.
-----------
(b) Taxes and Assessments. All ad valorem real estate taxes due and
---------------------
payable in the year 1999, special or general assessments, sales taxes, occupancy
and entertainment taxes, water and sewer rents, rates and charges and vault
charges and other municipal permit fees. If
20.
<PAGE>
the amount of any such item is unascertainable on the Closing Date, the credit
therefor shall be based on the most recent available bill. If the actual amount
of any such item, when later determined and prorated for the applicable period,
differs from the credit given therefor at the Closing, the parties shall
promptly make the appropriate adjustment, and the party owing sums by reason of
such adjustment shall promptly remit such sums to the other party. Purchaser
shall give Seller written notice of the actual amounts of any such bills within
five (5) business days after Purchaser's receipt thereof.
(c) Utility Contracts. Telephone contracts and contracts for the
-----------------
supply of heat, steam, cable, satellite, electric power, gas, lighting and any
other utility service, with Seller receiving a credit for all deposits, if any,
made by Seller as security under any such public service contract(s) if the same
is transferable and provided such deposit remains on deposit for the benefit of
Purchaser.
(d) License Fees. Fees paid or payable for Permits (other than
------------
Excluded Permits, unless and to the extent Purchaser has the benefit of such
Excluded Permits after the Closing Date).
(e) Intentionally omitted.
(f) Rents. Rents, including without limitation all payments from
-----
Tenant under the SGI Lease for items such as minimum or base rent, additional
rent, reimbursement for real estate taxes, for utilities, for operating and
maintenance expenses and for insurance, as well as other reimbursements (herein
collectively called "Rental Payments") received by Seller before or after the
Closing Date, shall not be prorated as of the Closing Date; Seller shall remain
entitled to retain and receive for its own account all Rental Payments
applicable prior to and during the term of the Master Lease.
(g) Intentionally omitted.
(h) Intentionally omitted.
(i) Contracts. On or before 5:00 p.m. Eastern Daylight Time on the
---------
Due Diligence Approval Date, Purchaser shall notify Seller in writing if
Purchaser elects not to assume at Closing any of the Contracts. Provided that
this Agreement is not terminated prior to Closing pursuant to the terms hereof,
Seller shall give notice of termination of such disapproved Contracts to the
other parties thereto and Seller shall be responsible for all termination fees
payable as a result of the termination of such contracts. However, Purchaser
agrees that as of the Closing Date, at Seller's option , Seller's property
manager and leasing agent, if any (whether such persons are independent
contractors or employees of Seller) shall continue to manage the affairs of the
Property.
(j) Intentionally omitted.
(k) No Adjustments. This Section 9.1(k) shall govern any inconsistent
--------------
provision herein. Seller and Purchaser acknowledge that because Seller and
Purchaser will enter into the Master Lease on the Closing Date, it will be
unnecessary to prorate real estate taxes, assessments,
21.
<PAGE>
utility charges, insurance premiums or any other operating expenses or
additional rent items that are to be paid directly by Seller as tenant under the
Master Lease. Accordingly, any and all of the costs, expenses, fees or other
charges set forth above in this Section 9.1 shall not be prorated as of the
Closing Date if and to the extent the same are operating expenses or other
additional rent items to be paid directly by Seller as tenant under the Master
Lease.
9.2 Closing Statement.
-----------------
Seller authorizes Purchaser's agents and employees to enter the Property
upon two (2) business days' prior notice to Seller (which notice may be
telephonic) before the Closing Date for the purpose of making such inventories,
examinations and audits of the Property, and of the books and records of the
Property, as Purchaser reasonably deems necessary in order to make the
adjustments and prorations required under this Article 9, or under any other
---------
provisions of this Agreement, and to determine which items of Personal Property
are excluded from this transaction and are to be retained by Seller or are
subject to payment by Purchaser or proration between Purchaser and Seller in
accordance with the terms of this Agreement. Based upon such audits and
inventories made by both Purchaser and Seller, at or before the Closing, the
Title Company shall prepare, subject to Seller's and Purchaser's review and
approval, a closing statement (the "Closing Statement") which will show the net
-----------------
amount due either to Seller or to Purchaser as the result of the adjustments
contemplated herein, and such net due amount will be added to or subtracted from
the payment of the cash balance of the Purchase Price to be paid to Seller
pursuant to Article 3 hereof. The adjustments, prorations and determinations
---------
agreed to by Seller and Purchaser shall be conclusive and binding on the parties
hereto.
9.3 Calculations.
------------
Subject to the provisions of Section 9.1(a) above and solely for purposes
--------------
of calculating prorations, Purchaser shall be deemed to be entitled to the
Property and, therefore, entitled to the income therefrom and responsible for
the expenses thereof for the entire day upon which Closing occurs. All such
prorations shall be made on the basis of the actual number of days of the year
and month which shall have elapsed as of the Closing Date. Except as set forth
herein, all items of income and expense for the period after Closing will be for
the account of Purchaser, all as determined by the accrual method of accounting
in accordance with generally accepted accounting principles consistently
applied. Bills received after Closing which relate to expenses incurred,
services performed, and any and all amounts allocable to the period prior to
Closing, shall be paid by Seller and amounts received (including, without
limitation, refunds and insurance proceeds) relating to the period prior to the
Closing shall be paid to Seller.
9.4 Survival.
--------
The provisions of this Article 9 shall survive the Closing.
---------
22.
<PAGE>
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
Seller's obligation to close the transactions contemplated by this
Agreement and to deliver the documents and instruments required under Article 8
---------
is subject to the following conditions (which may be waived by Notice from
Seller):
(a) Purchaser shall have paid the balance of the Purchase Price, plus
or minus prorations and adjustments shown in the Closing Statement, by wire
transfer of funds to the Title Company, which shall transfer such funds to the
account or accounts as shall have been designated to the Title Company by Seller
in advance of the Closing;
(b) Purchaser shall have completed all of the deliveries required of
Purchaser under Article 8, and all such documents and instruments shall be in
---------
form reasonably satisfactory to Seller and its counsel;
(c) all of the representations set forth in Section 6 shall be true in
---------
all material respects as of the Closing Date; and
(d) all covenants and agreements which are required to be performed by
Purchaser on or before Closing shall have been duly and timely performed and
satisfied in all respects.
ARTICLE XI
CONDITIONS TO PURCHASER'S OBLIGATIONS
Purchaser's obligation to close the transactions contemplated by this
Agreement and to deliver the balance of the Purchase Price and the other
documents and instruments required under Article 8 is subject to the following
---------
conditions (which may be waived by Notice from Purchaser):
(a) Purchaser shall have received from Seller all of the items
described in Section 8.2(a) above that Seller is required to deliver to
--------------
Purchaser;
(b) all of the representations set forth in Section 5.1 shall be true
-----------
in all material respects as of the date hereof and as of the Closing Date;
(c) Intentionally omitted.
(d) Purchaser shall have received an ALTA owner's policy of title
insurance with full extended coverage (including deletion of the mechanics lien
and survey exceptions) and together with the Title Endorsements, or a commitment
therefor reasonably satisfactory to Purchaser, issued by the Title Company,
dated as of the date and time of the Closing and with liability in the amount of
the Purchase Price, showing record fee simple title to the Real Property to be
vested in Purchaser (subject only to the Permitted Encumbrances). If Purchaser
wishes the
23.
<PAGE>
Title Company to issue any endorsements, Purchaser shall pay any costs
associated with such endorsements;
(e) All covenants and agreements which are required to be performed by
Seller on or before Closing shall have been duly and timely performed and
satisfied in all respects;
(f) Between the Due Diligence Approval Date and the Closing Date,
there shall not have occurred any event or change in the Property which results
in the Improvements (a) becoming a non-conforming use under applicable zoning
ordinances, (b) violating any restrictions, conditions or agreements which
materially and adversely affects the value or operation of the Improvements
following Closing, or (c) violating any applicable law, ordinance or regulation
which materially and adversely affects the value or operation of the
Improvements following Closing.
(g) Between the Due Diligence Approval Date and the Closing Date,
there shall not have occurred any event or change in the Property which results
in the introduction of any hazardous substance or hazardous materials as defined
by federal, state or local law, provided, however, that Seller shall be
permitted to introduce to the Property such materials as reasonably and commonly
used, and only in such quantities as reasonably and commonly used, in the
operation of an office building complex such as the Property, provided, however,
that such materials are used in accordance with all applicable laws.
If the conditions described above have not been fulfilled on or before
the Closing Date, then this Agreement may be terminated at Purchaser's sole
option, by written notice from Purchaser to Seller delivered on or before the
Closing Date, in which event both the Initial Deposit and the Additional
Deposit, together with interest accrued thereon, shall be returned to Purchaser.
If no such termination notice is timely delivered to Seller, the foregoing
conditions shall be deemed satisfied or waived by Purchaser.
ARTICLE XII
ACTIONS AND OPERATIONS PENDING CLOSING
Seller agrees that, between the date of this Agreement and the Closing
Date:
(a) Seller shall continue to operate and maintain the Property
substantially in accordance with the present standards.
(b) Until the Closing Date, Seller shall maintain or replace in the
ordinary course of business all Personal Property associated with the Property
and shall not sell, transfer, encumber or permit the sale, transfer or
encumbrance of any such Personal Property except in the ordinary course of
business, unless such Personal Property so removed is replaced with new Personal
Property of similar quality and utility.
(c) Seller shall maintain all Contracts and Permits in full force and
effect, and in the ordinary course of business timely make all payments and
observe and perform all material
24.
<PAGE>
obligations to be paid, observed or performed by Seller thereunder. Seller shall
renew or replace with reasonably comparable service the Contracts which expire
prior to the Closing Date, unless Purchaser requests in writing that they not be
extended, renewed or replaced after being given reasonable notice of the
expected expiration of the Contracts, which requests shall not be unreasonably
made.
(d) After the expiration of the Inspection Period, assuming that
Purchaser has not terminated the Agreement, Seller shall not enter into any new
Permits, Contracts or leases not subject to termination or cancellation by
Seller by the expiration of the term of the Master Lease, materially modify or
renew any existing Contracts or leases to extend beyond the term of the Master
Lease, without the prior written consent of Purchaser. Purchaser will not
unreasonably withhold, delay or qualify any consent requested by Seller under
this subparagraph (b), and if Purchaser shall fail to give Notice of consent or
disapproval of any such matter within five (5) business days after request
therefor from Seller, then Purchaser shall be deemed to have consented thereto.
(e) Seller shall execute and Purchaser, where necessary, shall join in
the execution of, all applications and instruments required in connection with
the transfer of all Permits (other than Excluded Permits) in order to transfer
the benefits of such Permits to Purchaser on or prior to the Closing Date.
Purchaser shall be responsible for, and pay promptly upon Seller's request, all
costs related to such applications and instruments. Seller, subject to the next
succeeding sentence, shall use its best efforts to preserve in full force and
effect all existing Permits and to cause all those expiring to be renewed prior
to the Closing Date. If any such Permit shall be suspended or revoked, Seller
shall promptly so notify Purchaser and shall take all measures necessary to
cause the reinstatement of such Permit without any additional limitation or
condition.
(f) Seller shall maintain in effect all policies of casualty and
liability insurance or similar policies of insurance, with no less than the
limits of coverage now carried with respect to the Real Property.
ARTICLE XIII
CASUALTIES AND TAKINGS
13.1 Casualties.
----------
(a) Materiality Threshold. For purposes of this Section, "material"
---------------------
shall mean damage or destruction of the Property ("Casualty") for which the
aggregate estimated cost of repair, restoration and rehabilitation (including
all indirect and incidental costs and expenses), determined by Purchaser in its
reasonable discretion, is in excess of Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00).
(b) Notice. Seller shall give Purchaser prompt written notice of any
------
damage or destruction of the Property, without regard to the extent of such
damage or destruction, which
25.
<PAGE>
notice shall specify the damage and the Seller's estimated cost of repair,
restoration and rehabilitation, including all indirect and incidental costs and
expenses (the "Casualty Notice").
(c) Material Loss from Casualty. If, prior to Closing, any portion of
---------------------------
the Property is damaged or destroyed to a "material" degree, Purchaser may, at
its option, terminate this Agreement by delivery of written notice of such
termination (the "Casualty Termination Notice") to Seller within fifteen (15)
business days after receipt of the Casualty Notice. If damage or destruction
occurs within fifteen (15) business days prior to the Closing Date, such Closing
Date shall be extended to the date which is fifteen (15) business days after the
receipt by Purchaser of the Casualty Notice. If Purchaser elects not to so
terminate this Agreement then, (i) prior to the Closing, Seller will not settle
the loss or otherwise irrevocably bind Purchaser to an award without Purchaser's
consent, which consent shall not be unreasonably withheld, conditioned or
delayed, and (ii) Purchaser shall have the exclusive right to settle the loss
and to receive all proceeds of the casualty insurance covering the Improvements
so damaged or destroyed.
(d) Minor Loss from Casualty. If, prior to Closing, any portion of the
------------------------
Property is damaged or destroyed, but such damage or destruction is not
"material," Seller shall use commercially reasonable efforts to restore, prior
to Closing, the Property to its previous condition. If Seller is unable to
complete said restoration of the Property to its previous condition prior to the
Closing, then Purchaser shall accept an assignment from Seller to Purchaser of
all of Seller's rights with respect to the settlement of all insurance proceeds
receivable with respect to such damage or destruction and shall receive a
proration credit at Closing equal to all deductibles therefrom (but not in
excess of the amount of the cost of repair).
(e) Termination. If Purchaser elects to terminate this Agreement
-----------
pursuant to this Section 13.1, both the Initial Deposit and the Additional
------------
Deposit (if made), together with interest accrued thereon, shall be returned to
Purchaser.
13.2 Taking.
------
In the event that Seller has knowledge of the actual or threatened taking
of all or any part of the Real Property by exercise of right of eminent domain,
Seller will give Purchaser prompt written notice (a "Condemnation Notice") of
-------------------
such event. If, on or before the Closing Date, any Real Property shall be taken
or threatened to be taken by exercise of right of eminent domain, or there shall
be taken or threatened to be taken so material a part thereof that, in the
reasonable opinion of Purchaser, the taking does or would materially interfere
with the economic operation or use of the Property, then Purchaser may elect to
terminate this Agreement by giving Seller Notice to such effect by the earlier
to occur of (a) the Closing Date, or (b) ten (10) days after Seller has given
Purchaser the Condemnation Notice. In the event that Purchaser elects to
terminate this Agreement pursuant to this Section 13.2, both the Initial Deposit
------------
and the Additional Deposit (if made), together with interest accrued thereon
prior to the termination of the Inspection Period, shall be returned to
Purchaser. If Purchaser does not elect to terminate this Agreement, then the
Closing shall take place as herein provided without any abatement of the
Purchase Price, and Seller shall, by written instrument at the Closing, assign
to Purchaser all of Seller's right, title and interest in and to any
condemnation award which may be payable to Seller
26.
<PAGE>
on account of such condemnation without recourse. If, prior to the Closing Date,
all or any portion of the Real Property shall be taken by exercise of right of
eminent domain in a manner which does not give Purchaser the right to terminate
this Agreement, the transaction contemplated hereby shall take place as provided
in the preceding sentence. For purposes of this Section 13.2, the term "taking"
------------
shall include temporary as well as permanent takings, and a taking shall not be
deemed to be "threatened" unless and until a fund for the payment of the
anticipated compensation for such taking shall have been appropriated or some
official action with respect to such taking shall have been taken by a
governmental body possessing powers of eminent domain.
ARTICLE XIV
ESCROW INSTRUCTIONS
(a) Immediately after execution of this Agreement, Purchaser and
Seller shall open an escrow account with Escrow Agent. The transactions
contemplated by this Agreement shall be completed through Escrow Agent. This
Agreement, together with Escrow Agent's standard form provisions and any
additional restrictions not inconsistent with this Agreement as may be
reasonably required by Escrow Agent, shall constitute joint escrow instructions
to Escrow Agent regarding this matter.
(b) In the event that the Closing hereunder shall occur, all interest
accruing on the Initial Deposit and Additional Deposit shall thereupon be paid
to Seller (with appropriate credit to Purchaser on the Settlement Statement).
Such interest shall otherwise be payable to the party entitled to receive the
Initial and Additional Deposits pursuant to this Agreement.
(c) If disbursement from the Escrow Agent is requested at any time
other than at the Closing, notice thereof shall be given by the requesting party
to the non-requesting party, their respective attorneys, and the Escrow Agent.
Such notice shall detail the basis for the request and shall be given by
certified mail, return receipt requested, and the Escrow Agent shall not make
any disbursement pursuant to (b) above until five (5) business days after
receipt by the Escrow Agent of such notice and only if the Escrow Agent shall
not receive notice disputing such payment prior to the expiration of said five
(5) business days.
(d) The Escrow Agent, in its sole discretion, may at any time deposit
the Initial Deposit and the Additional Deposit (if made) and any accrued
interest with a court of competent jurisdiction selected by it in its capacity
as Escrow Agent, and, in such event, the Escrow Agent shall be fully released
and discharged from all liabilities and responsibilities in connection with
holding the Initial Deposit and the Additional Deposit (if made).
(e) The duties of the Escrow Agent are only as herein specifically
provided and are purely ministerial in nature and the Escrow Agent shall incur
no liability whatever with respect thereto, provided the Escrow Agent has acted
in good faith.
27.
<PAGE>
(f) The Escrow Agent is executing this Agreement solely to confirm
that it will hold the Initial and Additional Deposits in escrow pursuant to the
provisions of this paragraph.
(g) The parties hereto acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and that the Escrow Agent shall not be
deemed to be an agent of either of the parties in any action that it shall take
in its capacity as Escrow Agent. The Escrow Agent shall not be liable for any
action or omission on its part unless such action is taken or suffered as the
result of the willful misconduct or gross negligence of the Escrow Agent. The
Escrow Agent will incur no liability for acting upon any instruction, notice,
receipt or document believed by it to be genuine and to have been made, signed,
sent or presented by a person or persons authorized to perform such acts. The
Escrow Agent shall be under no duty to obtain the highest rate of interest upon
the deposit to be placed in escrow.
ARTICLE XV
NOTICES
Except as otherwise provided in this Agreement, all notices, demands,
requests, consents approvals and other communications (herein collectively
called "Notices") required or permitted to be given hereunder, or which are to
-------
be given with respect to this Agreement, shall be in writing and shall be
personally served or sent by registered or certified mail, postage prepaid,
return receipt requested, addressed to the party to be so notified as follows:
If to Purchaser: c/o Chase Capital Partners
380 Madison Avenue
New York, New York 10017
Attention: Dwight I. Arnesen
Telephone: (212) 622-3667
Telecopy: (212) 622-4026
with a copy to: O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Steven C. Koppel, Esq.
Telephone: (212) 408-2490
Telecopy: (212) 728-5950
If to Seller: WAM!NET, INC.
655 Lone Oak Drive
Eagan, Minnesota 55121
Attention: Mark Marlow
Telephone: (651) 256-5177
Telecopy: 651-256-5435
28.
<PAGE>
with a copy to: WAM!NET, Inc.
655 Lone Oak Drive
Eagan, Minnesota 55121
Attention: General Counsel
with a copy to: Larkin Hoffman Daly & Lindgren, Ltd.
1500 Northwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attention: Gary A. Renneke, Esq.
Telephone: 612-896-3238
Telecopy: 612-896-3250
A Notice shall be effective on the earlier of actual receipt or three (3) days
after the mailing thereof. Notices may also be sent or delivered by (a) hand,
(b) overnight delivery or (c) facsimile, provided that in utilizing any form of
delivery authorized by this sentence other than (a) or (b), such Notice must
also be immediately sent to the addressee via certified mail, return receipt
requested. Either party may at any time change the address for Notices to such
party by giving a Notice as aforesaid.
ARTICLE XVI
DEFAULT
(a) Purchaser and Seller agree that it will be difficult or impossible
to ascertain Seller's damages in the event of a default by Purchaser hereunder,
and that the Initial Deposit and the Additional Deposit (if paid) represents a
fair and reasonable estimate thereof. Therefore, if Seller shall fully perform
its obligations hereunder, and Purchaser shall fail or refuse to perform its
obligations as required by the terms hereof, the sole remedy of the Seller shall
be to retain the Initial Deposit and the Additional Deposit (if paid) as
liquidated damages and not as a penalty and Purchaser's liability hereunder
shall be limited to the Initial and Additional Deposits and neither party hereto
shall have any further liability to the other hereunder, except for Purchaser's
surviving obligations under Section 4(a) hereof.
(b) If Purchaser shall fully perform its obligations hereunder and if
Seller shall fail or refuse to perform its obligations hereunder, Seller's
liability for damages shall be expressly limited to the return of the Initial
Deposit and the Additional Deposit (if paid) (together with all interest
accruing thereon) to Purchaser and the reimbursement of Purchaser for all
reasonable costs of title examination, survey costs, reasonable legal fees and
any fees and expenses actually incurred by or on behalf of Purchaser in
connection with the transactions contemplated hereunder, provided that Seller's
obligations shall not exceed Fifty Thousand Dollars and 00/100 ($50,000) in the
aggregate. Alternatively, Purchaser shall have the right to specific performance
of this Agreement. The foregoing remedies of damages or specific performance
shall be Purchaser's sole remedies available.
29.
<PAGE>
ARTICLE XVII
MISCELLANEOUS
17.1 Assessments.
-----------
Assessments affecting the Property shall be payable by the party owning the
Property at the time such assessments become due and payable. Notwithstanding
the foregoing, if, on the Closing Date, the Property or any part thereof shall
be or shall have been affected by an assessment or assessments which are or may
become payable in installments, Seller shall be obligated to pay only those
installments due and payable prior to or on the Closing Date and Purchaser shall
be obligated to pay all installments due and payable after the Closing Date.
17.2 Assignment.
----------
Purchaser shall not have the right to assign its right, title or interest
in this Agreement to any person or entity without Seller's prior written
consent, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Purchaser may assign this Agreement without Seller's consent to one
(1) or more affiliates of Purchaser or to Purchaser's lending sources. Any
attempted assignment by Purchaser in violation of the preceding sentence shall
be null and void and of no force and effect, at Seller's option. Purchaser
hereby agrees that any assignment by Purchaser (whether or not consented to by
Seller) shall not relieve Purchaser of its obligations and liabilities
hereunder.
17.3 Assignment of Contracts, Rights, etc.
---------------------------------------
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or attempted agreement to transfer,
sublease or assign any contract, license, real or personal property lease, or
other agreement, or any Permit, if an attempted transfer, sublease or assignment
thereof, without the required consent of any other party thereto, would
constitute a breach thereof or in any way affect the rights of Purchaser or
Seller thereunder. The parties shall use commercially reasonable efforts to
obtain the consent of any such third party to the foregoing to the transfer or
assignment thereof to Purchaser in all cases in which such consent is required
for such transfer or assignment. If such consent is not obtained, the parties
shall cooperate in any arrangements necessary or desirable to provide for
Purchaser the benefits thereunder, including, without limitation, enforcement by
Seller for the benefit of Purchaser of any and all rights of Seller thereunder
against the other party thereto.
17.4 Attorneys' Fees.
---------------
If any action is brought by either Purchaser or Seller, each party shall
pay its own costs and expenses incurred in such action.
17.5 Broker's Commission.
-------------------
Purchaser represents to Seller that it has not dealt with any broker other
than Pearson Partners, Inc. ("Pearson") in connection with this transaction.
Seller represents to Purchaser that it has not dealt with any broker other than
Nelson, Tietz & Hoye ("NTH") and Grubb & Ellis
30.
<PAGE>
("G&E") in connection with this transaction. Seller shall be exclusively
responsible for payment of any commission or other compensation earned by NTH,
G&E and Pearson through G&E in connection herewith. Purchaser agrees to
indemnify, defend and hold Seller harmless from and against any and all claims,
losses, liability, costs and expenses (including reasonable attorneys' fees and
disbursements) resulting from any claim that may be made against Seller by any
other broker or other person claiming a commission, fee or other compensation by
reason of this transaction, if the same shall arise by, through or on account of
any act, omission or alleged act or omission of Purchaser or its
representatives. Seller agrees to indemnify, defend and hold Purchaser harmless
from and against any and all claims, losses, liability, costs and expenses
(including reasonable attorneys' fees and disbursements) resulting from any
claim that may be made against Purchaser by any other broker or other person
claiming a commission, fee or other compensation by reason of this transaction,
if the same shall arise by, through or on account of any act, omission or
alleged act or omission of Seller or its representatives.
17.6 Confidentiality.
---------------
Seller and Purchaser hereby covenant and agree that, at all times after
the date of this Agreement and prior to the Closing, unless expressly consented
to in writing by the other party, no public disclosure (by press release or
other media) shall be made concerning this transaction except for Seller's S-1
filing with the United States Securities and Exchange Commission. Purchaser
agrees to keep strictly confidential all information provided to or obtained by
Purchaser pursuant to this Agreement provided, however, that disclosures with
-------- -------
respect to the Agreement, the transactions contemplated thereby and any
negotiations or discussions with respect thereto shall be permitted among
Purchaser, Purchaser agents and any persons or entities that may potentially
supply financing to Purchaser to consummate the transactions contemplated
hereby.
17.7 Construction.
------------
The parties acknowledge that their attorneys have reviewed this Agreement
and that the normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any Exhibits, Schedules or amendments
hereto.
17.8 Cooperation.
-----------
The parties agree to use commercially reasonable efforts to satisfy, and
to cooperate with and assist the other parties hereto to satisfy, the conditions
to Closing in a timely manner.
17.9 Delivery of Keys.
----------------
At the Closing, Seller shall deliver to Purchaser a key to the main
entrance of the Property.
31.
<PAGE>
17.10 Further Assurances.
------------------
Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate transactions
contemplated by this Agreement. From time to time after the Closing Date,
without further consideration, the parties shall execute and deliver or cause to
be executed and delivered such documents as may be reasonably request for the
implementation and consummation of the transactions contemplated by this
Agreement. Each party hereto which is a designated signatory to any Exhibits and
Schedules hereto agrees to execute and deliver the execution copies of such
Exhibits and Schedules at or prior to the Closing.
17.11 Further Instruments and Acts.
----------------------------
The parties shall execute and deliver such additional instruments and
shall do such further acts as may be reasonably necessary to carry out the
provisions of this Agreement.
17.12 General.
-------
This Agreement may be executed in any number of counterparts, each of
which shall constitute an original but all of which, taken together, shall
constitute but one and the same instrument. This Agreement (including, without
limitation, all Schedules and Exhibits hereto) contains the entire agreement
between the parties with respect to the subject matter hereof, supersedes all
prior understandings, if any, with respect thereto and may not be amended,
supplemented or terminated, nor shall any obligation hereunder or condition
hereof be deemed waived, except by a written instrument to such effect signed by
the party to be charged. The warranties, representations, agreements and
undertakings contained herein shall not be deemed to have been made for the
benefit of any person or entity other than the parties hereto. Within this
Agreement, words of any gender shall be held and construed to include any other
gender, and words in the singular number shall be held and construed to include
the plural, unless the context otherwise requires. All Schedules and Exhibits
described herein and attached hereto are fully incorporated into this Agreement
by this reference for all purposes.
17.13 Governing Law.
-------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE SATE OF MINNESOTA. PURCHASER AND SELLER EACH HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY MINNESOTA STATE COURT OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND FURTHER
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH MINNESOTA STATE COURT. PURCHASER AND SELLER
EACH HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EACH EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
32.
<PAGE>
17.14 Indemnities.
-----------
Purchaser agrees that it will indemnify, defend, protect and hold Seller
and their agents harmless from and against all actions, claims, penalties,
damages and expense including, without limitation, reasonable attorneys' fees
and disbursements, based upon or arising out of all matters relating to the
operation of the Property and any claim for personal injury or property damage
based on any event occurring on or about the Property after the Closing Date or
in connection with Purchaser's access to the Property in accordance with this
Agreement prior to the Closing Date (the foregoing indemnity shall survive any
termination of this Agreement). Seller agrees that it will indemnify, defend,
protect and hold Purchaser harmless from and against all costs, claims,
penalties, damages and expense including, without limitation, reasonable
attorneys' fees, based upon or arising out of (i) all matters relating to the
operation of the Property prior to the Closing Date, (ii) any claim for personal
injury or property damage based upon an event occurring in or about the Property
prior to the Closing Date and (iii) all matters arising out of any contract or
agreement relating to and of the Property that has been terminated by Seller on
or prior to the Closing Date.
17.15 Joint and Several Obligations.
-----------------------------
If more than one person signs this Agreement as Seller or Purchaser,
their obligations under this Agreement will be joint and several.
17.16 No Solicitation.
---------------
(a) Seller shall, and shall direct and cause its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
its other representatives and agents (collectively, "Representatives") to,
---------------
immediately cease any discussions or negotiations with any parties other than
Purchaser that may be ongoing with respect to an Alternative Transaction (as
hereinafter defined). From and after the date hereof until the earlier of the
Closing or the termination of this Agreement pursuant to the terms hereof,
Seller shall not authorize or permit its Representatives to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal that may lead to an Alternative Transaction, (ii)
participate in any discussions or negotiations regarding any proposed
Alternative Transaction or (iii) execute any agreements regarding an Alternative
Transaction. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
Representative of Seller shall be deemed to be a breach of this Section 17.16 by
-------------
Seller. For purposes of this Agreement, an "Alternative Transaction" means the
-----------------------
purchase or lease of all or of any portion of the Property or any debt or equity
financing of the Property other than an equity investment or debt financing in
Seller by an investor which is not secured by the Property.
(c) The parties recognize and acknowledge that in the event of a
breach of this Section 17.16 will cause irreparable and material loss and damage
-------------
to the non-breaching party as to which it will not have an adequate remedy at
law or in equity. Accordingly, each party acknowledges and agrees that the
issuance of an injunction or other equitable remedy is an appropriate remedy for
any such breach.
33.
<PAGE>
(d) Notwithstanding the foregoing provisions of this Section 17.16,
-------------
during the period after August 14, 1999 and prior to the end of the Inspection
Period, Seller shall have the right to enter into agreements for the sale of the
Property (and to enter into discussions and negotiations related thereto) with
other persons or entities (any such person or entity being referred to herein as
a "Back-Up Purchaser") provided that (i) Seller shall disclose to any Back-Up
Purchaser the fact that Seller has entered into an agreement for the sale of the
Property, and (ii) Seller shall not disclose to any Back-Up Purchaser or to any
of its representatives any of the terms of this Agreement or any agreements
executed or contemplated to be executed in connection herewith. On the Closing
Date, Seller shall immediately terminate any agreements entered into (and any
discussions and negotiation related thereto) with any Back-Up Purchaser.
17.17 Paragraph Headings.
------------------
The paragraph headings contained in this Agreement are for convenience
only and shall in no way enlarge or limit the scope or meaning of the various
and several paragraphs hereof.
17.18 No Recording.
------------
Neither party shall record this Agreement or a memorandum hereof.
17.19 Remedies.
--------
Except as otherwise set forth herein, the parties shall have and retain
all rights and remedies existing in their favor at law or in equity, including
without limitation, any actions for specific performance and/or injunctive or
other equitable relief (including without limitation, the remedy of rescission)
to enforce or prevent any violations of the provisions of this Agreement.
17.20 Rights Cumulative.
-----------------
Except as set forth herein, all rights, powers and remedies herein given
to Purchaser and Seller are cumulative and not alternative, and are in addition
to all statutes or rules of law. All agreements and covenants hereunder shall be
given independent effect so that if a certain action or condition constitutes a
default under a certain agreement or covenant, the fact that such action or
condition is permitted by another agreement or covenant shall not affect the
occurrence of such default, unless expressly permitted under an exception to
such initial covenant. In addition, all representations and warranties hereunder
shall be given independent effect so that if a particular representation or
warranty proves to be incorrect or is breached, the fact that another
representation or warranty concerning the same or similar subject matter is
correct or is not breached will not affect the incorrectness of or a breach of a
representation and warrant hereunder.
17.21 Severability.
------------
The provisions of this Agreement are severable, and if any provision or
part hereof or the application thereof to any person or circumstances shall ever
be held by any court of competent jurisdiction to be invalid or unconstitutional
for any reason, the remainder of this Agreement and
34.
<PAGE>
the application of such provisions or part hereof to other persons or
circumstances shall not be affected thereby.
17.22 Successors.
----------
The terms and provisions of this Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
17.23 Survival.
--------
The provisions of this Article 17 shall survive the Closing.
----------
17.24 Waiver.
------
No waiver of a breach of, or default under, any provision of this
Agreement shall be deemed a waiver of such provision or of any subsequent breach
or default of the same or similar nature or of any other provision or condition
of this Agreement.
17.25 Master Lease and Warrant Agreement.
----------------------------------
Commencing on the date hereof, the parties shall negotiate in good faith
and prepare the Master Lease and the Warrant Agreement. If the Master Lease
and/or the Warrant Agreement has not been finalized prior to the Closing Date,
either party shall have the right to terminate this Agreement which right shall
be exercised by delivering written notice to the other party within five (5)
days thereafter. Notwithstanding the foregoing, if either party has not acted
in good faith in negotiating the Master Lease and/or the Warrant Agreement, such
party shall not have the right to terminate this Agreement pursuant to this
Section 17.25. For purposes of this Section 17.25, a party shall be deemed to
- ------------- -------------
have not acted in good faith if, among other things, such party has not made
itself and its representatives reasonably available for negotiations of the
Master Lease and/or the Warrant Agreement. If this Agreement is terminated by
either party pursuant to the provisions of this Section 17.25, the Initial
Deposit and the Additional Deposit (if made), together with all interest
thereon, shall be returned to Purchaser within two (2) business days after the
other party's receipt of the terminating party's notice of termination.
17.26 Break-up Fee.
------------
In the event that the Seller does not obtain board approval for the
execution of the Master Lease or Warrant Agreement which incorporate the terms
of the transactions contemplated hereunder and Purchaser is otherwise willing
and able to execute the Master Lease or Warrant Agreement consistent with the
terms of Exhibit G and Exhibit H, the Seller shall reimburse Purchaser for all
--------- ---------
costs of title examination, surveys, reasonable legal fees, engineering reports,
environmental reports and any other fees and expenses incurred by or on behalf
of Purchaser in connection with the transactions contemplated hereunder, not to
exceed Fifty Thousand and 00/100 Dollars ($50,000) in the aggregate.
35.
<PAGE>
17.27 Termination and Return of Deposits.
----------------------------------
This Section 17.26 shall govern any inconsistent provision of this
Agreement. In the event of the termination of this Agreement and the Initial
Deposit and/or the Additional Deposit are to be returned to Purchaser, neither
the Initial Deposit nor the Additional Deposit (as applicable) shall be returned
to Purchaser until the following conditions are satisfied: (i) Purchaser
executes and delivers a purchase agreement cancellation instrument reasonably
satisfactory to Seller; and (ii) Purchaser pays any and all amounts to be paid
in connection with Purchaser's Reports, if the failure to pay the same may
subject Seller or the Property to any liability or liens, and Purchaser provides
Seller with paid receipts and lien waivers (if applicable) for the same; and
(iii) Purchaser has delivered to Seller true and complete copies of all of
Purchaser's Reports and other written materials pertaining to its due diligence;
however, this subsection (iii) shall apply only if Seller is obligated to pay
and in fact pays (a) the break-up fee referred to in Section 17.26 of this
Agreement, or (b) Purchaser's costs, fees and expenses pursuant to Section 16(b)
of this Agreement.
17.28 Assignment of Foothill Loan.
---------------------------
Seller hereby consents to Purchaser and Purchaser's lender contacting
Foothill Capital Corporation in connection with a possible partial assignment of
the Foothill Loan (as hereinafter defined) from Foothill to Purchaser's lender.
As used herein, the "Foothill Loan" shall mean that certain loan by Foothill to
Seller pursuant to that certain Loan and Security Agreement and that certain
Mortgage with Power of Sale, Assignment of Rents, Security Agreement and Fixture
Filing (the "Mortgage"), each dated as of July 16, 1999. Purchaser understands
and acknowledges that although the lien of the Mortgage against the Property is
to be released in conjunction with the Closing, the Foothill Loan will not be
paid in its entirety as of the Closing and that Seller intends to continue to
utilize the Foothill Loan as an ongoing line of credit pursuant to said Loan and
Security Agreement. Accordingly, Seller does not hereby make any representation
regarding the practicability or feasibility of any such partial assignment, even
if the same is otherwise acceptable to all parties thereto. Purchaser shall
cause any such assignment to be conditioned upon Seller being fully released of
liability under and in connection with that part of the Foothill Loan to be
assigned. Purchaser shall reimburse Seller for any and all costs and expenses
incurred by Seller, including but not limited to attorneys' fees, incurred in
connection with its cooperation, facilitation and execution of documents in
connection with such assignment. Purchaser shall make such reimbursement to
Seller upon the earlier of the Closing or ten (10) days after written request
therefor by Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
SELLER: WAM!NET INC.
By: ________________________________
Name:
36.
<PAGE>
Title:
PURCHASER: CCPRE-EAGAN, LLC
By: _____________________________
Name:
Title:
37.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Preliminary statement....................................................................................... 1
ARTICLE I DEFINITIONS...................................................................................... 1
1.1 Definitions............................................................................................. 1
-----------
1.2 References.............................................................................................. 5
----------
ARTICLE II SALE AND PURCHASE............................................................................... 6
2.1 Sale and Purchase....................................................................................... 6
-----------------
2.2 Liabilities Not Being Assumed........................................................................... 6
-----------------------------
ARTICLE III PURCHASE PRICE AND DOWN PAYMENTS............................................................... 6
3.1 Purchase Price.......................................................................................... 6
--------------
3.2 Downpayments............................................................................................ 6
------------
ARTICLE IV INSPECTION BY PURCHASER......................................................................... 8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER......................................................... 9
5.1 Seller's Representations and Warranties................................................................. 9
---------------------------------------
5.2 Survival................................................................................................ 13
--------
5.3 As Is................................................................................................... 13
-----
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................... 14
6.1 Purchaser's Representations and Warranties.............................................................. 14
------------------------------------------
6.2 Survival................................................................................................ 15
--------
ARTICLE VII TITLE AND SURVEY MATTERS....................................................................... 15
7.1 Objections to Title..................................................................................... 15
-------------------
7.2 Violations.............................................................................................. 16
----------
7.3 Survey.................................................................................................. 16
------
7.4 Curing Objections to Title and Violations............................................................... 17
-----------------------------------------
ARTICLE VIII THE CLOSING................................................................................... 17
8.1 Closing................................................................................................. 17
-------
8.2 Deliveries at Closing................................................................................... 17
---------------------
8.3 Closing Costs........................................................................................... 20
-------------
8.4 Reporting............................................................................................... 20
---------
ARTICLE IX ADJUSTMENTS AND PRORATIONS; CLOSING STATEMENTS.................................................. 21
9.1 Adjustments and Prorations.............................................................................. 21
9.2 Closing Statement....................................................................................... 22
-----------------
9.3 Calculations............................................................................................ 22
------------
9.4 Survival................................................................................................ 23
--------
ARTICLE X CONDITIONS TO SELLER'S OBLIGATIONS............................................................... 23
ARTICLE XI CONDITIONS TO PURCHASER'S OBLIGATIONS........................................................... 23
ARTICLE XII ACTIONS AND OPERATIONS PENDING CLOSING......................................................... 25
ARTICLE XIII CASUALTIES AND TAKINGS........................................................................ 26
13.1 Casualties............................................................................................. 26
-----------
13.2 Taking................................................................................................. 27
-------
ARTICLE XIV ESCROW INSTRUCTIONS............................................................................ 27
ARTICLE XV NOTICES......................................................................................... 28
ARTICLE XVI DEFAULT........................................................................................ 29
</TABLE>
i.
<PAGE>
<TABLE>
<S> <C>
ARTICLE XVII MISCELLANEOUS.................................................................................. 30
17.1 Assessments........................................................................................... 30
------------
17.2 Assignment............................................................................................ 30
----------
17.3 Assignment of Contracts, Rights, etc.................................................................. 30
------------------------------------
17.4 Attorneys' Fees....................................................................................... 31
---------------
17.5 Broker's Commission................................................................................... 31
-------------------
17.6 Confidentiality....................................................................................... 31
---------------
17.7 Construction.......................................................................................... 32
------------
17.8 Cooperation........................................................................................... 32
-----------
17.9 Delivery of Keys...................................................................................... 32
----------------
17.10 Further Assurances.................................................................................... 32
------------------
17.11 Further Instruments and Acts.......................................................................... 32
----------------------------
17.12 General............................................................................................... 32
-------
17.13 Governing Law......................................................................................... 33
-------------
17.14 Indemnities........................................................................................... 33
-----------
17.15 Joint and Several Obligations......................................................................... 33
-----------------------------
17.16 No Solicitation....................................................................................... 33
---------------
17.17 Paragraph Headings.................................................................................... 34
------------------
17.18 No Recording.......................................................................................... 34
------------
17.19 Remedies.............................................................................................. 34
--------
17.20 Rights Cumulative..................................................................................... 35
-----------------
17.21 Severability.......................................................................................... 35
------------
17.22 Successors............................................................................................ 35
----------
17.23 Survival.............................................................................................. 35
--------
17.24 Waiver................................................................................................ 35
------
17.25 Master Lease and Warrant Agreement.................................................................... 35
----------------------------------
17.26 Break-up Fee.......................................................................................... 36
------------
17.26 Termination and Return of Deposits.................................................................... 36
----------------------------------
</TABLE>
ii.
<PAGE>
SCHEDULES
Schedule A-1 - Contracts
Schedule A-2 - Excluded Contracts
Schedule B - Excluded Permits
Schedule C - Personal Property
Schedule D - Warranties
Schedule 5.1(d) - Consents
Schedule 5.1(f) - Permitted Encumbrances
Schedule 5.1(n) - Litigation
Schedule 5.1(p) - Environmental Disclosures
iii.
<PAGE>
EXHIBITS
Exhibit A-1 - Operating Parcel
Exhibit A-2 - Vacant Parcel
Exhibit B - Limited Warranty Deed
Exhibit C - Bill of Sale
Exhibit D - Assignment and Assumption Agreement
Exhibit E - Omitted
Exhibit F - Tenant Estoppel Certificate
Exhibit G - Master Lease Terms
Exhibit H - Warrant Terms
Exhibit I - Development Agreements
Exhibit J - Title Endorsement
Exhibit K Financial Statements
iv.
<PAGE>
SCHEDULE A-1
CONTRACTS
<PAGE>
SCHEDULE A-2
EXCLUDED CONTRACTS
<PAGE>
SCHEDULE B
EXCLUDED PERMITS
<PAGE>
SCHEDULE C
PERSONAL PROPERTY
<PAGE>
SCHEDULE D
WARRANTIES
<PAGE>
SCHEDULE 5.1(f)
PERMITTED ENCUMBRANCES
<PAGE>
SCHEDULE 5.1(n)
LITIGATION
<PAGE>
SCHEDULE 5.1(p)
ENVIRONMENTAL DISCLOSURES
<PAGE>
EXHIBIT A-1
OPERATING PARCEL
Lots 1 and 2, Cray Second Addition, according to the recorded plat thereof,
Dakota County, Minnesota.
<PAGE>
EXHIBIT A-2
VACANT PARCEL
Not Applicable. All of the Land is comprised of the Operating Parcel. There is
no separate and distinct Vacant Parcel.
<PAGE>
EXHIBIT B
LIMITED WARRANTY DEED
<PAGE>
EXHIBIT C
BILL OF SALE
Not Applicable.
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT E
Intentionally Omitted/Blank.
<PAGE>
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
<PAGE>
EXHIBIT G
MASTER LEASE TERMS
See Letter of Intent dated August 4, 1999, by and between Seller and Purchaser.
<PAGE>
EXHIBIT H
WARRANT TERMS
See Letter of Intent dated August 4, 1999, by and between Seller and Purchaser.
<PAGE>
EXHIBIT I
DEVELOPMENT AGREEMENTS
1. Agreement (Land Use Covenants and Restrictions) dated December 2, 1986 by
and between First National Bank of Minneapolis, as Trustee and JAR Eagan
Properties, Inc.
2. Development Contract dated December 17, 1987 between the City of Eagan and
Cray Research, Inc.
3. Development Contract dated August 15, 1989 between the City of Eagan and
Cray Research, Inc.
4. Amendment to Agreement dated February 28, 1992, between First Bank National
Association, as Trustee, and Cray Research, Inc.
5. Development Rights Distribution Agreement dated March 4, 1999 between Cray
Research, LLC, and WAM!NET Inc.
6. Allocation of Parking Spaces Agreement dated March 4, 1999 between Cray
Research, LLC and WAM!NET Inc.
7. Indirect Source Permit 99-14 issued by the City of Eagan to WAM!NET Inc.
<PAGE>
EXHIBIT J
TITLE ENDORSEMENT
1. ALTA/Form 9
2. Delineated Survey
3. Access
4. Subdivision
5. Tax Parcel
6. ALTA/Form 3.1
7. ALTA/Form 116
8. Environmental Protection
9. Doing Business
10. ALTA/Form 1
11. First Loss
12. Arbitration
13. Creditor's Rights
14. Usury
15. ALTA/Form 6
<PAGE>
EXHIBIT K
FINANCIAL STATEMENTS
<PAGE>
SCHEDULE A-1
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
CONTRACTS
1. Development Agreement dated December 17, 1987, as amended by First
Amendment to Development Contract dated June 20, 1989.
2. Development Contract dated August 15, 1989, by and between the City of
Eagan and Cray Research, Inc.
3. Agreement (Land Use Covenants and Restrictions) dated December 2, 1986, by
and between First National Bank of Minneapolis and JAR Eagan Properties,
Inc., as amended by Amendment to Agreement (Land Use Covenants and
Restrictions) dated February 28, 1992.
4. Development Rights Distribution Agreement dated March 4, 1999, by and
between Cray Research, L.L.C. and WAM!NET INC.
5. Allocation of Parking Spaces Agreement dated March 4, 1999, by Cray
Research, L.L.C. and WAM!NET INC.
6. Lease dated March 4, 1999, by and between WAM!NET INC., as Lessor, and
Silicon Graphics, Inc., as Lessee.
7. Property Management Agreement dated March 4, 1999, by and between WAM!NET
INC., as Owner, and Silicon Graphics, Inc., as Property Manager.
8. Pollution Legal Liability Select Policy by AIG Environmental in favor of
WAM!NET INC. dated March 3, 1999.
9. Indirect Source Permit (ISP) 99-14 dated June 7, 1999.
<PAGE>
SCHEDULE A-2
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
EXCLUDED CONTRACTS
1. Property Management Agreement dated March 4, 1999, by and between WAM!NET
INC., as Owner, and Silicon Graphics, Inc., as Property Manager.
2. The SGI Lease.
<PAGE>
SCHEDULE B
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
EXCLUDED PERMITS
NONE.
<PAGE>
SCHEDULE C
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
PERSONAL PROPERTY
NONE.
<PAGE>
SCHEDULE D
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
WARRANTIES
Any and all warranties pertaining to the Property and benefiting Seller, if and
to the extent assignable.
<PAGE>
SCHEDULE 5.1 (d)
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
CONSENTS
NONE.
<PAGE>
SCHEDULE 5.1 (f)
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
PERMITTED ENCUMBRANCES
1. Terms and conditions of Lease as evidenced by Memorandum of Lease dated as
of March 4, 1999, filed of record March 8, 1999, as Document No. 1586099,
by and between Wam!Net Inc., a Minnesota corporation, Lessor, and Silicon
Graphics, Inc., a Delaware corporation, Lessee.
2. As to Lots 1 and 2:
Terms and conditions of the unrecorded Allocation of Parking Spaces
Agreement dated March 4, 1999, by and between Cray Research, L.L.C., and
Wam!Net Inc.
3. As to Lots 1 and 2:
Agreement (Land Use Covenants and Restrictions) dated December 2, 1986,
filed or record December 3, 1986, as Document No. 754646, by and between
First National Bank of Minneapolis, and JAR Eagan Properties, Inc., a
Delaware corporation, as amended by Amendment to Agreement (Land Use
Covenants and Restrictions) dated February 28, 1992, filed of record March
8, 1999, as Document No. 1586097.
4. As to Lots 1 and 2:
Terms and conditions of Development Rights Distribution Agreement dated as
of March 4, 1999, filed of record March 8, 1999, as Document No. 1586100,
by and between Cray Research, L.L.C., a Delaware limited liability company,
and WAM!NET Inc., a Minnesota corporation.
5. Drainage and utility easement(s) as shown on the recorded plat of Cray
Second Addition.
6. As to Lot 1:
20-foot easement in favor of the City of Eagan as contained in Easement
filed of record March 7, 1990, as Document No. 928999.
7. As to Lot 1:
Easement over the Southerly 20 feet of the subject property in favor of the
City of Eagan as contained in Easement filed of record June 22, 1990, as
Document No. 943309.
8. As to Lot 1:
Limitation of access from subject property to County State Aid Highway No.
26 (Lone Oak Road) along the Southerly boundary as per the Official Plat of
Lone Oak and Cray Second Addition.
9. As to Lot 1:
<PAGE>
Easement to Socony Mobil Oil Co. over the North 100 feet of the East 100
feet as per Grant filed of record in Book 64 of Miscellaneous Records, page
504.
10. As to Lot 1:
Drainage and utility easements over Southwesterly 10 feet of subject
property as per the Official Plat of Lone Oak, as partially vacated by
Resolution filed of record October 21, 1987, as Document No. 811972.
11. As to Lots 1 and 2:
Memorandum of Development Agreement dated December 17, 1987, filed of
record April 19, 1988, as Document No. 835970, as amended by unrecorded
First Amendment to Development Contract dated June 20, 1989.
12. As to Lots 1 and 2:
Terms and conditions contained in the unrecorded Development Contract dated
August 15, 1989, by and between the City of Eagan, a Minnesota municipal
corporation, and Cray Research, Inc., a Delaware corporation.
<PAGE>
SCHEDULE 5.1 (n)
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
LITIGATION
NONE.
<PAGE>
SCHEDULE 5.1 (p)
TO
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
ENVIRONMENTAL DISCLOSURES
a) Copies of all correspondence and communications betweeen SGI and the
Minnesota Pollution Control Agency, Environmental Protection Agency, or any
other governmental body/agency in connection with the property.
a) June 26, 1995 - Correspondence to Minnesota Emergency Reponse
Commission Regarding Original Toxic Chemical Release Inventory
Form
b) 1997 Tier Tow Turnaround Report to State of Minnesota, Department
of Public Safety
c) 1996 Tier Two Turnaround Report to State of Minnesota, Department
of Public Safety
d) June 24, 1994 - Minnesota Pollution Control Agency Above-Ground
Tank Facility Notification Form
e) August 19, 1996 - Minnesota Pollution Control Agency Above Ground
Tank Facility Notification Form
f) 1991 Dakota County Annual Report and Re-license Application
g) January 31, 1995 - Correspondence to the Minnesota Department of
Public Safety enclosing Tier Tow Turnaround Reports and MSDS
h) 1995 Tier Tow Turnaround Report to State of Minnesota, Department
of Public Safety
i) Novemebr 29, 1994 - Hazardous Chemical Release/Inventory Fee
Statement from the Minnesota Department of Public Safety
j) May 7, 1998 - Hazardous Chemical Release/Inventory Fee Statement
from the Minnesota Department of Public Safety
k) December 15, 1995 - Cray Research, Inc., Modified Contingency
Plan
l) Correspondence from the Minnesota Department of Public Safety
regarding verification report
m) July 9, 1996 - Corresponence to the Minnesota Energy Commission
regarding Pollution Prevention Plan and Report
n) November 3, 1994 - Correspondence from Minnesota Emergency
Response Commission enclosing three (3) Toxic Chemical Release
Inventory forms
o) February 27, 1992 - Correspondence to the Minnesota Emergency
Response Board enclosing the 1991 Tier Two Turnaround Report
p) February 27, 1993 - Correspondence to the Emergency Response
Commission enclosing the Tier Tow Turnaround Report for 1992
q) 1994 Interoffice Memorandum Regarding Cray Research, Inc. EPA ID
numbers and Air Permits
r) August 26, 1991 - Correspondence to United States Environmental
Protection Agency regarding Conditional Exempt Generator Status
s) September 11, 1991 - Correspondence from United Statements
Environmental Protection Association Regarding Generator Status
t) September 15, 1995 - Correspondence to EPCRA Reporting Center
Regarding Deletion of a SARA Title III Form R Report
u) November 15, 1995 - Toxic Release Inventory Releasive Value
Report
v) December 5, 1995 - Toxic Release Inventory Releasive Value Report
w) December 9, 1994 - Correspondence from EPCRA Reporting Center
Regarding Toxic Release Inventory Reports
x) June 27, 1991 - Correspondence to EPCRA Reporting Center
Regarding Toxic Chemical Release Reporting Information
y) August 21, 1992 - EPA Form R
<PAGE>
z) June 25, 1993 - Correspondence to EPCRA Reporting Center
Regarding Toxic Chemical Release Reporting Information
aa) July 23, 1991 - Notification of Regulated Waste Activity
bb) August 21, 1992 - Correspondence to EPCRA Reporting Center
Regarding Toxic Chemical Release Reporting Information
cc) June 30, 1994 - Correspondence to EPCRA Reporting Center
Regarding Toxic Chemical Reporting Information
dd) September 15, 1995 - Correspondence to Minnesota Pollution
Control Agency Regarding Pollution Prevention Plan or Report
ee) August 15, 1995 - Correspondence to Minnesota Pollution Control
Agency Regarding Air Emission Registration Premit No.
03700222-001
ff) April 24, 1997 - Correspondence to Minnesota Pollution Control
Agency Regarding Request to Amend the Registration Option C Plan
Text Permit for Cray Research
gg) June 20, 1995 - Minnesota Pollution Control Agency Facility
Information
hh) 1995 Air Emission Inventory for Option C Registration Permitees -
Minnesota Pollution Control Agency
ii) 1996 Minnesota Pollution Control Agency Air Emissions Estimate
jj) December 17, 1998 - Correspondence from Minnesota Pollution
Control Agency Regarding 1997 Air Emissions Estimate
kk) 1995 Emission Inventory Certification
ll) April 4, 1996 - Internal correspondence Regarding Air Permit
Invoice
mm) August 21, 1992 - Correspondence to Minnesota Pollution Control
Agency Regarding Pollution Prevention Plan and Report
nn) March 29, 1993 - Correspondence to Minnesota Pollution Control
Agency Regarding Storm Water Permit Application
oo) August 25, 1993 - Correspondence to Minnesota Pollution Control
Agency Regarding Pollution Prevention Plan and Report
pp) January 11, 1995 - Correspondence to the Minnesota Pollution
Control Agency Enclosing Hazardous Waste Manifest and Land Band
qq) September 24, 1997 - Correspondence to the Minnesota Pollution
Control Agency Regarding Manifest Inspection Data Tracking Form
rr) September 12, 1986 - Correspondence to City of Eagan Regarding
Environmental Impact Statement
ss) April 27, 1987 - Correspondence to Minnesota Pollution Control
Agency Indirect Source Permit ISP 87-3
b) Existing Phase I and Phase II Environmental Reports and/or wetlands
analysis, if any, issued in connection with the property
a) E86-196 Preliminary Environmental Evaluation - Braun
Environmental Laboratories
b) October 15, 1986 - Correspondence regarding E86 - 196 Addendum to
Environmental Evaluation Report
c) Bay West Environmental and "Green" Audit 6/23/94 (sent to Tom
Alexander on February 22, 1999)
d) Update on Bay West Audit 10/97 (sent to Tom Alexander on February
22, 1999).
III. Copies of all governemental permits and approvals, including without
limitation all indirect source permits and variances, granted in
connection with the construction or operation of the property
a) February, 1986 - Application for Indirect Source Permit
b) April 10, 1989 - Permit Application of Waters of the State,
Non-irrigation
c) January 27, 1999 - Environmental, Health and Safety-Due Diligence
for 655 Lone Oak Drive, Eagan, Minnesota
d) 1992 - 1993, Dakota County Environmental Management
Correspondence Enclosing Hazardous Waste Generator License
e) 1995 - 1996, Dakota County Environmental Management
correspondence Enclosing Hazardous Waste Generator License
<PAGE>
f) 1998 - 1999, Dakota County Environmental Management
correspondence Enclosing Hazardous Waste Generator License
g) October 28, 1992 - Dakota County Environmental Management
Correspondence Enclosing Hazardous Waste Generator License
Application
h) July 15, 1991 - Dakota County Environmental Management
Correspondence Enclosing Hazardous Waste Generator License
Application
i) July 16, 1991 - Dakota County Hazardous Waste Generator Fee
Statement
j) December 18, 1991 - Correspondence from Dakota County Regarding
Hazardous Waste License
k) February 1, 1995 - Dakota County Environmental Management Invoice
l) February 5, 1997 - Dakota County Environmental Management Invoice
m) January 13, 1998 - 1997 Hazardous Waste Generator Annual Report
and License Renewal Application
n) 1996 Hazardous Waste Base Tax for VSQGs
o) July 18, 1991 - Correspondence from Dakota County Public Health
Department Regarding Hazardous Waste Generator Inspection
p) Commercial License from March 1, 1998 to 1999
q) May 12, 1987 - Correspondence from the Minnesota Pollution
Control Agency Regarding Transfer of Indirect Source Permit 87-3
r) Indirect Source Permit (ISP) 92-11 (sent to Ed Driscoll on
January 21, 1999)
s) Ingress and Egress Easement in Connection with Private Project
#89-E
t) Letter Agreement of January 17, 1989 with Northwest Airlines,
Inc. (delivered to Tom Alexander January 29, 1999)
u) Correspondence of December 19, 1988 with Steven Rosholt, Counsel
for City of Eagan with Tax Increment Financing Plan (delivered to
Tom Alexander January 29, 1999)
v) Correspondence of December 6, 1988 from Ronald A. Zamansky to
City of Eagan regarding Tax increment Financing; (delivered to
Tom Alexander January 29, 1999)
w) Response of City of Eagan Counsel dated Janaury 12, 1989 to
Ronald A. Zamansky.
x) Limited OSHA Compliance Survey Report 6/19/96 sent to Tom
Alexander on February 22, 1999)
y) January 17, 1989, City of Eagan Resolutions regarding Tax
Increment Financing (sent via fax to Tom Alexander March 2, 1999)
IV. Pollution Legal Liability Select Policy by AIG Environmental in favor
of WAM!NET INC. dated March 3, 1999.
5.l(p)3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT B
MD Form No. 23-M-LIMITED WARRANTY DEED Minnesota Uniform Conveyancing Blanks (1/15/97) Miller - Davis CO., St. Paul, MN
- ------------------------------------------------------- ---------------------------------------------------------------------------
Corporation, Partnership or Limited Liability Company
to Corporation, Partnership or Limited Liability
Company
- -------------------------------------------------------
No delinquent taxes and transfer entered; Certificate
of Real Estate Value ( ) filed ( )not required.
Certificate of Real Estate Value No. __________________
_______________________________________________________
Date
_______________________________________________________
County Auditor
by:____________________________________________________
Deputy
- -------------------------------------------------------
DEED TAX DUE:__________________________________________
Date:__________________________________________________
- ------------------------------------------------------- ---------------------------------------------------------------------------
FOR VALUABLE CONSIDERATION, WAM!NET INC.___________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
____________________________________________________, a _______________________________corporation_______________ under the laws of
the State of Minnesota, Grantor, hereby conveys and quitclaims to CCPRE-EAGAN, LLC_________________________________________________
___________________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________, Grantee, a
limited liability company_______ under the laws of the State of Deleware_________________________________________, real property in
________________________________ Dakota____County, Minnesota, described as follows:
SEE EXHIBIT A ATTACHED HERETO
Together with all hereditaments and appurtenances.
This Deed conveys after-acquired title. Grantor warrants that Grantor has not done or suffered anything to encumber the property,
EXCEPT: SEE EXHIBITS B ATTACHED HERETO____________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
Check box if applicable
[_] The Seller certifies that the seller does not know of any wells on the described real property.
[_] A well disclosure certificate accompanies this document.
[_] I am familiar with the property described in this instrument and I certify that the status and number of wells on the
described real property have not changed since the last previously filed well disclosure certificate.
WAM!NET INC.
-----------------------------------
By
--------------------------------
Its
-----------------------------
Affix Deed Tax Stamp here
By
--------------------------------
STATE OF MINNESOTA
Its
-----------------------------
COUNTY OF __________
This instrument was acknowledged before me on_____________________________________________________________________________,
(Date)
by _____________________________________________________ and _____________________________________________________________,
the ____________________________________________________ and ______________________________________________________________
of WAM!NET INC._____________________________________________________________, a ____________ corporation under the laws of
_______ the State of Minnesota, on behalf of the __________________________ corporation
- --------------------------------------------------------------- -------------------------------------------------------------------
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK):
____________________________________________
SIGNATURE OF NOTARY PUBLIC OR OTHER OFFICIAL
[_] Check here if part or all of the land is Registered
(Torrens)
- --------------------------------------------------------------- -------------------------------------------------------------------
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Tax Statements for the real property described in this instrument
should be sent to (include name and address of Grantee):
Thomas F. Alexander
Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, MN 55431
(612) 835-3800
(247935)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
TO
LIMITED WARRANTY DEED
Legal Description:
- ------------------
Lots 1 and 2, Block 1, Cray Second Addition, according to the recorded
plat thereof, Dakota County, Minnesota
<PAGE>
EXHIBIT B
TO
LIMITED WARRANTY DEED
1. Terms and conditions of Lease as evidenced by Memorandum of Lease
dated as of March 4, 1999, filed of record March 8, 1999, as Document
No. 1586099, by and between Wam!Net Inc., a Minnesota corporation,
Lessor, and Silicon Graphics, Inc., a Delaware corporation, Lessee.
2. Terms and conditions of the unrecorded Allocation of Parking Spaces
Agreement dated March 4, 1999, by and between Cray Research, L.L.C.,
and Wam!Net Inc.
3. Agreement (Land Use Covenants and Restrictions) dated December 2,
1986, filed or record December 3, 1986, as Document No. 754646, by and
between First National Bank of Minneapolis, and JAR Eagan Properties,
Inc., a Delaware corporation, as amended by Amendment to Agreement
(Land Use Covenants and Restrictions) dated February 28, 1992, filed
of record March 8, 1999, as Document No. 1586097.
4. Terms and conditions of Development Rights Distribution Agreement
dated as of March 4, 1999, filed of record March 8, 1999, as Document
No. 1586100, by and between Cray Research, L.L.C., a Delaware limited
liability company, and WAM!NET Inc., a Minnesota corporation.
5. Term and conditions of Lease as evidenced by Memorandum of Lease dated
as of September 30, 1999, filed of record _______________________,
1999, as Document No. ______________, by and between CCPRE-Eagan, LLC,
a Delaware limited liability company, as Landlord, and WAM!NET Inc., a
Minnesota corporation, as Tenant. Grantor hereby reserves all of
Grantor's right, title and interest in and to the subject property
under and pursuant to said Lease.
<PAGE>
EXHIBIT D
ASSIGNMENT OF PERMITS, CONTRACTS AND INTANGIBLES
THIS ASSIGNMENT (this "Assignment") is made as of September __, 1999, by
WAM!NET INC., a Minnesota corporation ("Assignor"), in favor of CCPRE-EAGAN,
LLC, a Delaware limited liability company ("Assignee"). All capitalized terms
used herein but not defined herein shall have the meanings given to such terms
in that certain Purchase and Sale Agreement dated as of September __, 1999,
between Assignor and Assignee (the "Purchase Agreement"). Unless otherwise
defined herein or unless the context otherwise requires, capitalized terms used
in this Assignment shall have the same meaning as in that certain Purchase and
Sale Agreement and Escrow Instructions by and between Assignor, as seller, and
Assignee, as purchaser, dated as of September __, 1999.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, Assignor hereby grants, sells, transfers and assigns
unto Assignee, if and to the extent assignable, all of the right, title and
interest, if any, of Assignor in, to and under any and all of the following
items, to the extent that they are related to that certain real property located
in the County of Dakota, State of Minnesota, which is legally described on
Exhibit A attached hereto (the "Real Property"):
(a) Any and all Contracts, except for Excluded Contracts;
(b) Any and all Permits, except for Excluded Permits;
(c) Any and all Warranties;
(d) Any and all Development Agreements; and
(e) all rights, benefits and indemnities inuring to Assignor's benefit
under that certain Sale and Purchase Agreement dated March 3, 1999 by and
between Silicon Graphics, Inc. and Cray Research LLC, as seller and
Assignor, as purchaser.
Assignee hereby accepts the foregoing assignment and agrees to assume
the obligations of Assignor, if any, under any of the foregoing that arise
from and after the date hereof. The provisions of this Assignment shall be
binding upon, and shall inure to the benefit of, the successors and assigns
of Assignor and Assignee, respectively.
This Assignment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused their duly authorized
representatives to execute this Assignment in duplicate original as of the date
first above written.
ASSIGNOR:
WAM!NET INC.
By:
-----------------------------------
Name:
Title:
ASSIGNEE:
CCPRE - EAGAN, LLC
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Legal Description of Real Property
Lots 1 and 2, Block 1, Cray Second Addition, according to the recorded plat
thereof, Dakota County, Minnesota.
<PAGE>
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by SILICON
GRAPHICS, INC., a Delaware corporation, on behalf of itself and its successors
and assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited
liability company ("Purchaser") and to any lender or investor supplying
financing to Purchaser, including without limitation, Deutsche Bank Mortgage
Capital, L.L.C. ("Lender"), with the understanding that Purchaser and Lender and
their respective counsel will rely on this Certificate in connection with the
acquisition and financing of the premises located at 655 Lone Oak Parkway,
Eagan, Minnesota (the "Property"). Tenant hereby certifies as follows:
1. Lease. The undersigned, on behalf of itself and its wholly-owned
subsidiary, Gray Research, L.L.C., a Delaware limited liability company, is the
tenant under that certain lease (the "Lease") dated as of March 4, 1999, a true,
complete and correct copy of which is attached hereto as Exhibit A-I.
Capitalized terms used herein but not defined herein shall have the meaning
given to such terms in the Lease. Except with respect to the proposed amendment
to the Lease, a true, complete and correct copy of which is attached hereto as
Exhibit A-2, the Lease is the entire agreement between Landlord (or any
affiliated party) and Tenant (or any affiliated party) pertaining to the
Premises (as defined herein). There are no modifications, amendments,
supplements, renewals or assignments of the Lease. The Lease is in full force
and effect in accordance with its terms. There are no other oral or written side
agreements, representations or warranties by Landlord, which entitle Tenant to
payments or credits from Landlord or which entitle Tenant to expand or contract
the Premises or to extend or contract the term of the Lease. The Lease has been
duly executed and delivered by, and is a binding obligation of, Tenant.
2. Leased Premises. The premises covered by the Lease (the "Premises")
consist of a total of approximately 341,941 square feet comprised of
approximately ___ square feet in Building D, approximately ___ square feet in
Building E and all of Building F, containing approximately ___ square feet
within the buildings known as Building D, E and F. Tenant has vacated all of
Building A and 76,633 square feet in Building E in accordance with the terms of
the Lease. Any and all Demising Improvements required or desired in connection
with the vacating by Tenant of Building A and Building E have been completed and
paid for in full, except for approximately $40,000. Exhibit B sets forth a
complete description of any and all such Demising Improvements.
3. Term of Lease. The Lease commenced on March 4, 1999 and, unless
otherwise terminated in accordance with the terms of the Lease or unless Tenant
exercises its early termination rights as set forth in Article 2, will expire on
May 31, 2004.
<PAGE>
4. Rents. (a) The present amount of monthly Base Rent payable under the
Lease is $325,796.00 and has been paid in full through August 31, 1999. (b) In
addition to Base Rent, Tenant is currently paying $_______ per month as
additional rent to cover Tenant's Proportionate Share of Operating Expenses.
Attached hereto as Exhibit C as is a true, complete and correct copy of the most
recent written estimate of the Operating Expenses for the 1999 calendar year
(the "1999 Operating Expense Statement"). Tenant's Proportionate Share is
currently sixty-seven and eighth tenths percent (67.8%).
5. Security Deposit. Landlord is not holding any security deposit under the
Lease.
6. Renewal and Extention Options. Tenant does not have any right or option
to renew or extend the term of the Lease or to expand into any additional space
or to terminate the Lease in whole or in part prior to the expiration of the
term except as expressly set forth in the Lease.
7. Acceptance of Premises. Tenant has unconditionally accepted the
Premises. Tenant has taken possession and is in occupancy of the and as of the
date hereof Tenant is not aware of any defect in the Premises. To Tenant's
knowledge, without independent investigation, Landlord has satisfied all
commitments made to induce Tenant to enter into the Lease; there are no offsets
or credits against rentals payable under the Lease; no free periods of rent,
tenant improvements, contributions or other concessions have been granted to
Tenant; Landlord is not reimbursing Tenant or paying Tenant's rent obligations
under any other lease; and Tenant has not advanced any funds for or on behalf of
Landlord with respect to Landlord's obligations under the Lease for which Tenant
has a right of deduction from, or set off against, future rent payments under
the Lease.
8. No Landlord Defaults. All obligations of Landlord under the Lease have
been performed, and, to the best of Tenant's knowledge, no event has occurred
and no condition exists that, with the giving of notice or lapse of time or
both, would constitute a default by Landlord under the Lease. To Tenant's
knowledge, there are no offsets or defenses that Tenant has against the full
enforcement of the Lease by Landlord.
9. No Tenant Defaults. Tenant is not in any respect in default under the
Lease and has not assigned, transferred or hypothecated the Lease or any
interest therein or subleased all or any portion of the Premises. Tenant is not
insolvent and is able to pay its debts as they mature. Tenant has not declared
bankruptcy or filed a petition seeking to take advantage of any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, Tenant has no present intentions of doing so, and no such proceeding
has been commenced against Tenant seeking such relief, and Tenant has no
knowledge that any such proceeding is threatened.
10. Purchase Options. Tenant does not have any right or option to purchase
all or any part of the Property.
<PAGE>
11. Notices to Ground Lessor. Tenant from and after the date hereof shall
send a copy of any notices under the Lease to Lender at the same time such
notice or statement is sent to Landlord under the Lease and agrees that,
notwithstanding any provisions of the Lease to the contrary, such notice shall
not be effective unless Lender shall have been given such notice and shall have
failed to cure such default as herein provided. All notices given under this
Agreement shall be sent by certified or registered mail, postage prepaid, return
receipt requested, or shall be delivered to the parties at the addresses set
forth above (or at such other addresses as the parties hereto shall specify in a
written notice to the other parties at the addresses specified herein). Any
notices hereunder shall be deemed to be given on the earlier to occur of (a) the
day of receipt or (b) three (3) days after deposit in the mail.
12. Other Agreements. The terms and provisions of this Certificate shall
not be deemed to affect the rights and obligations of Landlord and Tenant under
any other document to which Landlord and Tenant are a party.
13. No Further Amendment. Tenant agrees that no future modifications or
amendments of the Lease will be enforceable unless the modification or amendment
has been consented to in writing by the Purchaser and Lender.
14. No Assignments. Tenant has no notice of any assignment of the Lease by
Landlord, or any assignment, hypothecation or pledge of rents accruing under the
Lease by Landlord.
15. Payment of Rent. Tenant represents that it has not and Tenant further
agrees that, from and after the date hereof, the Tenant shall not pay any rent
under the Lease more than thirty (30) days in advance of its due date and will
not assign or sublet its interest in the Demised Premises or any portion thereof
or make or cause to be made any additions, alterations or improvements to the
Demised Premises except as expressly permitted under the Lease without the prior
written consent of the Landlord and Purchaser.
16. Successors and Assigns. This Certificate is made for the benefit of,
and may be relied upon by, the Purchaser and the Lender and their respective
successors and assigns.
17. Due Authorization. The person executing this Certificate is authorized
by Tenant to do so and the execution hereof is the binding act of Tenant
enforceable against Tenant.
Dated: September ____, 1999 SILICON GRAPHICS, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT K TO PURCHASE AGREEMENT
1999 Grand Total - Facility end Services
<TABLE>
<CAPTION>
Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Labor and $40,508 $40,508 $40,508 $40,508 $40,508 $4,508
Benefits
Travel and $2,722 $2,722 $2,722 $1,850 $1,850 1,850
Training
Repairs $9,109 $9,109 $9,109 $9,133 $9,133 $9,133
Contract $71,038 $71,038 $71,038 $68,722 $78,722 $93,131
Services
Supplies $14,000 $14,000 $14,000 $14,000 $14,000 $14,000
Janitorial $39,046 $39,046 $39,046 $38,937 $38,937 $38,937
Security $39,161 $39,161 $39,161 $37,982 $37,982 $39,482
Grounds $40,000 $40,000 $26,500 $6,408 $6,408 $6,408
Utilities $34,573 $34,573 $34,573 $34,573 $34,573 $34,573
Insurances $10,891 $10,891 $10,891 $10,891 $10,891 $10,891
Other $1,138 $1,138 $1,138 $319 $319 $319
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------
Subtotal $302,186 $302,186 $288,686 $263,323 $273,323 $252,782
Taxes $134,000 $134,000 $134,000 $134,000 $134,000 $134,000
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------
Grand Total $436,168 $436,186 $422,686 $397,323 $407,323 $386,782
================ ============ ============ ============ ============ ============= ============
</TABLE>
[WIDE TABLE CONTINUES BELOW]
<TABLE>
<CAPTION>
Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 TOTAL
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Labor and $40,420 $40,420 $40,420 $41,278 $41,278 $41,278 $451.692
Benefits
Travel and $2,400 $2,400 $2,400 $7,400 $2,400 $2,400 $33,116
Training
Repairs $9,005 $9,555 $9,005 $11,205 $7,905 $7,905 $109.306
Contract $56,007 $63,403 $73,457 $56,007 $76,438 $73,457 $852,458
Services
Supplies $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $168,000
Janitorial $39,100 $39,100 $39,100 $39,100 $39,100 $39,100 $468,549
Security $39,500 $39,500 $39,500 $39,500 $39,500 $39,500 $469,929
Grounds $4,000 $4,000 $4,000 $4,000 $26,500 $40,000 $208,224
Utilities $34,573 $34,573 $34,573 $34,573 $34,573 $34,573 $414.876
Insurances $10,891 $10,891 $10,891 $10,891 $10,891 $10,891 $10,891
Other $1,548 $1,548 $1,548 $1,548 $1,548 $1,548 $13,659
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------ -------------
Subtotal $251,444 $259,390 $268,894 $259,502 $294,133 $304,652 $3,320,501
Taxes $134,000 $134,000 $134,000 $134,000 $134,000 $134,000 $1,608,000
- ---------------- ------------ ------------ ------------ ------------ ------------- ------------ -------------
Grand Total $385,444 $393,390 $402,894 $393,502 $428,133 $438,652 $4,928,501
================ ============ ============ ============ ============ ============= ============ =============
</TABLE>
Date: 9/17/99.
Prepared by: Nelson, Tietz 8 Hoye.
Source: Information furnished and deemed reliable by Wam!Net.
K-1
<PAGE>
Eagan Operating Expenses 1998
- --------------------------------------------------------------------------------
Data Center Facilities TOTAL
-------------------------------------------
Operations $336,000 $1,139,000 $1,475,000
Labor and benefits
Travel & Training
Repairs
Contract Services
Repairs/Contract
Services - Data Center
Supplies
Security
Janitorial $ 37,000 $ 360,000 $ 397,000
Grounds $ - $ 246,000 $ 246,000
Utilities $ - $ 390,000 $ 390,000
Insurance $ - $ 130,000 $ 130,000
Property Taxes $ - $1,743,000 $1,743,000
- --------------------------------------------------------------------------
TOTAL $373,000 $4,008,000 $4,381,000
==========================================================================
- --------------------------------------------------------------------------------
Date: 9/17/99.
Prepared by: Nelson, Tietz & Hoye.
Source: Information furnished and deemed reliable by Wam!Net.
K-2
<PAGE>
Eagan Operating Expenses 1997
- --------------------------------------------------------------------------------
Data Center Facilities TOTAL
---------------------------------------------
Operations $230,000 $1,810,000 $2,040,000
Labor and benefits
Travel & Training
Repairs
Contract Services
Repairs/Contract
Services - Data Center
Supplies
Security
Janitorial $ 30,000 $ 390,000 $ 420,000
Grounds $ - $ 250,000 $ 250,000
Utilities $ - $ 434,000 $ 434,000
Insurance $ 36,000 $ 100,000 $ 136,000
Property Taxes $ - $1,600,000 $1,600,000
- --------------------------------------------------------------------------
TOTAL $296,000 $4,584,000 $4,880,000
==========================================================================
- --------------------------------------------------------------------------------
Date: 9/17/99.
Prepared by: Nelson, Tietz & Hoye.
Source: Information furnished and deemed reliable by Wam!Net.
K-3
<PAGE>
Exhibit 10.29
AMENDMENT NO. ONE
TO PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
THIS AMENDMENT is made this 30th day of September, 1999, by and between
WAM!NET INC. ("Seller") and CCPRE-EAGAN, LLC ("Purchaser").
RECITALS
--------
Seller and Purchaser entered into that certain Purchase and Sale Agreement
and Escrow Instructions (the "Purchase Agreement") dated September 30, 1999
regarding the sale and purchase of property located at 655 Lone Oak Drive,
Eagan, Minnesota, as more specifically described in Purchase Agreement.
Seller and Purchaser desire to amend the Purchase Agreement as set forth
hereinbelow.
NOW, THEREFORE, in consideration of One Dollar and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
both parties, Seller and Purchaser hereby agree as follows:
1.) Recitals. The foregoing recitals are correct and are incorporated
--------
herein.
2.) Definitions. Unless otherwise defined in this Amendment or unless the
-----------
context otherwise requires, capitalized terms used in this Amendment shall have
the same meaning as in the Purchase Agreement.
3.) Contract for Deed. Purchaser shall purchase, and Seller shall sell,
-----------------
the Property pursuant to a contract for deed (the "Contract for Deed"). Seller
and Purchaser shall execute and deliver counterparts of the Contract for Deed on
the Closing Date. The Deed shall not be delivered to Purchaser on the Closing
Date. Seller shall deposit the Deed in escrow with the Title Company to hold in
trust for Seller pending full payment and performance by Purchaser under the
Contract for Deed. Upon such full payment and performance, Seller shall
authorize and instruct the Title Company to deliver the Deed to Purchaser.
4.) Closing. Section 8.1 is hereby amended to change the Closing Date
-------
from September 3, 1999 to September 30, 1999.
5.) Nullification of Assignments. In the event of a default by Purchaser
----------------------------
under the Contract for Deed and cancellation of the Contract for Deed, (i) the
assignment or other transfer by Seller to Purchaser of any other rights or
benefits pertaining to the Property, including, but without limitation,
contracts, development agreements, permits (including, but without limitation,
the indirect source permit), warranties and any other rights, title, interest or
benefits (collectively the "Rights") assigned or transferred by Seller to
Purchaser, shall be deemed null and void and automatically reassigned and
transferred by Purchaser to Seller, and (ii) Purchaser shall cooperate with
Seller and execute such documents as reasonably requested to further
<PAGE>
evidence the assignment and transfer of the Rights back to Seller. This Section
5 shall survive closing and shall not merge with the Contract for Deed or any
other closing document.
6.) Ratification. As hereby amended, the Purchase Agreement is hereby
------------
ratified and affirmed by Seller and Purchaser.
7.) Facsimile Signatures. Facsimile signatures on the Purchase Agreement
--------------------
and/or this Amendment shall be deemed effective and enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SELLER:
WAM!NET INC.
By: ___________________________
Its:
PURCHASER:
CCPRE-EAGAN, LLC
By: ___________________________
Its:
2.
<PAGE>
Exhibit 10.30
================================================================================
CCPRE-EAGAN, LLC,
Landlord
AND
WAM!NET INC.,
Tenant
____________________________________
NET LEASE
_______________________________
Dated As of September ___, 1999
================================================================================
<PAGE>
THIS LEASE (this "Lease"), dated as of September __, 1999, between
CCPRE-EAGAN, LLC, a Delaware limited liability company having an office c/o
Chase Capital Partners, 380 Madison Avenue, New York, New York 10017
("Landlord"), and WAM!NET INC., a Minnesota corporation having an office at 655
Lone Oak Drive, Eagan, Minnesota ("Tenant").
Landlord desires to lease and demise to Tenant, and Tenant desires to
lease, hire and take from Landlord, the Demised Premises (as hereinafter
defined) upon the terms and conditions hereinafter set forth. Accordingly, the
parties hereto hereby agree as follows:
ARTICLE 1
DEMISE OF PREMISES
------------------
Landlord, for and in consideration of the rents to be paid and of the
covenants and agreements hereinafter contained to be kept and performed by
Tenant, hereby demises and leases to Tenant, and Tenant hereby leases, hires and
takes from Landlord upon the terms and conditions herein contained the Demised
Premises, for the term hereinafter set forth;
SUBJECT, HOWEVER, to the following:
(i) any state of facts which an inspection or survey would
show;.
(ii) Impositions (as defined in Section 6.1 hereof);
(iii) grants, licenses or consents, if any, with respect to
public utility lines and equipment;
(iv) rules and regulations adopted by the Governmental
Authorities (as hereinafter defined) now or hereafter having jurisdiction
over the Demised Premises and the use and improvement thereof;
(v) present and future zoning laws, ordinances, resolutions
and regulations and orders of the Governmental Authorities;
(vi) the effect of all tenants, including without limitation
SGI (as defined herein), present and future municipal, state and federal
laws, orders and regulations relating to tenants and subtenants, their
rights and rentals to be charged for the use of all or part of the Demised
Premises;
(vii) violations of law, ordinances, orders or requirements that
might be disclosed by an examination and inspection or search of the
Demised Premises by any of the Governmental Authorities, as the same may
exist on the date of the commencement of the Term;
(viii) the condition and state of repair of the Demised Premises
as the same may exist on the date of the commencement of the term of this
Lease and Landlord
1.
<PAGE>
makes no warranty or representation of any kind with respect thereto,
INCLUDING IN RESPECT OF ANY FIXTURES OR OTHER ITEMS OF PERSONAL PROPERTY,
LANDLORD MAKES NO EXPRESS OR IMPLIED WARRANTY WHATSOEVER OF MERCHANTABILITY
OR FITNESS FOR PURPOSE;
(ix) covenants, conditions, restrictions, easements, rights,
licenses, leases or any other matters affecting title except those caused
by the acts or omissions of Landlord, unless approved in writing by Tenant,
whether or not of record;
(x) any defects of title or encumbrances or encroachments,
existing at the date of the commencement of the Term whether or not of
record;
(xi) assessments or installments of assessments becoming a lien
against the Demised Premises during the term of this Lease;
TO HAVE AND TO HOLD the same, subject as aforesaid, unto Tenant, and,
subject to the provisions hereof, its permitted successors and assigns, for the
term hereinafter specified.
ARTICLE 2
CERTAIN DEFINITIONS AND INTERPRETIVE PROVISIONS
-----------------------------------------------
(a) Unless the context otherwise requires, the terms defined below
have the meanings set forth below:
(i) "AAA" has the meaning given to it in Section 10.5 of this
Lease.
(ii) "Additional Rent" has the meaning given to it in Section
5.3 of this Lease.
(iii) "CPI" has the meaning given to it in Section 46.3(c) of
this Lease.
(iv) "Default" means an Event of Default and any event which
would constitute an Event of Default if any requirement in connection
therewith for the giving of notice, or the lapse of time or the happening
of any further condition, event or action had been satisfied.
(v) "Demised Premises" means the Land, Improvements and
Personal Property each as defined in the Original Purchase Agreement,
located in Eagan, Minnesota, the real property element of which is
described on Exhibit A attached hereto.
---------
(vi) "Event of Default" has the meaning given to it in Section
22.1 of this Lease.
(vii) "Fixed Rent" has the meaning given to it in Section 5.1 of
this Lease.
2.
<PAGE>
(viii) "Governmental Authorities" means municipal, county, state
and Federal governments, agencies, departments, authorities, both public
and quasi-public, courts, boards, bureaus, commissions and officers.
(ix) "Hazardous Material" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any
Governmental Authority and any other flammable, explosive or radioactive
material, hazardous waste or material, toxic waste or material or other
similar substances, including substances regulated under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Section 9601, et. seq.), the Hazardous Materials Transportation
-- ---
Act, as amended (49 U.S.C. Section 1801, et. seq.), the Resource
-- ---
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et.
--
seq.).
---
(x) "Imposition" or "Impositions" has the meaning given to
them in Section 6.1 of this Lease.
(xi) "Improvements" shall have the meaning attributed to it in
the Original Purchase Agreement now or hereafter located on the Demised
Premises and any restoration, addition to or replacement thereof.
(xii) "Interest Rate" means the lesser of (i) two percent (2%)
per annum in excess of the rate publicly announced from time to time by
Citibank, N.A. in New York City as its prime rate or (ii) the maximum
applicable legal rate, if any.
(xiii) "Insurance Threshold Amount" has the meaning given to it
in Section 8.4 of this Lease.
(xiv) "Lease" means this lease.
(xv) "Major Sublease" has the meaning given to it in Section
22.1(h).
(xvi) "Mortgagee" means the holder of any Underlying Mortgage.
(xvii) "Original Purchase Agreement" has the meaning given to it
in Section 47(a) of this Lease.
(xviii) "Proceeding" means the taking of the whole or of a part
of the Demised Premises by virtue of eminent domain or for any public or
quasi public purpose (or by deed in lieu thereof).
(xix) "SGI" means Silicon Graphics, Inc. and Cray Research,
LLC, a wholly owned subsidiary of Silicon Graphics, Inc.
(xx) "SGI Lease" means the lease dated as of March 4, 1999,
between Tenant, as landlord and SGI, as tenant.
(xxi) "Superior Lessor" means the landlord under any Underlying
Lease.
3.
<PAGE>
(xxii) "Underlying Lease" means any lease which now affects or
may hereafter affect Landlord's interest in the Demised Premises.
(xxiii) "Underlying Mortgage" means any mortgage or deed of
trust which now affects or which may hereafter affect Landlord's interest
in the Demised Premises.
(b) Interpretation. No provision of this Lease will be interpreted
--------------
in favor of, or against, any of the parties hereto by reason of the extent to
which any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof. The use in this Lease of the term "including" means "including,
--------- ----------
without limitation." The words "herein", "hereof", "hereunder", "hereby",
- ------------------ ------ ------ --------- ------
"hereto", "hereinafter", and other words of similar import refer to this Lease
------ -----------
as a whole, including the schedules and exhibits, as the same may from time to
time be amended, modified, supplemented or restated, and not to any particular
article, section, subsection, paragraph, subparagraph or clause contained in
this Lease. All references to articles, sections, subsections, clauses,
paragraphs, and exhibits mean such provisions of this Lease and the schedules
and exhibits attached to this Lease, except where otherwise stated. Where
specific language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates. The
language used in this Lease has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
ARTICLE 3
USE OF DEMISED PREMISES
-----------------------
Tenant covenants and agrees that it will use and occupy the Demised
Premises, or cause the same to be used and occupied for purposes of general,
administrative and sales office, research and development, training and any
other lawful purpose incidental thereto, in addition to all lawful uses
currently being made of the Demised Premises, as well as any other uses
permitted under the SGI Lease. Tenant shall not at any time during the Term use
or occupy the Demised Premises, nor knowingly permit the Demised Premises to be
used or occupied; (i) in violation of any certificate of occupancy or
certificate of compliance covering or affecting all or part of the Demised
Premises (as the same may be modified from time to time) or of any law,
ordinance, order or regulation of the Governmental Authorities (collectively
"Law"), (ii) in a manner to cause a reduction in the coverage or a termination
of any insurance policy or policies relating to the Demised Premises or which is
not in compliance with the requirements of insurance bodies which impose any
violation or duty on Landlord or Tenant with respect to the Demised Premises,
(iii) in a manner which constitutes waste, damage, disfigurement or injury to
the Improvements, or (iv) in a manner which will constitute a public or private
nuisance or in connection with any dangerous, noxious or offensive business.
4.
<PAGE>
ARTICLE 4
TERM OF LEASE
-------------
The term of this Lease shall commence on the date hereof (the "Commencement
Date") and shall expire, unless sooner terminated as hereinafter provided, on
the date immediately prior to the twentieth (20th) anniversary of such date on
September 30, 2019 (the "Expiration Date").
ARTICLE 5
FIXED RENT AND ADDITIONAL RENT
------------------------------
SECTION 5.1
Tenant shall pay to Landlord during the term of this Lease in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, at the address of
Landlord for notices as specified in ARTICLE 38 or at such other address as
Landlord shall specify by written notice to Tenant, a fixed net annual rental
(the "Fixed Rent"), over and above the other additional payments to be made by
Tenant as hereinafter provided. The Fixed Rent for each year of the term of
this Lease shall be paid by Tenant to Landlord in equal monthly installments in
advance on the twentieth (20th) day of each calendar month during the term of
this Lease (or if that day is a Saturday, Sunday or holiday, on the next
business day thereafter) as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Lease Year Fixed Rent
------------ -----------------------
-----------------------------------------------------------------------------
<S> <C>
1-3 $5,768,688.00 per annum
($480,724.00 per month)
-----------------------------------------------------------------------------
4 $6,633,991.20 per annum
($552,832.60 per month)
-----------------------------------------------------------------------------
5 $6,866,180.89 per annum
($572,181.74 per month)
-----------------------------------------------------------------------------
6 $7,106,497.22 per annum
($592,208.10 per month)
-----------------------------------------------------------------------------
7 $7,355,224.62 per annum
($612,935.39 per month)
-----------------------------------------------------------------------------
8 $7,612,657.48 per annum
(per month $634,388.12)
-----------------------------------------------------------------------------
9 $7,879,100.49 per annum
($656,591.71) per month
-----------------------------------------------------------------------------
10 $8,154,869.01 per annum
-----------------------------------------------------------------------------
</TABLE>
5.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Lease Year Fixed Rent
------------ -----------------------
-----------------------------------------------------------------------------
<S> <C>
($679,572.42 per month)
-----------------------------------------------------------------------------
11 $8,440,289.43 per annum
($703,357.45 per month)
-----------------------------------------------------------------------------
12 $8,735,699.56 per annum
($727,974.96 per month)
-----------------------------------------------------------------------------
13 $9,041,449.04 per annum
($753,454.09 per month)
-----------------------------------------------------------------------------
14 $9,357,899.76 per annum
($779,824.98 per month)
-----------------------------------------------------------------------------
15 $9,685,426.25 per annum
($807,118.85 per month)
-----------------------------------------------------------------------------
16 $10,024,416.16 per annum
($835,368.01 per month)
-----------------------------------------------------------------------------
17 $10,375,270.72 per annum
($864,605.89 per month)
-----------------------------------------------------------------------------
18 $10,738,405.19 per annum
($894,867.10 per month)
-----------------------------------------------------------------------------
19 $11,114,249.37 per annum
($926,187.54 per month)
-----------------------------------------------------------------------------
20 $11,503,248.09 per annum
($958,604.01 per month)
-----------------------------------------------------------------------------
</TABLE>
The first monthly installment of Fixed Rent (the "First Installment") in
the amount of $480,724.00 shall be paid upon execution of this Lease. The First
Installment shall be applied against Fixed Rent due for the first full month of
the Term. In addition, if the Commencement Date shall occur on a date which is
not the first day of a month, Tenant shall pay to Landlord upon execution of
this Lease together with the payment of the First Installment an amount equal to
the pro-rated amount of Fixed Rent for the number of days remaining in the month
in which the Commencement Date occurs. The term "Lease Year" shall mean the
twelve (12) month period commencing on the Commencement Date (if that date is
the first day of a month) or commencing on the first day of the month
immediately following the Commencement Date (if that date is not the first day
of a month but, in such event, the first Lease Year shall include the days
between the Commencement Date and the first day of the following month).
6.
<PAGE>
SECTION 5.2
(a) The liability and obligation of Tenant to pay the Fixed Rent is a
separate, absolute, unconditional and independent covenant. Tenant shall pay
the Fixed Rent without notice, demand, set-off, counterclaim, deduction,
defense, abatement, suspension, deferment, recoupment, diminution or reduction.
(b) Except as otherwise expressly provided in ARTICLE 10 of this
Lease, Tenant shall have no right to terminate this Lease or to be released,
relieved or discharged from any obligations or liabilities hereunder for any
reason whatsoever, including without limitation:
(i) any damage to or destruction of all or part of the Demised
Premises;
(ii) any limitation, restriction, deprivation or prevention of,
or any interference with, any use of all or part of the Demised Premises;
(iii) any taking of all or part of the Demised Premises by
condemnation or otherwise;
(iv) any eviction from all or part of the Demised Premises,
following an Event of Default;
(v) any action, omission or breach on the part of Landlord
under this Lease or under any other agreement at the time existing between
Landlord and Tenant;
(vi) any claim as a result of any other business dealings of
Landlord or Tenant; and
(vii) any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or similar proceeding
involving or affecting Landlord.
SECTION 5.3
Tenant shall also pay, as additional rent, all Impositions and all sums,
costs, expenses and other payments which Tenant under any of the provisions of
this Lease assumes or agrees to pay (which Impositions and all sums, costs,
expenses and other payments are hereinafter collectively called "Additional
Rent"), and, in the event of any nonpayment of Additional Rent, Landlord shall
have all the rights and remedies provided herein or by law in the case of
nonpayment of Fixed Rent.
SECTION 5.4
This Lease is a net lease and the Fixed Rent shall be absolutely net to
Landlord (except for Landlord's administrative and internal costs), so that this
Lease shall yield, net, to Landlord,
7.
<PAGE>
the Fixed Rent during the term of this Lease, and, all costs, expenses and
obligations of every kind and nature whatsoever relating to the Demised Premises
which arise and are attributable to the ownership, operation, use and/or
occupancy of the Demised Premises during the term of this Lease shall be paid by
Tenant and Tenant shall indemnify and save Landlord harmless against the same.
SECTION 5.5
Unless and until an Event of Default shall occur hereunder, Tenant may pay
the Fixed Rent by unendorsed check payable to Landlord, subject to collection;
provided, however, that, from and after the occurrence of any Event of Default
- -------- -------
and whether or not the same may thereafter be cured, Landlord may, by notice to
Tenant, thereafter require Tenant to pay the Fixed Rent by unendorsed certified
or official bank check payable to Landlord drawn on a bank or trust company
reasonably acceptable to Landlord in which event Tenant may elect to pay by such
check or by wire transfer of immediately available federal funds to an account
designated by Landlord.
SECTION 5.6
(a) Tenant shall deposit with Landlord upon the earlier to occur of
(i) a default by SGI under the SGI Lease or (ii) the later to occur of (aa) the
expiration of the SGI Lease or (bb) July 1, 2001, an amount equal to One Million
Four Hundred Thousand One Hundred Seventy-Two and 00/100 Dollars
($1,442,172.00), referred to herein as the "Security Deposit Amount". The
Security Deposit Amount which is deposited by Tenant under this Section and any
interest and earnings thereon (the "Security Deposit") shall serve as security
for the full and faithful performance and observance by Tenant of Tenant's
covenants and obligations under this Lease, and shall be deposited in an
interest bearing account earning not less than money market rates in a bank
chosen by Landlord, and all interest thereon shall be paid monthly to Tenant.
(b) Effective as of the date that is four (4) years from the date
hereof (the "Fourth Anniversary"), the Security Deposit Amount shall be
increased by Two Hundred Sixteen Thousand Three Hundred Twenty-five and 80/100
Dollars ($216,325.80) (the "Fourth Anniversary Supplemental Security Deposit
Amount") to One Million Six Hundred Fifty-eight Thousand Four Hundred Ninety-
seven and 80/100 Dollars ($1,658,497.80). Tenant, on or before the Fourth
Anniversary, shall deliver to Landlord an amount equal to the Fourth Anniversary
Supplemental Security Deposit Amount.
(c) Effective as of the date that is five (5) years from the date
hereof and each annual anniversary thereafter (each "Annual Anniversary Date"),
the Security Deposit Amount shall be increased by an amount (the "Annual
Security Deposit Supplemental Amount") equal to three and one-half percent
(3.5%) of the Security Deposit Amount for the immediately preceding Lease Year.
Tenant, on or before each Annual Anniversary Date, shall deliver to Landlord an
amount equal to the Annual Security Deposit Supplemental Amount.
(d) Landlord may, but shall not be required to, use, apply or retain
the whole or any part of the Security Deposit to the extent required for the
payment of any Fixed Rent and
8.
<PAGE>
other Additional Rent or for any sum which Landlord may reasonably expend or may
be required to expend by reason of an Event of Default whether accruing before
or after summary proceedings or other re-entry by Landlord. If Landlord shall so
use, apply or retain the whole or any part of the Security Deposit, Tenant
shall, upon demand, immediately deposit with Landlord a sum equal to the amount
so used, applied or retained. The Security Deposit together with accrued
interest thereon, less any portion of the Security Deposit to which Landlord is
entitled pursuant to the terms of this Lease, shall be paid to Tenant
immediately after the date fixed as the end of this Lease and after delivery to
Landlord of entire possession of the Demised Premises in the manner required by
the terms of the Lease.
(e) Tenant shall have the right to furnish to Landlord, at Tenant's
sole cost and expense, in lieu of and in substitution for the whole (and not
part) of the Security Deposit, a clean, transferable, irrevocable and
unconditional letter of credit (the "Letter of Credit") drawn in favor of
Landlord on a member bank of the New York Clearinghouse Associates or such other
bank as Landlord shall have approved, in its discretion in writing, and
substantially in the form attached hereto as Exhibit B. If Tenant furnishes to
---------
Landlord such Letter of Credit as herein provided, Landlord shall refund to
Tenant any unapplied Security Deposit held by Landlord pursuant to this Section
5.6 and shall be increased each year to the increased amount of the Security
Deposit required under this Section 5.6 at the same time as Tenant is obligated
under this Section 5.6 to increase the amount of the Security Deposit. The
Letter of Credit shall be assignable, upon request of Landlord, to any Mortgagee
or to a successor of Landlord at no additional charge. Tenant shall, not later
than thirty (30) days prior to the expiration of the term of the Letter of
Credit or any replacement thereof, deliver to Landlord a replacement letter of
credit (a "Replacement Letter") such that the Letter of Credit or a Replacement
Letter shall be in effect at all times after the date of this Lease until the
end of the term of this Lease and thereafter so long as Tenant (or any assignee
or subtenant of Tenant) is in occupancy of any part of the Demised Premises.
Each Letter of Credit or Replacement Letter shall be in a face amount at least
equal to the amount of the Security Deposit required pursuant to this Section
5.6. If Tenant fails to deliver to Landlord a Replacement Letter within the
time limit set forth in this Section 5.6, Landlord may draw the full amount of
the existing Letter of Credit or Replacement Letter without notice or demand and
retain the proceeds thereof as security subject to the provisions of this
Section 5.6, until such time as the Replacement Letter is delivered, at which
time the proceeds shall be returned to Tenant.
ARTICLE 6
PAYMENT OF IMPOSITIONS
----------------------
SECTION 6.1
Tenant shall pay as Additional Rent all (a) taxes, (b) assessments, (c)
water and sewer rents, rates and charges, whether governmental or non-
governmental, (d) excises, levies, license and permit fees and other charges of
the Governmental Authorities, general and special, ordinary and extraordinary,
foreseen and unforeseen, of any kind and nature whatsoever which at any time
during the term of this Lease may be assessed, levied, confirmed, imposed upon,
and become due and payable out of or in respect of, or become a lien on, (i) the
Demised Premises or any part
9.
<PAGE>
thereof or any appurtenances thereto, (ii) the rent, income or other payments
received by Tenant or anyone claiming by, through or under Tenant (iii) upon or
against this Lease or the leasehold estate hereby created or any document to
which Tenant is a party creating or transferring any interest or estate in the
Demised Premises, (iv) any use or occupation of the Demised Premises, or (v)
such franchises as may be appurtenant to the use of the Demised Premises (all
such rent, taxes, assessments, water and sewer rents, rates and charges,
excises, levies, license and permit fees and other charges of the Governmental
Authorities and any other amounts referred to in this Section 6.1 are
hereinafter called "Impositions" and any of the same are hereinafter called an
"Imposition"), together with any penalties, interest or costs which may be
imposed thereon or added for late payment thereof. Tenant shall have the option
to pay any Impositions in installments over the longest period allowed by law,
and Tenant shall only pay such installments that become due and payable during
the Term as they respectively become due and payable.
SECTION 6.2
Nothing herein contained shall require Tenant to pay any income and/or
excess profits, capital levy, corporate franchise, payroll, estate, succession,
inheritance, gift or transfer taxes levied or assessed by any Governmental
Authority against Landlord. If at any time during the term of this Lease the
methods of taxation prevailing at the commencement of the term shall be altered
so as to cause the whole or any part of such taxes, assessments, rates, levies,
fees, impositions or charges now levied, or hereafter assessed or imposed on,
real estate and the improvements thereon to be levied, assessed and imposed
wholly or partially as a capital levy, or otherwise, directly on the rents
received therefrom, or if, as the result of the alteration of any such method,
any such tax, assessment, rate, levy, fee, imposition or charge, or any part
thereof, shall be measured by or based, in whole or in part, upon the Demised
Premises, the Fixed Rent or the Additional Rent and shall be imposed upon
Landlord, then all such taxes, assessments, rates, levies, fees, impositions or
charges or the part thereof so measured or based shall be deemed to be included
within the term "Impositions" for the purposes hereof to the extent that such
Impositions would be payable if the Demised Premises were the only property of
Landlord subject to such Impositions and Tenant shall pay and discharge the
same.
SECTION 6.3
(a) Tenant, upon written request of Landlord or any Mortgagee, will furnish
to or as directed by Landlord or any Mortgagee, within twenty (20) days after
the date when any Imposition would become delinquent, true and complete copies
of official receipts of the appropriate taxing authority, or other evidence
reasonably satisfactory to Landlord or such Mortgagee, evidencing the payment
thereof. If such official receipts are not available within twenty (20) days
after the date any Imposition would become delinquent, Tenant will furnish the
same within twenty (20) days after they are available. This Section 6.3(a)
shall not apply if Tenant is required to make monthly deposits under Section
6.3(b).
(b) After an Event of Default, or if required by any Mortgagee, Tenant
shall upon delivery of notice from Landlord or such Mortgagee, deposit from and
after the date of delivery of such notice with or as directed by such Mortgagee
the amount of any Impositions to be paid by Tenant pursuant to Section 6.1, (a)
ten (10) days before the same would otherwise be payable pursuant to
10.
<PAGE>
Section 6.1 hereof, or (b) monthly in advance in an amount equal to one-twelfth
thereof. Landlord shall cause such monthly deposits to be deposited in an
interest bearing account earning not less than money market rates in a bank
chosen by Landlord, and all interest thereon shall be paid monthly to Tenant;
however, if Landlord is required to provide such monthly deposits to a
Mortgagee, then Landlord shall cause the Mortgagee to deposit such monthly
deposits in an interest bearing account and the interest payable to Tenant
hereunder shall be the same as the interest earned in said account. Landlord
shall cause all Impositions to be paid to the appropriate taxing authority on or
before the date due and payable.
SECTION 6.4
Tenant shall have the right to contest the amount or validity, in whole or
in part, of any Imposition to be paid hereunder by Tenant by appropriate
proceedings diligently conducted in good faith and to seek a reduction in the
valuation of the Demised Premises assessed for tax purposes. Tenant shall
provide Landlord with written notice of any such proceeding. Any refund or
credit relating to Impositions for a fiscal year in which both Landlord and
Tenant were responsible for Impositions shall be apportioned between Landlord
and Tenant pursuant to ARTICLE 26.
Landlord shall have the right during the last three (3) years of the term
of this Lease at its own expense after notice to Tenant to seek a reduction in
the valuation of the Demised Premises assessed for tax purposes and to
participate in any action or proceeding theretofore commenced by Tenant.
SECTION 6.5
Landlord shall not be required to join in any proceedings referred to in
Section 6.4 hereof unless the provisions of any Law at the time in effect shall
require that such proceedings be brought by or in the name of Landlord, in which
event Landlord shall join in such proceedings or permit the same to be brought
in its name. Landlord shall, at the request of Tenant, cooperate with Tenant in
connection with any such proceedings. Subject to the terms and conditions of
the second paragraph of Section 6.4 above, Landlord shall not be subjected to
any liability for the payment of any costs or expenses (including those relating
to its own activity) in connection with any such proceedings, and Tenant will
indemnify and save Landlord harmless from any such costs and expenses, including
reasonable attorneys' fees incurred at any stage of such proceedings or on
appeal therefrom. Except as otherwise provided in Section 26.1 of this Lease,
Tenant shall be entitled to any refund of any Imposition and penalties or
interest thereon received by Landlord which have been paid by Tenant, or which
have been paid by Landlord but previously reimbursed in full by Tenant.
SECTION 6.6
Landlord appoints Tenant the attorney-in-fact of Landlord for the purpose
of making all payments to be made by Tenant pursuant to any of the provisions of
this Lease to persons or entities ("Persons") other than Landlord and for the
purposes of contesting in accordance with this Lease the amount or validity of
any Imposition. In case any Person to whom any sum is
11.
<PAGE>
directly payable by Tenant under any of the provisions of this Lease shall
refuse to accept payment of such sum from Tenant, Tenant shall thereupon give
written notice of such fact to Landlord and shall pay such sum directly to
Landlord at the address of Landlord specified pursuant to ARTICLE 38 hereof, or
at such other place as Landlord may from time to time specify by notice given
pursuant to ARTICLE 38 and to the attention of such officer or other person as
Landlord may by like notice from time to time designate to Tenant, and Landlord
shall thereupon pay such sum or cause such sum to be paid to such Person and
provide evidence of such payment to Tenant.
ARTICLE 7
SERVICES AND UTILITIES
----------------------
Tenant shall pay or cause to be paid all charges for (i) utilities for the
Demised Premises, including but not limited to electricity, steam, water,
telephone and other communication service and cable; (ii) security system; and
(iii) new and further installations and equipment to supply the same, and Tenant
shall indemnify and hold Landlord harmless against any liability, loss, expense
or damage incurred in connection therewith. In furtherance of the foregoing,
Tenant shall procure any and all necessary permits, licenses or other
authorizations required for the lawful and proper installation and maintenance
upon the Demised Premises of wires, pipes, conduits, tubes and other equipment
and appliances for use in supplying any such service to and upon the Demised
Premises. Landlord shall not be required to furnish to Tenant or provide any
facilities or services of any kind, nor shall Landlord be liable for any failure
of water supply, electric current or other utilities or any security system or
service therefor, except as may be caused by acts or omissions of Landlord, its
employees, agents or contractors.
ARTICLE 8
INSURANCE
---------
SECTION 8.1
Tenant, at its sole cost and expense, shall keep the Improvements insured,
during the term of this Lease, (i) against loss or damage by flood with a
sublimit of $1,000,000.00 and (ii) against loss or damage by fire, lightning,
windstorm, hail, explosion, riot and civil commotion, aircraft and vehicles,
smoke, damage or leakage of sprinkler systems now or hereafter installed,
vandalism and malicious mischief and such other casualties as are presently
included in the so-called All Risk Coverage Endorsement in an amount not less
than 100% of the "full replacement cost" of the Improvements (without regard to
and with a waiver of any depreciation thereof) containing an agreed amount
endorsement with respect to Improvements and personal property waiving co-
insurance and provisions providing for no deductible in excess of Twenty-Five
Thousand Dollars and 00/100 ($25,000) for all such insurance coverage. Such
"full replacement cost" when applied to the Improvements, shall mean the actual
replacement cost (excluding land, excavation costs and that part of the footing
and foundation cost which is customarily not insurable under fire policies)
without regard to depreciation, and shall be determined from time to time (not
more frequently than once in any twelve (12) consecutive months), at the request
of
12.
<PAGE>
Landlord, but at the expense of Tenant, by one of the insurers, a reputable
insurance broker or by an appraiser chosen by Tenant subject to the reasonable
approval of Landlord. Landlord's failure to request such a determination shall
not relieve Tenant of its obligation hereunder. Landlord may require Tenant to
furnish additional insurance at any time that Landlord deems such insurance to
be inadequate based upon the requirements of an owner of property similar to the
Demised Premises.
SECTION 8.2
Tenant, at its sole cost and expense, shall maintain:
(a) comprehensive general liability insurance including, without
limitation, contractual liability, on an "occurrence basis", (so long as all or
any risks under comprehensive liability coverage can be obtained from insurers
meeting the standards set forth in Section 8.3 hereof on an occurrence basis,
and without regard for the cost thereof) against claims for personal injury
(including without limitation bodily injury and death) or property damage,
occurring on, in or about the Demised Premises or any elevator or any escalator
therein and on, in or about the adjoining sidewalks, streets and passageways,
such insurance to afford minimum protection, during the Term, of not less than
$10,000,000 in respect of personal injury or death to any one individual and in
respect of any one "occurrence" involving any one or more individuals and for
property damage;
(b) boiler and machinery insurance, provided the Improvements contain
equipment of the nature ordinarily covered by such a policy;
(c) insurance covering Tenant's obligation to indemnify hereunder
Landlord and each Mortgagee;
(d) specific excess workers' compensation insurance including
Employer's Liability insurance in an amount not less than $5,000,000, with no
more than $10,000 self insured retention covering all individuals and other
Persons employed by Tenant in connection with the Demised Premises and with
respect to whom death or bodily injury claims could be asserted against
Landlord, Tenant or the Demised Premises;
(e) rental income insurance covering rental income under the SGI Lease
for a period of not less than twelve (12) months;
(f) business interruption insurance in an amount equal to not less
than $10,000,000.00 per occurrence;
(g) vandalism and malicious mischief insurance in an amount of not
less than $1,000,000; and
(h) such other insurance, in such amounts as may from time to time be
required by Landlord against other insurable hazards based upon the requirements
of an owner of property similar to the Demised Premises.
13.
<PAGE>
Tenant shall not violate or permit to be violated any of the conditions or
provisions of any policy provided for herein.
SECTION 8.3
All insurance provided for in this ARTICLE shall be effected under valid
and enforceable policies in such forms and amounts as may, from time to time, be
required as herein and elsewhere specified in this Lease, issued by insurers of
recognized responsibility which are licensed to do business in the State of
Minnesota, are rated "A VII" or better by Best's Key Rating Guide or, if there
is no Best's Key Rating Guide, a comparable rating by another national rating
organization reasonably acceptable to Landlord. The aggregate limit of liability
underwritten by any insurer in conformance with the provisions of this Lease
shall not exceed 5% of that insurer's surplus to policyholders. Upon execution
of this Lease, and thereafter not less than fifteen (15) days prior to the
expiration dates of the expiring policies theretofore furnished pursuant to this
ARTICLE, certificates of the insurers reasonably satisfactory to Landlord and,
upon request, duplicate originals of the policies involved, shall be delivered
by Tenant to or as directed by Landlord. Each policy of insurance procured
pursuant to Section 8.1 shall contain, if obtainable, either (i) a waiver by the
insurer of the right of subrogation against Landlord for negligence of Landlord,
or (ii) a statement that the insurance shall not be invalidated should any
insured waive in writing prior to a loss any or all right of recovery against
Landlord for loss accruing to the property described in the insurance policy.
Tenant shall not carry separate or additional insurance, concurrent in form or
contributing, in the event of any loss or damage, with any insurance required to
be obtained by Tenant under this Lease.
SECTION 8.4
All policies of insurance provided for in Sections 8.1 and 8.2 hereof shall
insure Landlord and Tenant and any Mortgagee as named insureds. Such policies
shall also, if requested by Landlord, be made payable, subject to the provisions
of this Lease, to any Mortgagee, as its interest may appear, pursuant to a
standard mortgagee clause, its equivalent, or a loss payable clause reasonably
acceptable to Landlord and acceptable to such Mortgagee. Landlord requests, and
Tenant acknowledges the request of Landlord, that Deutsche Banc Mortgage
Capital, L.L.C. be so named as Mortgagee under the insurance provided for in
Sections 8.1 and 8.2 hereof. The loss, if any, under any policies provided for
in Section 8.1 and in paragraphs (b), (d) and (e) of Section 8.2 shall be
adjusted with the insurance companies (a) by Tenant, in the case of any
particular casualty resulting in damage or destruction not exceeding the
Insurance Threshold Amount in the aggregate, and provided Tenant is not in
default under this Lease (i.e. Landlord shall consent in writing and cause any
Mortgagee to consent in writing to Tenant's adjustment of any losses not
exceeding the Insurance Threshold Amount, provided Tenant is not in default
under this Lease) or (b) by Landlord, Tenant and any Mortgagee, if requested by
such Mortgagee, in the case of any particular casualty resulting in damage or
destruction exceeding the Insurance Threshold Amount in the aggregate or if
Tenant shall be in default under this Lease (regardless of the extent of the
damage or destruction). The proceeds of any such insurance, as so adjusted,
shall be payable:
14.
<PAGE>
(i) to Tenant in the case of any particular casualty resulting
in damage or destruction to the Improvements not exceeding the Insurance
Threshold Amount in the aggregate, provided Tenant is not in default under
this Lease, or
(ii) in the case of any particular casualty resulting in damage
or destruction exceeding the Insurance Threshold Amount in the aggregate,
or if Tenant is in default under this Lease (regardless of the extent of
the damage or destruction), to any Mortgagee or Mortgagees so long as
Landlord's interest in this Lease is assigned to such Mortgagee or
Mortgagees, or if there is no Mortgagee, then to Landlord.
All such policies shall provide Landlord and any Mortgagee with not less
than the rights and benefits with respect to payment and adjustment provided
above in this Section 8.4. Each policy shall contain (a) a provision that no
inadvertent act or omission of Landlord or Tenant which would otherwise result
in a forfeiture or reduction of the insurance therein provided shall affect or
limit the obligation of the insurance company so to pay in accordance with
Sections 8.4 and 8.7 of this Lease the amount of any loss sustained, (b) an
agreement by the insurer that such policy shall not be cancelled without at
least thirty (30) days prior written notice to Landlord and to any Mortgagee and
(c) an agreement by the insurer to give written notice to Landlord and any
Mortgagee if such policy has not been renewed fifteen (15) days prior to its
expiration. The "Insurance Threshold Amount" means Five Hundred Thousand and
00/100 Dollars ($500,000.00).
SECTION 8.5
If, at any time during the term of this Lease, Landlord or any Mortgagee
shall request that the amount of insurance required under Sections 8.1 and 8.2
hereof be increased on the ground that such coverage is inadequate properly to
protect the interest of Landlord and such Mortgagee, or if Landlord or any
Mortgagee shall require other insurance pursuant to the provisions of Section
8.1 and Section 8.2, Tenant shall thereafter carry the amount and such kind of
insurance as determined by Landlord or any Mortgagee to be adequate and
required, but in no event shall the amount of insurance under Sections 8.1 and
8.2 hereof be (i) less than the amount required by such Sections, or (ii)
materially greater than amounts typically required by landlords and mortgagees
of comparable properties in the Minneapolis - St. Paul metropolitan area.
SECTION 8.6
Any insurance provided for in this ARTICLE 8 may be effected by a policy or
policies of blanket insurance; provided, however, that the amount of the total
-------- -------
insurance shall be such as to furnish in protection the equivalent of separate
policies in the amounts herein required; and provided, further that in all other
-------- -------
respects, any such policy or policies shall comply with the other provisions of
this Lease. In any such case, Tenant shall deliver to or as directed by
Landlord a certificate or duplicate of such policy.
15.
<PAGE>
SECTION 8.7
Tenant shall furnish Landlord annually, a certificate signed by an
authorized officer of Tenant containing a detailed list of the insurance
policies then outstanding and in force on the Demised Premises and stating that
such insurance complies with the requirements of this ARTICLE 8.
ARTICLE 9
DAMAGE OR DESTRUCTION
---------------------
SECTION 9.1
In the case of any particular casualty to the Improvements resulting in
damage or destruction in excess of One Hundred Thousand and No/100 Dollars
($100,000), Tenant shall promptly give written notice thereof to Landlord.
Regardless of the amount of any damage or destruction, Tenant shall, at its sole
cost and expense, and whether or not the insurance proceeds, if any, shall be
sufficient for the purpose, either restore, repair, replace, rebuild or alter
the Improvements as nearly as possible to their value, condition and character
immediately prior to such damage or destruction substantially in accordance with
plans and specifications approved in writing by Landlord and any Mortgagee (such
approval shall not be unreasonably withheld, conditioned or delayed). Such
restoration, repairs, replacements, rebuilding or alterations shall be commenced
promptly, and prosecuted in a good and workmanlike manner with reasonable
diligence. Within thirty (30) days or such longer period as is reasonably
necessary after any casualty, but in no event greater than sixty (60) days after
such casualty, Tenant shall deliver to Landlord an estimate of the costs to
repair, restore and/or rebuild the Demised Premises in accordance with the terms
of this Lease, which estimate shall be prepared by a licensed contractor or
architect acceptable to Landlord (such consent shall not be unreasonably
withheld, conditioned or delayed).
SECTION 9.2
All insurance proceeds received by Landlord or any Mortgagee, on account of
such damage or destruction, less the costs, fees and expenses, if any, incurred
in connection with adjustment of the loss, shall be applied to pay or, if Tenant
elected to make advance payments, reimburse Tenant, for the payment of the cost
of the aforesaid restoration, repairs, replacements, rebuilding or alterations,
including the cost of temporary repairs or for the protection of property
pending the completion of permanent restoration, repairs, replacements,
rebuilding or alteration (all of which temporary repairs, protection of property
and permanent restorations, repairs, replacements, rebuilding or alterations are
hereinafter collectively referred to as the "restoration"), and provided there
is no Event of Default under this Lease, shall be paid out from time to time as
such restoration progresses upon the written request of Tenant which shall be
accompanied by the following:
(a) A certificate signed by Tenant, dated not more than five (5) days
prior to such request, setting forth the following:
16.
<PAGE>
(i) that the sum then requested either has been paid by
Tenant, or is justly due to contractors, subcontractors, materialmen,
engineers, architects or other Persons who have rendered services or
furnished materials for the restoration therein specified, the names and
addresses of such Persons, a brief description of such services and
materials, the several amounts so paid or due to each of such Persons in
respect thereof, that no part of such expenditures has been or is being
made the basis, in any previous or then pending request, for the withdrawal
of insurance money or has been made out of the proceeds of insurance
received by Tenant, and that the sum then requested does not exceed the
value of the services and materials described in the certificate;
(ii) that on the date of Tenant's certificate, except for the
amount, if any, stated pursuant to the foregoing subclause (a)(i) in such
certificate to be due for services or materials and any retainage permitted
under the agreement with the contractor, there is no outstanding
indebtedness known to the Tenant, after due inquiry, which is then due for
labor, wages, materials, supplies or services in connection with such
restoration; and
(iii) that on the date of Tenant's certificate the cost, as
estimated by Tenant, of the restoration required to be done subsequent to
the date of such certificate in order to complete the same, does not exceed
the insurance money, plus amounts otherwise available to Tenant, after
payment of the sum requested in such certificate;
(b) A title company or official search, showing that there have not
been filed with respect to the Demised Premises, any vendor's, contractor's,
mechanic's, laborer's or materialman's statutory or similar lien which has not
been discharged of record, except such as will be discharged upon payment of the
sum requested in such certificate; and
In the event the total cost of the restoration exceeds the Insurance
Threshold Amount at the time the certificate is delivered, the certificate
required by clause (a) of this Section 9.2 shall be signed also by an
independent licensed architect and/or engineer, who shall be in charge of the
restoration and shall be selected by Tenant and approved in writing by Landlord.
Upon compliance with the foregoing provisions of this Section 9.2, there
shall be paid or caused to be paid out of such insurance money to Tenant or the
Persons named pursuant to subclause (a)(i) of this Section 9.2 in such
certificate the respective amounts stated therein to have been paid by Tenant or
be due to them, as the case may be.
If the insurance money at the time available for the purpose, less the
actual costs, fees and expenses, if any, incurred in connection with the
adjustment of the loss, shall be insufficient to pay the entire cost of such
restoration, Tenant shall pay the deficiency. Any such deficiency shall be paid
by Tenant prior to application of the insurance money.
Upon receipt by Landlord, or the Mortgagee, of the items required by
clauses (a) and (b) of this Section 9.2 evidencing that the restoration has been
completed and paid for in full and that there are no liens of the character
referred to herein or right to obtain the same by filing, and provided (i)
Lessor shall be reasonably satisfied that sufficient funds are available to
complete the restoration, and (ii) Tenant is not in default under this Lease,
any balance of the insurance
17.
<PAGE>
money held by Landlord or the Mortgagee shall be paid to Tenant. Notwithstanding
any contrary or inconsistent provision in this Lease, regardless of (i) Tenant's
default hereunder; or (ii) Tenant's satisfaction of any of the provisions
contained in Article 9, upon closing of the re-purchase by Tenant pursuant to
Article 47 below, Article 48 below, or otherwise, Landlord shall simultaneously
assign, transfer and pay over to Tenant any and all insurance proceeds and
related rights and benefits less any reasonable out-of-pocket costs theretofore
incurred in connection with receiving such proceeds.
If, notwithstanding the provisions of this Article 9, Landlord or the
Mortgagee is entitled to receive the insurance proceeds but Tenant instead
receives such insurance proceeds, Tenant shall hold such insurance proceeds in
trust and shall immediately cause such insurance proceeds to paid to Landlord or
the Mortgagee, as required under this Article 9.
SECTION 9.3
No destruction of or damage to the Demised Premises or any part thereof by
fire or any other casualty shall terminate or permit Tenant to surrender this
Lease or shall relieve Tenant from its liability to pay the Fixed Rent,
Additional Rent and other charges payable under this Lease or from any of its
other obligations under this Lease, and Tenant waives any rights now or
hereafter conferred upon it by statute or otherwise to quit or surrender this
Lease or the Demised Premises or any part thereof, or to any suspension,
diminution, abatement or reduction of rent on account of any such destruction or
damage. No destruction of or damage to the Demised Premises or any part thereof
by fire or any other casualty shall terminate or permit Landlord to terminate
this Lease or shall relieve Landlord from its obligations under this Lease.
SECTION 9.4
If insurance proceeds are received by Landlord and paid out to Tenant as
provided in Section 9.2, Tenant shall pay the reasonable fees and expenses of
any third Person architect or engineer engaged by and reasonably required by
Landlord, in its judgment, to review any plans and specifications prepared by
Tenant and to inspect any work performed by Tenant under this ARTICLE 9 and any
other reasonable out-of-pocket expenses incurred by Landlord in review of such
plans and specifications and inspection of such work. However, Tenant's
obligations under this Section 9.4 shall in no event exceed Seven Thousand Five
Hundred Dollars ($7,500.00) per casualty.
ARTICLE 10
CONDEMNATION
------------
SECTION 10.1
Tenant hereby assigns to Landlord any award, payment or compensation to
which it may be or become entitled during the term of this Lease by reason of
any taking of the Demised Premises or a part thereof, in or by condemnation or
other eminent domain Proceeding pursuant to any law, general or special, or,
except as otherwise provided in Sections 10.3 and 10.4, by
18.
<PAGE>
reason of the temporary requisition of the use or occupancy of the Demised
Premises or a part thereof, by any Governmental Authority whether the same shall
be paid or payable in respect of Tenant's leasehold interest hereunder, provided
that such award, payment or compensation and any interest or income earned
thereon shall be applied as hereinafter provided for in this ARTICLE 10.
Landlord and Mortgagee shall be entitled to participate in any such Proceedings
and if Landlord participates therein, Landlord shall pay all costs and expenses,
including fees of attorneys, appraisers, architects and engineers, incurred by
Landlord in so participating. Tenant shall not be liable for any such costs or
expenses incurred by Landlord or Mortgagee. Notwithstanding the foregoing
provisions of this Section 10.1, Tenant shall have the right to make a separate
claim in condemnation or other eminent domain Proceedings solely for the loss of
all or part of its leasehold estate, and for its removal expenses, value of the
leasehold, value of Tenant's fixtures, and relocation expenses as a result of
such Proceeding. No claim may be made by Tenant in any such Proceeding and
Tenant shall not be entitled to any award, payment or compensation for the cost
of any demolition, repairs and replacement required as a result of any such
Proceeding or for the cost of any of Tenant's leasehold improvements.
SECTION 10.2
If, during the term of this Lease, all or substantially all of the Demised
Premises shall be taken in or by condemnation or other eminent domain Proceeding
pursuant to any Law, general or special, then this Lease and all right, title
and interest of Tenant hereunder shall terminate as of the date that title to
the Demised Premises shall vest in accordance with such Proceeding. If
substantially all (but not all) of the Demised Premises is so taken and Landlord
disputes Tenant's exercise of its right to so terminate this Lease, and the
resolution of the dispute is that Tenant had the right to so terminate the
Lease, then such termination shall occur as of the termination date specified in
such notice by Tenant, provided that Tenant has vacated the Demised Premises on
or before such date. In the event that this Lease shall so terminate or be
terminated, the Fixed Rent and the Additional Rent shall be appropriately
apportioned as of the date of such termination. Any dispute by Landlord or
Tenant under the provisions of this Section 10.2 shall be resolved by
arbitration in the manner provided in Section 10.5. For purposes of this
Section, substantially all of the Demised Premises shall be deemed to have been
taken if the portion of the Demised Premises not so taken, taking into
consideration the amount of the award available for such purpose, cannot in the
reasonable opinion of Landlord and Tenant be so repaired or reconstructed as to
constitute a facility suitable for all of the uses permitted hereunder.
SECTION 10.3
If, during the term of this Lease, any portion of the Demised Premises
shall be taken in or by any such Proceeding and this Lease shall not terminate
or be terminated pursuant to Section 10.2 hereof, then this Lease shall continue
in full force and effect, and Tenant's obligation to pay the Fixed Rent,
Additional Rent and all other charges on the part of Tenant to be paid and to
perform all other covenants and agreements on the part of Tenant to be performed
shall not be affected by any such taking of the Demised Premises, and Tenant
hereby waives the provisions of any Laws now or hereafter in effect contrary to
such obligation of Tenant or which relieves Tenant therefrom to pay costs of
demolition, repair and restoration required as a result of the taking in any
such Proceeding. Landlord shall deliver such award to Tenant if such costs are
19.
<PAGE>
estimated to be less than the Insurance Threshold Amount provided Tenant is not
in default under this Lease. If such costs are estimated to exceed the
Insurance Threshold Amount, or if Tenant is in default under this Lease
regardless of such costs, such award shall be retained by Landlord, or shall be
applied by Tenant, if delivered to Tenant, and paid over to Tenant if delivered
to any Mortgagee or Landlord, to be applied in the manner provided in Section
9.2, for the cost of demolition, repair and restoration, if any, required as a
result of the taking in any such Proceeding, which demolition, repair and
restoration shall be undertaken by Tenant in substantially the same manner as
required in Section 9.1 hereof. Any balance of such award remaining after
payment of such costs of demolition, repair and restoration shall be retained by
Landlord. If any portion of the Demised Premises shall be taken in or by any
condemnation or other eminent domain Proceeding and this Lease shall not
terminate or be terminated, then the Purchase Option Price and the Put Option
Price shall be reduced by an amount equal to the portion of any award received
by Landlord in connection with such Proceeding. The Purchase Option Price and
the Put Option Price shall not, however, be reduced by the amount of any award
received by Tenant under Section 10.4 hereof for any temporary taking. Tenant
shall have the right provided in Section 10.1 to make a separate claim for its
own award solely for loss of all or part of its leasehold estate and its removal
expenses and relocation expenses, but not for its leasehold improvements (which
shall be considered only in valuing Tenant's leasehold estate.)
SECTION 10.4
If, during the term of this Lease, the temporary use or occupancy of all or
part of the Demised Premises shall be taken in or by such Proceeding or in any
other manner for any public or quasi-public use or purpose or by agreement
between Landlord and those authorized to exercise such right, then, if the
period of temporary use is totally within the term of this Lease, the sums
awarded or made available as a result of such temporary taking shall be paid to
Tenant and that portion of the award which represents reimbursement for the cost
of restoration of the Demised Premises as reasonably estimated by an independent
licensed architect or engineer chosen by Landlord and reasonably acceptable to
Tenant, and engaged at the expense of Tenant, shall be applied by Tenant toward
the cost of its restoration of the Demised Premises. In addition, Tenant shall
be entitled to receive that portion of the award which represents compensation
for the taking of Tenant's personal property (if any, and only to the extent
that Tenant's personal property is so taken) and for relocation expenses if
Tenant is required to relocate, and Tenant shall be entitled to a credit against
Fixed Rent of that portion of the award or payment which represents compensation
for the use and occupancy of the Demised Premises. If the period of temporary
use is not totally within the term of this Lease, or if it is not possible to
determine whether it is totally within the term of this Lease, then the sums
awarded or made available as a result of such temporary taking shall be paid to
Landlord and shall be applied in the following order of priority: (a) first,
Landlord shall be entitled to receive that portion of the award which represents
reimbursement for the cost of restoration of the Premises as reasonably
estimated by an independent licensed architect or engineer chosen and engaged by
Landlord and reasonably acceptable to Tenant, and Tenant shall (to the extent
feasible within the remainder of the term of this Lease) restore the Demised
Premises and Landlord shall pay over such portion of such award in the same
manner as is provided for insurance proceeds under ARTICLE 9, (b) second, Tenant
shall be entitled to receive that portion of the award which represents
compensation for the taking of Tenant's personal property and for relocation
expenses, and (c)
20.
<PAGE>
third, Tenant shall be entitled to a credit against Fixed Rent of that portion
of the award or payment which represents compensation for the use and occupancy
of the Demised Premises (but in no event more than the Fixed Rent due under this
Lease). This Lease shall be unaffected by such taking and Tenant shall continue
to be responsible for all of its obligations hereunder and shall continue to pay
in full the Fixed Rent, and Additional Rent when due except to the extent of the
credit provided for above. All monies paid to Landlord as, or as part of, an
award for which the Fixed Rent have been paid shall be received, held and
applied by Landlord as a trust fund for payment of the Fixed Rent becoming due
hereunder.
Notwithstanding any contrary or inconsistent provision in this Lease,
regardless of (i) Tenant's default hereunder; or (ii) Tenant's satisfaction of
any of the provisions contained in Article 10, upon closing of the re-purchase
by Tenant pursuant to Article 47 below, Article 48 below, or otherwise, Landlord
shall simultaneously assign, transfer and pay over to Tenant any and all
condemnation award(s) and related rights and benefits.
SECTION 10.5
In any instance in this ARTICLE 10 where this Agreement provides for
submission of a dispute or matter to arbitration (and not under any other
circumstance) the arbitration shall be conducted by the American Arbitration
Association ("AAA"), or any successor thereto, in the City of Minneapolis,
Minnesota, in accordance with its rules then obtaining and the provisions of
this Section 10.5. The party requesting arbitration shall give written notice
to that effect to the other party, specifying in said notice the name and
address of the Qualified Arbitrator (as hereinafter defined) designated to act
as arbitrator on behalf of the requesting party. Each arbitrator shall be an
impartial third party having experience in matters similar to the subject matter
of the dispute (a "Qualified Arbitrator"). Within fifteen (15) days after the
--------------------
service of such notice, the other party shall give written notice to the
requesting party specifying the name and address of a Qualified Arbitrator
designated to act as arbitrator on its behalf. If the other party fails to
notify the requesting party of the appointment of its arbitrator within the time
specified, the second arbitrator shall be a Qualified Arbitrator appointed by
the AAA. The arbitrators so chosen shall meet within ten (10) days after the
second arbitrator is appointed. If, within thirty (30) days after the second
arbitrator is appointed, the two arbitrators shall not agree upon a resolution
of the dispute, they shall themselves appoint a third Qualified Arbitrator. If
they are unable to agree upon such appointment within ten (10) days after the
expiration of said thirty (30)-day period, the third Qualified Arbitrator shall
be selected by the parties. If the parties are unable to agree upon a third
Qualified Arbitrator within fifteen (15) days, then such third Qualified
Arbitrator shall be appointed by the AAA. The decision of the arbitrators so
chosen shall be given within a period of thirty (30) days after the appointment
of the third Qualified Arbitrator, if a third Qualified Arbitrator is appointed,
or within thirty (30) days after the second arbitrator is appointed. Such
decision shall be final and conclusive on Landlord and Tenant and judgment
thereon may be entered in any court of competent jurisdiction. In acting under
this Lease, the arbitrators shall: (i) not modify the provisions of this Lease;
and (ii) apply the applicable laws of the State of Minnesota. The costs of the
arbitrators and of the AAA shall be paid fifty percent (50%) by Landlord and
fifty percent (50%) by Tenant.
21.
<PAGE>
ARTICLE 11
MAINTENANCE AND REPAIRS
-----------------------
SECTION 11.1
(a) Throughout the term of this Lease, Tenant shall, at its sole cost
and expense, take good care of the Demised Premises (including the
Improvements), all alleyways and passageways and the sidewalks, curbs and vaults
adjoining the Demised Premises, and keep the same in good order, condition and
repair, ordinary wear and tear and obsolescence excepted, and make all necessary
repairs thereto, interior and exterior, structural and nonstructural, ordinary
and extraordinary, foreseen and unforeseen. When used in this ARTICLE 11, the
term "repairs" shall include all necessary replacements, renewals, alterations
and additions and any rebuilt, additional or substituted buildings, structures,
facilities and other improvements. Landlord shall not be required to furnish
any services or facilities or to make any repairs or alterations in or to the
Demised Premises, Tenant hereby assuming the full and sole responsibility for
the condition, operation, repair, replacement, maintenance and management of the
Demised Premises. All repairs made by Tenant shall be made in a good and
workmanlike manner. The necessity for and adequacy of repairs to the
Improvements pursuant to this ARTICLE 11 shall be measured by the standards
which are generally appropriate for buildings and facilities of similar
construction, age and use.
(b) In the event that Tenant is required pursuant to the provisions of
Section 11.1(a) during the term of this Lease or during the Renewal Options or
any extension of the term to replace the roof of any of the buildings located at
the Demised Premises, make a structural change or structural repair in any of
the buildings located at the Demised Premises or to replace all or part of the
HVAC system in any of the buildings located at the Demised Premises
(collectively, the "Capital Work") at an aggregate cost for Capital Work in any
twelve (12) month period exceeding One Hundred Seventy-five Thousand Dollars
($175,000.00), Tenant shall notify Landlord thereof. In addition, if Tenant
desires that the cost thereof be shared by Landlord in the manner provided in
this Section 11.1(b), Tenant and Landlord shall jointly participate in and
determine the Persons to perform the Capital Work (including architects,
engineers and contractors), the plans and specifications for the Capital Work
and the cost thereof which, in hiring the contractor or contractors performing
such work, shall be determined by a bid process determined by Tenant and
reasonably acceptable to Landlord. To the extent that the improvements
resulting from such Capital Work constitute capital improvements and which under
Generally Accepted Accounting Principles, applied consistently ("GAAP"), will
have a useful life extending beyond the term of this Lease, then Tenant may
elect by notice to Landlord that Landlord pay to Tenant as provided in this
Section 11.1(b) a portion of the cost of such Capital Work. In the event Tenant
makes such an election and complies with the foregoing provisions of this
section, Landlord shall pay to Tenant a portion of the cost appropriately
classified as capitalized under GAAP of the improvements resulting from such
Capital Work. Landlord's share of such costs shall be equivalent to the product
of the amount that is capitalized times a fraction, the numerator of which is
the number of years remaining in the useful life of such capital improvements at
the Trigger Date (as hereinafter defined) determined under GAAP and the
denominator of which is the total useful life of such capitalized improvement.
Such
22.
<PAGE>
payment shall be made by Landlord to Tenant not later than ten (10) business
days after the date of the last to occur of the following (the "Trigger Date"):
(i) the termination of this Lease pursuant to the terms of this Lease; (ii) the
end of the term of this Lease (including any exercised Renewal Options), and
(iii) vacation by Tenant of the Demised Premises after such termination or
expiration. Landlord shall have the right to offset from the amount of such
payment any delinquent Fixed Rent or other delinquent amounts due Landlord from
Tenant. Landlord shall deliver notice of any such offset simultaneously with
delivery of such payment by Landlord. Determinations under GAAP under this
Section 11.1(b) shall be made by Tenant's independent certified public
accountants, subject to Landlord's right as hereinafter specified to dispute any
such determination. Any disputes between Tenant and Landlord under this Section
11.1(b), except disputes pertaining to an interpretation under GAAP, shall be
------
determined by arbitration before a single Qualified Arbitrator appointed by and
in accordance with the rules of the AAA. If Landlord disputes a determination
under GAAP, that dispute shall be determined by an accounting firm, independent
of both Landlord and Tenant, chosen by lot by Landlord and Tenant from among the
six (6) largest United States accounting firms (by numbers of employees) in the
United States. Such a determination by AAA or such accounting firm so chosen
shall be final and conclusive on Landlord and Tenant and judgment thereon may be
entered in any court of competent jurisdiction. Costs of the arbitrator, the AAA
and such accounting firm shall be paid fifty percent (50%) by Landlord and fifty
percent (50%) by Tenant. Notwithstanding the foregoing, if after requesting
reimbursement from Landlord for any Capital Work, Tenant shall exercise any of
its Renewal Options such that the entire useful life of such Capital Work falls
within the term of this Lease as so extended, Landlord shall have no obligation
to provide Tenant with any reimbursement whatsoever in connection with such
Capital Work.
SECTION 11.2
Tenant covenants not to permit or suffer any overloading of the floors of
the Demised Premises or the electrical equipment therein contrary to the
applicable certificate of occupancy, Board of Fire Underwriters certificate or
any certificate of any insurance carrier and/or Law; however, Tenant shall not
be obligated to correct any violation described above in this Section 11.2
unless required by, and pursuant to official notice from, the applicable
governmental authority with jurisdiction over the matter. Tenant also covenants
not to do or suffer any waste, disfigurement or injury to the Demised Premises.
SECTION 11.3
Tenant shall not remove or permit removal of any of the permanent
furnishings, fixtures or other property constituting a part of any buildings on
the Demised Premises unless other property at least equal in value and utility
shall be substituted therefor.
SECTION 11.4
Landlord shall have the right, but not the obligation, to have the Demised
Premises inspected from time to time during the term of this Lease by its
engineering and environmental consultants after providing ten (10) days prior
written notice of such inspection. If the results of any such inspection
disclose any maintenance, repairs or replacements that must be performed to
23.
<PAGE>
bring the Demised Premises into good order and repair and otherwise consistent
with the standards which are required under the terms of this Lease
(collectively, the "Required Repairs"), which were not already scheduled for
---
repair by Tenant, Tenant shall cause such Required Repairs to be made as soon as
practicable after receipt of notification (the "Repair Notification") from
Landlord. Landlord may exercise this right from time to time during the term of
this Lease but not more frequently than one (1) time in any twelve (12) month
period, except that if an Event of Default is continuing, Landlord may exercise
this right at any time during which the Event of Default continues uncured. If
the cost of such Required Repairs is less than $15,000.00, Landlord shall pay
any and all costs and expenses (except for the cost of the Required Repairs)
incurred by Landlord in connection with the performance of the inspections and
any and all supplemental inspections performed in connection therewith. If the
cost of the Required Repairs is $15,000.00 or more, Tenant shall, within ten
(10) business days after receipt of the Repair Notification, pay to Landlord an
amount equal to the amount of the reasonable costs and expenses incurred by or
on behalf of Landlord in connection with the inspections and any supplemental
inspections, up to a maximum of Seven Thousand Five Hundred Dollars ($7,500.00).
SECTION 11.5
In connection with Tenant's obligations to maintain the Demised Premises
pursuant to terms and conditions of Article 11, Tenant shall cause to be
performed the maintenance items listed on Schedule 11.5 attached hereto as and
when required by the terms of such Schedule. The listing of the maintenance
items on Schedule 11.5 is intended only as a partial listing of those items
required to be performed by Tenant in connection with its maintenance
obligations under this Lease and in no event shall Tenant be deemed to have
satisfied its maintenance obligations hereunder solely by the performance by
Tenant of the items listed on said Schedule.
ARTICLE 12
ALTERATIONS
-----------
SECTION 12.1
Tenant shall have the right at any time and from time to time during the
term of this Lease to make, at its sole cost and expense, changes, replacements,
alterations, additions, enlargements or expansions in, of or to the
Improvements, or to construct additional improvements on the Demised Premises
(all of the foregoing hereinafter collectively called "Alterations" and
individually called an "Alteration"), subject, however, in all cases to the
following:
(a) No particular Alteration involving an estimated cost of more than
$250,000 shall be undertaken except after thirty (30) days prior written notice
to Landlord.
(b) No particular Alteration, structural or non-structural (including
any restoration required by ARTICLE 9 or 10 herein), involving an estimated cost
of more than the Insurance Threshold Amount shall be made without the prior
written consent of any Mortgagee, if required by the terms of any Underlying
Mortgage, and of Landlord, such written consent of Landlord and
24.
<PAGE>
Mortgagee shall be granted without unreasonable delay or conditions if the
Alteration would not in the reasonable opinion of Landlord adversely affect in
any way the value, rental value, rentability or usefulness of the Improvements
(taking into consideration the length of the term remaining and any exercised
extensions allowed under this Lease), the structural integrity of the
Improvements or the proper functioning of the mechanical systems therein. If
such approval is required, such Alterations will be made substantially in
accordance with plans and specifications approved in writing by any such
Mortgagee and by Landlord. Three (3) copies of plans and specifications in such
reasonable detail as will permit Landlord to exercise its judgment shall be
submitted to Landlord in connection with Alterations under this Section 12.1(b).
Notwithstanding any contrary provision in this Article 12, Landlord may in its
sole discretion withhold consent to any Alteration to the extent it entails
constructing an addition on to the Improvements and/or constructing a new
building on the Demised Premises or constructing other new improvements on the
Demised Premises outside of the currently existing exterior walls of the
Improvements.
(c) If the estimated cost of any particular Alteration shall be in
excess of the Insurance Threshold Amount, Tenant shall pay to or as directed by
Landlord the reasonable fees and expenses of any third Person architects or
engineers selected by any Mortgagee and by Landlord to review the plans and
specifications and inspect the work on behalf of Landlord and such Mortgagee and
other out-of-pocket expenses incurred by Landlord and such Mortgagee in review
of such plans and specifications and inspection of such work. However, Tenant
shall not be obligated to pay more than Seven Thousand Five Hundred Dollars
($7,500.00) for such review and inspection work.
25.
<PAGE>
(d) No Alteration shall be undertaken until Tenant shall have procured
and paid for, so far as the same may be required from time to time, all permits
and authorizations of the Governmental Authorities. Landlord shall join in the
application for such permits or authorizations whenever such action is
necessary, but without any liability or expense to Landlord.
(e) Any Alteration shall, when completed, be of comparable materials
and finish as then exist in the Demised Premises.
(f) Any Alteration shall be made promptly and in a good and
workmanlike manner, and, if such Alteration requires the consent of Landlord and
any Mortgagee, it shall be made substantially in accordance with plans and
specifications approved by Landlord and such Mortgagee. Any Alteration shall be
made in compliance with all applicable permits and authorizations and building
and zoning laws and with all other applicable Laws and requirements of all the
Governmental Authorities, any national or local Board of Fire Underwriters, and
any insurance policy affecting the Demised Premises or any other body hereafter
exercising functions similar to those of any of the foregoing. Landlord shall,
at the request of Tenant, cooperate at Tenant's sole cost and expense in
connection with any requirement of the Governmental Authorities which requires
Landlord participation in seeking permits and authorizations required for any
Alteration.
(g) The cost of any such Alterations shall be paid in cash or its
equivalent when due. If the estimated cost of any Alterations exceeds the
Insurance Threshold Amount, Tenant shall deliver security reasonably
satisfactory to Landlord and Mortgagee for the amount such estimated cost
exceeds the Insurance Threshold Amount. Without limitation, a payment bond or
letter of credit for such excess amount shall be deemed satisfactory.
(h) Tenant shall cause workers' compensation insurance including
Employer's Liability insurance in an amount not less than $5,000,000 (part of
which may be provided under Tenant's umbrella policies), covering all
individuals employed in connection with the work and with respect to whom death
or bodily injury claims could be asserted against Landlord, Tenant or the
Demised Premises, and comprehensive general liability insurance on an occurrence
basis for the mutual benefit of Tenant and Landlord, as named insureds, with
limits of not less than $10,000,000 in the event of personal injury or death to
any one individual and to any number of individuals in respect of any one
"occurrence", and with limits of not less than $10,000,000 for property damage,
shall be maintained or caused to be maintained by Tenant at Tenant's sole cost
and expense at all times when any work is in process in connection with any
Alteration. All such insurance shall be issued by a company or companies of
recognized responsibility, and all policies or certificates therefor issued by
the respective insurers, bearing notations evidencing the payment of premiums or
accompanied by other evidence reasonably satisfactory to Landlord of such
payment, shall be delivered to or as directed by Landlord.
(i) All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises shall be and shall remain a part of the
Demised Premises and shall be deemed to be the property of Landlord and shall
not be removed by Tenant.
26.
<PAGE>
(j) Upon completion of any restoration or Alteration for which plans
and specifications are required to be delivered to Landlord and any Mortgagee,
Tenant shall deliver to Landlord three copies of "as-built" plans for such
restoration or Alteration.
SECTION 12.2
No approval of plans or specifications by Landlord or any Mortgagee or
consent by Landlord or any Mortgagee allowing Tenant to make a restoration or
Alteration to the Demised Premises shall in any way be deemed to be an agreement
by Landlord or such Mortgagee that the contemplated restoration or Alteration
comply with requirements of the Governmental Authorities or any insurance policy
affecting the Demised Premises or any certificates of occupancy for the
Improvements nor shall it be deemed to be a waiver by Landlord of the compliance
by Tenant with any of the terms of this Lease.
ARTICLE 13
COMPLIANCE WITH LAW; HAZARDOUS MATERIAL
---------------------------------------
SECTION 13.1
Tenant shall, during and after the term of this Lease, at its sole cost and
expense, promptly comply with all Laws, any national or local Board of Fire
Underwriters, any insurer of the Demised Premises or any other body exercising
functions similar to those of any of the foregoing, foreseen or unforeseen,
ordinary as well as extraordinary (including but not limited to Laws related to
Hazardous Materials and clean up of Hazardous Materials and the Americans with
Disabilities Act and local laws), which are now or may hereafter during the term
of this Lease be applicable to the Demised Premises, the use, manner of use or
occupancy thereof or any transaction related thereto, whether or not the same
shall necessitate structural repairs or alterations or interfere with the use or
occupancy of the Demised Premises; however, Tenant shall not be obligated to
correct any building code, Americans with Disabilities Act or Hazardous
Materials violations unless required by, and pursuant to official notice from,
the applicable governmental authority with jurisdiction over the matter. Tenant
shall not cause by Tenant's actions or negligent inactions or knowingly permit
any Hazardous Material to be brought or deposited or used on the Demised
Premises in a manner which is not in compliance with all Laws. Hazardous
Material will be used, kept, stored and disposed of in compliance with the
provisions of this Section 13.1. Tenant shall promptly notify Landlord in
writing of the existence of new types of Hazardous Materials (not previously
disclosed to Landlord) used by Tenant on the Demised Premises.
SECTION 13.2
Tenant shall not cause or maintain any nuisance in or upon the Demised
Premises, as determined by a court of competent jurisdiction. Tenant shall not
knowingly suffer or permit the Demised Premises, or any portion thereof, to be
used by the public, as such, in any way as to impair Landlord's title thereto.
27.
<PAGE>
SECTION 13.3
Tenant may, at its own cost and expense and in its name (or, if required by
the Governmental Authorities, in Landlord's name) contest in any manner
permitted by the Governmental Authorities the validity or enforcement of Laws of
the Governmental Authorities with which Tenant is required to comply pursuant to
this Lease and may defer compliance therewith, provided that:
(a) such non-compliance shall not subject Landlord to criminal
prosecution or the Demised Premises to lien or sale;
(b) such non-compliance shall not be in violation of any Underlying
Mortgage; provided that Landlord has given Tenant a copy of such mortgage;
(c) At the request of Landlord, Tenant shall first deliver to Landlord
a surety bond issued by a surety company of recognized responsibility
satisfactory to Landlord and Mortgagee and in form and substance satisfactory to
Landlord and Mortgagee, or shall provide other security satisfactory to Landlord
protecting Landlord against loss or liability by reason of such non-compliance;
and
(d) Tenant shall promptly and diligently prosecute such contest.
Landlord, without expense or liability to it, shall cooperate with Tenant in any
such contest.
ARTICLE 14
DISCHARGE OF LIENS
------------------
SECTION 14.1
Tenant will not create or permit to remain, and will discharge, any lien,
encumbrance or charge (levied on account of any Imposition or any mechanic's,
laborer's or materialman's lien or any security interest, conditional sale,
title retention agreement or chattel mortgage, or otherwise) upon the Demised
Premises or any part thereof, having any priority or preference over or ranking
on a parity with the estate, rights and interest of Landlord in the Demised
Premises or any part thereof or the income therefrom, and Tenant will not suffer
any other matter or thing to be done whereby the estate, rights and interest of
Landlord in the Demised Premises or any part thereof might be impaired; provided
that any Imposition may, after the same becomes a lien on the Demised Premises,
be paid or contested in accordance with ARTICLE 6 hereof, and any mechanic's,
laborer's or materialman's lien may be discharged in accordance with Section
14.2 hereof.
SECTION 14.2
If any mechanic's, laborer's or materialman's lien shall at any time be
filed against the Demised Premises or any part thereof, Tenant, within thirty
(30) days thereafter shall cause the same to be discharged of record by payment,
deposit, bond, order of a court of competent
28.
<PAGE>
jurisdiction or otherwise. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid, then, in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings. Any amount so paid by Landlord and
all costs and expenses incurred by Landlord in connection therewith, together
with interest thereon at the Interest Rate from the respective dates of the
making of the payment or incurring of the cost and expense by Landlord shall be
paid by Tenant to Landlord within ten (10) days after demand.
SECTION 14.3
Nothing in this Lease contained shall be deemed or construed in any way as
constituting the consent or request of Landlord or Tenant, express or implied by
inference or otherwise, to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials for any
specific improvement, alteration to or repair of all or part of the Demised
Premises.
ARTICLE 15
RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
-----------------------------------------------
SECTION 15.1
Landlord shall have the right at any time, after five (5) days' notice
(which notice may be by facsimile) to Tenant (or without notice in case of
emergency or in case any fine, penalty, interest or cost may otherwise be
imposed or incurred on or by Landlord), but no earlier than the expiration of
the applicable cure period hereunder (except in the case of emergency or in case
any fine, penalty, interest or cost may otherwise be imposed or incurred on or
by Landlord), to make any payment or perform any act required of Tenant under
this Lease, and in exercising such right, to incur necessary and reasonable
incidental costs and expenses, including fees and charges of counsel,
accountants, appraisers, architects and engineers. Nothing herein shall imply
any obligation on the part of Landlord to make any payment or perform any act
required of Tenant, and the exercise of the right so to do shall not constitute
a release of any obligation or a waiver of any Default.
SECTION 15.2
All payments made by Landlord and all reasonable costs and expenses
incurred by Landlord in connection with any exercise of such right, together
with interest at the Interest Rate from the respective dates of the making of
such payments or the incurring of such costs and expenses, shall be payable to
Landlord by Tenant within ten (10) days after demand. All sums which may become
payable to Landlord by Tenant pursuant to this ARTICLE 15 shall be deemed
Additional Rent hereunder and Landlord shall have (in addition to any other
right or remedy of Landlord) the same rights and remedies in the event of the
non-payment of any such sums by Tenant as in the cases of default by Tenant in
the payment of Fixed Rent or other Additional Rent.
29.
<PAGE>
ARTICLE 16
ENTRY ON PREMISES BY THE LANDLORD
---------------------------------
SECTION 16.1
Subject to Landlord's compliance with Tenant's and/or any subtenant's
established security measures and requirements provided the same do not prohibit
access to any portion thereof, Tenant shall permit Landlord and any Mortgagee or
prospective Mortgagee and the authorized representatives of Landlord to enter
the Demised Premises without notice in the event of an emergency and upon notice
(which notice may be by facsimile) at all reasonable times during usual business
hours for the purpose of (a) inspecting the same (including, without limitation,
performing tests reasonably required to determine if Tenant is complying with
the provisions of this Lease to be complied with by it including those related
to Hazardous Materials) and (b) making any necessary repairs to the Demised
Premises and performing any work therein that may be necessary by reason of an
Event of Default in making any such repairs or performing any such work.
Nothing herein shall imply any obligation on the part of Landlord to do any such
work which, under any provision of this Lease, Tenant may be required to perform
and the performance thereof by Landlord shall not constitute a waiver of
Tenant's Default in performing the same. Landlord may, during the progress of
any such work keep and store upon the Demised Premises all necessary materials,
tools, supplies and equipment. Landlord shall not be liable for reasonable
inconvenience, annoyance, disturbance, loss of business or other damage of
Tenant or any subtenant by reason of making such repairs or the performance of
any such work, or on account of bringing materials, tools, supplies and
equipment into or through the Demised Premises during the course thereof ''''and
the obligations of Tenant under this Lease shall not be affected thereby.
Landlord shall use commercially reasonable efforts to make such repairs in a
manner so as to minimize interference with the normal conduct of business of
Tenant and other occupants of the Demised Premises, provided that Landlord shall
not be required to employ overtime or premium labor therefor.
SECTION 16.2
Subject to Landlord's compliance with Tenant's and/or any subtenant's
established security measures and requirements provided the same do not prohibit
access to any portion thereof, Landlord shall have the right at all reasonable
times to enter upon the Demised Premises for the purpose of exhibiting the same
to prospective mortgagees, purchasers and, during the last twenty-four (24)
months of the term of this Lease, to prospective tenants.
30.
<PAGE>
ARTICLE 17
ASSIGNMENT, MORTGAGES AND OTHER
-------------------------------
TRANSFERS OF TENANT'S INTEREST; SUBLETTING
------------------------------------------
SECTION 17.1
Without the prior written consent of Landlord which shall not be
unreasonably withheld, conditioned or delayed, neither this Lease nor any
interest of Tenant in this Lease or in any sublease or in any subrents shall be
sold, assigned, transferred, mortgaged, pledged, hypothecated, or otherwise
disposed of or encumbered, whether voluntarily, by operation of law or
otherwise, nor shall Tenant sublet all or any part of the Demised Premises or
agree to do any of the foregoing. Landlord shall provide such consent or denial
of consent within ten (10) business days after Tenant's request therefor. Any
such denial shall include a reasonable explanation of the basis for denial. No
such sale, assignment, transfer, mortgage, pledge or hypothecation shall release
Tenant from liability hereunder, unless otherwise agreed in writing by Landlord
and Mortgagee.
Any assignment or other attempted disposition or encumbering of this Lease
or any sublease hereof, or of the interest of Tenant hereunder, without the
prior written consent of Landlord or without full compliance with any and all
reasonable requirements set forth in such consent of Landlord or in this Lease,
in addition to constituting an Event of Default under this Lease, shall be
invalid and of no effect against Landlord.
SECTION 17.2
The provisions of Section 17.1 shall apply to transfers of capital stock
and any other mechanism which results in a change of control of Tenant (if
Tenant is a corporation) and to transfers of an interest in the distributions of
profits and losses and any other mechanism which results in a change of control
of Tenant (if Tenant is a partnership or joint venture or other entity) as if
such transfer or other mechanism were an assignment of this lease, except that
the provisions of Section 17.1 shall not apply to (w) the public sale of
securities of Tenant, (x) transactions with a corporation or other entity into
or with which Tenant is merged or consolidated, (y) transactions with a
corporation or other entity to which substantially all of Tenant's assets are
transferred or (z) transfers to any corporation or other entity which controls
or is controlled by Tenant or is under common control with Tenant (prior to or
after the transaction involved), provided, that (i) in any of such events within
-------- ----
ten (10) days after the effective date of any such transaction, the executed
instrument of assignment and assumption, if applicable, in the form previously
exhibited to Landlord, in which such assignee assumes all of the terms,
covenants and conditions of this Lease on Tenant's part to be performed and
observed shall have been delivered to Landlord and (ii) in the event of a
transaction described in subsections (x) or (y), above, the successor to Tenant
has a rating equal to or better than CCC+ (Standard and Poors) or the equivalent
from another recognized rating agency. Tenant shall, however, notify Landlord
of such assignment not less than ten (10) days prior to the effective date
thereof and shall promptly deliver to Landlord such other documentation and
evidence with respect thereto as Landlord may reasonably request. For purposes
of this Section 17.2, the term "control" means,
31.
<PAGE>
in the case of a corporation, ownership or voting control, directly or
indirectly, of at least fifty-one (51%) percent of all its voting stock, and in
case of a partnership, joint venture or other entity, ownership, directly or
indirectly, of at least fifty-one (51%) percent of all the general partnership
or other interests therein.
SECTION 17.3
Any consent by Landlord to a sale, assignment, transfer, mortgage, pledge,
hypothecation, or other disposition or encumbering of this Lease or of any
sublease, shall apply only to the specific transaction thereby authorized and
shall not relieve Tenant from the requirement of obtaining the prior written
consent of Landlord to any further sale, assignment, transfer, mortgage, pledge,
hypothecation, or other disposition or encumbering of this Lease or of any
sublease. Contemporaneously with the request of Tenant for each such consent,
Tenant shall submit, in writing, information sufficient to enable Landlord to
decide with respect thereto.
SECTION 17.4
If this Lease be assigned, Landlord may, and is hereby empowered to collect
rent from the assignee. If the Demised Premises or any part thereof be underlet
or occupied by any Person other than Tenant, Landlord, upon the occurrence of
and Event of Default, may, and is hereby empowered to, collect rent from the
undertenant or occupant. In either of such events, Landlord shall apply the
rent received by it to the Fixed Rent and the Additional Rent, and such
collection shall not be deemed a waiver of the covenant of Tenant against
mortgaging or pledging this Lease, or the acceptance of such assignee,
undertenant or occupant as Tenant under this Lease or a release of Tenant from
performance of Tenant's covenants hereunder.
SECTION 17.5
Notwithstanding the foregoing provisions of this ARTICLE 17, Landlord shall
not unreasonably withhold, condition or delay its consent to any subleases,
licenses or concessions to be entered into by Tenant with respect to all or any
portion of the Demised Premises. During the term of this Lease, Tenant shall be
entitled to all rent, income and profits relating to any subleases, licenses or
concessions at the Demised Premises (collectively, the "Sublease Profits"),
provided, however, that Tenant hereby grants to Landlord a first priority
- -------- -------
security interest in and to such Sublease Profits which shall entitle Landlord
to exercise the right to receive the Sublease Profits while an Event of Default
in payment of Fixed Rent and/or Additional Rent exists hereunder. Landlord
shall apply all Sublease Profits toward payment of delinquent and current Fixed
Rent and Additional Rent (as applicable), in that order. Any excess shall be
promptly paid to Tenant.
SECTION 17.6
Any violation of any provision of this Lease, whether by act or omission,
by any assignee, subtenant or undertenant, shall be deemed a violation of such
provision by Tenant, it being the intention and meaning of the parties hereto
that Tenant shall assume and be liable to Landlord for
32.
<PAGE>
any and all acts and omissions of any and all assignees, subtenants and
undertenants in violation of this Lease.
SECTION 17.7
Landlord hereby approves the SGI Lease as an acceptable sublease, provided
that the SGI Lease shall be subject and subordinate to this Lease upon the
execution and delivery by SGI of a subordination, nondisturbance and attornment
agreement in the form attached hereto as Exhibit C. Tenant shall promptly
---------
notify Landlord of any material defaults under the SGI Lease or any other
sublease entered into by Tenant and shall provide to Landlord copies of any and
all notices of default or correspondence relating to material defaults whether
received or delivered by Tenant. Notwithstanding any other provision of this
Lease, Landlord hereby acknowledges that any provisions of or rights granted
under the SGI Lease that may conflict or are inconsistent with the terms and
conditions of this Lease shall not be deemed a violation of this Lease.
ARTICLE 18
ADDITIONAL UNDERTAKING OF THE TENANT
------------------------------------
If, (a) for any reason, the Fixed Rent payable by Tenant to Landlord
pursuant to this Lease shall during the Term hereof be diminished or subject to
diminution through attachment, claim, demand, charge, lien, levy, process,
encumbrance or by Law, or shall be subject to withholding or diminution at the
source, by reason of any taxes (including a tax on rent), assessments, expenses,
indebtedness, obligation or liabilities of any character, foreseen or unforeseen
and the same is required to be paid by Tenant under this Lease, and whether or
not valid, or (b) by reason of any claims, demands, charges or liens of any
nature, foreseen or unforeseen, incurred by any Person, and the same is required
to be paid by Tenant under this Lease, so that the Fixed Rent or any part
thereof would be unavailable to Landlord, when due, or (c) the payment in full
of the Fixed Rent when due and payable under this Lease shall be delayed,
hindered or prevented, or the right of Landlord to use or apply the same shall
be adversely affected due to the fault of Tenant, or (d) the Demised Premises
shall be or become subject to or burdened by any lien, charge or encumbrance (i)
of any kind other than permitted in this Lease or otherwise approved by Landlord
and (ii) not created by Landlord, then and in any such event, Tenant promptly
shall take at any time and from time to time after notice by Landlord such
action (including the payment of money to Landlord) to the extent, and as often
as may be, necessary to (i) pay fully and discharge such taxes, assessments,
expenses, indebtedness, obligations and liabilities, and to eliminate or nullify
the cause of such attachment, claim, demand, charge, lien, levy, order, process,
encumbrance, withholding or diminution, (ii) eliminate or prevent any such
delay, hindrance or obstacle in the payment in full of the Fixed Rent when the
same is due and payable under this Lease, and (iii) protect fully the right of
Landlord to use or apply the Fixed Rent for its purposes. Except as otherwise
set forth in this Lease, it is the intention of the Tenant in giving the
undertakings set forth in this ARTICLE 18 that the Fixed Rent, the Additional
Rent and other sums payable under this Lease shall be received and enjoyed by
the Landlord, or its assignee, as an absolutely net sum, so that said rent shall
be available for use by the Landlord, or its assignee, when due, without
diminution to any extent and without delay or postponement for any reason.
33.
<PAGE>
ARTICLE 19
CONDITION OF AND TITLE TO DEMISED
PREMISES; QUIET ENJOYMENT
-------------------------
SECTION 19.1
Tenant represents and agrees that the Demised Premises, the title thereto,
and the present uses and non-uses thereof, have been examined by Tenant and that
Tenant accepts the same in the condition or state in which they or any of them
now are, without representation or warranty, express or implied in fact or by
law, by Landlord and without recourse to Landlord, as to the title thereto, the
nature, condition or usability thereof or the use or uses to which the Demised
Premises or any part thereof may be put. Tenant further represents that Tenant
was the previous owner of fee title to the Demised Premises and sold the Demised
Premises to Landlord pursuant to the Original Purchase Agreement (as defined
herein).
SECTION 19.2
Tenant, upon paying the Fixed Rent and the other Additional Rent in this
Lease provided for and observing and keeping the covenants, agreements, terms
and conditions of this Lease on its part to be performed, shall, subject to its
terms, lawfully and quietly hold, occupy and enjoy the Demised Premises during
the term of this Lease, without hindrance or molestation by Landlord or by any
other Person claiming under Landlord subject, however, to the exceptions and
reservations of this Lease. Any breach or default of this ARTICLE 19, shall not
give to Tenant any right during the term of this Lease to cancel or terminate
this Lease or to abate or make deduction from or offset against Fixed Rent,
Additional Rent or any other sums payable by Tenant under this Lease, or to fail
to perform any other covenant, agreement or obligation of Tenant hereunder, but
nothing herein shall preclude Tenant from obtaining damages and injunctive
relief against Landlord or any Person claiming under Landlord. The covenant in
this Section 19.2 shall be construed as a covenant running with the Demised
Premises and not as a personal covenant or obligation of Landlord, except to the
extent of Landlord's covenants, agreements, obligations and liabilities that
arise while Landlord possesses an interest in this Lease and/or the Demised
Premises, and provided that any successors or assigns of Landlord assume all of
Landlord's covenants, agreements, obligations and liabilities hereunder.
ARTICLE 20
INDEMNIFICATION OF THE LANDLORD, TENANT AND MORTGAGEES
------------------------------------------------------
SECTION 20.1
Tenant shall indemnify and save harmless Landlord and any Mortgagees from
and against any and all liabilities, obligations, damages, penalties, claims,
suits, and any reasonable Mortgagee costs, charges and expenses, including
engineers', architects', appraisers', accountants', and attorneys' fees and
charges, which may be imposed upon or asserted against
34.
<PAGE>
Landlord, or any Mortgagee whether during or after the term of this Lease by
reason of any of the following occurring during the Term:
(a) any work or thing done in, on or about the Demised Premises or any
part thereof by Tenant or any subtenant, or their respective employees, agents
or contractors;
(b) any act, omission or negligence of Tenant or any agent,
contractor, employee, licensee or invitee of Tenant;
(c) any accident or injury to any individual (including death) or
damage to property occurring in, on or about the Demised Premises or any part
thereof or any street, alley, sidewalk, curb, passageway or space adjacent
thereto which is not the result of any act or omission of Landlord, Mortgagee,
or their respective employees, agents or contractors; and
(d) any failure on the part of Tenant to perform or comply with any of
the agreements, terms or conditions contained in this Lease on its part to be
performed or complied with.
Landlord shall promptly notify Tenant of any claim asserted against
Landlord for which Landlord claims Tenant may have to indemnify Landlord
hereunder. In the event that any action or proceeding shall be brought against
Landlord or any Mortgagee by reason of any matter covered by this Section 20.1,
Tenant, upon written notice from Landlord or any Mortgagee will, at Tenant's
sole cost and expense, resist or defend the same.
SECTION 20.2
Tenant shall indemnify and save harmless Landlord against all legal costs
and charges, including counsel fees and charges, lawfully incurred in obtaining
possession of the Demised Premises after an Event of Default or after Tenant's
Default in surrendering possession upon expiration or earlier termination of the
term of this Lease or enforcing any covenant or agreement of Tenant herein
contained provided, and only to the extent, that Landlord is successful in
obtaining possession and/or enforcing the terms of this Lease.
SECTION 20.3
Landlord shall indemnify and save harmless Tenant against all legal costs
and charges, including counsel fees and charges, lawfully incurred by Tenant as
a result of Landlord's breach of this Lease and/or the negligence or willful
misconduct of Landlord, its employees, agents or contractors.
35.
<PAGE>
ARTICLE 21
EXCAVATIONS ON ADJOINING PROPERTY
---------------------------------
SECTION 21.1
If any excavation or other building operation shall be about to be made or
shall be made upon any premises or streets adjoining the Demised Premises,
Tenant shall permit the owner or lessee of such adjoining premises and their
respective representatives to enter the Demised Premises and to shore the
foundations and walls thereof, and to do any other act or thing necessary for
the safety or preservation of the Demised Premises all at such owner or lessee's
sole cost and expense. Landlord shall not be liable for any inconvenience,
annoyance, disturbance, loss of business or other damage arising therefrom and
Tenant's obligations hereunder shall not thereby be affected. Nothing in this
ARTICLE 21 shall be construed as a waiver of any rights of Tenant against
Persons other than Landlord.
ARTICLE 22
DEFAULT
-------
SECTION 22.1
If, during the term of this Lease, any one or more of the following acts or
occurrences (any one of such occurrences or acts being hereinafter called an
"Event of Default") shall happen:
(a) Tenant shall fail to make payment of any installment of the Fixed
Rent more than five (5) days after the same shall have become due; or
(b) Tenant shall fail to make payment of any Additional Rent after the
same shall have become due for more than ten (10) days after written notice
thereof from Landlord to Tenant;
(c) Tenant shall fail to perform or comply with any of the other
covenants, agreements, terms and conditions of this Lease to be performed or
complied with by Tenant, and such default shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant, or, in the case
of a default which by its nature cannot with due diligence be cured within
thirty (30) days (and the continuance of which for the period required for cure
will not (i) subject Landlord or any Mortgagee to prosecution for a crime, (ii)
subject all or part of the Demised Premises to being condemned or (iii) result
in the termination of any Underlying Mortgage, provided that Landlord has given
Tenant a copy of such mortgage), Tenant shall not (x) proceed promptly upon the
giving of such notice and with all due diligence to prosecute to completion all
steps to remedy the same and (y) complete such remedy within a reasonable time
after the giving of such notice by Landlord; or
(d) Tenant shall file a voluntary petition under any bankruptcy or
insolvency law or shall be adjudicated a bankrupt or insolvent, or shall file
any petition or answer seeking any reorganization, composition, readjustment or
similar relief under any present or future
36.
<PAGE>
bankruptcy or other applicable law, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver, or liquidator of Tenant or of all or
any substantial part of its properties or of all or any substantial part of the
Demised Premises; or
(e) If within sixty (60) days after the filing of an involuntary
petition in bankruptcy against Tenant or the commencement of any proceeding
against Tenant seeking any reorganization, composition, readjustment or similar
relief under any Law, such proceeding shall not have been dismissed, or if,
within sixty (60) days after the appointment, without the consent or
acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant or of
all or any substantial part of the properties of Tenant or all or any
substantial part of the Demised Premises, such appointment shall not have been
vacated or stayed on appeal or otherwise, or if, within sixty (60) days after
the expiration of any such stay, such appointment shall not have been vacated,
or if within sixty (60) days after the taking of possession, without the consent
or acquiescence of Tenant, of the property of Tenant by any Governmental
Authority pursuant to statutory authority for the dissolution or liquidation of
Tenant, such taking shall not have been vacated or stayed on appeal or
otherwise; or
(f) if the Demised Premises shall be abandoned by Tenant, unless the
same is being sublet by Tenant to other Persons pursuant to and in accordance
with the terms of this Lease;
(g) if any event shall occur or any contingency shall arise whereby
this Lease and the estate hereby granted or the unexpired balance of the Term
would, by operation of law or otherwise, devolve upon or pass to any party other
than Tenant, except as is expressly permitted under ARTICLE 17; or
(h) Tenant shall be in default under the SGI Lease or any other lease
relating to more than 50,000 square feet of space at the Demised Premises (a
"Major Sublease");
then, and in such event, Landlord may at its option, then or thereafter while
any such Event of Default shall continue and notwithstanding the fact that
Landlord may have any other remedy hereunder or at law or in equity, by written
notice to Tenant, designate a date, not less than sixty (60) days after the
giving of such notice, on which this Lease shall terminate; and thereupon, on
such date the term of this Lease and the estate hereby granted shall expire and
terminate upon the date specified in such notice with the same force and effect
as if the date specified in such notice were the date herein fixed for the
expiration of the term of this Lease, and all rights of Tenant hereunder shall
expire and terminate, but Tenant shall remain liable as hereinafter provided.
Nothing in the preceding paragraph shall be deemed to require Landlord to
give the five (5) day notice provided for therein prior to the commencement of a
summary proceeding for non-payment of rent or a plenary action for recovery of
rent, it being intended that such notice is for the purpose of creating a
conditional limitation hereunder pursuant to which this Lease shall terminate
and Tenant, if it remains in occupancy, shall become a holdover tenant.
37.
<PAGE>
SECTION 22.2
Tenant's due and punctual performance of all of its obligations under this
Lease throughout the Term is of importance to Landlord. Without limiting the
provisions of Section 22.1, if Tenant shall default in the timely payment of any
installment of Fixed Rent, and any such default shall continue or be repeated
for two consecutive months or for a total of three months in any period of
twelve months then, notwithstanding that such Defaults shall have each been
cured within the applicable period, if any, as above provided, any further
--------
similar Default shall be deemed to be deliberate and Landlord thereafter may
serve the said five (5) days' notice of termination upon Tenant without
affording to Tenant an opportunity to cure such further Default.
SECTION 22.3
(a) If a petition is filed by, or an order-for relief is entered
against Tenant under Chapter 7 of the Bankruptcy Code and the trustee of Tenant
elects to assume this Lease for the purpose of assigning it, such election or
assignment, or both, may be made only if all of the terms and conditions of
subparagraphs (b) and (d) below are satisfied. To be effective, an election to
assume this Lease must be in writing and addressed to Landlord, and in
Landlord's business judgment, all of the conditions hereinafter stated, which
Landlord and Tenant acknowledge to be commercially reasonable, must have been
satisfied. If the trustee fails so to elect to assume this Lease within sixty
(60) days after his appointment, this Lease will be deemed to have been
rejected, and Landlord shall then immediately be entitled to possession of the
Demised Premises without further obligation to Tenant or the trustee and this
Lease shall be terminated. Landlord's right to be compensated for damages in the
bankruptcy proceeding, however, shall survive such termination.
(b) If Tenant files a petition for reorganization under Chapters 11 or
13 of the Bankruptcy Code, or if a proceeding fried by or against Tenant under
any other chapter of the Bankruptcy Code is converted to a Chapter 11 or 13
proceeding and Tenant's trustee or Tenant as debtor-in-possession fails to
assume this Lease within sixty (60) days from the date of the filing of such
petition or conversion, then the trustee or the debtor-in-possession shall be
deemed to have rejected this Lease. To be effective any election to assume this
Lease must be in writing addressed to Landlord and, in Landlord's business
judgment, all of the following conditions, which Landlord and Tenant acknowledge
to be commercially reasonable, must have been satisfied:
(i) The trustee or the debtor-in-possession has cured or has
provided to Landlord adequate assurance, as defined in this subparagraph
(b), that:
(A) The trustee will cure all monetary defaults under this
Lease within ten (10) days from the date of assumption
(B) The trustee will cure all nonmonetary defaults under this
Lease within thirty (30) days from the date of assumption.
38.
<PAGE>
(i) The trustee or the debtor-in-possession has compensated
Landlord, or has provided Landlord with adequate assurance, as hereinafter
defined, that within ten (10) days from the date of assumption Landlord
will be compensated for any pecuniary loss it has incurred arising from the
default of Tenant, the trustee, or the debtor-in-possession, as recited in
Landlord's written statement of pecuniary loss sent to the trustee or
debtor-in-possession.
(ii) The trustee or the debtor-in-possession has provided
Landlord with adequate assurance of the future performance of each of
Tenant's obligations under this Lease; provided, however, that:
(A) From and after the date of assumption of this Lease,
the trustee or the debtor-in-possession shall pay the
Fixed Rent and Additional Rent payable under this
Lease in advance in equal monthly installments on each
date that such Rent are payable.
(B) The trustee or debtor-in-possession shall also deposit
with Landlord, as security for the timely payment of
any and all sums due under this Lease, an amount equal
to three (3) months' Fixed Rent and other monetary
charges accruing under this Lease;
(C) If not otherwise requested by the terms of this Lease,
the trustee or the debtor-in-possession shall also pay
in advance, on each day that any installment of Fixed
Rent is payable, one-twelfth (1/12) of Tenant's annual
Impositions, operating expenses, and other obligations
under this Lease; and
(D) The obligations imposed upon the trustee or the
debtor-in-possession will continue for Tenant after
the completion of bankruptcy proceedings.
(iii) Landlord has determined that the assumption of this Lease
will not:
(A) Breach any provision in any other lease, mortgage,
financing agreement, or other agreement by which
Landlord is bound relating to the Demised Premises; or
(B) Disrupt, in Landlord's judgment, the occupant mix or
occupant consistency of the Demised Premises or any
other attempt by Landlord to provide or exclude a
specific variety of occupants in the Demised Premises
which, in Landlord's judgment, would be most
beneficial to all of the tenants thereof (including
Landlord) and would enhance the security, image,
reputation, and profitability thereof.
(iv) For purposes of this subparagraph (b), "adequate
assurance" means that:
39.
<PAGE>
(A) Landlord determines that the trustee or the debtor-in-
possession has, and will continue to have, sufficient
unencumbered assets, after the payment of all secured
obligations and administrative expenses, to assure
Landlord that the trustee or the debtor-in-possession
will have sufficient funds timely to fulfill Tenant's
obligations under this Lease and to keep the Demised
Premises properly staffed with sufficient employees to
conduct a fully operational, actively promoted
business in the Demised Premises; and
(B) An order shall have been entered segregating
sufficient cash payable to Landlord and/or a valid and
perfected first lien and security interest shall have
been granted in property of Tenant, trustee, or
debtor-in-possession which is acceptable in value and
kind to Landlord, to secure to Landlord the obligation
of the trustee or debtor-in-possession to cure all
monetary and nonmonetary defaults under this Lease
within the time periods set forth above.
(c) In the event this Lease is assumed by a trustee appointed for
Tenant or by Tenant as debtor-in-possession under the provisions of subparagraph
(b) above and, thereafter, Tenant is either adjudicated bankrupt or files a
subsequent petition for arrangement under Chapter 11 of the Bankruptcy Code,
then Landlord may, at its option, terminate this Lease and all the Tenant's
rights under it, by giving written notice of Landlord's election so to
terminate.
(d) If the trustee or the debtor-in-possession has assumed this Lease,
pursuant to subparagraph (a) or (b) above, to assign or to elect to assign
Tenant's interest under this Lease or the estate created by that interest to any
other person, such interest or estate may be assigned only if the intended
assignee has provided adequate assurance of future performance, as defined in
this subparagraph (d), of all of the terms, covenants, and conditions of this
Lease. For purposes of this subparagraph (d), "adequate assurance of future
performance" means that Landlord has ascertained that each of the following
conditions has been satisfied:
(ii) The assignee has submitted a current financial statement,
audited by a certified public accountant, which shows a net worth and
working capital in amounts determined by Landlord to be sufficient to
assure the future performance by the assignee of the tenant's obligations
under this Lease;
(iii) If requested by Landlord, the assignee will obtain
guarantees, in form and substance satisfactory to Landlord (i.e. letter(s)
of credit), from one or more persons who satisfy Landlord's standards of
creditworthiness; and
(iv) Landlord has obtained consents or waivers from any third
parties which may be required under any lease, mortgage, financing
arrangement, or other agreement by which Landlord is bound, to enable
Landlord to permit such assignment.
40.
<PAGE>
(e) When, pursuant to the Bankruptcy Code, the trustee or the debtor-
in-possession is obligated to pay reasonable use and occupancy charges for the
use of all or part of the Demised Premises, it is agreed that such charges will
not be less than the Fixed Rent as defined in this Lease, plus Additional rent
and other monetary obligations of Tenant included herein.
(f) Neither Tenant's interest in this Lease nor any estate of Tenant
created in this Lease shall pass to any trustee, receiver, assignee for the
benefit of creditors, or any other person or entity, nor otherwise by operation
of law under the laws of any state having jurisdiction of the person or property
of Tenant, unless Landlord consents in writing to such transfer. Landlord's
acceptance of Fixed Rent, Additional Rent or any other payments from any
trustee, receiver, assignee, person, or other entity will not be deemed to have
waived, or waive, either the requirement of Landlord's consent or Landlord's
right to terminate this Lease for any transfer of Tenant's interest under this
Lease without such consent.
SECTION 22.4
If this Lease is terminated as provided in Section 22.1 or 22.2, or as
permitted by law, Tenant shall peaceably quit and surrender possession of the
Demised Premises to Landlord, and Landlord may, without further notice enter
upon, re-enter, possess and repossess the same by summary proceedings, ejectment
or other judicial proceeding, and again have, repossess and enjoy the same
SECTION 22.5
(a) If Landlord re-enters and obtains possession of the Demised
Premises, as provided in Section 22.4 of this Lease, Landlord shall have the
right, without notice, to repair or alter the Demised Premises in such manner as
Landlord may reasonably deem necessary or advisable so as to put the Demised
Premises in good order, including restoration of the Demised Premises caused by
any removal of machinery and equipment by Tenant, and shall have the right, at
Landlord's option, to re-let the Demised Premises or a part thereof at such
rentals and on such conditions, including concessions and free rent periods, as
Landlord in good faith, in its reasonable discretion, may determine, and Tenant
shall pay to Landlord on demand all reasonable expenses incurred by Landlord in
obtaining possession, and in altering, repairing and putting the Demised
Premises in good order and condition and in reletting the same, including fees
and charges of attorneys, engineers and architects and brokers, and all other
expenses or commissions.
(b) Tenant shall pay to Landlord upon the Fixed Rent payment dates
following the date of such re-entry to and including the date set forth in
ARTICLE 4 hereof for the expiration of the Term of this Lease, the sums of money
which would have been payable by Tenant as Fixed Rent hereunder on such Fixed
Rent payment dates as if Landlord had not re-entered and resumed possession of
the Demised Premises, deducting only the net amount of rent, if any, which
Landlord shall actually receive (after deducting therefrom the expenses, costs
and payments of Landlord which, in accordance with the terms of this Lease would
have been borne by Tenant) in the meantime from and by any reletting of the
Demised Premises, and Tenant shall remain liable for all sums otherwise payable
by Tenant under this Lease, including but not limited to
41.
<PAGE>
Additional Rent, such expenses of Landlord, as well as for any deficiency
aforesaid, and Landlord shall have the right from time to time to begin and
maintain successive actions or other legal proceedings against Tenant for the
recovery of such deficiency, expenses or damages and for a sum equal to any
installments of Fixed Rent and Additional Rent. As an alternative remedy, in the
event of termination of this Lease, Landlord shall be entitled to damages
against Tenant for breach of this Lease, at any time (whether or not Landlord
shall have become entitled to or shall have received any damages as hereinabove
provided) in an amount equal to the excess, if any, of (x) the Fixed Rent and
Additional Rent which would be payable under this Lease for the period
commencing on the date of the expiration of this Lease to the end of the term of
this Lease had not so terminated, over (y) the fair rental value (including
Additional Rent) of the Demised Premises for the same period, discounted to the
date of payment at the rate of six percent (6%) per annum. The obligation and
liability of Tenant to pay the Fixed Rent and Additional Rent shall survive the
commencement, prosecution and termination of any action to secure possession of
the Demised Premises. Nothing contained herein shall be deemed to require
Landlord to wait to begin such action or other legal proceedings until the date
when this Lease would have expired had there not been any Event of Default.
Landlord shall use reasonable efforts to relet the Demised Premises, but shall
not be liable for its reasonable failure to relet all or part of the Demised
Premises and shall not, under any circumstances, have any liability for its
reasonable failure to sublet a part of the Demised Premises, particularly when
the possible letting of the whole of the Demised Premises will be adversely
affected thereby.
(c) Nothing herein contained shall limit or prejudice the right of
Landlord, in any bankruptcy or reorganization or insolvency proceeding, to prove
for and obtain as liquidated damages by reason of such termination an amount
equal to the maximum allowed by any bankruptcy or reorganization or insolvency
proceedings, or to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law whether such amount shall be greater or less than the damages provided
hereinafter.
SECTION 22.6
TENANT AND LANDLORD HEREBY WAIVE THE BENEFITS OF TRIAL BY JURY IN ANY
ACTION OR PROCEEDING AGAINST THE OTHER. TENANT HEREBY EXPRESSLY WAIVES, SO FAR
AS PERMITTED BY LAW, ANY AND ALL RIGHT OF REDEMPTION IN CASE TENANT SHALL BE
DISPOSSESSED BY A JUDGMENT OR BY WARRANT OF ANY COURT OF COMPETENT JURISDICTION
OR IN CASE OF LEGAL AND PROPER RE-ENTRY OR REPOSSESSION BY LANDLORD OR IN CASE
OF ANY EXPIRATION OR TERMINATION OF THIS LEASE.
SECTION 22.7
At any time after an Event of Default shall have occurred and while it is
continuing, Landlord shall be entitled to enjoin any breach by Tenant of any of
the covenants, agreements, terms or conditions contained in this Lease and
Landlord shall have the right to invoke any right and remedy allowed at law or
in equity or by statute or otherwise as though re-entry, summary proceedings,
and other remedies were not provided for in this Lease.
42.
<PAGE>
SECTION 22.8
Interest at the Interest Rate shall accrue from the due date thereof upon
any Fixed Rent or Additional Rent payable under this Lease to Landlord during
any period the payment thereof by Tenant to Landlord may be overdue by more than
five (5) days. In addition, Tenant's failure to pay any Fixed Rent or
Additional Rent within five (5) days of the due date thereof shall result in the
imposition of a service charge for such late payment in the amount of five
percent (5%) of the amount due.
ARTICLE 23
ATTORNEYS' FEES
---------------
In any action or proceeding (other than an arbitration proceeding under
ARTICLE 10 or ARTICLE 11) which Landlord or Tenant may prosecute to enforce its
rights hereunder, the non-prevailing party shall pay all reasonable costs
incurred by the other party therein, including attorneys' fees and charges
(including those on appeal) and such costs and attorneys' fees and charges shall
be made a part of any judgment in such action. If Landlord shall, without fault
on its part, be made a party to any litigation commenced against Tenant, and if
Tenant shall not provide Landlord with counsel satisfactory to Landlord (of
which fact Landlord shall promptly notify Tenant), Tenant shall pay all
reasonable costs and attorneys' fees and charges (including those on appeal)
reasonably incurred or paid by Landlord in connection with such litigation.
ARTICLE 24
SUBORDINATION OF LEASE
----------------------
SECTION 24.1
The Lease shall be subject and subordinate at all times to any Underlying
Mortgage and to any Underlying Lease, and to all renewals, modification,
amendments, consolidations, replacements and extensions thereof, provided that
Tenant receives from the holder of such Underlying Mortgage or Underlying Lease,
an agreement that (a) the Tenant's possession, use and enjoyment of the Demised
Premises under this Lease shall not be disturbed and (b) all of Tenant's rights
and privileges under this Lease (including, but not limited to its Purchase
Option rights) shall be upheld and honored so long as there is no Event of
Default hereunder. The foregoing is self-operative and no further confirmation
thereof is required. Until Tenant receives such an agreement, this Lease shall
not be so subject and subordinate. If, by dispossess, foreclosure or otherwise,
such Mortgagee or Superior Lessor, or any successor in interest, shall come into
possession of the Demised Premises, or shall become the owner of the Demised
Premises, or take over the rights of Landlord in the Demised Premises, it will
not disturb the possession, use or enjoyment of the Demised Premises by Tenant,
its successors or assigns, nor disaffirm this Lease or Tenant's rights or estate
hereunder, so long as all of the obligations of Tenant are fully performed in
accordance with the terms of this Lease. Tenant shall execute and deliver any
instrument which may be required by Landlord or any Mortgagee or Superior Lessor
in confirmation of such subordination promptly upon the request of Landlord, any
Mortgagee or
43.
<PAGE>
any Superior Lessor. Such agreement shall contain such other provisions as the
holder of any Underlying Mortgage may reasonably require, so long as such other
provisions do not (i) modify this Lease or (ii) impose any additional costs,
obligations or liabilities on Tenant except to a de minimis extent.
SECTION 24.2
If any Mortgagee, Superior Lessor or any designee of any Mortgagee or any
Superior Lessor ("Successor Landlord"), shall succeed to the rights of Landlord
under this lease, whether through possession or foreclosure action or delivery
of a new lease or deed, then at the request of such Successor Landlord and upon
such Successor Landlord's written agreement to accept Tenant's attornment,
Tenant shall attorn to and recognize such Successor Landlord as the landlord
under this Lease and shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment; provided
that such instrument includes non-disturbance provisions reasonably satisfactory
to Tenant. Such Successor Landlord shall not be (a) liable for any previous act
or omission of Landlord; (b) subject to any credits, offsets, claims, counter-
claims, demands or defenses which Tenant may have had against Landlord prior to
Successor Landlord taking title or delivery of possession of the Demised
Premises; or (c) bound by any payments of rent which Tenant might have made for
more than one (1) month in advance to Landlord.
SECTION 24.3
Tenant shall give notice to any Mortgagee or any Superior Lessor of any act
or omission of Landlord which Tenant believes would give it the right to
terminate this Lease or abate rent hereunder, if said Mortgagee or Superior
Landlord has delivered a written request to Tenant to that effect, including
said Mortgagee's or Superior Landlord's notice address.
ARTICLE 25
SURRENDER AND HOLDING OVER
--------------------------
SECTION 25.1
On the last day of the term hereof, or upon any earlier termination of this
Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall
surrender the Demised Premises unto the possession and use of Landlord without
delay and in good order, condition and repair, reasonable wear and tear
excepted, free and clear of all lettings and occupancies and free and clear of
all liens and encumbrances other than those created or consented to by Landlord.
Landlord hereby consents to (i) all liens and encumbrances of record affecting
the Demised Premises as of the date of this Lease, and (ii) all matters
disclosed by the survey of the Demised Premises dated 8/27/99 prepared by BRW.
All machinery, equipment and fixed assets (except for Tenant's trade fixtures
and business equipment) now or hereafter installed at the Demised Premises and
used in the operations thereof shall be and remain part of the Demised Premises.
44.
<PAGE>
SECTION 25.2
Tenant may remove Tenant's personal property from the Demised Premises
during the term of this Lease and Tenant shall repair any damage to the Demised
Premises caused by such removal. At Landlord's election, Tenant shall remove
Tenant's personal property from the Demised Premises no later than the last day
of the Term. Any personal property of Tenant which shall remain in the
Improvements after the termination of this Lease may, at the option of Landlord,
be deemed to have been abandoned by Tenant and either may be retained by
Landlord as its property or be disposed of without accountability in such manner
as Landlord may see fit or Landlord may require Tenant to remove the same at
Tenant's expense.
SECTION 25.3
Landlord shall not be responsible for any loss or damage occurring to any
property owned by Tenant or any subtenant unless such loss or damage is caused
by Landlord's, or its employee's, agent's or contractor's negligent act or
omission or willful misconduct.
SECTION 25.4
Any subrents shall be apportioned between Landlord and Tenant as of the
last day of the term hereof or as of the effective date of any earlier
termination of this Lease, provided that if Tenant shall then be in default in
the performance of any Tenant's covenants, agreements and undertakings in this
Lease, then to the extent of the amount of any such default, Tenant shall not be
entitled to receive an apportionment.
SECTION 25.5
In the event of a termination of this Lease in accordance with its terms
and a holding over by Tenant thereafter, there shall be no renewal or extension
of this Lease by operation of law, but Tenant shall continue to pay to Landlord
for each month of use and occupancy a sum equal to two times the Fixed Rent
installment then payable, and also pay all other amounts payable by Tenant to
Landlord hereunder, the Fixed Rent to be calculated on a per diem basis for each
day or fraction thereof that Tenant remains in occupancy of the Demised Premises
after expiration of the term of this Lease.
SECTION 25.6
The provisions of this ARTICLE 25 shall survive any termination of this
Lease.
ARTICLE 26
CERTAIN APPORTIONMENTS AND OTHER MATTERS
----------------------------------------
SECTION 26.1
Tenant and Landlord shall apportion between them Impositions, with Landlord
being responsible for Impositions which relate to the period after the end of
the term of this Lease and
45.
<PAGE>
Tenant being responsible for Impositions relating to periods after the
Commencement Date and to the end of the term of this Lease.
Tenant shall be responsible under ARTICLE 7 for all services and utilities
for the Demised Premises during the term of this Lease (including, without
limitation, those to be provided to the tenants under any subleases) from the
Commencement Date.
ARTICLE 27
ESTOPPEL CERTIFICATES
---------------------
Each of Tenant and Landlord shall, from time to time upon not less than ten
(10) business days' prior request by the other, execute, acknowledge and deliver
to the requesting party a statement in writing in the form attached hereto as
Exhibit D or such other form as is reasonably requested, executed by an
- ---------
authorized officer of Tenant or Landlord, as the case may be, certifying that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified, and
setting forth such modifications) and the dates to which the Fixed Rent and the
other Additional Rent have been paid, and either stating that to the knowledge
of Tenant or Landlord, as the case may be, no default exists in the performance
of any covenant, agreement or condition contained in this Lease or specifying
each default of which Tenant or Landlord, as the case may be, may have
knowledge. Any such statement delivered pursuant to this ARTICLE 27 may be
relied upon by any Mortgagee, by any prospective purchaser of the Demised
Premises, any assignee of such Mortgagee, any subtenant of Tenant, purchaser of
Tenant or purchaser/assignee of Tenant's interest in and under this Lease.
ARTICLE 28
ASSIGNMENT OF THE LANDLORD'S INTEREST; UNDERLYING MORTGAGE
----------------------------------------------------------
Landlord may at any time and from time to time assign to any one
Person (herein called the "Assignee"), by way of pledge or otherwise, any or all
of the rights (in whole or in part) of Landlord under this Lease. The Assignee
may enforce any and all of the terms of this Lease, to the extent so assigned,
as though the Assignee had been a party hereto.
46.
<PAGE>
ARTICLE 29
LIMITATION OF THE LANDLORD'S LIABILITY
--------------------------------------
SECTION 29.1
Provided that Landlord complies with Section 29.1, Landlord shall have no
personal liability hereunder and Tenant shall look solely to Landlord's estate
and interest in the Demised Premises, the Security Deposit, and/or Landlord's
operating account(s) in connection with the Demised Premises and/or this Lease
for the satisfaction of any right or remedy of Tenant for the collection of a
judgment (or other judicial process) requiring payment of money by Landlord, and
no other property of Landlord or the partners or members thereof, if Landlord is
not an individual or corporation, shall be subject to levy, attachment or other
enforcement procedures for satisfaction of Tenant's remedies under this Lease.
Landlord covenants that it shall at all times during the term of this Lease
maintain at least $5,000,000.00 of equity in the Demised Premises, where
"equity" means (i) the fair market value of the Demised Premises minus (ii) the
total amount of all mortgages, liens and other monetary encumbrances, if any,
against the Demised Premises. Tenant agrees that Landlord's failure to pay any
judgment or award to Tenant shall not affect Tenant's obligations under this
Lease.
The term "Landlord" as used in this Lease, so far as covenants or
agreements on the part of Landlord are concerned, shall be limited to the owner
or owners of Landlord's interest in this Lease at the time in question, and in
the event of any transfer or transfers of all of such interest, except a
transfer by way of security, Landlord herein named (and in case of any
subsequent transfer, the then transferor) shall be automatically freed and
relieved from and after the date of such transfer of all liability as respects
the performance of any covenants or agreements on the part of Landlord contained
in this Lease thereafter to be performed but shall remain liable for such
obligations accruing prior to such transfer; provided, however, that
-------- -------
(a) any funds in the hands of such Landlord or the then transferor at
the time of such transfer, in which Tenant has an interest, shall be turned over
to the transferee and any amount then due and payable to Tenant by Landlord or
the then transferor under any provision of this Lease, shall be paid to Tenant
simultaneous with such transfer; and
(b) upon any such transfer, the transferee shall be deemed to have
assumed, subject to the limitations of this ARTICLE 29, all of the covenants,
agreements and conditions in this Lease to be performed on the part of Landlord,
it being intended hereby that the covenants and agreements contained in this
Lease on the part of Landlord shall, subject as aforesaid, be binding on
Landlord, its successors and assigns, only during and in respect of their
respective successive periods of ownership; however, no such transfer shall
release any transferor from its obligations hereunder accruing during its
respective period of ownership.
47.
<PAGE>
ARTICLE 30
SEPARATE COVENANTS; INVALIDITY OF PARTICULAR PROVISIONS
-------------------------------------------------------
Each covenant and agreement contained in this Lease shall be construed to
be a separate and independent covenant and agreement, and the breach of any such
covenant or agreement by Landlord shall not discharge or relieve Tenant from
Tenant's obligation to perform each and every covenant and agreement of this
Lease to be performed by Tenant. If any term or provision of this Lease or the
application thereof to any Person or circumstance shall to any extent be invalid
and unenforceable, the remainder of this Lease, or the application of such term
or provision to Persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected, and each term and provision of
this Lease shall be valid and shall be enforced to the extent permitted by law.
ARTICLE 31
CUMULATIVE REMEDIES; NO WAIVER
------------------------------
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which Landlord may be lawfully entitled in case of any
breach by Tenant of any provision of this Lease. The failure of Landlord to
insist in any one or more cases upon the strict performance of any of the
covenants of this Lease, or to exercise any option herein contained, shall not
be construed as a waiver or relinquishment for the future of such covenants or
option. A receipt by Landlord of Fixed Rent or Additional Rent with knowledge
of the breach of any covenant hereof shall not be deemed a waiver of such
breach.
ARTICLE 32
RECORDING
---------
SECTION 32.1
Tenant shall not record this Lease. Landlord and Tenant shall execute and
deliver in recordable form a memorandum of lease for the purpose of recording
and giving notice of this Lease. If this Lease terminates, Tenant shall, upon
the request of Landlord, sign an agreement in recordable form reflecting
termination of this Lease and if Tenant shall fail to do so within ten (10)
business days of Landlord's request therefor, Tenant hereby appoints Landlord as
Tenant's attorney in fact to sign such an agreement on behalf of Tenant.
SECTION 32.2
The cost of recording or filing the memorandum of lease referred to in
Section 32.1 shall be paid by Tenant.
48.
<PAGE>
ARTICLE 33
BROKERS
-------
Tenant represents to Landlord that it has dealt with no real estate broker,
sales person or agent other than Nelson, Tietz & Hoye ("Nelson"), Pearson
Partners, Inc. ("Pearson") and Grubb & Ellis ( "G&E" and together with Nelson
and Pearson, the "Broker") in connection with this Lease. Landlord represents
to Tenant that it has dealt with no real estate broker, sales person or agent
other than the Broker, in connection with this Lease. Tenant shall pay the
commission due the Broker, in accordance with the terms of a separate agreement.
Tenant shall indemnify and hold Landlord harmless from any loss, cost or expense
including reasonable attorney fees and charges incurred as a result of a breach
of Tenant's foregoing representation by Tenant. Landlord shall indemnify and
hold Tenant harmless from any loss, cost or expense including reasonable
attorneys fees and charges incurred as a result of a breach of Landlord's
foregoing representation by Landlord.
ARTICLE 34
FORCE MAJEURE
-------------
In the event that Landlord or Tenant shall be delayed or prevented from
performing any act (not including payment of money for Fixed Rent or Additional
Rent) required hereunder by reason of strikes or lock-outs, inability to procure
materials, failure of power, laws or regulations of Governmental Authorities,
riots, insurrection or war or acts of God, then performance of such act shall be
excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
ARTICLE 35
LAWS APPLICABLE AND CONSTRUCTION
--------------------------------
This Lease shall be construed and enforced in accordance with the laws of
the State of Minnesota applicable to leases made and to be performed in
Minnesota, without regard to choice of laws provisions of the State of
Minnesota.
ARTICLE 36
COUNTERPARTS
------------
If this Lease has been executed and delivered, for the convenience of
Landlord and Tenant, in several counterparts, it is intended that all
counterparts shall constitute only one Lease.
49.
<PAGE>
ARTICLE 37
AMENDMENT; NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS
-------------------------------------------------------
This Lease may not be changed, modified or discharged except by a writing
signed by Landlord and Tenant. All covenants, conditions and obligations
contained in this Lease shall be binding upon and inure to the benefit of the
respective successors and assigns of Landlord and Tenant to the same extent as
if each such successor and assign were named as a party to this Lease. For so
long as Mortgagee is Deutsche Banc Mortgage Capital, LLC, its successors or
assigns, this Lease shall not be amended, modified or terminated without the
consent of Mortgagee, if and to the extent is required under the Underlying
Mortgage. Notwithstanding the foregoing, no consent of the Mortgagee shall be
required to terminate this Lease pursuant to Section 10.2 hereof, or pursuant to
closing the Purchase Option or Put Option transactions.
ARTICLE 38
NOTICES
-------
All notices, demands, consents, approvals, requests and other instruments
herein required or permitted to be given to, or served upon, either party shall
be in writing. Any such notice, demand, consent or request shall be
sufficiently given or delivered if delivered personally, by recognized courier
service or telecopier with receipt acknowledged or by registered or certified
mail, postage prepaid return receipt requested, addressed to such party at its
address set forth below, or at such other address or to such other parties as it
shall designate by notice to the other party, as follows:
To Landlord:
CCPRE-EAGAN, LLC
c/o Chase Capital Partners
380 Madison Avenue
New York, New York 10017
Attn: David J. Gilbert
Dwight I. Arneson
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Steven C. Koppel, Esq.
50.
<PAGE>
To Tenant:
WAM!NET Inc.
655 Lone Oak Drive
Eagan, Minnesota 55121
Attn: President
with a copy to:
Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Minneapolis, Minnesota 55431
Attn: Gary A. Renneke, Esq.
Landlord may, by notice to Tenant, require that Tenant pay rent to Landlord
at an address different from the address for notices provided for herein.
Any notice so delivered by mail shall be deemed given or served on the
third business day following the date mailed as aforesaid and any notification
by Landlord as a notice of termination under ARTICLE 22 so delivered by mail
shall be deemed given or served on the day of actual receipt thereof or refusal
of delivery.
ARTICLE 39
SEVERABILITY
------------
Intentionally left blank.
ARTICLE 40
NO PARTNERSHIP
--------------
Landlord shall not, by virtue of the execution of this Lease or the leasing
of the Premises to Tenant, become or be deemed a partner of Tenant in the
conduct of Tenant's business on the Demised Premises or otherwise.
ARTICLE 41
EXECUTION BY LANDLORD
---------------------
Submission of this instrument to Tenant, or Tenant's agents or attorneys,
for examination or signature does not constitute or imply an offer to lease,
reservation of space, or option to lease, and this Lease shall have no binding
legal effect until execution hereof by both Landlord and Tenant.
51.
<PAGE>
ARTICLE 42
TIME OF ESSENCE
---------------
Time is of the essence of this Lease and each of its provisions.
ARTICLE 43
YEAR 2000 DISCLAIMER
--------------------
Landlord and Tenant each hereby disclaims any liability for any and all
damages, injuries or other losses, whether ordinary, special consequential,
punitive or otherwise arising out of, relating to or in connection with (a) the
failure of any automated, computerized and/or software system or other
technology used in, on or about the Demised Premises or relating to the
management or operation of the Demised Premises to accurately receive, provide
or process date/time (including, but not limited to, calculating, comparing and
sequencing) before, after, during and between the years 1999 A.D. and 2000 A.D.,
and leap year calculations and/or (b) the malfunction, ceasing to function or
providing of invalid or incorrect results by any such technology as a result of
date/time data. The foregoing disclaimer shall apply to any such technology
used in, on or about the Demised Premises or that affect the Demised Premises,
whether or not such technology is within the control of Landlord or Tenant or
their respective agents or representatives. THE FOREGOING DISCLAIMER INCLUDES A
DISCLAIMER BY LANDLORD OF ALL WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
WITH RESPECT TO THE MATTERS DESCRIBED HEREIN, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 44
DRAFTING PARTY
--------------
INTENTIONALLY LEFT BLANK.
ARTICLE 45
HEADINGS AND TABLE OF CONTENTS
------------------------------
The headings of the ARTICLES of this Lease and the table of contents
preceding this Lease are for convenience of reference only and in no way define,
limit or describe the scope or intent of this Lease or in any way modify, amend
or change the express terms and provisions of this Lease.
52.
<PAGE>
ARTICLE 46
RENEWAL OPTION
--------------
SECTION 46.1
(a) Provided this Lease is in full force and effect and no Event of
Default exists immediately prior to (i) the date Tenant delivers to Landlord the
First Election Notice (as hereinafter defined) and (ii) the expiration of the
initial term of this Lease, Tenant shall have the option (the "First Renewal
Option") to renew the term of this Lease (the "First Renewal Option") for all of
the Demised Premises for an additional five (5) year term (the "First Renewal
Term") commencing on the date (the "First Renewal Term Commencement Date")
following the Expiration Date of the initial term of this Lease and ending on
the date immediately prior to the fifth (5th) anniversary of the First Renewal
Term Commencement Date (which date shall hereupon be and become the Expiration
Date of this Lease). The First Renewal Option shall be exercised by written
notice (the "First Election Notice") to Landlord delivered no later than six (6)
months prior to the Expiration Date of the initial term of this Lease. The
annual Fixed Rent for the First Renewal Term shall be equal to the fair market
rental value of the Demised Premises as determined pursuant to the provisions of
Section 46.3(b) hereof.
(b) Provided that Tenant has exercised the First Renewal Option and
provided further that this Lease is in full force and effect and no Event of
Default exists immediately prior to (i) the date Tenant delivers to Landlord the
Second Election Notice (as hereinafter defined) and (ii) the expiration of the
First Renewal Term, Tenant shall have the option to renew the term of this Lease
(the "Second Renewal Option") for all of the Demised Premises for an additional
five (5) year term (the "Second Renewal Term") commencing on the date (the
"Second Renewal Term Commencement Date") immediately following the Expiration
Date of the First Renewal Term and ending on the date immediately preceding the
fifth (5th) anniversary of the Second Renewal Term Commencement Date (which date
shall thereupon be and become the Expiration Date of this Lease). The Second
Renewal Option shall be exercised by written notice (the "Second Election
Notice") to Landlord delivered no later than six (6) months prior to the
expiration of the First Renewal Term. The annual Fixed Rent for the Second
Renewal Term shall be determined pursuant to the provisions of Section 46.3(c)
hereof.
(c) Provided that Tenant has exercised the First and Second Renewal
Options and provided further that this Lease is in full force and effect and no
Event of Default exists immediately prior to (i) the date Tenant delivers to
Landlord the Third Election Notice (as hereinafter defined) and (ii) the
expiration of the Second Renewal Term, Tenant shall have the option to renew the
term of this Lease (the "Third Renewal Option") for all of the Demised Premises
for an additional five (5) year term (the "Third Renewal Term") commencing on
the date (the "Third Renewal Term Commencement Date") immediately following the
Expiration Date of the Second Renewal Term and ending on the date immediately
preceding the fifth (5th) anniversary of the Third Renewal Term Commencement
Date (which date shall thereupon be and become the Expiration Date of this
Lease). The Third Renewal Option shall be exercised by written notice (the
"Third Election Notice") to Landlord delivered no later than six (6) months
prior to the expiration of the Second Renewal Term. The annual Fixed Rent for
the Third
53.
<PAGE>
Renewal Term shall be equal the fair market rental value of the Demised Premises
as determined pursuant to the provisions of Section 46.3 (b) hereof.
SECTION 46.2
This Lease, as so extended during the applicable Renewal Term, shall be
upon the same terms and conditions as contained in this Lease except that the
annual Fixed Rent for the First and Third Renewal Terms shall be a sum equal to
the then fair market rental value of the Demised Premises, determined as of the
commencement date of the respective Renewal Term assuming all of the terms set
forth herein and the annual Fixed Rent for the Second Renewal Term shall be as
determined pursuant to Section 46.3(c).
SECTION 46.3
The exercise of any of the Renewal Options shall only be effective upon,
and in strict compliance with, the following terms and conditions:
(a) Each Renewal Option must be exercised in the manner specifically
set forth for such Option in Section 46.1 hereof or such option shall be deemed
waived and all of Tenant's rights with respect thereto shall wholly cease,
terminate and expire. Time shall be of the essence in connection with the
exercise of any Renewal Option and the delivery of any Election Notice by Tenant
hereunder. Any such Election Notice shall be irrevocable by Tenant upon
delivery. If Tenant shall fail to duly exercise any Renewal Option, Tenant
agrees upon request of Landlord to confirm such non-exercise in writing, but
failure to do so by Tenant shall not operate to revive any rights of Tenant
under this Article.
(b) Landlord and Tenant shall seek to agree as to the amount of such
fair market rental value for the Demised Premises, taking into consideration the
fair market rental value of comparable properties in the Minneapolis-St. Paul in
comparable condition available for a comparable term and any commissions payable
by Landlord to the Broker. The determination of fair market rental value shall
exclude any increase in value as a result of improvements made after the
Commencement Date if such improvements were not made at Landlord's expense. If
Landlord and Tenant shall not agree as to such fair market rental value by the
date which is two (2) months after the Election Notice is given, then each of
Landlord and Tenant, by no later than three (3) months after the Election Notice
is given, shall simultaneously meet and exchange notices setting forth in such
notices the annual fair market rental value that such party believes is the
basis for the Fixed Rent which should be paid by Tenant hereunder and in such
event said annual fair market rental value shall be determined by arbitration as
hereinafter in this Article provided. In no event shall the annual Fixed Rent
for the First and Third Renewal Terms be less than the annual Fixed Rent for the
last Lease Year of the immediately preceding term.
(c) The annual Fixed Rent commencing on the first day of the Second
Renewal Term and ending on the last day of the Second Renewal Term shall be an
amount equal to (i) the annual Fixed Rent for the First Renewal Term, plus (ii)
an amount equal to the greater of (A) five percent (5%) of the annual Fixed Rent
for the First Renewal Term or (B) the annual Fixed Rent for the First Renewal
Term multiplied by the percentage by which the CPI (as hereinafter
54.
<PAGE>
defined) in June 2024 exceeds the CPI in June 2019. As used in this Lease, the
term "CPI" means the Consumer Price Index for All Items For All Urban Consumers
for Minneapolis, Minnesota published by the Bureau of Labor Statistics of the
U.S. Department of Labor with a 1993-95 = 100 base; provided, however, that (i)
-------- -------
if such index (or any index substituted therefor as hereinafter provided) shall
cease to be published, then for the purposes of this Lease there shall be
substituted for such index another index of a similar kind published by a
governmental or other nonpartisan organization as may be reasonably selected by
Landlord, and (ii) if there is any change in the manner of computation of any
such index, then for the purposes of this Lease such index as so changed shall
be substituted for the index in effect prior thereto and appropriate adjustments
shall be made to make the changed index comparable to the previous index.
SECTION 46.4
If Landlord and Tenant shall be unable to agree as to the annual fair
market rental value as set forth in Section 46.3(b), then and in such event said
annual fair market rental value for the Demised Premises shall be determined by
arbitration with three (3) arbitrators selected in accordance with the
provisions of Section 10.5 except that the arbitrators so specified in such
notices shall be licensed appraisers doing business in the City of Minneapolis,
State of Minnesota, and having not less than ten (10) years' active experience
as appraisers of said City and State. In making their determinations, the
arbitrators shall consider the criteria set forth in Section 46.3(b) and follow
the directions set forth in this Article. Each arbitrator shall independently
determine the fair market rental value within thirty (30) days after being
selected and each shall simultaneously deliver its report of the fair market
value to Landlord and Tenant. The two (2) closest determinations of fair market
value shall be averaged, and said average shall be deemed the fair market rental
value for purposes of this Lease. The third determination of fair market rental
value shall be ignored.
SECTION 46.5
(a) If on the commencement date of the First or Third Renewal Terms,
the amount of the Fixed Rent payable during such Renewal Term in accordance with
the foregoing paragraphs of this Article shall not have been determined, then,
pending such determination, Tenant shall pay Fixed Rent at the rate which is the
average of the rates proposed by Landlord and Tenant for that Renewal Term (the
"Temporary Rate"). After the determination by arbitration of the annual fair
market rental value of the Demised Premises, if such rental value is greater or
less than the "Temporary Rate," Landlord shall promptly pay to Tenant the excess
of the Temporary Rate over (or Tenant shall promptly pay to Landlord the
shortfall of the Temporary Rate below) the rental value determined by the
arbitration, together with interest at the Prime Rate on the amount so paid; and
the Fixed Rent so determined by the arbitration shall be payable during that
Renewal Term.
(b) Upon determination of the Fixed Rent for each Renewal Term,
Landlord and Tenant shall execute, acknowledge and deliver to each other an
agreement specifying the amount of the Fixed Rent for such Renewal Term (but any
failure to execute such an agreement shall not affect Tenant's obligation to pay
and Landlord's right to receive such Fixed Rent).
55.
<PAGE>
ARTICLE 47
PURCHASE OPTION
---------------
(a) Provided this Lease is in full force and effect and no Event of
Default exists hereunder and subject to the other terms and conditions of this
Article 47, Tenant shall have an option (the "Purchase Option") to purchase from
Landlord either on the twenty-fourth (24th) or thirty-sixth (36th) month
anniversary of the Commencement Date (either date being referred to herein as
the "Purchase Date") the Demised Premises and all other assets acquired by
Landlord from Tenant pursuant to the purchase agreement (the "Original Purchase
Agreement") dated as of September __, 1999, between Landlord, as purchaser, and
Tenant, as seller (the Demised Premises and such other assets being referred to
herein as the "Assets"). The Purchase Option shall be exercised by written
notice (the "Purchase Option Notice") delivered to Landlord no later than the
date which is six (6) months prior to the Purchase Date. Time shall be of the
essence in connection with the exercise of the Purchase Option and the delivery
of notice to exercise the Purchase Option shall be irrevocable upon delivery.
(b) The purchase price for the purchase by Tenant of the Assets
pursuant to the terms of this Article 47 shall be $45,600,000.00 (the "Purchase
Option Price") less any amounts applied thereto pursuant to terms of this Lease
which amount shall be paid to Landlord by wire transfer in immediately available
New York funds on the Purchase Option Closing Date (as defined herein). Tenant
shall execute and deliver to Landlord within ten (10) days after the Purchase
Date a purchase agreement (the "Purchase Option Purchase Agreement") containing
representations and warranties substantially the same form as in the Original
Purchase Agreement, except to the extent necessary to make the representations
and warranties contained in the Original Purchase Agreement true, complete and
correct in all material respects. The Purchase Option Purchase Agreement shall
otherwise be in form and content reasonably acceptable to Landlord and Tenant
and shall be consistent with typical commercial real estate purchase agreements
by and between institutional commercial real estate buyers and sellers desiring,
but under no compulsion, to buy and sell. If Landlord and Tenant cannot agree
as to the terms and conditions of such agreement, the parties shall submit such
disagreements to arbitration as contemplated in Section 10.5 above. In no
event, however, shall Landlord have any termination rights under the Purchase
Option Purchase Agreement except in the event of Tenant's default and failure to
cure under the terms and conditions of the Purchase Option Purchase Agreement.
(c) The closing (the "Purchase Option Closing") of the sale under the
Purchase Option Purchase Agreement shall occur on or before the date (the
"Purchase Option Closing Date") which is the later of ten (10) days after mutual
execution and delivery of the Purchase Option Purchase Agreement or thirty (30)
days after the Purchase Date. The conveyance documents delivered pursuant to
the Purchase Option Purchase Agreement shall be in substantially the same form
as the conveyance documents delivered pursuant to the Original Purchase
Agreement. If the Purchase Option Closing shall not occur on or before the
Purchase Option Closing Date for any reason except by reason of force majeure or
Landlord's default under the Purchase Option Purchase Agreement, the Purchase
Option, at Landlord's option, shall be void and of no further effect. If
Landlord elects to void the Purchase Option Purchase
56.
<PAGE>
Agreement pursuant to the foregoing sentence, the term of this Lease shall
continue, unaffected by such election, pursuant to the terms and conditions of
this Lease. Notwithstanding anything to the contrary contained in the Purchase
Option Purchase Agreement, Landlord and Tenant shall have the right to
specifically enforce the terms of the Purchase Option Purchase Agreement.
(d) Tenant and Landlord shall each be responsible for all costs and
expenses incurred by such party in connection with the consummation of the
transactions contemplated under the Purchase Option Purchase Agreement,
including without limitation, title and survey costs, engineering and
environmental inspections and any and all transfer taxes due in connection
therewith, unless otherwise set forth in the Purchase Option Purchase Agreement.
(e) The provisions of this Article 47 shall inure to the benefit of
Tenant and its successors and assigns as Tenant hereunder and no other Person
shall have the right to exercise the Purchase Option.
ARTICLE 48
PUT OPTION
----------
(a) Landlord shall have an option (the "Put Option") to require Tenant
to purchase the Assets from Landlord at any time after the thirty-sixth (36th)
month anniversary of the Commencement Date. The Put Option shall be exercised
by written notice (the "Put Option Notice") delivered to Tenant.
(b) The purchase price for the purchase by Tenant of the Assets
pursuant to the terms of this Article 48.1 shall be $41,800,000.00 (the "Put
Option Purchase Price") less any amounts applied thereto pursuant to terms of
this Lease which amount shall be paid to Tenant by wire transfer on the Purchase
Option Closing Date. Landlord shall execute and deliver to Tenant within ten
(10) days after the Purchase Date a purchase agreement (the "Put Option Purchase
Agreement") containing representations and warranties substantially the same
form as in the Original Purchase Agreement, except to the extent necessary to
make the representations and warranties contained in the Original Purchase
Agreement true, complete and correct in all material respects. The Put Option
Purchase Agreement shall otherwise be in form and content reasonably acceptable
to Landlord and Tenant and shall be consistent with commercial real estate
purchase agreements by and between institutional commercial real estate buyers
and sellers desiring, but under no compulsion, to buy and sell. If Landlord and
Tenant cannot agree as to the terms and conditions of such agreement, the
parties shall submit such disagreements to arbitration as contemplated in
Section 10.5 above. In no event, however, shall Landlord have any termination
rights under the Put Option Purchase Agreement except in the event of Tenant's
default and failure to cure under the terms and conditions of the Put Option
Purchase Agreement.
(c) The closing (the "Put Option Closing") of the sale under the Put
Option Purchase Agreement shall occur on a date (the "Put Option Closing Date")
which is no earlier than one hundred eighty (180) days and no later than two
hundred seventy (270) days after Tenant's receipt of the Put Option Notice, as
determined in a notice to be delivered by Tenant to Landlord within sixty (60)
days after Tenant's receipt of the Put Option Notice. The conveyance
57.
<PAGE>
documents delivered pursuant to the Put Option Purchase Agreement shall be in
substantially the same form as the conveyance documents delivered pursuant to
the Original Purchase Agreement.
(d) Tenant and Landlord shall each be responsible for all costs and
expenses incurred by or on behalf of such party in connection with the
consummation of the transactions contemplated under the Put Option Purchase
Agreement, including without limitation, title and survey costs, engineering and
environmental inspections and any and all transfer taxes due in connection
therewith, unless otherwise set forth in the Put Option Purchase Agreement.
(e) The provisions of this Article 48 shall inure to the benefit of
Landlord and its successors and assigns as Landlord hereunder.
IN WITNESS WHEREOF, Landlord and Tenant respectively have caused this
Lease to be executed as of the day and year first above written.
CCPRE-EAGAN, LLC
By:____________________________________
Name: David Gilbert
Title: President
WAM!NET INC.
By:____________________________________
Name:
Title:
58.
<PAGE>
EXHIBIT A
---------
Legal Description of the Demised Premises
-----------------------------------------
Lots 1 and 2, Block 1, Cray Second Addition, according to the
recorded plat thereof, Dakota County, Minnesota.
<PAGE>
EXHIBIT B
---------
Form of Letter of Credit
------------------------
<PAGE>
EXHIBIT C
---------
SGI Subordination, Nondisturbance and Attornment Agreement
----------------------------------------------------------
<PAGE>
EXHIBIT D
---------
Form of Estoppel Certificate
----------------------------
<PAGE>
SCHEDULE 11.5
-------------
Maintenance Schedule
--------------------
See pages 11.5-1, 11.5-2 and 11.5-3, attached. The items listed in the column
labeled "Immediate" shall be completed within ninety (90) days from the date
hereof. The items listed in the column labeled "Short Term" shall be completed
within one (1) year from the date hereof. The items listed in the column
labeled "Long Term/Recomm." shall be completed within five (5) years from the
date hereof.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1 DEMISE OF PREMISES 1
------------------
ARTICLE 2 CERTAIN DEFINITIONS AND INTERPRETIVE PROVISIONS 2
-----------------------------------------------
ARTICLE 3 USE OF DEMISED PREMISES 4
-----------------------
ARTICLE 4 TERM OF LEASE 5
-------------
ARTICLE 5 FIXED RENT AND ADDITIONAL RENT 5
------------------------------
ARTICLE 6 PAYMENT OF IMPOSITIONS 9
----------------------
ARTICLE 7 SERVICES AND UTILITIES 12
----------------------
ARTICLE 8 INSURANCE 12
---------
ARTICLE 9 DAMAGE OR DESTRUCTION 16
---------------------
ARTICLE 10 CONDEMNATION 18
-----------
ARTICLE 11 MAINTENANCE AND REPAIRS 22
-----------------------
ARTICLE 12 ALTERATIONS 24
-----------
ARTICLE 13 COMPLIANCE WITH LAW; HAZARDOUS MATERIAL 27
---------------------------------------
ARTICLE 14 DISCHARGE OF LIENS 28
------------------
ARTICLE 15 RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS 29
-----------------------------------------------
ARTICLE 16 ENTRY ON PREMISES BY THE LANDLORD 30
---------------------------------
ARTICLE 17 ASSIGNMENT, MORTGAGES AND OTHER TRANSFERS OF TENANT'S
-----------------------------------------------------
INTEREST; SUBLETTING 31
--------------------
ARTICLE 18 ADDITIONAL UNDERTAKING OF THE TENANT 33
------------------------------------
ARTICLE 19 CONDITION OF AND TITLE TO DEMISEDPREMISES; QUIET ENJOYMENT 34
----------------------------------------------------------
ARTICLE 20 INDEMNIFICATION OF THE LANDLORD, TENANT AND MORTGAGEES 34
------------------------------------------------------
ARTICLE 21 EXCAVATIONS ON ADJOINING PROPERTY 36
---------------------------------
ARTICLE 22 DEFAULT 36
-------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
ARTICLE 23 ATTORNEYS' FEES 43
---------------
ARTICLE 24 SUBORDINATION OF LEASE 43
----------------------
ARTICLE 25 SURRENDER AND HOLDING OVER 44
--------------------------
ARTICLE 26 CERTAIN APPORTIONMENTS AND OTHER MATTERS 45
----------------------------------------
ARTICLE 27 ESTOPPEL CERTIFICATES 46
---------------------
ARTICLE 28 ASSIGNMENT OF THE LANDLORD'S INTEREST; UNDERLYING MORTGAGE 46
----------------------------------------------------------
ARTICLE 29 LIMITATION OF THE LANDLORD'S LIABILITY 47
--------------------------------------
ARTICLE 30 SEPARATE COVENANTS; INVALIDITY OF PARTICULAR PROVISIONS 48
-------------------------------------------------------
ARTICLE 31 CUMULATIVE REMEDIES; NO WAIVER 48
------------------------------
ARTICLE 32 RECORDING 48
---------
ARTICLE 33 BROKERS 49
-------
ARTICLE 34 FORCE MAJEURE 49
-------------
ARTICLE 35 LAWS APPLICABLE AND CONSTRUCTION 49
--------------------------------
ARTICLE 36 COUNTERPARTS 49
------------
ARTICLE 37 NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS 50
--------------------------------------------
ARTICLE 38 NOTICES 50
-------
ARTICLE 39 SEVERABILITY 51
------------
ARTICLE 40 NO PARTNERSHIP 51
--------------
ARTICLE 41 EXECUTION BY LANDLORD 51
---------------------
ARTICLE 42 TIME OF ESSENCE 52
---------------
ARTICLE 43 YEAR 2000 DISCLAIMER 52
--------------------
ARTICLE 44 DRAFTING PARTY 52
--------------
ARTICLE 45 HEADINGS AND TABLE OF CONTENTS 52
------------------------------
ARTICLE 46 RENEWAL OPTION 53
--------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE 47 PURCHASE OPTION 56
---------------
ARTICLE 48 PUT OPTION 57
----------
</TABLE>
(iii)
<PAGE>
Index of Definitions
--------------------
<TABLE>
<CAPTION>
Term Location
- ---- --------
<S> <C>
AAA................................................................................................... 10.5
Additional Rent....................................................................................... 5.3
Alterations/Alteration................................................................................ 12.1
Assignee.............................................................................................. 28
Commencement Date..................................................................................... 4
Default............................................................................................... 2(a)(iv)
Demised Premises...................................................................................... 2(a)(v)
Event of Default...................................................................................... 22.1
Fixed Rent............................................................................................ 5.1
Full Replacement Cost................................................................................. 8.1
GAAP.................................................................................................. 11.1(b)
Governmental Authorities.............................................................................. 2(a)(viii)
Hazardous Material.................................................................................... 2(a)(ix)
Imposition or Impositions............................................................................. 6.1
Improvements.......................................................................................... 2(a)(xi)
Insurance Threshold Amount............................................................................ 8.4
Interest Rate......................................................................................... 2(a)(xiii)
Landlord.............................................................................................. Heading
Law................................................................................................... 3
Letter of Credit...................................................................................... 5.6(e)
Mortgagee............................................................................................. 2(a)(xvi)
Occurrence Basis, Occurrence.......................................................................... 8.2(a)
Persons............................................................................................... 6.6
Proceeding............................................................................................ 2(a)(xviii)
Qualified Arbitrator.................................................................................. 10.5
Repairs............................................................................................... 11.1(a)
Replacement Letter.................................................................................... 5.6 (e)
Re-enter, Entry or Re-entry........................................................................... 22.5
Restoration........................................................................................... 9.2
Security Deposit...................................................................................... 5.6(a)
Security Deposit Amount............................................................................... 5.6(a)
Successor Landlord.................................................................................... 24.2
Tenant................................................................................................ Heading
Underlying Mortgage................................................................................... 2(a)(xxiii)
</TABLE>
<PAGE>
Exhibits
- --------
Exhibit A - Description of Demised Premises
Exhibit B - Form of Letter of Credit
Exhibit C - SGI Subordination Nondisturbance and Attornment Agreement
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by
WAM!NET INC., a Minnesota corporation, on behalf of itself and its successors
and assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited
liability company ("Landlord") and to ____________________________ [specific
--------
lender or investor supplying financing to Landlord] ("Lender"), with the
- ---------------------------------------------------
understanding that Purchaser and Lender and their respective counsel will rely
on this Certificate in connection with the acquisition and financing of the
premises located at 655 Lone Oak Drive, Eagan, Minnesota (the "Property").
Tenant hereby certifies as follows:
1. Lease. The undersigned is the tenant under that certain lease
-----
(the "Lease") dated as of September __, 1999, a true, complete and correct copy
of which is attached hereto as Exhibit A. Capitalized terms used herein but not
---------
defined herein shall have the meaning given to such terms in the Lease. The
Lease is the entire agreement between Landlord (or any affiliated party) and
Tenant (or any affiliated party) pertaining to the leasing or occupancy of the
Premises (as defined herein). There are no modifications, amendments,
supplements, renewals or assignments of the Lease except as may be otherwise set
forth on Exhibit B. The Lease is in full force and effect in accordance with
---------
its terms. There are no other oral or written side agreements, representations
or warranties by Landlord which entitle Tenant to payments or credits from
Landlord or which entitle Tenant to expand or contract the Premises or to extend
or contract the term of the Lease. The Lease has been duly executed and
delivered by, and is a binding obligation of, Tenant.
2. Leased Premises. The premises covered by the Lease (the
---------------
"Premises") consist of all of the property known as 655 Lone Oak Drive, Eagan,
Minnesota, as described more particularly on Exhibit C.
---------
3. Term of Lease. The Lease commenced on September __, 1999 and,
-------------
unless otherwise terminated in accordance with the terms of the Lease will
expire on September __, 2019, subject to three (3) five (5) year renewal terms.
4. Rents. (a) The present amount of monthly Fixed Rent payable under
-----
the Lease is $____________ and has been paid in full through _______________ __,
_____. (b) In addition to Fixed Rent, Tenant is currently paying $__________
per month as additional rent to cover operating expenses. Attached hereto as
Exhibit D as is a true, complete and correct copy of the most recent written
- ---------
estimate of the operating expenses for the _____ calendar year (the "_____
Operating Expense Statement"). To Tenant's knowledge, no conditions exist and
no events have occurred which would have a material impact on the amount of the
operating expenses. For purposes of this Certificate, "material impact" means
an increase of five percent (5%) or more in the operating expenses as set forth
on the _____ Operating Expense Statement.
5. Security Deposit. Landlord is not holding any security deposit
----------------
under the Lease. [Or, specify security deposit, if there is one.]
<PAGE>
6. Renewal and Extension Options. Tenant does not have any right or
-----------------------------
option to renew or extend the term of the Lease or to expand into any additional
space or to terminate the Lease in whole or in part prior to the expiration of
the term except as expressly set forth in the Lease.
7. Acceptance of Premises. Tenant has unconditionally accepted the
----------------------
Premises. Tenant has taken possession and is in occupancy of the Premises.
Landlord has satisfied all commitments made to induce Tenant to enter into the
Lease; there are no offsets or credits against rentals payable under the Lease;
no free periods of rent, tenant improvements, contributions or other concessions
have been granted to Tenant; Landlord is not reimbursing Tenant or paying
Tenant's rent obligations under any other lease; and Tenant has not advanced any
funds for or on behalf of Landlord for which Tenant has a right of deduction
from, or set off against, future rent payments.
8. No Landlord Defaults. To the best of Tenant's knowledge, all
--------------------
obligations of Landlord under the Lease have been performed through the date
hereof, and no event has occurred and no condition exists that, with the giving
of notice or lapse of time or both, would constitute a default by Landlord under
the Lease. To the best of Tenant's knowledge, there are no offsets or defenses
that Tenant has against the full enforcement of the Lease by Landlord.
9. No Tenant Defaults. To the best of Tenant's knowledge, Tenant is
------------------
not in any respect in default under the Lease and, except as set forth on
Exhibit E, Tenant has not assigned, transferred or hypothecated the Lease or any
- ---------
interest therein or subleased all or any portion of the Premises. Tenant is not
insolvent and is able to pay its debts as they mature. Tenant has not declared
bankruptcy or filed a petition seeking to take advantage of any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, Tenant has no present intentions of doing so, and no such proceeding
has been commenced against Tenant seeking such relief, and Tenant has no
knowledge that any such proceeding is threatened.
10. Purchase Options. Tenant does not have any right or option to
----------------
purchase all or any part of the Property except as expressly set forth in the
Lease.
11. No Further Amendment. Tenant agrees that no future modifications
--------------------
or amendments of the Lease will be enforceable unless the modification or
amendment has been consented to in writing by the Landlord.
12. Payment of Rent. Tenant represents that it has not and Tenant
---------------
further agrees that, from and after the date hereof, the Tenant shall not pay
any rent under the Lease more than thirty (30) days in advance of its due date.
13. Successors and Assigns. This Certificate is made for the benefit
----------------------
of, and may be relied upon by, the Landlord and the Lender and their respective
successors and assigns.
2.
<PAGE>
14. Due Authorization. The person executing this Certificate is
-----------------
authorized by Tenant to do so and the execution hereof is the binding act of
Tenant enforceable against Tenant.
Dated: _____________ WAM!NET INC.
By: ________________________________
Name:
Title:
3.
<PAGE>
Exhibit A
---------
to
--
Tenant Estoppel Certificate
---------------------------
Lease
<PAGE>
Exhibit B
---------
to
--
Tenant Estoppel Certificate
---------------------------
List of Modifications, if any:
[None, unless otherwise specified.]
<PAGE>
Exhibit C
---------
to
--
Tenant Estoppel Certificate
---------------------------
Description of Leased Premises
<PAGE>
Exhibit D
---------
to
--
Tenant Estoppel Certificate
---------------------------
Operating Expense Statement
<PAGE>
Exhibit E
---------
to
--
Tenant Estoppel Certificate
---------------------------
Assignments, subleases, etc.
[None, unless otherwise specified.]
<PAGE>
EXHIBIT B
LETTER OF CREDIT
----------------
BENEFICIARY: CCPRE-EAGAN, LLC
380 MADISON AVENUE
NEW YORK, NEW YORK
IRREVOCABLE STANDBY LETTER OF CREDIT
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit Number ________ in
favor of CCPRE-EAGAN, LLC, its successors and assigns ("Eagan"), as Landlord by
order and for account of WAM!NET INC. ("WAM!NET") for a sum or sums not
exceeding in all ___________ 00/100 U.S. Dollars (USD _________) available by
your sight draft(s) drawn on us accompanied by either:
A. Your statement, purportedly signed by an authorized
representative of Eagan, stating (i) that WAM!NET! is in default
of the terms of the Lease dated September ___, 1999, between
Eagan and WAM!NET!, (ii) the date written notice of such default
was given (a copy of which notice shall be attached to the
statement), and (iii) that such default was not cured within the
applicable cure period; or
B. Your statement, purportedly signed by an authorized
representative of Eagan, stating that Eagan has received notice
from us indicating that this Letter of Credit will not be
renewed.
Partial Drawing(s) permitted.
The term "Beneficiary" includes any successor by operation of law of the named
beneficiary, including without limitation, any liquidator, rehabilitator,
receiver, or conservator.
Drafts drawn hereunder must be marked "DRAWN UNDER [_____________ BANK] CREDIT
NO. ___________ DATED ________________."
The Letter of Credit shall be deemed to be automatically renewed, without
amendment, for consecutive periods of one year each unless we send written
notice to the Beneficiary by certified or registered mail, return receipt
requested, not less than thirty (30) days next preceding the then expiration
date of this Letter of Credit, that we elect nor to have this Letter of Credit
renewed.
<PAGE>
This Letter of Credit sets forth in full the terms of our undertaking and such
undertaking shall not in any way be modified, amended or amplified by reference
to any document or instrument referred to herein or in which this Letter of
Credit is referred to or to which this Letter of Credit relates, and any such
reference shall not be deemed to incorporate herein by reference any documents
or instrument.
We engage with you that your draft(s) drawn hereunder and in compliance with the
terms of this credit will be duly honored by us on delivery of documents as
specified, if presented at ___________________________________________________,
on or before the date which is one year from the date of this Letter of Credit
or, if this Letter of Credit be automatically renewed for consecutive periods of
one year, the anniversary date of this Letter of Credit applicable to such
renewal.
The terms hereof shall not be modified without the prior written consent of
Eagan and WAM!NET!.
Except as otherwise expressly stated herein, this credit is subject to the
uniform customs and practice for documentary credits, 1993 revision, ICC
Publication No. 500.
Very truly yours,
-----------------------------------
Authorized Signature
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by WAM!NET
INC., a Minnesota corporation, on behalf of itself and its successors and
assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited
liability company ("Landlord") and to ____________________________ [specific
lender or investor supplying financing to Landlord] ("Lender"), with the
understanding that Purchaser and Lender and their respective counsel will rely
on this Certificate in connection with the acquisition and financing of the
premises located at 655 Lone Oak Drive, Eagan, Minnesota (the "Property").
Tenant hereby certifies as follows:
1. Lease. The undersigned is the tenant under that certain lease (the
"Lease") dated as of September __, 1999, a true, complete and correct copy of
which is attached hereto as Exhibit A. Capitalized terms used herein but not
defined herein shall have the meaning given to such terms in the Lease. The
Lease is the entire agreement between Landlord (or any affiliated party) and
Tenant (or any affiliated party) pertaining to the leasing or occupancy of the
Premises (as defined herein). There are no modifications, amendments,
supplements, renewals or assignments of the Lease except as may be otherwise set
forth on Exhibit B. The Lease is in full force and effect in accordance with its
terms. There are no other oral or written side agreements, representations or
warranties by Landlord which entitle Tenant to payments or credits from Landlord
or which entitle Tenant to expand or contract the Premises or to extend or
contract the term of the Lease. The Lease has been duly executed and delivered
by, and is a binding obligation of, Tenant.
2. Leased Premises. The premises covered by the Lease (the "Premises")
consist of all of the property known as 655 Lone Oak Drive, Eagan, Minnesota, as
described more particularly on Exhibit C.
3. Term of Lease. The Lease commenced on September __, 1999 and, unless
otherwise terminated in accordance with the terms of the Lease will expire on
September __, 2019, subject to three (3) five (5) year renewal terms.
4. Rents. (a) The present amount of monthly Fixed Rent payable under the
Lease is $____________ and has been paid in full through _______________ __,
_____. (b) In addition to Fixed Rent, Tenant is currently paying $__________ per
month as additional rent to cover operating expenses. Attached hereto as Exhibit
D as is a true, complete and correct copy of the most recent written estimate of
the operating expenses for the _____ calendar year (the "_____ Operating Expense
Statement"). To Tenant's knowledge, no conditions exist and no events have
occurred which would have a material impact on the amount of the operating
expenses. For purposes of this Certificate, "material impact" means an increase
of five percent (5%) or more in the operating expenses as set forth on the _____
Operating Expense Statement.
5. Security Deposit. Landlord is not holding any security deposit under the
Lease. [Or, specify security deposit, if there is one.]
<PAGE>
6. Renewal and Extension Options. Tenant does not have any right or option
to renew or extend the term of the Lease or to expand into any additional space
or to terminate the Lease in whole or in part prior to the expiration of the
term except as expressly set forth in the Lease.
7. Acceptance of Premises. Tenant has unconditionally accepted the
Premises. Tenant has taken possession and is in occupancy of the Premises.
Landlord has satisfied all commitments made to induce Tenant to enter into the
Lease; there are no offsets or credits against rentals payable under the Lease;
no free periods of rent, tenant improvements, contributions or other concessions
have been granted to Tenant; Landlord is not reimbursing Tenant or paying
Tenant's rent obligations under any other lease; and Tenant has not advanced any
funds for or on behalf of Landlord for which Tenant has a right of deduction
from, or set off against, future rent payments.
8. No Landlord Defaults. To the best of Tenant's knowledge, all obligations
of Landlord under the Lease have been performed through the date hereof, and no
event has occurred and no condition exists that, with the giving of notice or
lapse of time or both, would constitute a default by Landlord under the Lease.
To the best of Tenant's knowledge, there are no offsets or defenses that Tenant
has against the full enforcement of the Lease by Landlord.
9. No Tenant Defaults. To the best of Tenant's knowledge, Tenant is not in
any respect in default under the Lease and, except as set forth on Exhibit E,
Tenant has not assigned, transferred or hypothecated the Lease or any interest
therein or subleased all or any portion of the Premises. Tenant is not insolvent
and is able to pay its debts as they mature. Tenant has not declared bankruptcy
or filed a petition seeking to take advantage of any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
Tenant has no present intentions of doing so, and no such proceeding has been
commenced against Tenant seeking such relief, and Tenant has no knowledge that
any such proceeding is threatened.
10. Purchase Options. Tenant does not have any right or option to purchase
all or any part of the Property except as expressly set forth in the Lease.
11. No Further Amendment. Tenant agrees that no future modifications or
amendments of the Lease will be enforceable unless the modification or amendment
has been consented to in writing by the Landlord.
12. Payment of Rent. Tenant represents that it has not and Tenant further
agrees that, from and after the date hereof, the Tenant shall not pay any rent
under the Lease more than thirty (30) days in advance of its due date.
13. Successors and Assigns. This Certificate is made for the benefit of,
and may be relied upon by, the Landlord and the Lender and their respective
successors and assigns.
2.
<PAGE>
14. Due Authorization. The person executing this Certificate is authorized
by Tenant to do so and the execution hereof is the binding act of Tenant
enforceable against Tenant.
Dated: _____________ WAM!NET INC.
By:
-----------------------------------
Name:
Title:
3.
<PAGE>
Exhibit A
---------
to
--
Tenant Estoppel Certificate
---------------------------
Lease
<PAGE>
Exhibit B
---------
to
--
Tenant Estoppel Certificate
---------------------------
List of Modifications, if any:
[None, unless otherwise specified.]
<PAGE>
Exhibit C
---------
to
--
Tenant Estoppel Certificate
---------------------------
Description of Leased Premises
<PAGE>
Exhibit D
---------
to
--
Tenant Estoppel Certificate
---------------------------
Operating Expense Statement
<PAGE>
Exhibit E
---------
to
--
Tenant Estoppel Certificate
---------------------------
Assignments, subleases, etc.
[None, unless otherwise specified.]
<PAGE>
EXHIBIT C
NONDISTURBANCE, SUBORDINATION AND ATTORNMENT AGREEMENT
------------------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of the ___ day of September
1999, between CCPRE-EAGAN, LLC, a Delaware limited liability company, having an
address c/o Chase Capital Partners, 380 Madison Avenue, New York, New York
("Ground Lessor"), WAM!NET INC., a Minnesota corporation, having an address at
655 Lone Oak Parkway, Eagan, Minnesota ("Landlord") and SILICON GRAPHICS, INC. a
Delaware corporation, having an address at 655 Lone Oak Parkway, Eagan,
Minnesota ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are parties to (i) that certain lease dated as
of March 4, 1999 with respect to certain premises (the "Premises") at the
corporate campus located at 655 Loan Oak Parkway, Eagan, Minnesota (the
"Project") (said lease, as the same may be amended, modified or supplemented
subject to and in accordance with the terms of this Agreement being referred to
herein as the "Lease"); and, (ii) that certain property management agreement
(the "Property Management Agreement") dated as of March 4, 1999.
WHEREAS, Ground Lessor has acquired fee title to the Project from Landlord
pursuant to a deed dated September ____, 1999 and has entered into a lease (the
"Master Lease") dated as of the date hereof with Landlord pursuant to which
Ground Lessor will lease the Project to Landlord, the term of which Master Lease
extends beyond the term of the Lease; and
WHEREAS, Tenant has agreed to subordinate the Lease and Ground Lessor has
agreed to grant nondisturbance and recognition to Tenant on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the agreements of the
parties contained herein, the parties hereto hereby covenant and agree as
follows:
Section 1. Subordination. Tenant agrees that the Lease is and shall be
subject and subordinate to the Master Lease and to all renewals, amendments,
modifications, supplements, consolidations, replacements and extensions thereof,
provided that, as between Landlord and Tenant, nothing contained in this
Agreement shall be deemed to affect the obligations of Landlord or the rights of
Tenant under the Lease.
Section 2. Nondisturbance. Ground Lessor hereby agrees that so long as (i)
the Lease shall be in full force and effect and (ii) Tenant shall not be in
default in the payment of Base Rent or Additional Rent or other charges due
under the Lease or in default in the performance or observance of any of the
other terms, covenants and
<PAGE>
conditions of the Lease, in each case, beyond any applicable notice and cure
periods (the "Nondisturb Conditions"), (a) Ground Lessor shall not join Tenant
as a party defendant in any action or proceeding which may be instituted or
taken by Ground Lessor under the Master Lease, by reason of any default by
Landlord thereunder or any financing instrument or collateral, to terminate the
Master Lease, to remove or evict Landlord or to recover possession of the
Premises, unless required by law in order to make such action or proceeding
effective and then only for technical purposes and not for removal of Tenant or
adversely affecting any interest of Tenant in the Premises or the Project, (b)
Tenant shall not be evicted from the Demised Premises, and (c) Tenant's estate
under the Lease shall not be diminished, interfered with, disturbed or
terminated and, subject to the provisions of Section 2 and Section 4 of this
Agreement, Ground Lessor shall recognize the Lease and Tenant's rights
thereunder and under the Property Management Agreement.
Section 3. Notices to Ground Lessor.
(a) Tenant hereby agrees that in the event of any act or omission by
Landlord which would give Tenant the right, either immediately or after the
lapse of a period of time, to terminate the Lease, or to claim a partial or
total eviction, Tenant shall not exercise any such right (a) until it has given
written notice of such act or omission to Ground Lessor, and (b) until a
reasonable period for remedying such act or omission shall have elapsed
following such giving of notice (but in no event less than thirty (30) days).
Tenant from and after the date hereof shall send a copy of any notices under the
Lease to Ground Lessor at the same time such notice or statement is sent to
Landlord under the Lease and agrees that, notwithstanding any provisions of the
Lease to the contrary, such notice shall not be effective unless Ground Lessor
shall have been given such notice and shall have failed to cure such default as
herein provided. All notices given under this Agreement shall be sent by
certified or registered mail, postage prepaid, return receipt requested, or
shall be delivered to the parties at the addresses set forth above (or at such
other addresses as the parties hereto shall specify in a written notice to the
other parties at the addresses specified herein). Any notices hereunder shall be
deemed to be given on the earlier to occur of (a) the day of receipt or (b)
three (3) days after deposit in the mail. No cure of Landlord's default by
Mortgagee shall be deemed an assumption of Landlord's other obligations under
the Lease and no right of Mortgagee hereunder to receive any notice or to cure
any default shall be deemed to impose any obligation on Mortgagee to cure (or
attempt to cure) any such default.
(b) Tenant agrees, from time to time, to state in writing to Ground Lessor,
upon request, but not more than twice a year, whether or not, to the best of
Tenant's actual knowledge, any default on the part of Landlord exists under the
Lease and the nature of any such default.
Section 4. Attornment. Tenant and Ground Lessor hereby agree that, in the
event by reason of default on the part of Landlord under the Master Lease or by
reason of the termination or surrender of the Master Lease, Ground Lessor shall
enter into and become possessed of the Premises or shall otherwise succeed to
Landlord's interest under the
<PAGE>
Lease (the date of such event shall be deemed the "Attornment Date"), then, so
long as the Nondisturb Conditions shall then be satisfied, the Lease shall
continue as a direct lease between Ground Lessor and Tenant upon all of the
terms, covenants, conditions and agreements as set forth in the Lease, and
Tenant agrees to be bound thereby and to attorn to Ground Lessor and recognize
Ground Lessor as its landlord and Ground Lessor agrees to be bound thereby and
recognize Tenant as its tenant thereunder provided, however, that Ground Lessor
shall not:
(a) be liable for any act or omission or negligence of any prior
landlord under the Lease (including Landlord) except that nothing herein
shall be construed to relieve Ground Lessor of liability in respect of any
defaults under the Lease after the Adornment Date, but then only as if the
same first occurred on the Attornment Date or of liability in respect of
the negligence or willful misconduct of Ground Lessor occurring prior to
the Attornment Date;
(b) be subject to any counterclaim, offset or defense which
theretofore accrued to the Tenant against any prior Landlord under the
Lease;
(c) be bound by any amendment, modification, cancellation or surrender
of the Lease not entered into or permitted pursuant to the specific terms
of the Lease and entered into without the prior written consent of
Landlord, but only if the same is prohibited by the terms of the Lease;
(d) be bound by any payment of Base Rent or Additional Rent for more
than one (1)month in advance;
(e) be liable for any security deposit given by Tenant under the
Lease, unless and to the extent actually received by Ground Lessor.
Upon the request of either Tenant or Ground Lessor, Ground Lessor or Tenant,
respectively, shall promptly execute and deliver to the other an agreement or
other instrument in recordable form which may be necessary or appropriate to
evidence such attornment and recognition.
Section 5. Collection of Rent. Tenant acknowledges that pursuant to the
Master Lease, the Ground Lessor may elect to collect rent and all other sums due
under the Lease under certain circumstances. In the event that the Ground Lessor
notifies Tenant of its election to collect rent or other charges under the
Master Lease, then from and after the such election, until further notice from
Ground Lessor, Tenant shall pay its Base Rent, Additional Rent and all other
sums due under the Lease directly to Ground Lessor; provided however, such
receipt of rents and other sums, moneys and other amounts shall not relieve
Landlord of its obligations under the Lease, and Tenant shall continue to look
to Landlord only for performance thereof; provided that Tenant shall retain all
of its rights to the extent Landlord shall fail to pay or perform such
obligations. Tenant further agrees that, from and after the date that Ground
Lessor notifies Tenant that there has been an
<PAGE>
event of default under the Master Lease, that any notice, demand approval,
consent, election, determination, waiver or other action given or taken by
Ground Lessor or in respect of the Lease from time to time shall have the same
force and effect as a notice, demand, approval, consent, election,
determination, waiver or other action or taken by Landlord thereunder in respect
of the subject matter thereof and that, in the event of an inconsistent notice,
demand, approval, consent, election, determination, waiver or other action given
or taken from or by Landlord or Ground Lessor, the notice, demand, approval
consent, election, determination, waiver or other action given or taken from or
by Ground Lessor shall control and be dispositive and binding on Tenant for all
purposes of the Lease and Landlord hereby agrees that Tenant is released from
any payment owed to Landlord which Tenant makes to Ground Lessor pursuant to the
Master Lease.
Section 6. New Lease. Notwithstanding anything herein or in the Lease to
the contrary, in the event that the Lease shall continue as a direct Lease
between Ground Lessor and Tenant:
(a) Ground Lessor shall thereafter have the right to enter into a new
ground lease of the Premises and to substitute the tenant under such new
ground lease as the landlord under the Lease provided that any person or
entity so substituted shall agree to be bound by the terms of this
Agreement. In such event, Ground Lessor shall have no obligation, nor incur
any liability, for any obligations under the Lease accruing after such
substitution, and Ground Lessor shall be released and discharged therefrom,
but such obligations shall be deemed assumed by and binding upon such
successor to Ground Lessor; and
(b) Ground Lessor's obligations under the Lease, as modified hereby,
or under any new ground lease entered into pursuant to Section 6(a), shall
continue only during the period Ground Lessor owns the Demised Premises,
and in the event the Demised Premises are sold or otherwise transferred,
Ground Lessor shall have no obligation, nor incur any liability, for any
obligations under the Lease or under any such new ground lease entered into
thereafter accruing, and Ground Lessor shall be released and discharged
therefrom, but such obligations shall be deemed assumed by and binding upon
such successor to Ground Lessor.
Section 7. No Changes to Lease. The Lease constitutes an inducement to the
Ground Lessor to enter into this Agreement. Consequently, Tenant shall not,
without obtaining the prior written consent of Ground Lessor, (i) enter into any
agreement renewing, extending, amending, canceling, modifying, terminating or
surrendering the Lease which are not entered into or permitted pursuant to the
specific terms of the Lease except for that certain proposed lease amendment, a
true, complete and correct copy of which is attached hereto as Exhibit A,
provided that the final amendment entered into does not differ in any material
respect from such proposed amendment, (ii) prepay any of the Base Rent and one
billing period of additional rent due under the Lease for more than one (i)
month in advance of the due dates thereof, (111) voluntarily surrender the
Premises or terminate the Lease without cause or shorten the term thereof,
except as and
<PAGE>
to the extent specifically provided for in the Lease, or (iv) assign the Lease
or sublet the Premises or any part thereof other than pursuant to the provisions
of the Lease and any such amendment, modification, termination, prepayment,
voluntary surrender, assignment or subletting, without Ground Lessor's prior
consent, shall not be binding upon Ground Lessor, but shall not otherwise have
any effect on the rights and obligations of the parties hereunder.
(i) agrees that upon notice from Ground Lessor, or its successors
or assigns, all rents and other sums, moneys and other amounts due or
to become due and (including, without limitation, all base rent and
additional rent thereunder) shall be paid to Ground Lessor or as
otherwise directed by Ground Lessor;
(ii) agrees that Ground Lessor shall not, by reason of the
Assignment of Leases, be subject to any obligation, duty or liability
under the Lease, except that when Ground Lessor is exercising rights
under the Lease, it shall do so in accordance with the terms and
conditions thereof and, to the extent applicable, this Agreement.
Section 8. Satisfaction. Tenant agrees that this Agreement, when executed,
acknowledged and delivered by Ground Lessor satisfies any condition or
requirement in the Lease relating to the delivery of a nondisturbance agreement
by Landlord in connection with Landlord's sale of the Premises to the Ground
Lessor.
Section 9. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto and may not be
modified or terminated orally.
(b) This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of Minnesota.
(c) This Agreement may be signed in counterparts.
(d) This Agreement may not be modified, amended or terminated unless
in writing and duly executed by the party against whom the same is sought
to be asserted and constitutes the entire agreement between the parties
with respect to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
GROUND LESSOR:
CCPRE-EAGAN, LLC
By: CCPRE!, LLC, its sole member
By: CCP REAL ESTATE EQUITY, L.P.,
its sole member
By: CCP REAL ESTATE EQUITY, INC.,
its General Partner
By:
-----------------------------------
Name:
Title:
LANDLORD:
WAM!NET INC.
By:
-----------------------------------
Name:
Title:
TENANT:
SILICON GRAPHICS, INC.
By:
-----------------------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 31,919
<SECURITIES> 0
<RECEIVABLES> 6,018
<ALLOWANCES> 880
<INVENTORY> 1,572
<CURRENT-ASSETS> 42,612
<PP&E> 137,106
<DEPRECIATION> 33,374
<TOTAL-ASSETS> 189,235
<CURRENT-LIABILITIES> 35,689
<BONDS> 261,964
1,152
88
<COMMON> 93
<OTHER-SE> (109,570)
<TOTAL-LIABILITY-AND-EQUITY> 189,235
<SALES> 5,622
<TOTAL-REVENUES> 17,483
<CGS> 2,220
<TOTAL-COSTS> 21,709
<OTHER-EXPENSES> 73,082
<LOSS-PROVISION> 2,403
<INTEREST-EXPENSE> 25,479
<INCOME-PRETAX> (101,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> (101,484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,589)
<EPS-BASIC> (11.36)
<EPS-DILUTED> (11.36)
</TABLE>
