UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
COMMISSION FILE NUMBER 0-9747
EXCALIBUR TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0278207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1921 GALLOWS ROAD, SUITE 200, VIENNA, VIRGINIA 22182
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 790-2110
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes x No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 19, 1996 (based on the closing sales price as reported on
the NASDAQ National Market System) was $ 228,840,167.
The number of shares outstanding of the registrant's class of common stock as of
April 19, 1996 was 12,333,417.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III.
The Index to Exhibits begins on Page 20
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EXCALIBUR TECHNOLOGIES CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
TABLE OF CONTENTS
Page
PART I
Item 1. Business........................................... 1
Item 2. Properties......................................... 9
Item 3. Legal Proceedings.................................. 9
Item 4. Submission of Matters to a Vote of Security Holders
7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 11
Item 6. Selected Financial Data............................ 12
Item 7. Management's Discussion and Analysis of Financial..
Condition and Results of Operations ............... 14
Item 8. Financial Statements and Supplementary Data........ 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 21
PART III
Item 10. Directors and Executive Officers of the Registrant. 22
Item 11. Executive Compensation ............................ 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 24
Item 13. Certain Relationships and Related Transactions..... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 25
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Excalibur Technologies Corporation ("Excalibur") is a leader in the development
and sale of software solutions for information retrieval. Excalibur's software
products combine two complementary technologies: Adaptive Pattern Recognition
Processing (APRP(TM)) and semantic networks. The APRP(TM) technology identifies
and indexes the underlying binary patterns in digital data, providing the
capability to build content-based retrieval applications for any type of digital
information, including text, images, video and sounds. Semantic networks
leverage lexical knowledge, offering a system with built-in knowledgebases to
search for specific word meanings enriched by related terms and concepts.
Integration of these two approaches provides complete and powerful information
retrieval capabilities with accuracy and speed. Excalibur's core technologies
enable highly fault-tolerant fuzzy searching and natural language-based
searching for text, as well as powerful query-by-example capabilities which can
be applied to words, pictures, video clips, fingerprints, facial images and many
other types of multi-media data.
Using these technologies, Excalibur has developed a comprehensive suite of
information retrieval software products, including libraries, services and
applications, called RetrievalWare. RetrievalWare is a unified family of
applications and software components for building retrieval solutions across
multiple information types. Its flexible and modular architecture supports the
full range of Excalibur development tools for value added resellers ("VARs"),
original equipment manufacturers ("OEMs"), systems integrators ("SIs") and
corporate and government information technology departments. Excalibur's
RetrievalWare is a complete software component architecture, enabling developers
to build information retrieval applications for workgroup, enterprises and
across the internet. RetrievalWare platforms include all major UNIX and
Windows/NT servers, with PC and UNIX clients.
In July 1995, Excalibur acquired ConQuest Software, Inc. ("ConQuest"), a private
company located in Columbia, Maryland, engaged in the business of providing
natural language text management software tools, through the issuance of
approximately 1,427,000 restricted shares of Excalibur common stock and options
to purchase approximately 572,000 restricted shares of Excalibur common stock to
the former ConQuest shareholders and option holders in exchange for all of the
outstanding common stock of ConQuest. The transaction has been accounted for as
a pooling of interests. The consolidated results of operations and the
discussion thereof that are presented herein reflect the combined results of the
pooled business for the respective periods presented.
The Company established a wholly-owned subsidiary in the United Kingdom,
Excalibur Technologies International, Ltd. ("ETIL"), which began operations in
July 1992. Except as otherwise noted, Excalibur, ConQuest (the acquired company)
and ETIL are collectively referred to hereinafter as the "Company."
The Company markets and distributes its products through VARs, SIs, OEMs, direct
sales, distribution agreements, and a marketing agreement with IBM. As of
January 31, 1996, more than 600 customers were using the Company's information
retrieval products.
The Company can be contacted on the World Wide Web at http://www.excalib.com
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SOFTWARE RETRIEVAL PRODUCTS
The Excalibur RetrievalWare suite of information retrieval software products
delivers integrated APRP(TM) and semantic network searching in a unified family
of client/server based software components. RetrievalWare enables developers and
integrators to build best-of-breed retrieval solutions across multiple
information types. The RetrievalWare architecture is designed to support the
entire range of the Company's products and capabilities: real-time and
retrospective text searching; fingerprint, facial image and a developing family
of other image and signal retrieval servers; and end-user systems for
applications such as document management and intelligence analysis.
RetrievalWare is licensed as a software developer's kit, a suite of text and
other retrieval servers, a set of optional and third-party components and
end-user applications. A description of each of the Company's products is set
forth below.
RETRIEVALWARE SDK
The RetrievalWare Software Developer's Kit (SDK) is a comprehensive set of tools
for building information retrieval solutions. At its core is a highly scaleable,
distributed client/server architecture. Independent server processes maximize
the efficiency and reliability of document loading, indexing and query handling,
and support security and encryption/decryption features. Dedicated server
processes enable integration of text search and relational database (DBMS)
storage capabilities through an open DBMS gateway. The RetrievalWare client
environment is optimized for the development of graphical interfaces using
industry standard tools. RetrievalWare delivers Windows Visual Basic and Motif
interfaces as source code, as well as Visual Basic Custom Controls and RDBMS
interface DLLs. The RetrievalWare API set includes engine-level, high-level and
client/server APIs.
RETRIEVALWARE TEXT SERVERS
RetrievalWare text servers are built upon an open and extensible pipeline of
processing modules. The RetrievalWare Semantic and Pattern Server includes both
semantic network and APRP(TM) search engines and offers a complete range of text
retrieval options: word meaning-based and pattern recognition-based searching,
natural language searching and fuzzy searching, statistical searching and full
Boolean logic searching. The RetrievalWare Server combines APRP(TM), statistical
and Boolean techniques and is optimized for applications requiring a high level
of fault-tolerance, such as document management applications based upon the
scanning and optical character recognition of large volumes of hard copy
documents.
RETRIEVALWARE WEB SERVER
The RetrievalWare Web Server is a component solution that interfaces with any
HTTP server through a template-based common gateway interface and supports very
large scale distributed electronic publishing and enterprise applications on the
internet and the world wide web. The RetrievalWare Web Server deploys a
dedicated front-end server, providing handling of large volumes of user queries
and extensible functionality through integration with relational databases. The
RetrievalWare Web Server includes an integrated security server and its
functionality is easily extended with the full range of RetrievalWare
components, including the RetrievalWare Profiling Server for real-time
information filtering.
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RETRIEVALWARE PROFILING SERVER
The RetrievalWare Profiling Server is a high performance system for filtering
newswires, electronic mail messages, file transfers and other dynamic
information streams in real-time. Its architecture is optimized for real-time
performance while preserving complete symmetry with RetrievalWare Text Servers.
The design facilitates the development of applications which fully integrate
retrospective searching and real-time content profiling.
RETRIEVALWARE IMAGE SERVERS
RetrievalWare Image Servers utilize APRP(TM) technology to provide tools for
developing applications that can index and retrieve digital images based on
their objective content. Image Servers provide components that automatically
recognize certain types of visual information and offer extensive image
management capabilities. RetrievalWare Image Servers include system components
for building client/server applications that provide parallel network retrieval
operations using the Company's inter-process communication layer. Additionally,
RetrievalWare Image Servers include support for TCL/TK, a popular development
environment and script interpreter that allows experienced programmers to
optimize their image indexing and retrieval applications for a variety of
specific image data types. The Company has developed RetrievalWare image
application demonstrations for fingerprint, faces and character recognition and
is continuing development on components for full-motion video, photographs,
graphics and other digital media.
The RetrievalWare suite of software components and related services accounted
for approximately 30%, 19%, and 20% of total revenues in the fiscal years ended
January 31, 1996, 1995, and 1994, respectively.
ELECTRONIC FILING SOFTWARE (EFS)
The Company's Electronic Filing Software ("EFS") is a multi-platform,
commercial, end-user software application for document imaging and information
retrieval. It is the latest version of the product which was originally
introduced in 1991. Text and images can be entered into the system from computer
files, scanners or facsimile machines (after the scanned image is converted to
text by optical character recognition software) and is automatically filed and
indexed in a replica of a physical file room with file cabinets, drawers,
folders, in-baskets and wastebaskets, utilizing a graphical user interface. EFS
provides users with four methods for document retrieval: retrieval based on the
document contents using APRP(TM); retrieval via relational database query for
document control information such as author and date; content-based queries on
file room labels; and file room retrieval using icons representing cabinets,
drawers and folders that users can open using a computer mouse. Excalibur EFS
operates under the following UNIX operating systems in a client/server
environment: Sun OS and Solaris, HP HP-UX, IBM RISC System/6000 AIX and Digital
Ultrix and OSF/1; and under the Digital VMS and Open VMS operating systems.
Client-only implementations are available on personal computers running
Microsoft Windows and Apple Macintoshes. EFS also provides links to external
databases including Oracle, Informix, Digital Rdb and Ingres. The most recent
release of Excalibur EFS includes a Client API which gives users the ability to
integrate EFS with other software applications and products. EFS is priced based
upon the number of concurrent users on a system.
Earlier versions of Excalibur EFS software programs include Pix Tex/EFS, Pix
Tex/EFS ServerPlus, and PixTex, all of which are no longer being marketed by the
Company, but are still supported under post-contract support agreements.
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EFS WEBFILE
The Company's EFS Webfile product is a turnkey document image management
solution for the world wide web. EFS Webfile integrates accurate and robust
search and retrieval, advanced Web server technology and an intuitive interface
to provide organizations with unified, global access to mission critical
document information. In conjunction with the Company's EFS product, EFS Webfile
turns any standard HTML browser into a fully functional EFS client, accessing
the intuitive, file-room graphical interface and advanced server capabilities.
EFS Webfile includes HTML filters to fully leverage the power of HTML encoding.
Users can index HTML files and view those files in native form, including all
images and links to other URLs. The Webfile Server runs on IBM AIX, HP-UX, SunOS
and Solaris, DEC Digital UNIX and VMS platforms.
The Excalibur EFS family of products and related services accounted for
approximately 70%, 81%, and 80% of total revenues in the fiscal years ended
January 31, 1996, 1995, and 1994, respectively.
MARKETING AND DISTRIBUTION
The Company's marketing and distribution strategy has several components. The
primary strategy is to sell through established relationships with VARs, SIs,
OEMs, and distributors that sell licenses to customers to use the Company's
software libraries, servers, toolkits and application products.
The Company's marketing and distribution strategy also includes a direct sales
force and agreements with selected VARs and vertical market suppliers who sell
and distribute the Company's application products. During the past year, the
Company has established relationships with selected VARs and SIs to develop new
geographic and industry markets.
The Company entered into an amendment to its General Services Administration
Federal supply contract (the "GSA Contract") with the Federal government
effective October 1, 1995 through September 30, 1996. The GSA Contract provides
a contractual vehicle for government agencies to place orders for EFS with the
Company. It includes information about the Company and its products, and
establishes pricing, terms and conditions of sales. The Company expects to
negotiate a renewal of the amended GSA Contract upon its expiration.
TECHNICAL SUPPORT AND TRAINING
The Company believes that it has established a reputation for excellent customer
technical support by making it one of the Company's top priorities. Technical
support is provided to the Company's customers by its technical support
organization as well as by certain product distributors. Technical support
consists of bug fixing, telephone support and product enhancements. After an
initial 90-day period, during which technical support is provided without
additional charge, technical support is provided typically to customers under a
renewable annual contract.
The Company also provides installation and consulting services to its customers
on-site or through independent Certified Excalibur Consultants who have been
trained and certified by the Company. The Company also conducts training
seminars at its offices in Carlsbad, California, McLean, Virginia, and Columbia,
Maryland for its customers and distribution channel partners.
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STRATEGIC ALLIANCES
In January 1995, the Company entered into a development and distribution
agreement with IBM to integrate the RetrievalWare Image Server with certain
versions of IBM's DATABASE 2 (DB2)(TM) database product. The Company will
receive percentage royalties on revenues earned by IBM from licenses of DB2(TM)
that contain the Company's RetrievalWare Image Server, as described in the
agreement. In April 1996, the Company and IBM announced their intent to expand
their existing development relationship to include the integration of
Excalibur's EFS product with IBM's ImagePlus VisualInfo(TM). The combined
products will provide enterprise-wide image and document management, work
management and full-text retrieval on UNIX, OS/2, Windows NT and MVS/ESA.
In July and August 1993, the Company entered into Cooperative Marketing
Agreements with IBM, in the United States and Canada, under which IBM markets
Excalibur's EFS product to IBM's customers. IBM receives a marketing fee equal
to a percentage of the sales IBM generates of EFS. IBM made a guaranteed sales
commitment to the Company for fiscal years 1995 and 1994. In April 1996, the
Company and IBM announced their intent to expand the agreements to include
Excalibur's RetrievalWare products. Under the agreement, IBM will resell and
provide services for Excalibur's RetrievalWare full-text search solutions and
Excalibur's EFS product. IBM will offer these retrieval products in tandem with
its ImagePlus(TM) and FlowMark(TM) product lines to customers and channel
partners in the United States and Canada.
Revenues of approximately $1,538,000, or 12% of total revenues, were
attributable to IBM under the various agreements in the fiscal year ended
January 31, 1995. Such revenues were less than 10% of total revenues in the
fiscal years ended January 31, 1996 and 1994.
The Company signed an agreement with PRC, Inc. ("PRC"), a systems integrator, in
February 1993. Under the agreement, the Company provides its software to PRC as
part of a Federal procurement program. Under this contract, PRC paid to the
Company a minimum $2,000,000 in license and maintenance fees over a period of
two and one-half years. The Company expanded its relationship with PRC in April
1996 forming a strategic alliance to deliver advanced electronic document
management to major manufacturing, utility and government markets. Under an OEM
agreement, PRC will integrate the text search and retrieval functionality of
Excalibur's RetrievalWare technology with its Productivity Edge(TM) electronic
document management solution.
The Company has earned research, development and royalty fees under a series of
contracts with Nikkei Information Systems Co., Ltd. ("NIS"), a Japanese company,
since 1985. Under the current agreement, which was effective June 1, 1993
through January 31, 1996, NIS paid a minimum monthly royalty fee of $34,583
against the royalties on the revenue generated. Through the life of the
contract, the monthly royalties earned by the Company rarely exceeded the
minimum monthly royalty. In February 1996, the Company and NIS agreed to
discontinue the minimum monthly royalty fee and Excalibur will receive
percentage royalties on revenues as NIS license sales are generated. The
agreement also allows for distribution of third party products containing the
Company's software technologies into Japan under a royalty sharing accord with
NIS.
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In January 1996, the Company and BTG Incorporated ("BTG") entered into an
agreement designating BTG as the master Federal distributor for the Company's
EFS product. BTG, a major reseller of information technology products and
services to the Federal government, has been the Company's largest VAR in the
Federal market since 1992. The agreement provides exclusive distribution rights
to BTG in the Federal government market for Excalibur's EFS products for a
period of two years. The Company will receive royalties on license sales
including a minimum non-cancelable license royalty fee of $1,800,000 in the
first year of the agreement.
In May 1994, the Company entered into a Software Distribution Agreement with
Professional Computer Systems B.V. ("PCS") that was subsequently amended in
January 1995 to extend the contract expiration date to January 31, 1996. The
agreement granted PCS exclusive rights to license and distribute the Company's
EFS product throughout Belgium, the Netherlands and Luxembourg for a fee of
$1,100,000 that was paid over the term of the agreement, as amended. In January
1996, the Company amended the agreement again to extend the exclusive rights to
license and distribute the Company's EFS product to Belgium, the Netherlands,
Luxembourg and Italy and extended the contract expiration date to January 31,
1997 for a fee of $1,100,000 payable over the twelve months of the contract
extension period. Contemporaneously therewith, the Company executed a letter of
intent to create a joint venture with PCS to market, sell and distribute
Excalibur's EFS product and other products in the countries of Belgium, the
Netherlands, Luxembourg, Germany, Austria, Switzerland, Scandinavia and Italy as
well as to develop, market and distribute new products. This transaction is
subject to further discussions, conditions and approvals, including approval of
the definitive agreements by the boards of directors of each company.
In December 1994, the Company entered into a software development and license
agreement with Informix Software, Inc. ("Informix") to provide text and image
retrieval technology to users of certain Informix products. The agreement calls
for the integration of the Excalibur image and signal server across multiple
platforms supporting certain Informix products. The Company will receive a
percentage of the list price for such products licensed.
PRODUCT DEVELOPMENT AND ADVANCED RESEARCH
The Company's primary technologies are its proprietary adaptive pattern
recognition processing software (APRP(TM)) and semantic networks processing.
APRP(TM) consists of a software architecture for processing digital information
to extract patterns in the primary types of computerized data: text, image,
signal and video. The system provides high-speed pattern recognition that can be
used to store, categorize, retrieve and refine data. The processing of digital
patterns provides users with a way to store and use computerized data faster
with more flexibility and with fewer data storage requirements than competing
systems.
The Company's pattern recognition methods use neural computing techniques to
process data in a non-algorithmic, parallel fashion by generating responses to
input data. Systems utilizing these methods are unlike traditional computer
systems and are now being used in areas where traditional systems have been
inefficient, such as natural language, machine vision, robotics, pattern
matching and signal recognition. Neural computing systems are "trained" by
processing data, not by programming. Once the system has extracted patterns from
the digital data, these patterns can be sorted, labeled and used to make
decisions. The Company has in place a research and development program to
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explore and apply its proprietary pattern recognition technology in new areas
such a image recognition, character recognition, forms recognition, fingerprint
matching, facial identification and machine vision. The Company also has a
product development program to enhance the features of its existing software
products to address additional markets. Excalibur's semantic networks leverage
lexical knowledge at the highest level, offering a system to search for specific
word meanings enriched by related terms and concepts. With semantic networks,
users find information using natural language processing. Semantic networks
incorporate syntax, morphology and the actual meaning of words as defined by
published dictionaries and other reference sources.
The Company has conducted research and product development of pattern
recognition and natural language systems since 1980. Research and product
development expenditures for development of new products and enhancements to
existing products were approximately $4,972,000, $5,085,000 and $5,483,000 in
the fiscal years ended January 31, 1996, 1995 and 1994, respectively.
PROTECTION OF PROPRIETARY TECHNOLOGY
The Company regards its software as proprietary and relies primarily on a
combination of copyright, trademark and trade secret laws of general
applicability, employee confidentiality and invention assignment agreements,
distribution and OEM software protection agreements and other intellectual
property protection methods to safeguard its technology and software products.
The Company has not obtained patents on any of its technology. The Company also
relies upon its efforts to design and produce new products, and upon
improvements to existing products, to maintain a competitive position in the
marketplace.
COMPETITION
Competition in the computer and communications industry in general, and the
software development industry in particular, is intense. The Company's
competitors include many companies which are larger and more established and
have substantially more resources than the Company. In the United States, the
Company competes in two basic markets within the computer industry: the document
imaging and information retrieval markets. Both markets have many competitors
who are larger and more established than the Company and have access to greater
resources. The Company considers its principal competitive advantage to be the
performance of its products. The Company differentiates its products by using
new technology to provide benefits such as labor savings from reduced manual
pre-processing or organization of data, faster retrieval, access to many kinds
of data, full integration with network architecture, less start-up training and
more forgiving interaction in retrieving information stored in computers. The
information retrieval market is competitive, with numerous companies offering
products on multiple platforms. Most often, the Company competes with companies
such as Fulcrum Technologies Inc. and Verity, Inc. in this market. In the
document imaging market, the Company competes with large hardware companies and
established software vendors.
The Company's activities currently are subject to no particular regulation by
governmental agencies other than those routinely imposed on corporate
businesses, and no such regulation is now anticipated.
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EMPLOYEES
The Company had 125 employees as of January 31, 1996, of whom 47 were in
research and development, 51 in sales and marketing, 14 in technical support,
and 13 in finance and administration. The employees are not covered by
collective bargaining agreements and the management of the Company considers
relations with employees to be good.
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ITEM 2. PROPERTIES.
At January 31, 1996, the Company occupied approximately 6,000 square feet of
space in an office building located at 2000 Corporate Ridge, McLean, Virginia
22102 under a lease agreement relating to 4,000 square feet that expires in May
1997 and a month-to-month arrangement for 2,000 square feet. This facility
recently has served as the Company's corporate headquarters and contains the
executive office and certain administrative and sales functions. The Company has
signed an agreement, that expires in October 1999, to sublease approximately
14,200 square feet of space in an office building located at 1921 Gallows Road,
Vienna, Virginia 22182. The Company intends to move its corporate headquarters
to this location in May 1996.
The Company leases two facilities that serve primarily as software development
and customer support centers. The Company occupies approximately 31,000 square
feet of space in an office building, under a six-year lease that commenced in
November 1995 and expires in November 2001, located at 1959 Palomar Oaks Way,
Carlsbad, California 92009. The Company also occupies approximately 6,700 square
feet of space in an office building located at 10440 Little Patuxent Parkway,
Columbia, Maryland 21044 under a renewed five-year lease that commenced January
1996 and expires in December 2000.
The Company leases office space in Windsor, England and Vitrolles, France in
support of its international sales operation. Under these leases, the Company
occupies approximately 3,400 square feet and 800 square feet, respectively. The
two leases for the Windsor offices expire in 1997, and the Vitrolles lease is
renewable every three years over a nine year period, but may be cancelled with
six months notice.
During the fiscal year ended January 31, 1996, and in connection with the
corporate restructuring that is discussed in Note 7 to the Consolidated
Financial Statements, the Company vacated leased facilities located in San
Diego, California, and Albuquerque, New Mexico that have remaining lease terms
of approximately twenty three
and eleven months, respectively.
The Company believes that its facilities are maintained in good operating
condition and are adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is a party.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The 1995 Annual Meeting of Shareholders was held on November 17,
1995.
(b) The following individuals were elected to serve as the Board of Directors
for terms expiring at the 1996 Annual Meeting:
Number of Shares Voted
----------------------
For Against Abstain
--- ------- -------
Richard M. Crooks, Jr 8,977,924 170,769 --
J. M. Kennedy ....... 8,967,499 181,194 --
Edwin R. Addison .... 9,025,018 123,675 --
James W. Dowe, III .. 9,034,409 114,284 --
Jay H. Diamond ...... 8,965,206 183,487 --
W. Frank King, III .. 9,033,193 115,500 --
Philip J. O'Reilly .. 8,965,206 183,487 --
(c) In the only other matter voted upon, the shareholders voted 8,677,296 shares
in the affirmative and 358,943 shares in the negative to approve, for purposes
of Section 422 of the Internal Revenue Code, the adoption of the Company's 1995
Stock Option Plan authorizing the granting of options to purchase up to 400,000
shares of the Company's common stock pursuant to which options to purchase
324,150 shares of the Company's common stock were granted to employees of the
Company who were previously employed by ConQuest Software, Inc.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded in the over-the-counter market and is
listed on the National Market System of the NASDAQ System under the symbol EXCA.
The following table sets forth, for the period February 1, 1994 through January
31, 1996, the high and low sale prices for the common stock as reported by the
National Market System of NASDAQ. The number of shareholders of record as of
January 31, 1996, was 1,295. The Company has never declared or paid dividends on
its common stock, and anticipates that, for the foreseeable future, it will not
pay dividends on its common stock.
High Low
Fiscal 1995 (02/01/94-01/31/95)
First Quarter................ $12 $10 1/4
Second Quarter .............. 11 5 3/4
Third Quarter................ 8 1/2 6
Fourth Quarter............... 8 1/4 4 3/4
Fiscal 1996 (02/01/95-01/31/96)
First Quarter................ $12 3/4 $ 7
Second Quarter .............. 18 1/2 11 3/4
Third Quarter................ 18 13 1/4
Fourth Quarter............... 39 3/4 15 3/4
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below are derived from the Company's
consolidated financial statements and should be read in conjunction with such
consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K. The selected financial data presented below as of
January 31, 1994, 1993 and 1992 and for the fiscal years ended January 31, 1993
and 1992 has been derived from consolidated financial statements of the Company
not contained herein. All of the historical information has been restated to
reflect the pooling of interests with ConQuest Software, Inc.
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<TABLE>
<CAPTION>
Fiscal Years Ended January 31
----------------------------------------------------
1996 1995 1994 1993 1992
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues:
Software.................$ 15,004 $ 10,133 $ 10,878 $ 7,943 $ 4,725
Maintenance............ 3,671 2,505 1,407 563 237
--------- --------- --------- --------- ---------
18,675 12,638 12,285 8,506 4,962
--------- --------- --------- --------- ---------
Expenses:
Sales and marketing.... 8,791 9,399 10,124 7,859 3,994
Research and product
development.......... 4,972 5,085 5,483 5,483 3,367
General and
administrative....... 3,330 5,597 3,758 3,148 2,161
Cost of software
revenues............. 1,294 1,197 1,359 569 191
Cost of maintenance
revenues............. 573 524 343 285 184
Restructuring costs.... 653 776 - - -
Merger costs........... 490 - - - -
--------- --------- --------- --------- ---------
20,103 22,578 21,067 17,344 9,897
--------- --------- --------- --------- ---------
Operating loss........... (1,428) (9,940) (8,782) (8,838) (4,935)
Interest income.......... 601 431 485 631 800
Interest expense......... (57) (87) (22) (42) (11)
Other income............. - 208 - - -
--------- --------- --------- --------- ---------
Net loss................. (884) (9,388) (8,319) (8,249) (4,146)
Preferred stock
dividends................ 14 14 14 14 14
--------- --------- --------- --------- ---------
Net loss applicable to
common stock.........$ (898) $ (9,402) $ (8,333) $ (8,263) $ (4,160)
========= ========= ========= ========= =========
Net loss per share of
common stock.........$ (.08) $ (0.85) $ (0.79) $ (0.85) $ (0.52)
========= ========= ========= ========= =========
Weighted average number
of shares of common
stock outstanding.... 11,496 11,094 10,532 9,763 7,985
========= ========= ========= ========= =========
</TABLE>
<PAGE>
- 13 -
<TABLE>
Fiscal Years Ended January 31
----------------------------------------------------
1996 1995 1994 1993 1992
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
(at end of period)(1):
Cash and cash
equivalents..............$ 2,903 $ 2,645 $ 1,280 $ 1,928 $ 1,241
Working capital.......... 12,973 6,908 1,788 4,631 4,356
Total assets............. 23,046 17,951 18,015 21,125 14,041
Accumulated deficit...... (36,446) (35,367) (25,965) (17,646) (9,384)
Total shareholders'
equity (2)............... 15,251 9,475 12,363 17,138 12,096
<FN>
(1) The Company had no significant long-term debt for any of the periods
presented.
(2) No dividends have been declared or paid on the Company's common stock.
</FN>
</TABLE>
<PAGE>
- 14 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
In July 1995, Excalibur Technologies Corporation ("Excalibur") acquired ConQuest
Software, Inc. ("ConQuest"), a private company located in Columbia, Maryland
engaged in the business of providing natural language text management software
tools. The acquisition was effected through the issuance of Excalibur common
stock and options to purchase Excalibur common stock to the former ConQuest
shareholders and optionholders in exchange for all of the outstanding common
stock of ConQuest. The business combination was accounted for as a pooling of
interests and, accordingly, the Company's consolidated financial statements and
the discussion and analysis of such statements contained herein reflect the
combined results of the pooled businesses for the respective periods presented.
Prior to its acquisition by Excalibur, ConQuest reported operating results on a
calendar year basis. ConQuest's separate results for prior years have not been
restated to conform to the fiscal year of Excalibur. Therefore, the results of
operations contained in the consolidated financial statements for the fiscal
years ended January 31, 1995 and 1994 combine those of Excalibur for these
periods, as previously reported, with those of ConQuest for the calendar years
ended December 31, 1994 and 1993, respectively. ConQuest's separate results of
operations for the month ended January 31, 1995 are not reflected in the
consolidated statement of operations for the current fiscal year. The revenues,
operating loss and net loss of ConQuest for the month ended January 31, 1995
were $138,000, $177,000 and $181,000, respectively. The Company's consolidated
balance sheet at January 31, 1995 combines the consolidated balance sheet of
Excalibur and Excalibur Technologies International ("ETIL") as of January 31,
1995 and the balance sheet of ConQuest as of December 31, 1994.
The Company principally earns revenue from licensing its software to system
integrators and original equipment manufacturers through its distributors, to
value-added resellers, to strategic partners and to customers through a direct
sales force. Revenues are provided from sales to new customers and sales to
current customers for additional users, upgrades to newer product versions,
telephone support, and other services. Revenues generated from product licenses
can vary significantly within a period due to the relatively long sales cycle,
variations in the size of license agreements, and the number of shipments made.
Historically, the volume of customer orders and product shipments is greatest at
the end of a reporting period, and the Company often recognizes a significant
portion of license revenue towards the end of each fiscal period. Deferred
revenues of $2,759,000 at January 31, 1996, related primarily to maintenance
agreements and training, is not expected to cause significant fluctuations in
future quarterly revenue.
RESULTS OF OPERATIONS
For the fiscal year ended January 31, 1996, total revenues were $18,675,000, an
increase of 48% over total revenue of $12,638,000 in the prior year. Net loss
for the fiscal year ended January 31, 1996 was $884,000 or $.08 per common share
compared to a net loss of $9,388,000 or $.85 per common share last year.
Included in expenses for the current fiscal year were charges of $653,000
related to the restructuring that is discussed below and $490,000 related to the
acquisition of ConQuest.
<PAGE>
- 15 -
<TABLE>
<CAPTION>
REVENUES FY `96 Change FY '95 Change FY'94
(in thousands) ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Software $15,004 $ 4,871 48% $10,133 $ (745) (7)% $10,878
Maintenance 3,671 1,166 47% 2,505 1098 78% 1,407
-------- -------------- -------- -------------- ---------
Total $18,675 6,037 48% $12,638 $ 353 3% $ 12,285
======== ============== ======== ============== =========
</TABLE>
In fiscal year 1996 compared with fiscal 1995, the Company experienced overall
increases in revenues for both software products and maintenance of
approximately 48% and 47%, respectively, to $15,004,000 and $3,671,000,
respectively. Revenues from the sale of EFS and related products exceeded
revenues of last year, primarily because international product revenues grew at
a rate approximating 60%. In North America, revenues derived from the sale of
EFS products to commercial and Federal customers grew at a rate of approximately
15% in the current fiscal year. The Company is working to establish a strong
network of resellers to market the EFS products to customers in certain segments
of the market, or franchises. Consistent with that direction, the Company
recently entered into an agreement with a large systems integrator granting the
exclusive right to resell the EFS product in the Federal market.
The Company is continuing to focus direct sales and marketing efforts on the
sale of its family of core technologies to customers looking for tools to build
specialized applications that require, for example, a powerful search and
retrieval engine. The rapid expansion of the internet and the proliferation of a
variety of online service providers has presented new opportunities for the
application of the Company's technologies in this manner. The Company licensed
its RetrievalWare technology to several such providers in the current year,
contributing to an overall increase in RetrievalWare product revenues from
fiscal year 1995 to fiscal year 1996 of approximately 131%.
Despite a 47% increase in product sales to international customers experienced
in fiscal year 1995 compared with fiscal 1994, total software revenues declined
in the prior year by 7%. This decline reflected the early effects of the shift
in focus for the EFS product from direct sales to resellers. As a percentage of
total revenues, the revenues related to the sale of RetrievalWare products and
services did not change in fiscal year 1995 compared with fiscal year 1994.
The growth of product maintenance revenues in the current fiscal year is
consistent with the increase in software product revenues reflecting most
significantly the expanding installed base of EFS customers. Maintenance
revenues increased 78% in the prior fiscal year compared with the previous year
due, in part, to the Company's efforts to keep customers current on annual
maintenance contracts.
Sales to international customers are made primarily by ETIL. As a percentage of
total consolidated revenues, ETIL's results represented 19%, 18%, and 12% in
each of the past three fiscal years, respectively. The continued growth in
international operations is a result of a well established reseller network,
including certain resellers with exclusive licenses to sell EFS in a particular
country or region with guaranteed minimum sales levels. In February 1995, ETIL
opened an office in Vitrolles, France to better penetrate markets in central
Europe. Additionally, the political changes in Eastern Europe have opened new
<PAGE>
- 16 -
markets for the Company's products, and ETIL has begun establishing resellers
and generating sales in areas formerly under Communist rule.
Tighter overall expense controls and reductions in personnel that took place in
fiscal 1995 resulted in a $2.5 million, or 11%, decrease in operating expenses
during fiscal 1996 compared to fiscal 1995. Excluding merger and restructuring
charges, expenses decreased 13% between fiscal years. Fiscal 1995 operating
expenses increased $1.5 million, or 7%, compared to the prior year primarily due
to restructuring costs and litigation expenses. Due to both the increase in
revenues and the decrease in operating expenses, total operating expenses as a
percentage of total revenues dropped to 108% in fiscal 1996 compared to 179% and
171% in fiscal years 1995 and 1994, respectively.
<TABLE>
<CAPTION>
EXPENSES FY `96 Change FY '95 Change FY '94
(in thousands) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales and
marketing $ 8,791 (6)% $ 9,399 (7)% $10,124
Percentage of
total revenues 47% 74% 82%
-------------------------------------------------------------------
Research & product
development $ 4,972 (2)% $ 5,085 (7)% $ 5,483
Percentage of
total revenues 27% 40% 45%
-------------------------------------------------------------------
General and
administrative $ 3,330 (41)% $ 5,597 49% $ 3,758
Percentage of
total revenues 18% 44% 31%
-------------------------------------------------------------------
Total operating
expenses $20,103 11% $22,578 7% $21,067
Percentage of
total revenues 108% 179% 171%
-------------------------------------------------------------------
</TABLE>
Sales and marketing expenses were 47% of total revenues for fiscal year 1996
compared to 74% and 82% in the previous two fiscal years, respectively. Total
sales and marketing expenses decreased $608,000, or 6%, and $725,000, or 7%, in
fiscal years 1996 and 1995, respectively, compared in each case to the preceding
year. The decreases occurred in the United States where the Company channeled
more sales through its resellers in both fiscal 1996 and second half of fiscal
1995, thereby reducing its direct selling costs. Additionally, in fiscal year
1996, the marketing group operated with a smaller average number of personnel
under a tighter budget for product promotion and other similar expenses than in
the previous years.
<PAGE>
- 17 -
Research and product development costs were 27% of revenues in fiscal year 1996
compared to 40% in fiscal year 1995 and 45% in fiscal 1994. Total research and
development costs decreased $113,000, or 2%, in fiscal year 1996 from fiscal
year 1995. These declines were the results of the restructuring during fiscal
1995 that included a reduction in the number of employees in research and
development, primarily in the testing area, following a major release of the
Excalibur EFS software. Additionally, the write-off of obsolete equipment in the
second quarter of fiscal 1995 resulted in a reduction in depreciation expense
during fiscal 1996. The decrease in expenses as a percentage of revenues was
also due to ConQuest maintaining its development staff at a fairly constant
level through fiscal 1995 and well into the current year. Total research and
product development expenses decreased $398,000, or 7%, in fiscal year 1995
compared to 1994 primarily due to reductions in employee costs, depreciation and
other equipment costs.
General and administrative costs were 18% of revenues in fiscal year 1996
compared to 44% in fiscal year 1995 and 31% in fiscal year 1994. Included in the
fiscal 1995 costs were litigation expenses, representing 7% of total revenues in
the year, that related to a lawsuit settled at the beginning of fiscal 1996. A
significant portion of the $2.3 million, or 41%, drop in general and
administrative costs in fiscal 1996 compared to fiscal 1995 reflected the
absence of such costs in the current year. Also, during fiscal 1995, the Company
expensed $850,000 of compensation paid in the form stock grants and options to
purchase stock at below market prices and recorded bad debt expense of $361,000.
These expenses were $36,000 and $91,000, respectively for fiscal 1996. The $1.8
million, or 49%, increase in general and administrative expenses in fiscal 1995
compared to fiscal 1994 was the result of the litigation costs, stock
compensation, and bad debt provision.
<TABLE>
<CAPTION>
COST OF REVENUES FY `96 Change FY `95 Change FY `94
(in thousands) ---------------------------------------------
<S> <C> <C> <C> <C> <C>
Software costs $ 1,294 8% $ 1,197 (12)% $ 1,359
Percentage of
software revenues 9% 12% 12%
------------------------------------------------------------------
Maintenance costs $ 573 9% $ 524 53% $ 343
Percentage of
maintenance revenues 16% 21% 24%
------------------------------------------------------------------
</TABLE>
Cost of software revenues increased $97,000, or 8%, in fiscal year 1996 from
fiscal year 1995, and was 9% of software revenues for fiscal 1996 compared to
12% of software revenues in fiscal 1995. Fiscal year 1995 expenses included the
costs of new software documentation for the new version of Excalibur EFS and
other products, as well as the design and production of new product packaging.
Cost of software revenues dropped $162,000, or 12%, in fiscal 1995 compared to
fiscal 1994, but was 12% as a percentage of the related software revenues for
each of the prior year periods. The decrease in costs in fiscal 1995 compared to
fiscal 1994 was due primarily to a reduction in the amount of development work
performed under contract by ConQuest.
<PAGE>
- 18 -
Cost of maintenance revenues as a percentage of maintenance revenues dropped in
each of the past two fiscal years. The Company's cost of generating maintenance
revenues fluctuates with personnel costs. Such costs remained relatively flat in
fiscal 1996 compared to fiscal 1995 and increased at a slower rate than
maintenance revenues in fiscal year 1995 compared to fiscal 1994. Cost of
maintenance revenues increased $49,000, or 9%, in fiscal year 1996 compared to
fiscal year 1995 and the costs increased $181,000, or 53%, in fiscal year 1995
from fiscal year 1994, compared to increases of $1.2 million, or 47%, and $1.1
million, or 78%, respectively, in the associated revenues for the same reporting
periods.
Transaction costs totaling approximately $490,000 were paid in connection with
the merger with ConQuest. These costs, which included primarily legal and
accounting fees incurred by both Excalibur and ConQuest, were recorded in the
second fiscal quarter of the current year as an operating expense.
As discussed in Note 7 to the Consolidated Financial Statements, in the fourth
quarter of fiscal year 1996, the Company completed an assessment of its
personnel and facilities requirements and finalized a corporate restructuring
and relocation plan. This plan included the relocation of the Company's
headquarters from California to the Washington, D.C. area and the consolidation
of the product development and related customer support teams into two
facilities. The relocation moved corporate management closer to the Company's
major domestic and European customers and better organized the technical staff
to support the major product initiatives of the combined Company. In connection
with this plan, the Company vacated leased facilities in San Diego, California,
and Albuquerque, New Mexico, and consolidated employees on the west coast into a
new leased facility in Carlsbad, California. In May 1996, the Company is
scheduled to move into new leased office space, located in Vienna, Virginia,
that will serve as the Company's corporate headquarters. In the fourth quarter,
the Company also renewed the lease for its Columbia, Maryland, location
(formerly the offices of ConQuest) that serves as the text products development
center. The Company recorded a restructuring charge of $653,000 in the fourth
quarter of the current fiscal year, consisting primarily of severance payments
to terminated employees and lease abandonment costs. At January 31, 1996,
payments under the plan of $215,000 had been made and the net costs of leasehold
improvements at the vacated facilities had been written-off. The Company expects
that substantially all of the remaining costs will be paid in fiscal year 1997.
The Company also conducted restructuring activities in the prior year under a
separate and distinct plan to consolidate a remote development facility,
resulting in a restructuring charge of $312,000. Additionally, the Company
recorded a charge of $464,000 for the write-off of equipment no longer meeting
the requirements of the product development plan.
Despite the restructuring and merger costs, total operating expenses were
reduced by $2,475,000, or 11%, to $20,103,000 in fiscal year 1996. Total
operating costs increased in fiscal year 1995 by $1,511,000, or 7%, to
$22,578,000 due, in part, to the total restructuring costs of $776,000 recorded
in fiscal 1995. Interest income increased $170,000, or 39%, in fiscal 1996
compared to fiscal 1995 primarily due to higher rates of return on invested
funds. Interest income dropped $54,000, or 11%, in fiscal 1995 compared to
fiscal 1994 as the amount of invested funds declined during the year.
Interest expense of $57,000, $87,000, and $22,000 in fiscal years 1996, 1995 and
1994, respectively, represents primarily amounts accrued on the borrowings of
ConQuest.
<PAGE>
- 19 -
Other income in fiscal 1995 consists of approximately $208,000 received from
ConQuest's former landlord as an incentive for ConQuest to terminate a lease for
office space.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1996, the Company had a balance of cash and cash equivalents of
$2,903,000 compared to a balance of $2,645,000 at the end of the previous fiscal
year, which represents an increase between years of $258,000. In fiscal year
1995, the balance of cash and cash equivalents increased by $1,365,000. In
fiscal year 1994, the balance declined by $648,000. Marketable security
investments, which are not considered cash equivalents, consisted entirely of
U.S. Treasury Bills with maturities of less than one year at January 31, 1996.
Investments increased by $1,736,000 during the year. The balance of investments
declined by $746,000 and $3,479,000, respectively, during fiscal years 1995 and
1994. The combined increase in cash, cash equivalents and marketable securities
for the current fiscal year was $1,994,000, compared with a net increase in the
combined balance of $619,000 in fiscal year 1995 and a net decrease of
$4,127,000 in the combined balance in fiscal year 1994. The total of cash, cash
equivalents and marketable securities was $13,244,000 at January 31, 1996.
The net positive cash flows in the last two fiscal years were due primarily to
the sale of common stock to employees and investors. In fiscal year 1996, the
Company raised cash proceeds of $6,688,000 from the exercise of stock options by
employees and directors. In fiscal year 1995, the exercise of employee stock
options and the private sale of common stock to investors provided cash proceeds
of approximately $5,678,000. The Company also raised $2,877,000 in cash
primarily from the exercise of employee stock options in fiscal year 1994. There
can be no assurance that the Company will be able to obtain such funds from
employees and investors in the future, if required. Subsequent to January 31,
1996, the Company was successful in closing a private placement sale of its
common stock which provided net cash proceeds of approximately $8,388,000.
The Company has used cash in its operating activities in each of the last three
fiscal years. Net cash used in operations was $3,940,000, $4,469,000 and
$6,063,000, respectively, for fiscal years 1996, 1995 and 1994. The usage of
cash in the prior year periods was due primarily to the large net losses
incurred in those years. In the current fiscal year, the amount of net loss was
reduced substantially, however, the Company experienced a significant increase
in the balance of accounts receivable.
Accounts receivable increased by approximately $3,289,000, or 80%, in fiscal
year 1996. The increase was due to several factors including the overall
increase in the Company's revenues between years of approximately 48%, an
increase in the amount of sales negotiated with extended customer payment terms,
and an increase in the percentage of fourth quarter sales booked close to the
end of the period. The effect of these factors was an increase in the amount of
days sales outstanding at year end, although this measurement stayed at a
constant level between the end of the previous fiscal year and the end of the
current year's third quarter.
Although the balance of accounts receivables increased during the year, the
balance of the allowance for doubtful accounts increased by only $1,000 to
$375,000. Management carefully reviewed the customer account balances at year
end, noted payments made by customers after year end and considered the
infrequent write-offs that the Company has experienced. Based on this analysis,
it believes that the allowance is adequate at January 31, 1996.
<PAGE>
- 20 -
The Company used $549,000 cash to pay-off several high-interest bearing notes
payable that were obligations of ConQuest during the current fiscal year. The
Company's current balances of cash, cash equivalents and investments, together
with funds anticipated from future operations, are expected to provide
sufficient cash to meet the Company's current projected needs in the next fiscal
year, including the payment of the remaining restructuring costs, the future
costs associated with the move into the new corporate headquarters, and the
costs of providing computer equipment to new employees. Cash used to purchase
computer equipment and leasehold improvements in the fiscal years ended January
31, 1996, 1995 and 1994 was $567,000, $695,000 and $1,202,000, respectively.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The market for the Company's software products is growing rapidly and the
Company's business environment is characterized by rapid technological changes,
changes in customer requirements, new emerging market segments and increased
competition. Consequently, to compete effectively, the Company must make
frequent new product introductions and enhancements and deploy sales and
marketing resources to take advantage of new business opportunities. The ability
of the Company to achieve and manage the expected growth of the business and to
develop new products will depend on the Company's success in retaining its key
personnel and adding new employees with appropriate skills at the right times.
Failure to make timely product introductions and enhancements or to capitalize
on new market opportunities as they emerge may adversely affect future operating
results.
The Company's operations are also subject to certain other risks and
uncertainties including, among others, the effectiveness of actual and potential
competition, the success of the Company's relationships with its strategic
partners and other distributors of the Company's products, and the risks
associated with acquisitions and international expansion. The Company's business
is seasonal. Typically, revenues in the first half of the fiscal year,
particularly in the first quarter, are lower than total revenues in the second
half of the fiscal year.
The Company has incurred cumulative losses of approximately $18,591,000 over the
last three fiscal years and the accumulated deficit of the Company at January
31, 1996 was $36,446,000.
As explained in Note 5 to the Consolidated Financial Statements, the Company has
significant net operating loss carryforwards ("NOL's") related to Excalibur and
ConQuest of approximately $48,737,000 and $2,855,000, respectively. The deferred
tax assets representing the benefits of the NOL's have been offset completely by
a valuation allowance due to the Company's lack of an earnings history. The
realization of the benefits of the NOL's is dependent on sufficient taxable
income in future fiscal years. Lack of future earnings, or a change in the
ownership of the Company, could adversely affect the Company's ability to
utilize the NOL's. Further, because there was a change in the ownership of
ConQuest during fiscal year 1996, the Company's ability to utilize the ConQuest
NOL's may be limited. Despite the NOL carryforwards, the Company may have income
tax liability in future years due to the application of the alternative minimum
tax rules of the Internal Revenue Code.
<PAGE>
- 21 -
The preparation of financial statements in conformity with generally accepted
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company believes that inflation has not had a material effect on the results
of its operations to date.
ADOPTION OF NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." It encourages, but does not require, companies to
recognize compensation expense for grants of stock and stock options to
employees based on new fair value accounting rules. Companies that choose not to
adopt the new rules will continue to apply the existing accounting rules.
However, fair value accounting is required for transactions involving the
issuance of stock options or other equity instruments to acquire goods or
services from nonemployees. SFAS No. 123 will be effective for the Company's
fiscal year 1997 consolidated financial statements. Currently, the Company does
not expect to adopt the new fair value accounting rules of SFAS No. 123 for
employee stock options.
However, SFAS No. 123 will require the Company, in its fiscal 1997 financial
statements, to disclose pro forma net income/loss and earnings per share under
the fair value accounting method for stock option grants that occurred
subsequent to January 31, 1995. In addition, the Company will be required to
expand its disclosure about plan terms, exercise prices and the assumptions used
in measuring the fair value of stock-based grants. Although the Company has not
performed the pro forma calculation required by SFAS No. 123 for fiscal year
1996, it expects that the pro forma results will be lower than the historical
results reported herein.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of adopting this statement is not expected to be
material to the Company's results of operations or financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data of the Company are submitted as a
separate section of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
<PAGE>
- 22 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information on directors of the Company will be included under the heading
"Election of Directors" of the Company's definitive Proxy Statement relating the
Annual Meeting of Shareholders to be held on June 28, 1996 (the "Proxy
Statement") which is incorporated herein by reference.
The directors of the Company are elected each year at the Annual Meeting of
Shareholders to serve for the ensuing year until the next annual meeting and
until their respective successors are elected and qualified. There are no family
relationships between any of the executive officers of the Company. The
following information indicates the position and age of the present members of
the Board of Directors and the other executive officers at April 15, 1996 and
their business experience.
Name Age Position
Richard M. Crooks, Jr. 56 Chairman of the Board of
Directors
Patrick C. Condo 39 President and Chief Executive Officer,
Director
James H. Buchanan 40 Vice President, Chief
Financial Officer, Secretary
and Treasurer
Edwin R. Addison 39 Executive Vice President,
Director
James W. Dowe, III 54 Chief Scientist, Director
Jay H. Diamond 44 Director
J. M. Kennedy 49 Director
W. Frank King III 56 Director
Philip J. O'Reilly 58 Director
Richard M. Crooks, Jr. has been Chairman of the Board of Directors and
a Director of the Company since June 1990. Mr. Crooks has been
President of RMC Consultants, a financial advisory services firm, since
June 1990. Mr. Crooks is a director of and consultant to Allen &
Company Incorporated ("Allen"), a privately held investment banking
firm, which is the Company's principal shareholder. Mr. Crooks served
as a Managing Director of Allen for more than five years prior to June
1990. Mr. Crooks is a director of IMRE Corporation, a biotechnology
company engaged in developing, manufacturing and marketing products for
the treatment of immune-related diseases and cancers.
<PAGE>
- 23 -
Patrick C. Condo was named President and Chief Executive Officer in November
1995, and a Director in January 1996. Mr. Condo was President from May 1995 to
November 1995. He became Executive Vice President in January 1995 after being
the Director of Business Development since November 1992. From October 1987 to
November 1992, Mr. Condo held several manager level positions for Digital
Equipment Corporation's Image, Video and Voice Business Unit and Software
Business Group in New Hampshire.
James H. Buchanan joined the Company as Chief Financial Officer in September
1995. Mr. Buchanan was elected Secretary and Treasurer of the Company on
November 17, 1995. From March 1991 to August 1995, Mr. Buchanan was Vice
President Controller and Treasurer of Legent Corporation, a software development
company. Prior to that, he held several financial management positions with
Norfolk Southern Corporation and PepsiCo. Mr. Buchanan is a certified public
accountant.
Edwin R. Addison became the Executive Vice President and a Director of the
Company in July 1995 in connection with the Company's acquisition of ConQuest
Software, Inc., which Mr. Addison helped to found in 1989. Mr. Addison was the
President of ConQuest. Prior to ConQuest, Mr. Addison was a Senior Associate at
Booz Allen & Hamilton and a Senior Program Manager with Westinghouse Electric
Corporation. He has served from time to time as a part-time graduate instructor
in Computer Science and Electrical Engineering at the Johns Hopkins University
in Baltimore, Maryland.
James W. Dowe III has been the Company's Chief Scientist since its formation in
February 1980 and from February 1980 until June 1990, Chairman of the Board. He
was also President and Chief Executive Officer from the date of the Company's
formation until July 1984. Mr. Dowe is a consultant to the Company and is a
frequent keynote speaker at industry events.
Jay H. Diamond has been a Director of the Company since February 1989. Mr.
Diamond has been a partner in the law firm of Tenzer, Greenblatt, LLP since
February 1996. Prior to that, he was a partner in the law firm of Holtzmann,
Wise & Shepard, in New York, New York, where he had been in practice for more
than five years.
J. M. Kennedy has been a Director of the Company since March 1992. He also held
the position of Chief Executive Officer of the Company from January 1992 to
November 1995, and he was President of the Company from May 1992 until May 1995.
From January 1990 to January 1992, Mr. Kennedy was a partner in Geneva Group
International, a management consulting and search firm specializing in emerging
software companies. Prior to that, he held several sales, marketing and
management positions with Cullinet Inc., Seagate Technology, GRID Systems and
IBM.
W. Frank King III was elected a Director of the Company in June 1992. He is
presently President and a Director of PSW Technologies, formerly Pencom
Software, a leading provider of technology and resources for open systems
computing. From 1988 to November 1991, Dr. King was a Senior Vice President of
Development of Lotus Development Corporation, a software company. Prior to
joining Lotus, Dr. King held various positions with IBM over 17 years, the most
recent as Vice President of Development in its Entry Systems Division. Dr. King
is a director of Weitek Corporation, a semiconductor company, State of the Art,
Inc., a developer of high-end microcomputer accounting software, SystemSoft
Corporation, a software engineering company, and Auspex, Inc, a computer server
manufacturer.
<PAGE>
- 24 -
Philip J. O'Reilly has been a Director of the Company since April 1988. Mr.
O'Reilly is a partner in the law firm of O'Reilly, Marsh, Kearney & Corteselli
P.C., in Mineola, New York. Mr. O'Reilly has been in private practice for more
than the past five years. Mr. O'Reilly is a director of IMRE Corporation, a
biotechnology company engaged in developing, manufacturing and marketing
products for the treatment of immune-related diseases and cancers.
ITEM 11. EXECUTIVE COMPENSATION.
Information on executive compensation will be included under the heading
"Executive Compensation" of the Proxy Statement incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information of beneficial ownership of the Company's voting securities by each
director and all officers and directors as a group, and by any person known to
beneficially own more than 5% of any class of voting security of the Company
will be included under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to certain relationships and related transactions will be
included under the heading "Certain Relationships and Related Transactions" in
the Proxy Statement incorporated herein by reference.
<PAGE>
- 25 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(A) DOCUMENTS FILED AS PART OF FORM 10-K
1. FINANCIAL STATEMENTS:
The following financial statements of the Company are submitted in a
separate section pursuant to the requirements of Form 10-K, Part I,
Item 8 and Part IV, Items 14(a) and 14(d):
Index to Consolidated Financial Statements
Reports of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
The following schedule is filed as part of this Annual Report on Form
10-K and should be read in conjunction with the Company's financial
statements:
Schedule II, Valuation and Qualifying Accounts
All other schedules are omitted because they are not required,
inapplicable, or the information is otherwise shown in the financial
statements or notes to the financial statements.
3. EXHIBITS:
EXHIBIT NUMBER AND DESCRIPTION
2.01 Agreement and Plan of Merger Between Excalibur
Technologies Corporation, Excalibur Acquisition Corp.
and ConQuest Software, Inc., dated July 5, 1995. (4)
3.01 Certificate of Incorporation of Excalibur
Technologies Corporation. (2)
3.02 Bylaws of Excalibur Technologies Corporation. (2)
10.01 Savvy Research and Development Agreement between
Excalibur Technologies Corporation and Nikkei
Information Systems, signed on May 25, 1989. (2)
10.02 Savvy Programs Software Development and Marketing
Agreement between Excalibur Technologies Corporation
and Nikkei Information Systems, signed on May 25,
1989. (2)
<PAGE>
- 26 -
10.03 Producer Licensed, Digital Distributed Software Agreement,
dated as of April 6, 1990, between Excalibur Technologies
Corporation and Digital Equipment Corporation, as amended by
First Amendment, dated December 26, 1990, and as modified by
Amendment, dated December 31, 1991. (3)
10.04 Consulting Agreement with James W. Dowe III, dated
July 1, 1990. (2)
10.05 Incentive Stock Option Plan, dated April 1989. (2)
10.06 Agreement and Plan of Merger Between Excalibur
Technologies Corporation, Excalibur Acquisition Corp.
and ConQuest Software, Inc., dated July 5, 1995. (4)
10.07 Employment Agreement, dated July 20, 1995, with Edwin
R. Addison.
10.08 1995 Incentive Plan, dated November 1995. (5)
10.09 ConQuest Incentive Stock Option Plan, dated August 19, 1993.
10.10 Office Lease (10440 Little Patuxent Parkway, Suite
800, Columbia, MD), commencing January 1, 1996.
10.11 Office Lease (1959 Palomar Oaks Way, Carlsbad, CA),
commencing November 15, 1995.
10.12 Office Lease (1921 Gallows Road, Vienna, VA), commencing in
May 1996.
22.01 Subsidiaries of Excalibur Technologies Corporation.
23.01 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.02 Consent of Price Waterhouse LLP, Independent
Accountants.
- -----------------------
(1) Incorporated herein by reference to Form 10-K for the year ended January
31, 1990, filed May 1, 1990.
(2) Incorporated herein by reference to Form 10-K for the year ended January
31, 1991, filed April 22, 1991.
(3) Incorporated herein by reference to the Registration Statement on
Form S-3 (Registration No. 33-44287) of the Company, effective
February 18, 1992.
(4) Incorporated herein by reference to Form 8-K, filed August 4, 1995.
(5) Incorporated herein by reference to the Proxy Statement for the 1995
Annual Meeting of Shareholders, dated October 16, 1995.
<PAGE>
- 27 -
(B) REPORTS ON FORM 8-K.
On March 25, 1996, the Company filed a report on Form 8-K announcing new
customers and partners for its RetrievalWare searching and profiling software
tools and its EFS turnkey document image management solution.
On November 22, 1995, the Company filed a Report on Form 8-K containing its
unaudited results of operations for the seven month period ended August 31,
1995, which included thirty days of postmerger combined operations. The
publication of these results satisfied the requirement of ASR No. 135 which
prohibited sales of Excalibur shares by Excalibur affiliates prior to such
publication. Excalibur completed its acquisition of ConQuest Software, Inc. on
July 20, 1995.
On November 9, 1995, the Company filed an amendment to its Report on Form 8-K
dated August 4, 1995, containing the audited financial statements and required
pro forma financial information relating to the Company's acquisition of
ConQuest Software, Inc.
<PAGE>
- 28 -
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
Reports of Independent Public Accountants F-1
Consolidated Balance Sheets
As of January 31, 1996 and 1995 F-3
Consolidated Statements of Operations
For the fiscal years ended January 31, 1996, 1995, and 1994 F-4
Consolidated Statements of Shareholders' Equity
For the fiscal years ended January 31, 1996, 1995, and 1994 F-5
Consolidated Statements of Cash Flows
For the fiscal years ended January 31, 1996, 1995, and 1994 F-6
Notes to Consolidated Financial Statements F-8
Schedule II - Valuation and Qualifying Accounts
For the fiscal years ended January 31, 1996, 1995, and 1994 F-17
<PAGE>
- F1 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Excalibur Technologies Corporation:
We have audited the accompanying consolidated balance sheets of Excalibur
Technologies Corporation (a Delaware corporation) and subsidiaries as of January
31, 1996 and 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended January 31, 1996. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits. We did not audit the financial
statements for the year ended December 31, 1993, of ConQuest Software, Inc., a
company acquired during fiscal year 1996 in a transaction accounted for as a
pooling of interests, as discussed in Note 1. Such statements are included in
the consolidated financial statements of Excalibur Technologies Corporation and
subsidiaries for the fiscal year ended January 31, 1994 and reflect total
revenues of 13 percent and net loss of 20 percent of the related consolidated
totals for that fiscal year. These statements were audited by other auditors
whose report, dated April 15, 1994, has been furnished to us, and our opinion,
insofar as it relates to amounts included for ConQuest Software, Inc., is based
solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Excalibur Technologies Corporation
and subsidiaries as of January 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material
respects, the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.,
March 22, 1996
<PAGE>
- F2 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ConQuest Software, Inc.
In our opinion, the statements of operations, of changes in stockholders'
deficit and of cash flows of ConQuest Software, Inc. (not presented separately
herein) present fairly, in all material respects, the results of its operations
and its cash flows for the year ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 2 (not presented separately
herein) to the financial statements, the Company has suffered recurring losses
from operations, has a net capital deficiency and has current liabilities in
excess of current assets that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PRICE WATERHOUSE LLP
Washington, D.C.
April 15, 1994
<PAGE>
- F3 -
<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<CAPTION>
January 31
------------------------
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................... $ 2,903 $ 2,645
U.S. government securities, at cost.......... 10,341 8,605
Accounts receivable, net..................... 6,849 3,650
Prepaid expenses and other .................. 675 484
--------- ---------
Total current assets.................... 20,768 15,384
Equipment and Leasehold Improvements, net....... 1,943 2,523
Other Assets.................................... 335 44
--------- ---------
$ 23,046 $ 17,951
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $ 1,005 $ 968
Accrued expenses............................. 2,999 3,326
Deferred revenues............................ 2,759 3,018
Deferred compensation........................ 1,032 1,164
--------- ---------
Total current liabilities............... 7,795 8,476
--------- ---------
Shareholders' Equity:
5% Cumulative convertible preferred stock,
$0.01 par value, preference in liquidation
$10 per share, 1,000 shares authorized;
27 shares issued and outstanding........ 271 271
Common stock, $0.01 par value, 20,000
shares authorized; 11,953 and 11,231
shares issued and outstanding.......... 119 112
Additional paid-in capital................... 51,272 44,523
Deferred compensation........................ - (38)
Accumulated deficit ......................... (36,446) (35,367)
Cumulative translation adjustment............ 35 (26)
--------- ---------
Total shareholders' equity.............. 15,251 9,475
--------- ---------
$ 23,046 $ 17,951
========= =========
The accompanying notes to the financial statements are an integral
part of these consolidated balance sheets.
</TABLE>
<PAGE>
- F4 -
<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
For the Fiscal Years Ended January 31
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Software...................... $ 15,004 $ 10,133 $ 10,878
Maintenance................... 3,671 2,505 1,407
--------- --------- ---------
18,675 12,638 12,285
--------- --------- ---------
Expenses:
Sales and marketing........... 8,791 9,399 10,124
Research and product
development................... 4,972 5,085 5,483
General and
administrative................ 3,330 5,597 3,758
Cost of software revenues..... 1,294 1,197 1,359
Cost of maintenance revenues.. 573 524 343
Restructuring costs........... 653 776 -
Merger costs.................. 490 - -
--------- --------- ---------
20,103 22,578 21,067
--------- --------- ---------
Operating loss................... (1,428) (9,940) (8,782)
Other income / (expenses):
Interest income............... 601 431 485
Interest expense.............. (57) (87) (22)
Other income.................. - 208 -
--------- --------- ---------
Net loss......................... (884) (9,388) (8,319)
Dividends on preferred stock..... 14 14 14
--------- --------- ---------
Net loss applicable to
common stock................ $ (898) $ (9,402) $ (8,333)
========= ========= =========
Net loss per common share........ $ (0.08) $ (0.85) $ (0.79)
========= ========= =========
Weighted-average number of
common shares outstanding..... 11,496 11,094 10,532
========= ========= =========
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
</TABLE>
<PAGE>
- F5 -
<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<CAPTION>
Preferred Stock Common Stock Add'l Cumulative
--------------- ------------ Paid-in Deferred Accumulated Translation
Shares $ Shares $ Capital Comp. Deficit Adjust. Total
Balance, ------ ----- ----- ---- -------- ------- --------- ------ --------
January 31,1993 as
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
previously reported....... 27 $ 271 8,842 $ 88 $33,992 $ - $(16,658) $ 10 $17,703
Adjustment for pooling
of interests (Note 1)..... - - 894 9 414 - (988) - (565)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance as restated....... 27 $ 271 9,736 $ 97 $34,406 $ - $(17,646) $ 10 $17,138
Conversion of
notes payable............. - - 45 - 185 - - - 185
Issuance of common stock
upon exercise of options.. - - 305 3 2,479 - - - 2,482
Sales of common stock..... - - 109 1 454 - - - 455
Compensation paid
in common stock........... - - 57 1 377 - - - 378
Issuance of common stock
for fixed assets.......... - - 21 - 48 - - - 48
Translation
adjustment................ - - - - - - - (4) (4)
Net loss.................. - - - - - - (8,319) - (8,319)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance, January 31, 1994 27 $ 271 10,273 $102 $37,949 $ - $(25,965) $ 6 $12,363
Conversion of
notes payable............. - - 7 - 29 - - - 29
Sales of common stock,
net of offering costs..... - - 735 7 5,328 - - - 5,335
Compensation paid
in common stock........... - - 156 2 848 - - - 850
Issuance of common stock
upon exercise of options.. - - 76 1 463 (78) - - 386
Issuance of common stock
for antidilution
protection in agreement... - - 6 - - - - - -
Treasury stock purchase... - - (22) - (94) - - - (94)
Amortization of deferred
compensation.............. - - - - - 40 - - 40
Accrued dividends paid.... - - - - - - (14) - (14)
Translation adjustment.... - - - - - - - (32) (32)
Net loss.................. - - - - - - (9,388) - (9,388)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance,January 31, 1995.. 27 $271 11,231 $112 $44,523 $ (38) $(35,367) $ (26) $ 9,475
Issuance of common stock
upon exercise of options.. - - 714 7 6,726 - - - 6,733
Issuance of common stock
for services.............. - - 8 - 36 - - - 36
Amortization of deferred
compensation.............. - - - - (13) 38 - - 25
Accrued dividends paid.... - - - - - - (14) - (14)
Translation adjustment.... - - - - - - - 61 61
Adjustment for change in
ConQuest fiscal year...... - - - - - - (181) - (181)
Net loss.................. - - - - - - (884) - (884)
------ ----- ------ ---- -------- ------- --------- ------ --------
Balance,January 31, 1996.. 27 $ 271 11,953 $119 $51,272 - $(36,446) $ 35 $15,251
====== ===== ====== ==== ======== ======= ========= ====== ========
The accompanying notes to the financial statements are an integral
part of these consolidated statements.
</TABLE>
<PAGE>
- F6 -
<TABLE>
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Fiscal Years Ended
January 31
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ................................... $ (884) $ (9,388) $ (8,319)
Adjustments to reconcile net loss to
net
cash used in operating activities:
Depreciation and amortization ........... 1,048 1,084 1,173
Loss on disposal of assets .............. 66 450 4
Compensation paid in common stock ....... 36 850 378
Amortization of deferred compensation ... 25 40 -
Changes in operating assets and liabilities:
Accounts receivable, net ................ (3,289) (266) (1,065)
Prepaid expenses and other .............. (476) 131 111
Accounts payable and accrued expenses ... 47 1,196 50
Deferred revenues ....................... (244) 1,179 1,193
Deferred compensation ................... (88) 255 412
Adjustment for change in fiscal year of
ConQuest ................................... (181) - -
--------- --------- ---------
Net cash used in operating activities ... (3,940) (4,469) (6,063)
--------- --------- ---------
Cash Flows from Investing Activities:
Purchase of investments ................. (12,023) (8,903) (12,285)
Proceeds from maturities of
investments ............................. 10,287 9,649 15,764
Purchases of equipment and leasehold
improvements ............................ (567) (695) (1,202)
Proceeds from disposal of assets ........ 26 42 14
--------- --------- ---------
Net cash (used in) provided by
investing activities .................... (2,277) 93 2,291
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from notes payable ............. 238 189 252
Proceeds from the issuance
of common stock ......................... 6,688 5,678 2,877
Dividends paid .......................... (14) (14) -
Repayment of notes payable .............. (549) (48) -
--------- --------- ---------
Net cash provided by financing
activities .............................. 6,363 5,805 3,129
--------- --------- ---------
The Effect of Exchange Rate Changes on
Cash ....................................... 112 (64) (5)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents ........................... 258 1,365 (648)
Cash and Cash Equivalents, beginning of
period ..................................... 2,645 1,280 1,928
-------- -------- --------
Cash and Cash Equivalents, end of period ... $ 2,903 $ 2,645 $ 1,280
======== ======== ========
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
</TABLE>
<PAGE>
- F7 -
<TABLE>
<CAPTION>
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued, in thousands)
For the Fiscal Years Ended
January 31
-----------------------------
1996 1995 1994
------ ------ -------
Supplemental Disclosures of Cash Flow
Information:
<S> <C> <C> <C>
Cash paid for interest ........................ $ 61 $ 8 $ 13
===== ===== =====
Supplemental Disclosures of Noncash
Investing and Financing Activities:
Purchase of treasury stock with note payable... $ - $ 94 $ -
===== ===== =====
Stock options exercised under deferred
compensation arrangements...................... $ 45 $ 43 $ 60
===== ===== =====
Conversion of notes payable into common stock.. $ - $ 29 $ 185
===== ===== =====
Issuance of notes in relation to severance
agreements..................................... $ - $ 89 $ -
===== ===== =====
Issuance of common stock for fixed assets...... $ - $ - $ 48
===== ===== =====
The accompanying notes to the financial statements are an
integral part of these consolidated statements.
</TABLE>
<PAGE>
- F8 -
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY
OPERATIONS AND ORGANIZATION
The Company designs, develops, markets and supports computer software products
used for the document imaging and multimedia information retrieval marketplaces.
The Company also offers consulting, training, maintenance and systems
integration services in support of its customers' use of its software products.
In addition, the Company performs research and development under contract and
licenses proprietary software products for use in compound-document, digital
library, positive identification, and on-line services and information retrieval
systems. Distribution of the Company's products occurs through value added
resellers, system integrators, original equipment manufacturers, other
distributors and a direct sales force to North American and international
customers including commercial firms in various industries and government
agencies.
The Company has incurred cumulative losses of approximately $18.6 million over
the last three fiscal years and the accumulated deficit of the Company at
January 31, 1996 was $36,446,000. The Company's operations are subject to
certain risks and uncertainties including, among others, actual and potential
competition by entities with greater financial resources, experience and market
presence than the Company; the success of the Company's product marketing and
product distribution strategies; risks associated with acquisitions and
international expansion; the need to manage growth and certain technology risks.
The consolidated financial statements include the accounts of Excalibur
Technologies Corporation ("Excalibur"); its wholly-owned subsidiary, Excalibur
Technologies International, Ltd. ("ETIL"); and the acquired company, ConQuest
Software, Inc. ("ConQuest"). These entities are collectively referred to
hereinafter as the "Company." All significant intercompany transactions and
accounts have been eliminated. Certain amounts presented in the prior years'
financial statements have been reclassified to conform with the fiscal 1996
presentation.
ACQUISITION OF CONQUEST SOFTWARE, INC.
In July 1995, the Company acquired ConQuest, a private company located in
Columbia, Maryland, engaged in the business of providing natural language text
management software tools. The former shareholders of ConQuest received
approximately 1,427,000 shares of common stock of Excalibur in exchange for all
of the common stock of ConQuest. Outstanding options to purchase common stock of
ConQuest were converted into options to purchase approximately 572,000 shares of
Excalibur common stock. The acquisition was accounted for as a pooling of
interests and, as such, the accompanying consolidated financial statements
reflect the combined results of the pooled businesses for the respective periods
presented. The Company recorded a charge of approximately $490,000 for the
estimated transaction costs to complete the merger between Excalibur and
ConQuest. The costs included legal, accounting and other professional fees of
$363,000 and other costs of $127,000. These costs were paid by January 31, 1996.
<PAGE>
- F9 -
Separate results of Excalibur and ConQuest for the periods preceding the
acquisition are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal quarter Fiscal years
ended ended January 31
April 30, 1995 1995 1994
Revenues: ---------- ---------- ----------
<S> <C> <C> <C>
Excalibur, previously reported ... $ 2,801 $ 10,841 $ 10,665
ConQuest.......................... 840 1,797 1,620
---------- ---------- ----------
Total, as restated................... $ 3,641 $ 12,638 $ 12,285
========== ========== ==========
Net Loss:
Excalibur, previously reported ... $ (466) $ (6,926) $ (6,641)
ConQuest.......................... (137) (2,462) (1,678)
---------- ---------- ----------
Total, as restated................... $ (603) $ (9,388) $ (8,319)
========== ========== ==========
</TABLE>
Prior to its acquisition by Excalibur, ConQuest reported operating results on a
calendar year basis. ConQuest's separate results for prior years have not been
restated to conform to the fiscal year of Excalibur. Therefore, the Company's
consolidated balance sheet at January 31, 1995 combines the consolidated balance
sheet of Excalibur and ETIL as of January 31, 1995 and the balance sheet of
ConQuest as of December 31, 1994. Further, ConQuest's separate results of
operations for the month ended January 31, 1995 are not reflected in the
consolidated statement of operations for the current fiscal year. The revenues,
operating loss and net loss of ConQuest for the month ended January 31, 1995
were $138,000, $177,000 and $181,000, respectively. The results of operations
contained in these consolidated financial statements for the fiscal years ended
January 31, 1995 and 1994 combine those of Excalibur for the periods, as
previously reported, with those of ConQuest for the calendar years ended
December 31, 1994 and 1993, respectively.
(2) SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
- F10 -
REVENUE RECOGNITION
Revenues from the sale of computer software licenses are recognized upon
shipment of product provided that no significant vendor obligations remain and
that collection of the resulting receivable is considered probable. Revenues
related to agreements with customers that contain future performance
requirements are recognized in accordance with such performance requirements.
Revenues related to customer support agreements are deferred and recognized
ratably over the term of the respective agreements, usually one year.
Maintenance revenues that are bundled with initial licensing fees are deferred
and recognized over the term of the related maintenance periods, typically 90
days.
RESEARCH AND DEVELOPMENT COSTS
No product development costs were capitalized, and there were no capitalized
costs not yet amortized, during the fiscal years ended January 31, 1996, 1995
and 1994.
CASH AND CASH EQUIVALENTS
For purposes of the balance sheets and statements of cash flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. U.S. government securities are considered
investments and are excluded from cash equivalents regardless of their
maturities. Cash equivalents consist of funds deposited in money market
accounts. Consequently, the carrying amount of cash and cash equivalents
approximates fair value.
MARKETABLE SECURITIES
Under the Statement of Financial Accounting Standard ("SFAS") No. 115,
"Accounting For Certain Investments in Debt and Equity Securities," that was
adopted February 1, 1994, the Company classifies its marketable securities as
held-to-maturity securities. Accordingly, marketable securities, consisting
entirely of U.S. government securities, are carried at cost, adjusted for
premium and discount amortization. At January 31, 1996 and 1995, the aggregate
fair value of the securities based upon quoted market prices was $10,345,000 and
$8,583,000, respectively. The Company's adoption of SFAS No. 115 did not have an
impact on the Company's consolidated financial statements as marketable
securities previously were carried at cost.
INCOME TAXES
Deferred taxes are provided utilizing the liability method as prescribed by SFAS
No. 109, "Accounting for Income Taxes," whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
<PAGE>
- F11 -
DEPRECIATION AND AMORTIZATION
Depreciation of office furniture and equipment is provided over the estimated
useful lives of the assets on a straight-line basis. Lives range from three to
ten years. Amortization of leasehold improvements is provided on a straight-line
basis over the term of the applicable lease. Accumulated depreciation and
amortization of office furniture and equipment and leasehold improvements as of
January 31, 1996 and 1995 was approximately $2,838,000 and $1,912,000,
respectively.
NET LOSS PER COMMON SHARE
Net loss per common share is calculated based on the weighted-average number of
common shares outstanding during each period, after deducting the dividends on
preferred stock (see Note 3). Common stock equivalents (stock options, warrants
and cumulative convertible preferred stock) were excluded from the net loss per
share computations for all periods presented herein because of their
anti-dilutive effect.
TRANSLATION OF FOREIGN FINANCIAL STATEMENTS
Assets and liabilities of foreign operations are translated at the year-end rate
of exchange. Statements of operations are translated at the average rates of
exchange during the year. Gains or losses from translating foreign currency
financial statements are accumulated in a separate component of shareholders'
equity.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents, marketable securities, and
accounts receivable. The Company's investment policy limits its exposure to
concentrations of credit risk. The Company sells its products primarily to U.S.
government agencies and to major corporations, including value-added resellers
that serve a wide variety of U.S. and foreign markets. The Company extends
credit to its corporate customers based on an evaluation of the customer's
financial condition, generally without requiring a deposit or collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses. The allowance for doubtful accounts
was $375,000 and $374,000, respectively, at January 31, 1996 and 1995.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," that will be effective for the Company's fiscal year
1997 consolidated financial statements. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The impact of
adopting this statement is not expected to be material to the Company's results
of operations or financial position.
<PAGE>
- F12 -
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." Effective with the Company's fiscal year 1997 consolidated
financial statements, this statement will require new disclosures about certain
employee stock options based on their fair value at the date of grant. Companies
may also base the recognition of compensation cost for new and modified options
on these fair values. Currently, the Company plans to continue to apply existing
accounting rules for stock-based compensation pertaining to employees as allowed
under SFAS No. 123. However, fair value accounting will be required for
transactions involving the issuance of stock options or other equity instruments
to acquire goods or services from nonemployees.
(3) CAPITALIZATION
STOCK OFFERINGS
On March 8, 1996, the Company completed a private placement of 350,000 shares of
the Company's common stock at an offering price of $25.00 per share, resulting
in net proceeds of approximately $8,388,000. Allen & Company Incorporated
("Allen"), a shareholder of the Company, acted as the placement agency in this
transaction and received a fee of approximately $350,000.
On April 25, 1994, the Company completed a private placement of 625,000 shares
of the Company's common stock to an unaffiliated institutional investor, at an
offering price of $8.00 per share, resulting in net proceeds of approximately
$4,800,000 to the Company. Allen acted as the placement agency in this
transaction and received a fee of $200,000.
CUMULATIVE CONVERTIBLE PREFERRED STOCK
The cumulative convertible preferred stock is convertible into common stock at
the rate of 10 shares of common stock per share of cumulative convertible
preferred stock. Holders of the cumulative convertible preferred stock are
entitled to receive cumulative dividends of $0.50 per share per annum, payable
annually on April 1 if declared by the Board of Directors, in cash or shares of
common stock (to be determined by the Board of Directors) valued at the lower of
$1.00 per share or the market price on the date of declaration. The amount of
accumulated dividends which have not been declared or accrued at January 31,
1996 is approximately $14,000.
In the event of voluntary liquidation, dissolution or winding-up of the Company
or upon any distribution of assets, whether voluntary or involuntary, holders of
the convertible preferred stock would have a liquidation preference of $10 per
share, plus accrued and unpaid dividends.
<PAGE>
- F13 -
(4) EMPLOYEE BENEFIT PLANS
STOCK OPTIONS
The Company has an Incentive Stock Option Plan (the "Plan"), to attract, retain
and reward key employees of the Company by offering such key employees
performance-based stock incentives and/or other equity interest or equity-based
incentives in the Company, as well as performance-based incentives payable in
cash. The Plan is administered by a Committee appointed by the Board of
Directors, which has the authority, among other things, to determine which
officers, directors and key employees are eligible for awards under the Plan,
the type and amount of incentives to be awarded, and the restrictions and terms
of such incentives. In June 1993, the Company's shareholders approved an
increase in the number of shares reserved for issuance under the Plan from
1,600,000 to 2,450,000. At January 31, 1996, 455,563 shares remain available for
issuance under the Plan.
The Plan provides for the issuance of qualified and non-qualified stock options.
Qualified Incentive Stock Options are granted at an exercise price equal to the
fair market value of the common stock, calculated as an average of the closing
price on the ten trading days prior to the date of grant, have ten-year terms,
and vest over four-year periods. Non-qualified options are granted at an
exercise price at or below the fair market value of the common stock at the date
of grant and may be immediately exercisable. The Company records compensation
expense equal to the difference between the fair market value of the stock at
the date of grant and the exercise price, over the vesting period.
The Plan also provides that optionees may be granted stock appreciation rights
(SARs) at the discretion of the Board of Directors. To date, no SARs have been
granted. The vesting schedule of outstanding options, and SARs outstanding for
at least six months, would accelerate under the Plan in the event of the
occurrence of certain events constituting a change in control of the Company. In
addition to the options awarded under the Plan, the Directors award and
authorize additional options as they deem appropriate. During fiscal year 1996,
no stock options were granted outside the Plan.
<PAGE>
- F14 -
The following table summarizes the Company's stock option activity:
Number Price Range Per Share
------ ---------------------
Balance, January 31, 1993 2,044,705 $ .35 - 17.02
Granted 324,000 11.64 - 15.33
Exercised (290,705) .35 - 10.00
Canceled (96,100) 7.36 - 16.91
---------
Balance, January 31, 1994 1,981,900 1.00 - 17.02
Granted 145,000 6.34 - 11.60
Exercised (55,000) 6.25 - 6.25
Canceled (228,450) 8.47 - 16.64
----------
Balance, January 31, 1995 1,843,450 1.00 - 17.02
Granted 588,000 7.44 - 26.21
Exercised (702,661) 1.00 - 16.91
Canceled (183,963) 7.44 - 16.64
----------
Balance, January 31, 1996 1,544,826 $ 6.34 - 26.21
==========
At January 31, 1996, options to purchase a total of 933,189 shares were
immediately exercisable at prices ranging from $6.34 to $20.56 per share.
The Company also adopted the 1995 Incentive Plan (the "1995 Plan") in November
1995, under which Excalibur employees formerly employed by ConQuest were granted
incentive stock options to purchase 324,150 restricted shares of Excalibur
common stock at an exercise price of $15.23 per share; of these, 13,400 were
canceled during fiscal 1996. The 1995 Plan authorizes the granting of options to
purchase up to 400,000 shares of the Company's common stock. The terms of the
1995 Plan are identical to the terms of the Plan described above, except that
the 1995 Plan does not provide for the award of stock appreciation rights. At
January 31, 1996, options to purchase 38,844 shares were exercisable under the
1995 Plan.
Pursuant to the merger with ConQuest, outstanding options to purchase common
stock of ConQuest were converted into options to purchase 572,481 restricted
shares of Excalibur common stock. The ConQuest Stock Option Plan (the "ConQuest
Plan") was adopted in 1991 and provided for the issuance of qualified and
nonqualified stock options.
<PAGE>
- F15 -
The following table summarizes the activity under the ConQuest Plan, as
converted to Excalibur shares:
Number Price Range Per Share
------ ---------------------
Balance, January 31, 1993 523,598 $ 1.04 - 4.14
Granted 98,597 4.14 - 4.14
Exercised - -
Canceled - -
------
Balance, January 31, 1994 622,195 1.04 - 4.14
Granted 55,278 2.07 - 4.14
Exercised (37,930) 1.04 - 3.11
Canceled (67,062) 1.04 - 4.14
--------
Balance, January 31, 1995 572,481 1.04 - 4.14
Granted - -
Exercised (11,944) 4.14 - 4.14
Canceled - -
------
Balance, January 31, 1996 560,537 $ 1.04 - 4.14
=======
At January 31, 1996, all of the outstanding options to purchase Excalibur shares
under the ConQuest Plan were exercisable.
DEFERRED COMPENSATION
ConQuest entered into arrangements with certain of its officers, employees and
independent consultants to defer a portion of their compensation. Deferred
compensation to employees is restricted for use in the exercise of stock
options. However, if the employees' options have expired because the term has
lapsed or because employment has been terminated, the employee may request cash
redemption one year after expiration, with 90 days notice. During fiscal years
1996, 1995 and 1994, deferred compensation of $45,000, $43,000 and $60,000,
respectively, was settled through the exercise of options to purchase stock.
Pursuant to the merger with ConQuest, deferred compensation of $88,000 was paid
in cash. Effective January 1, 1993, ConQuest revised the deferred compensation
arrangements and discontinued the accrual of interest on deferred compensation
balances for employees only. Interest continues to accrue on deferred
compensation payable to independent consultants. Accrued interest, which is
included in the deferred compensation balances, totaled $60,000 and $67,000,
respectively at January 31, 1996 and 1995.
EMPLOYEE SAVINGS PLANS
The Company has an employee savings plan which qualifies under Section 401(k) of
the Internal Revenue Code (the "Code"). Under the plan, participating U.S.
employees may defer up to 20 percent of their pre-tax salary, but not more than
statutory limits. During fiscal year 1996, the Company made a discretionary
contribution of $3,000 to the savings plan.
<PAGE>
- F16 -
Effective January 1, 1994, ConQuest established an employee contribution plan
intended to be a qualified plan under Section 401 (k) of the Code. Each
participant may elect pre-tax salary deferrals, up to the maximum percentage
allowable by the plan and under the Code. Matching contributions are
discretionary and none were made through the end of fiscal 1996.
(5) INCOME TAXES
Since the Company incurred pretax losses for the fiscal year periods presented
herein, there are no income taxes provided in the accompanying statements of
operations. Though management believes that future net operating income and
taxable income of the Company may be sufficient to realize the benefits of the
Company's net operating loss carryforwards and to utilize the associated
deferred tax asset, a valuation allowance has been recorded to offset completely
the carrying value of such deferred tax asset due to the Company's lack of prior
earnings and the size of the accumulated deficit.
As of January 31, 1996, the Company had net operating loss carryforwards of
approximately $48,737,000 that expire at various dates beginning in fiscal year
1997 through fiscal year 2011. Realization of the benefits of the net operating
loss carryforwards may be limited in the event of future changes in the
ownership of the Company. At the same date, the Company also had net operating
loss carryforwards relating to ConQuest of approximately $2,855,000. Because
there was a change in ownership of ConQuest, as defined by the Code, during
fiscal year 1996, the Company's future realization of the benefits of these net
operating loss carryforwards, that begin to expire in fiscal year 2009, also may
be limited. Despite the NOL carryfowards, the Company may have income tax
liability in future years due to the application of the alternative minimum tax
rules of the Code.
(6) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company conducts its operations using leased office facilities. The leases
terminate at various dates through fiscal year 2002. The Company also has
operating leases for automobiles at its foreign subsidiary which are included in
the figures below. Future minimum rental payments under noncancelable operating
leases as of January 31, 1996, net of sublease payments, are as follows (in
thousands):
Year Ending
January 31
1997 $ 1,154
1998 996
1999 936
2000 849
2001 714
2002 480
===========
$ 5,129
===========
<PAGE>
- F17 -
Total rental expense under operating leases, net of sublease income, was
approximately $870,000, $873,000, and $877,000 in the fiscal years 1996, 1995
and 1994, respectively. In fiscal year 1995, other income included approximately
$208,000 that ConQuest received from its former landlord as incentive for
ConQuest to terminate its lease for office space.
EMPLOYMENT AGREEMENTS
In connection with the merger with ConQuest, the Company entered into employment
agreements with four former officers of ConQuest. The employement agreements,
which expire in July 1997, provide for aggregate minimum annual salary
compensation of $548,000 plus incentive compensation.
(7) RESTRUCTURING COSTS
In the fourth quarter of fiscal year 1996, the Company completed an assessment
of its personnel and facilities requirements and finalized a corporate
restructuring and relocation plan. This plan included the relocation of the
Company's corporate headquarters from San Diego, California to McLean, Virginia
and the consolidation of the product development and related customer support
teams into two facilities. The relocation was made to move corporate management
closer to the Company's major domestic and European customers and to better
organize the technical staff to support major product development initiatives.
Consequently, the Company recorded a restructuring charge of $653,000 in the
fourth quarter of the current fiscal year. This charge consisted of severance
payments to terminated employees, including a balance payable to the Company's
former Chief Executive Officer under an employment agreement, and lease
abandonment costs. A substantial amount of the balance accrued at January 31,
1996 should be paid during fiscal year 1997.
During fiscal year 1995, the Company recorded a charge of $312,000 for a
corporate restructuring that included the consolidation of a remote development
facility. Additionally, the Company reviewed its computer equipment
requirements, and consistent with its strategic direction, recorded a $464,000
charge for equipment no longer meeting the requirements of its current product
development.
<PAGE>
- F18 -
(8) OPERATIONS BY GEOGRAPHIC AREA
The major portion of the international sales of the Company for the past three
years were made by the Company's foreign subsidiary, ETIL, which was established
in the United Kingdom during fiscal year 1993. The following table presents
information about the Company's operations by geographical area (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended January 31
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales to unaffiliated customers:
North American operations $15,124 $10,416 $10,867
ETIL 3,551 2,222 1,418
----- ----- -----
$18,675 $12,638 $12,285
======= ======= =======
Net loss:
North American operations $ (597) $(9,069) $(7,899)
ETIL (287) (319) (420)
----- ----- -----
$ (884) $(9,388) $(8,319)
========= ======== ========
Identifiable assets:
North American operations $20,528 $16,324 $16,970
ETIL 2,518 1,627 1,045
----- ----- -----
$23,046 $17,951 $18,015
======= ======= =======
</TABLE>
<PAGE>
- F19 -
(9) OTHER FINANCIAL DATA
a) Equipment and leasehold improvements at January 31 consist of the
following (in thousands):
1996 1995
---- ----
Computer equipment $4,061 $3,664
Office furniture 631 615
Leasehold improvements 89 156
------- ------
4,781 4,435
Less accumulated 2,838 1,912
----- -----
depreciation
$1,943 $2,523
====== ======
b) Accrued liabilities at January 31 consist of the following ( in
thousands):
1996 1995
---- ----
Accrued salaries, bonuses
and commissions $1,413 1,331
Taxes payable 655 308
Accrued restructuring 473 130
costs
Accrued legal costs 15 716
Other 443 841
--- ---
$2,999 $3,326
====== ======
c) The Company paid legal fees and expenses totaling approximately $361,000,
$487,000 and $60,000, respectively, in fiscal 1996, 1995 and 1994 to a law firm
in which a director of the Company is a partner.
d) Revenues derived from contracts and orders issued by agencies of the U.S.
government were approximately $4,255,000, $3,668,000 and $3,578,000,
respectively, in the fiscal years ended January 31, 1996, 1995 and 1994. These
revenues, expressed as a percentage of total revenues for the fiscal year, were
approximately 23%, 29% and 29%, respectively. The Company has distribution and
cooperative marketing arrangements with International Business Machines
Corporation (IBM). Under these agreements, the Company recognized revenues of
approximately $1,538,000, or 12% of total revenues, in the fiscal year ended
January 31, 1995. Revenues related to these agreements were less than 10% of
total revenues in fiscal years 1996 and 1994.
<PAGE>
- F20 -
SCHEDULE II
EXCALIBUR TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Translation
Balance at Additions Deductions Adjustment Balance
Beginning Charged From During at End
Description of Year to Expense Reserves the Period of Year
- ----------- -------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
1996
- ----
Deducted from accounts
receivable: For
doubtful accounts $374,000 $ 91,000 $96,000 (a) $ 6,000 $375,000
1995
- ----
Deducted from accounts
receivable: For
doubtful accounts $100,000 $361,000 $87,000 (a) $ - $374,000
1994
- ----
Deducted from accounts
receivable: For
doubtful accounts $100,000 $ - $ - $ - $100,000
<FN>
Note (a) - Uncollected receivables written off, net of recoveries.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EXCALIBUR TECHNOLOGIES CORPORATION
By: /s/Patrick C. Condo
------------------------
Patrick C. Condo
President and Chief Executive Officer
Date: April 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Patrick C. Condo
- ---------------------- President, Chief Executive
Patrick C. Condo Officer and Director
(Principal Executive Officer) April 26, 1996
/s/Richard M. Crooks, Jr.
- ---------------------- Chairman of the Board of
Richard M. Crooks, Jr. Directors April 26, 1996
/s/James H. Buchanan Chief Financial Officer
- ---------------------- Secretary and Treasurer
James H. Buchanan (Principal Financial Officer
and Principal Accounting Officer) April 26, 1996
- ---------------------- Chief Scientist and Director
James W. Dowe III
/s/Edwin R. Addison
- ---------------------- Director April 26, 1996
Edwin R. Addison
/s/Jay H. Diamond
- ---------------------- Director April 26, 1996
Jay H. Diamond
/s/J.M. Kennedy
- ---------------------- Director April 26, 1996
J.M. Kennedy
/s/W. Frank King III
- ---------------------- Director April 26, 1996
W. Frank King III
/S/Philip J. O'Reilly
- ---------------------- Director April 26, 1996
Philip J. O'Reilly
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July __, 1995, between Edwin Addison
(the "Employee") and Excalibur Technologies Corporation, a Delaware corporation,
having its principal office at 9255 Towne Centre Drive, San Diego, CA 92121 (the
"Company").
WHEREAS, Employee presently serves as the Chief Executive Officer of
ConQuest Software, Inc.; and
WHEREAS, the Company's wholly-owned subsidiary, Excalibur Acquisition
Corporation, is entering into an agreement and plan of merger with ConQuest
Software, Inc. (the "Merger"); and
WHEREAS, the Company desires to employ Employee in the position of
Executive Vice President on the terms and conditions set forth herein; and the
Employee is willing to accept and undertake such employment;
WHEREAS, this Agreement supersedes Employee's prior employment agreement
with ConQuest Software, Inc.;
NOW, THEREFORE, in consideration of the foregoing and the provisions
contained herein, Employee and the Company hereby agree as follows:
1. EMPLOYMENT. For a period commencing on the date of consummation of the
Merger and extending until the second anniversary thereof (the "Employment
Period"), the Company will employ Employee and the Employee agrees to and does
hereby accept employment by the Company, as Executive Vice President.
2. DUTIES; FULL-TIME SERVICES.
2.1 DUTIES. Employee's responsibilities and duties shall be those
described in the attached Exhibit A, which duties shall not be materially
altered or diminished during the term of employment without the Employee's
consent. The Employee shall report to the Company's Chief Executive Officer.
2.2 FULL-TIME SERVICES. The Employee agrees that during the
Employment Period he will devote his full time and use his best efforts, ability
and skill to promote and advance the Company's business and interest and to
discharge his duties to the reasonable satisfaction of the Board of Directors of
the Company. During the Employment Period, the Employee will not accept other
gainful employment or become or remain an officer or director of any other
corporation except with the consent of the Board of Directors of the Company.
2.3 LOCATION. The Employee's office shall be located in Columbia,
Maryland. If the Company requires the Employee's relocation, and such relocation
necessitates relocation of the Employee's residence (as reasonably determined by
the Company), the Company shall promptly reimburse to the Employee his costs of
relocation (including, but not limited to, real estate sales commission, moving
costs, and trips incident to locating a new residence) plus an amount equal to
the applicable state or federal income tax payable by the Employee in connection
with such reimbursement.
3. COMPENSATION.
3.1 For all services performed by the Employee for the Company
during the Employment Period, the Employee will be compensated as follows:
(a) SALARY. During the Employment Period, the Company will pay the
Employee an annual salary of $150,000 (the "Base Salary") in equal
semi-monthly installments.
(b) INCENTIVE COMPENSATION. The Employee will receive incentive
compensation during the Company's fiscal year ended January 31, 1996 as
set forth on Schedule A to this Agreement. During the balance of the
Employment Period, Employee will receive incentive compensation pursuant
to an incentive compensation plan which will be similar to the incentive
compensation plans made available to other executive officers of the
Company. The level of Employee's participation and the amount of his
incentive compensation shall be commensurate with Employee's position as
Executive Vice President and his performance during the relevant period.
3.2 OTHER BENEFITS. Employee will be entitled to receive such
health, workmen's compensation, death, disability and other insurance benefits
and to participate in such retirement and other plans, as are made available to
other executive officers of the Company. The level of Employee's participation,
or the amount of his benefits shall be commensurate with benefits made available
to other employees
4. STOCK OPTIONS. Employee shall be granted 40,000 options to purchase
shares of Excalibur Common Stock, of which 26,260 shall be qualified stock
options (within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended) and 13,740 options shall be non-qualified options to purchase shares
of Excalibur Common stock at an exercise price equal to the average closing
price of Excalibur Common Stock during the ten trading days prior to the closing
of the Merger. These options will vest in equal 12.5% increments every six
months over four years. The Employee will participate in future grants under the
Company's present (and any future) option plan at a level and on terms
comparable to the Company's other senior executives, without regard to the
number of options described within the first sentence of this paragraph.
5. CONFIDENTIALITY.
5.1 As used in this Agreement, "Confidential Information" means
trade secrets and any other proprietary or confidential information that derives
independent economic value to the Company or its affiliates from not being
generally known to the public or to other persons who can obtain economic value
from its disclosure or use and that is the subject of efforts by the Company
that are reasonable under the circumstances to maintain its secrecy including,
without limitation, information with respect to marketing, sales, client and
supplier list, corporate planning and financial projections. Confidential
Information may include, but not be limited to, inventions, disclosures,
processes, systems, know-how, methods, techniques, drawings, applications,
solutions, materials, devices, research activities and plans, scientific data,
specifications, costs of production, prices, promotional methods, financial
information, marketing plans or customer and supplier information. The Employee
agrees that any Confidential Information which Employee may acquire in the
course of employment with the Company, shall be regarded as held by him in a
fiduciary capacity, solely for the benefit of the Company, and shall not at any
time, either during the term of this Agreement or thereafter, be disclosed,
divulged, furnished or made available to any third party or be otherwise used by
Employee other than in the regular course of business of the Company.
Information or collections of information shall be considered covered by the
preceding sentence if not known by the public generally, even though portions of
such information may be publicly available or may be available to certain third
parties pursuant to arrangements with the Company.
5.2 Upon termination of his employment with the Company, the
Employee will deliver to the Company all writings relating to or containing
Confidential Information, including without limitation, notes, memoranda,
letters, drawings, diagrams, printouts, computer tapes, computer disks, and any
other form of recorded information.
5.3 As a means reasonably calculated to prevent Employee from
disclosing any Confidential Information concerning the Company acquired by
Employee or used during the term of this employment, which would cause the
Company to be injured, because disclosure or use of such information is
difficult to detect and establish, and in recognition of Employee's critical and
unique role in the Company, Employee agrees that, during the term of his
employment by the Company, and for two years thereafter, he will not knowingly
(i) on behalf of any person or any entity other than the Company employ, retain,
or solicit for employment or retention any person who is at the time, an
employee of the Company or any affiliated or subsidiary of the Company in an
executive, creative, managerial, technical, marketing or sales capacity, or
cause or assist any other person or entity to do the same, (ii) directly or
indirectly solicit or contact, or cause, encourage or assist any other person or
entity to solicit or contact, any client of the Company, for the purpose of
competing with the Company in any way, or (iii) divert or attempt to divert, or
cause, encourage or assist any other person or entity to divert any business or
business opportunity of the Company of which the Employee became aware in
connection with his employment by the Company.
6. DEVELOPMENTS. Employee agrees promptly to disclose to the Company all
inventions, improvements, enhancements, discoveries and developments, which are
within the scope of the Company's products currently marketed or under
development during the Employment Period and which are made, developed or
conceived by him, either solely or jointly with others, during the Employment
Period. All such inventions, improvements, enhancements, discoveries and
developments shall become and remain the property of the Company, whether or not
patent or copyright applications have been filed thereon or with respect
thereto, and the Employee in consideration for the execution of this Agreement,
and his employment by the Company, hereby sells, assigns and transfers to the
Company all right, title and interest in and to such inventions, improvements,
enhancements, discoveries and developments, and further agrees that he will
cooperate fully and unconditionally in all reasonable requests by the Company in
furtherance of protecting, developing or exploiting commercially any inventions,
improvements, enhancements, discoveries and developments disclosed pursuant to
this Section 6. Further, Employee agrees that he will promptly execute all
necessary documents request of him by the Company incidental to any patent or
copyright application, assignments, powers of attorneys and all other documents
and do such other things as, in the opinion of counsel for the Company, may be
necessary or useful for the full enjoyment thereof throughout the world by the
Company and its designees.
7. REMEDIES. Employee acknowledges that any breach of any of the covenants
contained in Section 5 or Section 6 hereof may cause damage to the Company not
readily susceptible to measurement in economic terms or for which economic
compensation may be inadequate. Accordingly, in addition to any other remedy
provided at law or in equity, Employee agrees that the Company shall be entitled
to temporary, preliminary and/or permanent injunctive relief restraining
Executive from any actual or threatened violation of the covenants contained in
Section 5 or 6 (without any bond or security being required).
8. TERMINATION OF EMPLOYMENT. Employee's employment by the
Company may be terminated in the manner, for the reasons and with the
consequences provided for in this Section 8.
(a) Employee's employment hereunder may be terminated by the Company
effective at the end of the Employment Period without any additional
payment being due to Employee, provided that the Company shall remain
liable to pay the Employee the full amount of his salary and bonus and any
other amounts otherwise payable to him by the Company, which amounts are
attributable to any period prior to such termination.
(b) In the event that Employee shall be disabled through illness or
accident in performing his duties hereunder for a period in excess of six
months, the Company shall have the option, upon giving of not less than 30
days' written notice thereof, exercisable only so long as such disability
shall continue, to terminate Employee's employment under this Agreement.
In the event that Employee's employment is so terminated, or the Employee
dies during the term of this Agreement, the Company will pay to the
Employee or his Estate, as the case may be an amount equal to the amount
of the remaining salary payments due to Employee for the remainder of the
Employment Period as set forth in Section 3.1. The Employee or his Estate
shall be paid the foregoing amounts periodically, as though he were still
on the Company's payroll. In addition, the Company will pay Employee or
his Estate the share of any incentive compensation to which Employee would
be entitled pro rated for the period of time during which Employee
actually was employed. Finally, the Company will provide Employee (if he
is disabled) with life and health insurance and such other similar
benefits as Employee is receiving upon the date of discharge for the
remaining term of the Employment Period.
(c) Unless previously terminated pursuant to the provisions of
subdivision (a) or (b) of this Section 8, Employee's employment hereunder
may be terminated without any additional payment being due to Employee, if
(i) Employee shall have materially violated any of the provisions of this
Agreement and shall have continued to do so after receipt of written
notice thereof from the Company and reasonable opportunity to cure to the
extent that such breach is susceptible to complete cure or (ii) Employee
shall have engaged in any action during Employee's employment hereunder
involving willful malfeasance or gross negligence or shall have given aid
to a competitor of the Company which reasonably could be expected to be
detrimental to the Company.
Notwithstanding anything contained herein to the contrary, the Company
shall remain liable for the full amount of his salary and bonus and any
other amounts otherwise payable to him by the Company, which amounts are
attributable to any period prior to termination under this Section 8(c).
(d) The Employee and the Company expressly agree that nothing in
this Agreement shall prohibit the Company from discharging the Employee
for any reason. If the Company discharges the Employee for any reason
other than is set forth in Sections 8(a), (b) or (c) above, the Company
will pay to the Employee the remaining salary payments due the Employee
for the Employment Period. The Employee shall be paid the foregoing amount
periodically as though he were still on the Company's payroll. In
addition, the Company will pay Employee the share of any incentive
compensation to which Employee would be entitled as an employee had he
been employed through the Employment Period.
9. NON-SOLICITATION: NON-COMPETITION.
Whereas, this Agreement is being executed in connection with the
Agreement and Plan of Merger pursuant to which ConQuest Software, Inc. is being
merged into a wholly-owned subsidiary of the Company pursuant to which all of
Employees shares in ConQuest are being acquired in exchange for shares of the
Company's Common Stock, Employee has agreed to the following provisions:
9.1 NON-SOLICITATION. In addition to the limitations contained in
Section 2, the Employee agrees that during the term of this Agreement, and for a
term of two years after termination of this Agreement, that he will not directly
or indirectly solicit for employment any person employed by the Company or, at
the end of the Employment Period, any person being recruited by the Company. In
the event of breach of this covenant not to compete, the parties acknowledge
that the Company may be irreparably damaged and may not have an adequate remedy
at law. The Company may therefore obtain injunctive relief, without the
necessity of posting a bond, for any breach or threatened breach of this
covenant.
9.2 NON-COMPETITION. Employee agrees that during the term of this
Agreement and for a period of two years after termination of his employment with
the Company he will not compete, directly or indirectly, with the Company in
fields of business in which the Company is engaged as of the date of the
termination of his employment. For purposes of this Section 9.2 direct
competition means designing, developing, producing or selling products
competitive with those of the Company's products being marketed or under
development during the term of this Agreement or providing assistance to any
person or entity engaged in any such activity. Indirect competition means
accepting employment, with the department, division, or other business unit of a
third party which department, division or business unit produces products
competitive with the Company's products marketed or under development during the
term of this Agreement. Notwithstanding the foregoing, it shall be deemed a
violation of this Section 9.2 if the Employee accepts employment during the two
year period following the termination of this Agreement with any of the
following:
Fulcrum Technologies, Inc.
Verity
Personal Librarian Systems
Dataware
IDI
Microsoft
23158/1111/JD/230341.1
<PAGE>
Oracle
10. DILUTION PROTECTION. The following section from the Employee's
previous employment agreement with ConQuest Software, Inc. shall not be
effective until this Dilution Protection Section is explicitly approved by
shareholders holding a majority of the Company's outstanding Common Stock as
part of a stockholder vote:
The Company retains the right to dilute its equity for the purposes of
raising capital. Such dilution is intended at add value to the corporation.
Whenever dilution takes place, all existing shares will be diluted equally with
respect to the current base of 1.8 million shares, subject to the following
exceptions: a. The board of directors may allocate up to 2% additional for use
in incentives. b. Directors and officers are permitted to be distributed
warrants uniformly in proportion to their equity in the event of a merger,
acquisition, public offering, or major sale of equity in the event of a merger,
acquisition public offering, or major sale of equity. Such warrants must be at
prices at or above the then current stock price and are used as incentives for
future performance, c. If shares are sold at a price less than any unexercised
option price, such option price will be either adjusted downward to the sale
price, or the number of shares which can be purchased at the aggregate option
amount will be adjusted upward to reflect such price.
11. ABILITY TO PERFORM. The Employee hereby represents and warrants to the
Company that he is under no legal disability and has entered into no agreements
which in any way limit or render the Employee incapable of performing his
obligations under this Agreement or his fiduciary duties as the Executive Vice
President of the Company. The Employee further covenants that he will not impair
his ability to carry out his obligations under this Agreement or his fiduciary
duties as Executive Vice President of the Company by entering into any agreement
or in any way assisting others, directly or indirectly, to enter into any
agreement which will violate the nondisclosure, noncompetition and
confidentiality provisions of this Agreement.
12. SURVIVAL OF OBLIGATIONS. The covenants and agreements set forth in
this Agreement shall survive any termination of this Agreement and remain in
full force and effect regardless of the cause of the termination to the full
extent necessary to protect the interest of the party in whose favor they run.
13. ASSIGNABILITY OF AGREEMENT.
13.1 BY EMPLOYEE. Except as otherwise provided in this Agreement,
the Employee shall not be entitled to assign (voluntarily or involuntarily, by
operation of law or otherwise) any of his rights under this Agreement, nor
delegate any of his duties or obligations under this Agreement, without the
prior written consent of the Company.
13.2 BY THE COMPANY. The benefits hereunder with respect to the
rights of the Company to the services of the Employee may be assigned by the
Company to any other Company or other business entity which succeeds to all or
substantially all of the business of the Company through merger, consolidation,
corporate reorganization or by acquisition of all or substantially all of the
assets of the Company or to a company controlled by it, or controlling it, or
under common control with it; provided, however, that the obligations and
liabilities of the Company under this Agreement shall be binding upon any such
successors in interest or transferees.
14. NOTICES. All notices, consents, waivers or demands of any kind
which either party to this Agreement may be required or may desire to serve
on the other party in connection with this Agreement, shall be in writing and
may be delivered by personal service or sent by facsimile or sent by
registered or certified mail, return receipt requested, with postage thereon
fully prepaid. All such communications shall be addressed as follows:
Corporation: Excalibur Technologies
Corporation
9255 Towne Centre Drive
San Diego, California 92121
with copies to: Jay H. Diamond
Holtzmann, Wise & Shepard
1271 Sixth Avenue
45th Floor
New York, New York 10020
Employee Edwin Addison
8395 Scarlett Glenn Court
Millersville, MD 21108
If sent by facsimile, a confirmed copy of such facsimile notice
shall promptly be sent by mail (in the manner provided above) to the addresses.
Service of any such communication made only by mail shall be deemed complete on
the date of actual delivery as shown by the addressee's registry or
certification receipt or at the expiration of the third (3rd) business day after
the date of mailing, whichever is earlier in time. Either party thereto may from
time to time, by notice in writing served upon the other as aforesaid, designate
a different mailing address or a different person to which such notices or
demands are thereafter to be addressed or delivered. Nothing contained in this
Agreement shall excuse either party from giving oral notice to the other when
prompt notification is appropriate, but any oral notice given shall not satisfy
the requirement of written notice as provided in this Section.
15. SUPERSEDES OTHER AGREEMENTS. This Agreement supersedes and
replaces all prior negotiations, proposed agreements and agreements, written
or oral.
16. GOVERNING LAW. This Agreement shall be interpreted and enforced
according to the laws of the State of Delaware (regardless of that
jurisdiction's or any other jurisdiction's choice of law principles).
17. SEVERABILITY. If any provision of this Agreement is or becomes or is
deemed invalid, illegal, or unenforceable in any jurisdiction, (a) such
provision will be deemed amended to conform to applicable laws of such
jurisdiction so as to be valid and enforceable, or, if it cannot be so amended
without materially altering the intention of the parties, it will be stricken,
(b) the validity, legality and enforceability of such provision will not in any
way be affected or impaired thereby in any other jurisdiction, (c) the remainder
of this Agreement will remain in full force and effect.
18. COUNTERPARTS. This Agreement may be executed in two original
counterparts. Both counterparts shall constitute one and the same Agreement
19. ARBITRATION. Except for any claim or dispute which gives rise or could
give rise to equitable relief under this Agreement, any disagreement, dispute or
controversy arising under this Agreement shall be settled exclusively and
finally by arbitration. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules") in Baltimore, Maryland or in such other city as the parities to the
dispute may designate by mutual consent. The arbitration tribunal shall consist
of three arbitrators (or such lesser number as may be agreed upon by the
parties) selected according to the procedure set forth in the AAA Rules in
effect on the date hereof. The chairman of the arbitration tribunal shall be
appointed by the American Arbitration Association from among the three
arbitrators so selected. The fees and expenses of the arbitration tribunal
incurred in connection with such arbitration shall be borne equally by the
parties to the arbitration or otherwise as the arbitrators may determine.
-2-
23158/1111/JD/230341.1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into the above
Agreement as of the day and year first above written.
[Edwin Addison]
EXCALIBUR TECHNOLOGIES
CORPORATION
By:
Name:
Title:
-3-
23158/1111/JD/230341.1
<PAGE>
EXHIBIT A
. General management of Federal Government business of Excalibur
. General Management of the On-line (I.E., content providers)
business of Excalibur
. Director to the corporation
. Negotiate/maintain select strategic relationships
. Provide significant input to product/market strategy and business
vision
. Provide leadership/energy in establishing new business
initiatives as appropriate
. Communicate the company's vision to employees and customers
* General Management includes all aspects of management of a business unit
including revenue, delivery, net contribution, customer satisfaction.
<PAGE>
SCHEDULE A
The Employee is eligible to earn incentive compensation for the fiscal
year ended January 31, 1996 in an aggregate amount equal to 55% of the Base
Salary payable to the Employee during such period. Payment of incentive
compensation shall be determined as follows:
40% of the amount payable shall be paid quarterly (up to 10% for each
quarter) in the event that the Company earns revenue equal or
greater than the amount budgeted during each quarter; and
40% of the amount payable shall be paid quarterly (up to 20% for each
quarter) in the event that the Company achieves profitability in the
third and/or fourth quarter;
20% shall be payable in the discretion of the Compensation Committee of
the Board of Directors
CONQUEST SOFTWARE, INC. STOCK OPTION PLAN
ConQuest Software, Inc., a Maryland corporation, (the "Company") hereby
adopts the following Stock Option Plan, to be known as the ConQuest Software,
Inc. Stock Option Plan (the "Plan").
1. PURPOSE. The Plan is intended to promote the interests of the Company
and its subsidiaries by providing the employees of the Company and such other
persons as determined by the Board of Directors an additional financial
incentive and, through stock ownership, increase their proprietary interest in
the success of the Company and promote their continuity of association with the
Company.
2. STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in
paragraph 7 herein, the stock subject to the provisions of this Plan and
reserved for issuance hereunder shall consist of Seven hundred fifty thousand
(750,000) shares of the Company's common stock. The Stock to be optioned
hereunder may either be authorized and unissued stock or stock reacquired by the
Company as treasury stock. In the event any option granted hereunder shall
expire, terminate or be forfeited for any reason without having been exercised
in full, the unpurchased shares covered thereby shall be added to the shares
otherwise available for options hereunder.
3. ELIGIBILITY. Options shall be granted hereunder at the discretion of
the Board of Directors of the Company (the "Board") to any individual who is an
employee or a director of the Company, or such other person as determined by the
Board on the date of grant; provided, however, that Qualified Stock Options may
be granted hereunder only to individuals who are employees of the Company at the
time of grant. In no event shall a Qualified Stock Option be granted to any
person who, at the time of grant, owns stock possessing more than a ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of its parent or subsidiary corporations (hereinafter referred to as a
"ten-percent shareholder"); provided, however, that this restriction shall not
apply if at the time of grant the option price is not less than 110% of the fair
market value of the Stock subject to the option and such option is not
exercisable after the expiration of five (5) years from the date of grant.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board; provided, however, that the Board shall have authority, at its
discretion, to create a Stock Option or Compensation
<PAGE>
Committee ( the "Committee") which shall consist of not less than two (2) Board
members designated from time to time by the Board. The Committee, if created,
shall have full authority to administer the Plan, subject to the requirement of
reporting to the Board at least annually as to the number and extent of any
options granted and the recipients thereof. All questions of interpretation and
construction of the Plan and of any options issued under it shall be determined
by a majority of the Board, or by a majority of the Committee, if created, and
the determination of such majority shall be final, binding and conclusive upon
all persons. No member of the Board or Committee shall be liable for any action
or determination made in good faith, and the members shall be entitled to
indemnification and reimbursement to the extent and as provided in the Company's
bylaws and Articles of Incorporation. The Plan shall be administered so as to
qualify stock options designated as Qualified Stock Options under the Plan as
"Incentive Stock Options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
5. EFFECTIVE DATE AND AWARD OF OPTIONS. This Plan which was adopted by the
Company and became effective on the 1st day of February, 1991 (the "Effective
Date"), shall be subject to approval by a majority vote of the stockholders of
the Company as required by Code Section 422(b)(1). Options may be granted
hereunder from time to time after the Effective Date and prior to the expiration
of ten (10) years from the Effective Date. No specific option as to any employee
or any other person shall be effective unless specific Board or Committee action
conferring said option has been taken and nothing in this Plan shall PER SE be
construed as the grant of an option to any person. Options under this Plan shall
be designated by the Board or Committee at the time of the grant as either a
Qualified Stock Option or a Nonqualified Stock Option. Any option granted shall
be formalized by a written agreement substantially in the form of the Option
Agreement which is attached hereto as Exhibit "A" (for Qualified Stock Options)
or exhibit "B" (for Nonqualified Stock Options), and executed by or on behalf of
the Company and the person to whom such option is granted. Qualified Stock
Options are intended to comply with Section 422 of the Code as "Incentive Stock
Options." All other options granted under this Plan are Nonqualified Stock
Options.
6. OPTION PRICES. The purchase price of the shares of Common Stock which
are covered by all options granted hereunder shall be not less than the fair
market value of the Stock at the time such option is granted. If the Board or
the Committee does not establish a specific purchase price per share at the time
of grant, the purchase price per share shall be equal to the fair market value
of a share of Stock on the date of grant of the option. With regard to any
specific option, the Board or Committee shall determine the option price within
these guidelines.
7. CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding shares
of Stock of the Company are increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividend payable in capital stock, appropriate adjustment shall be made by the
Board or Committee in the number and kind of shares for the purchase of which
options may be granted under the Plan, including the maximum number or amount
that may be granted to any one participant. In addition, the Board or Committee
shall make appropriate adjustment in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be exercisable,
to the end that the optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in outstanding options
shall be made without change in the total price applicable to the unexercised
portion of the option and with a corresponding adjustment in the option price
per share; provided, however, that each such adjustment in the number and kind
of shares subject to outstanding options, including any adjustments in the
option price, shall be made in such manner so that this Plan and the stock
options designated as Qualified Stock Options granted and to be granted
hereunder shall continue to qualify under Code Section 422. Any such adjustment
made by the Board or Committee shall be conclusive.
8. EXERCISE RESTRICTIONS.
(a) IN GENERAL: Subject to the vesting provisions described in
Sections 8(b) and 8(c), no option granted hereunder shall be exercisable prior
to the expiration of one (1) year from the date of grant, nor after the
expiration of ten (10) years from the date of grant except that in the event a
Qualified Stock Option is granted to a "ten-percent shareholder" (as
herein-above defined), in which case such option, by its terms, may not be
exercisable after the expiration of five (5) years from the date of grant;
provided, however, that within these parameters the Board or Committee may
prescribe the expiration date or term of each option granted hereunder. The
aggregate fair market value (determined at the time the option is granted) of
the Stock with respect to which Qualified Stock Options granted under this Plan
are exercisable for the first time by an optionee during any calendar year
(under all such plans of the optionee's employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
(b) VESTING OF QUALIFIED STOCK OPTIONS: Subject to Section 8(a),
each optionee shall acquire the right to exercise the Qualified Stock Options
granted to him by completing twelve months of service with the Company, its
parent and subsidiaries, such that upon completion of the service specified, and
optionee may, subject to all other terms hereof, exercise the Qualified Stock
Options.
(c) VESTING OF NONQUALIFIED STOCK OPTIONS: Subject to Section 8(a),
each optionee shall immediately acquire the right to exercise the Nonqualified
Stock Options granted to him, subject to all other terms hereof, and is fully
vested in his Nonqualified Stock Options.
(d) BOARD OR COMMITTEE DISCRETION: Notwithstanding Sections 8(b) and
(c), the Board or the Committee may, in its discretion, grant Qualified Stock
Options or Nonqualified Stock Options with a different vesting schedule, even if
that vesting schedule is less favorable than provided in sections 8(b) and (c),
but such vesting schedule must be contained in the Agreement executed as
provided in Section 5. However, the limitations in Section 8(a) may not be
waived or modified under this Section 8(d).
9. METHOD OF EXERCISE.
(a) IN GENERAL: To the extent that the right to purchase shares by
the exercise of options has accrued hereunder, part or all of an option may be
exercised from time to time by the optionee's delivery of a signed, written
notice to the Company stating the number of shares with respect to which the
option is being exercised. The shares purchased shall be delivered and payment
therefore made thirty (30) days after the giving of such notice unless an
earlier date shall have been mutually agreed upon. At the time of delivery and
payment the Company shall, without transfer or issue tax to the optionee (or
other person entitled to exercise the option), deliver to the optionee (or other
person entitled to exercise the option) at the main office of the Company, or
such other place as shall be mutually acceptable, a certificate or certificates
for such shares out of theretofore authorized but unissued shares or reacquired
shares of its Stock, as the Company may elect, against payment of the option
price in full for the number of shares to be delivered by certified or bank
cashier's check. If the optionee (or other person entitled to exercise the
option) fails to accept delivery of or pay for all or any part of the number of
shares specified in such notice upon tender of delivery thereof, his right to
exercise the option with respect to such undelivered or non-paid shares may be
terminated at the discretion of the Board or Committee.
(b) NONQUALIFIED STOCK OPTIONS: The exercise of Nonqualified Stock
Options shall be as provided in Section 9(a), as modified by this Section 9(b).
Holders of Nonqualified Stock Options shall be entitled, at or prior to the time
the written notice provided for in section 9(a) is delivered to the Company, to
elect to have the Company withhold from the shares of Stock to be delivered upon
exercise of the Nonqualified Stock Option that number of shares of Stock
(determined based on the fair market value of a share of Stock on the date the
notice set forth in section 9(a) is received by the Company) necessary to
satisfy any withholding taxes attributable to the exercise of the Nonqualified
Stock Option. Alternatively, such holder of a Nonqualified Stock Option may
elect to deliver previously owned shares of common stock upon exercise of the
Nonqualified Stock Option to satisfy any withholding taxes attributable to the
exercise of the Nonqualified Stock Option. The maximum amount that an optionee
may elect to have withheld from the shares of Stock otherwise deliverable upon
exercise shall be equal to the minimum federal and state withholding.
Notwithstanding the foregoing provisions, the Board or Committee may include in
the Nonqualified Stock Option Agreement relating to any such Nonqualified Stock
Option provisions limiting or eliminating the Option holder's ability to pay his
withholding tax obligation with shares of Stock or, if no such provisions are
included in the Agreement but in the opinion of the Board or Committee such
withholding would have an adverse tax or accounting effect to the Company, at or
prior to exercise of the Nonqualified Stock Option the Board or Committee may so
limit or eliminate the optionee's ability to pay his withholding tax obligation
with shares of Stock.
10. TRANSFERABILITY OF OPTIONS. An option shall not be transferable,
except, in the event of the optionee's death, by will or the laws of descent
and distribution, and an option may be exercised during the lifetime of an
employee only by him.
11. TERMINATION OF EMPLOYMENT. In the event the employment, with the
Company or a parent or subsidiary of the Company, of an employee to whom an
option has been granted shall terminate for any reason, his vested options may
be exercised only within ninety (90) days after the date of termination,
notwithstanding the fact that, but for such termination, the option would have
extended for a longer period. If an employee to whom an option has been granted
shall die or become disabled, during the term of his employment by the Company
or any of its subsidiaries, or within ninety (90) days thereafter, such option
may be exercised (but only to the extent that the employee could have done so on
the date of his death or his disability), at any time within one (1) year after
the termination of employment. In any event an option shall not be exercisable
by anyone after the date of expiration of the option period.
12. SECURITIES REGISTRATION. Neither the options granted hereunder nor the
shares of the Company which may be acquired pursuant to such options are
registered under the securities laws of the United States, or any state thereof,
and upon issuance, the shares of stock will be "restricted," as that term is
defined by the Securities Act of 1933, for United States securities law
purposes. The shares of stock, upon acquisition, will not be transferable,
pursuant to such Act, without the registration thereof under the Securities Act
of 1933 and any applicable state securities laws, or an opinion of counsel to
the Company that such registration is not required. Each participant shall agree
to hold the shares acquired by his exercise of the options granted hereunder for
investment purposes only and not with a view to or for resale, transfer or other
distribution thereof to any other person or entity, and he shall deliver to the
Company, upon exercise, a certificate to that effect and an investment letter in
form approved by the Company's counsel. In the event that the company shall
nevertheless deem it necessary to register under the Securities Act of 1933 or
other applicable statutes, any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from the Securities
Act of 1933, then the Company shall take such action at its own expense before
delivery of such shares.
13. RIGHTS AS A STOCKHOLDER. An optionee shall have no rights as a
stockholder with respect to any shares covered by his option until the date of
issuance of a stock certificate to him for such shares. No adjustment, other
than as may be required by the terms of numerical paragraph seven (7) above,
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued. Notwithstanding any other
provision in this Plan, all options under this Plan shall be granted on the
condition that, upon exercise of the option, the shares of common stock and the
optionee are subject to the Shareholders Agreement which is attached hereto as
Exhibit "C", or any successor thereto, as if the optionee had executed the
Shareholders Agreement, and the shares issued upon exercise of the option shall
bear any restrictive legend required by said agreement.
14. EFFECTIVE DATE AND TERMINATION OF PLAN. The Board of Directors
may terminate this Plan at any time. Termination of the Plan will not affect
rights and obligations theretofore granted and then in effect.
15. AMENDMENT OF PLAN. The Board of Directors may at any time amend the
Plan, provided that without approval of stockholders there shall be, except by
operation of the provisions of paragraph 7 above, no increase in the total
number of shares covered by the Plan or which may be sold pursuant to options
granted hereunder to any one person, there shall be no change in the class of
employees eligible to receive options granted under the Plan, there shall be no
reduction in the option price, and there shall be no extension of the latest
date upon which options may be exercised, and provided further that no amendment
may affect, without the consent of the optionee, then outstanding options or any
unexercised portions thereof.
16. USE OF PROCEEDS. The proceeds from the sale of stock pursuant to
options granted under the Plan shall constitute general funds of the Company.
17. QUALIFICATION OF PLAN. The Qualified Stock Options granted hereunder
are intended in all respects to comply with the terms of Code Section 422 and
the Plan, as it relates to Qualified Stock Options, shall be so administered. To
the extent not expressly set forth herein, the necessary applicable provisions
of said Code Section 422 are incorporated herein by this reference.
18. PARENT AND SUBSIDIARY CORPORATIONS. For purposes of this Plan
and any option agreement executed pursuant hereto, the terms "parent" and
"subsidiary" corporations shall be defined as set forth in Code Sections
425(a) and 425(f), respectively.
<PAGE>
Signed this 19th day of August, 1993.
CONQUEST SOFTWARE, INC.
/s/ Dag Jensen By: /s/ Edwin R. Addison
- ------------------------------- ---------------------------------------
Financial Officer President
MARYLAND FULL-SERVICE OFFICE LEASE
30 COLUMBIA CORPORATE CENTER
THIS LEASE is made and entered into as of the day of , 1995, by and
between COLUMBIA MALL, INC., a Maryland corporation ("Landlord") by COLUMBIA
MANAGEMENT, INC., Managing Agent, and EXCALIBUR TECHNOLOGIES CORPORATION, a
Delaware corporation ("Tenant").
In consideration of the rents hereinafter reserved and the agreements
hereinafter set forth, Landlord and Tenant mutually agree as follows:
1. SUMMARY OF TERMS.
The following is a summary of the principal terms of the Lease. Any
capitalized term set forth below shall, for the purposes of this Lease, have the
meaning ascribed to it in this Section 1.
A. DESCRIPTION OF PREMISES
(1) BUILDING: The building known as 30 Columbia Corporate Center and
located at 10440 Little Patuxent Parkway, Columbia, Maryland 21044.
(2) BUSINESS COMMUNITY: Columbia Town Center.
(3) PREMISES: Approximately 6,660 square feet of Rental Area on the
eighth floor of the Building as shown on SCHEDULE A.
B. RENT
(1) ANNUAL BASIC RENT:
TERM ANNUAL BASIC RENT MONTHLY INSTALLMENT
1/1/96-12/31/97 $113,220.00 $9,435.00
1/1/98-12/31/98 $114,885.00 $9,573.75
1/1/99-12/31/00 $116,550.00 $9,712.50
(2) ADVANCE RENT: Nine Thousand Four Hundred Thirty-five
Dollars and No Cents ($9,435.00) representing the installment of Annual Basic
Rent for the first leasehold month of the Term.
(3) SECURITY DEPOSIT: Nine Thousand Five Hundred Seventy-three
Dollars and Seventy-five Cents ($9,573.75) to be held by Landlord as provided
in Section 6.4.
<PAGE>
C. ADJUSTMENTS.
(1) BASE OPERATING COSTS: The Base Operating Costs for the
Premises shall be the Operating Costs for the Operating Year (grossed up in
accordance with Section 7.1.) which commences January 1, 1996, multiplied by
Tenant's Fractional Share.
(2) ADJUSTMENT PERIOD CONSUMER PRICE INDEX. Intentionally
omitted.
D. TERM
(1) TERM: Five (5) years, subject to Section 4.
(2) LEASE COMMENCEMENT DATE: January 1, 1996, subject to
Section 4 and subject to satisfaction of the conditions set forth in the
"Contingency" provision in Section 34.
(3) TERMINATION DATE: December 31, 2000, subject to Section 4.
E. NOTICE AND PAYMENT
(1) Tenant Notice
Address: Excalibur
Technologies Corporation
Thirty Columbia Corporate Center
Suite 800
10440 Little Patuxent Parkway
Columbia, Maryland 21044
(2) Landlord Notice
Address: Columbia
Management, Inc.
10420 Little Patuxent Parkway
Suite 420
Columbia, Maryland 21044
with a copy to: Columbia
Management, Inc.
c/o The Rouse Company
10275 Little Patuxent Pkwy
Columbia, Maryland 21044
Attention: General Counsel
(3) Landlord Payment
Address: Columbia
Management, Inc.
P.O. Box 64385
Baltimore, Maryland 21264-4385
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F. BROKER Mr.
David Cravedi
The Fred Ezra Company
4520 East West Highway
Bethesda, Maryland 20814
2. DEFINITIONS.
For purposes of this Lease, the Schedules attached and made a part hereof
and all agreements supplemental to this Lease, the following terms shall have
the respective meanings as set forth in the following Section, subsection,
paragraph and Schedule references:
Reference
Additional Rent..........................................................6.3
Advance Rent.........................................................1.B.(2)
Alterations.............................................................15.1
Annual Basic Rent....................................................1.B.(1)
Bankruptcy Code.........................................................19.1
Base Operating Cost..................................................1.C.(1)
Building.............................................................1.A.(1)
Casualty................................................................17.1
Common Area.............................................................10.1
Default Rate.............................................................6.5
Event of Default........................................................20.1
Event of Tenant's Bankruptcy............................................19.1
Fractional Share.........................................................7.1
Insolvency Laws.........................................................19.1
Landlord Notice Address.................................................1.E.
Landlord Payment Address................................................1.E.
Lease Commencement Date..............................................1.D.(2)
Mortgage..................................................................27
Mortgagee.................................................................27
Operating Costs..........................................................7.1
Operating Costs Statement................................................7.2
Operating Year...........................................................7.1
Plans and Specifications.................................................5.1
Premises.............................................................1.A.(3)
Prevailing Market Rate (Renewal Term)....................................4.3
Prevailing Market Rate (Expansion).........................................3
Property.................................................................7.1
Public Areas......................................................Schedule C
Ready for Occupancy......................................................4.2
Renewal Term.............................................................4.3
Rental Area................................................................3
Rental Year..............................................................6.1
Rules and Regulations......................................................9
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Security Deposit.....................................................1.B.(3)
Tenant Improvements......................................................5.1
Tenant Notice Address...................................................1.E.
Tenant's Share of Increased Operating Costs..............................7.2
Tenant's Personal Property..............................................15.3
Term.....................................................................4.1
Termination Date.....................................................1.D.(3)
Transfer..................................................................25
3. LEASED PREMISES; MEASUREMENT; EXPANSION.
3.1. LEASED PREMISES; MEASUREMENT. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, the Premises as shown on the plan attached
hereto as SCHEDULE A, together with the right to use, in common with others, the
Common Area. The rental area of the Premises ("Rental Area") has been computed
in accordance with the applicable formula set forth in SCHEDULE X attached
hereto and made a part hereof.
Within sixty (60) days following completion of the Tenant Improvements,
either Landlord or Tenant shall have the right to remeasure the Premises in
accordance with the above formula and if such measurement shall disclose that
the Rental Area of the Premises is different from that set forth in Section 1.A.
hereof, the Annual Basic Rent and the Tenant's Fractional Share shall be
adjusted accordingly. If neither party elects to remeasure the Premises during
such sixty (60) day period, then the Rental Area set forth in Section 1.A. shall
be conclusively deemed the Rental Area of the Premises.
3.2. RIGHT OF FIRST OFFER. Subject to (i) the provisions set forth
hereinafter, (ii) the superior rights of third parties, and (iii) any renewal(s)
(whether by amendment/extension agreement or by the execution of a new lease
agreement) of the term of the lease between Landlord and Molinaro Associates,
Inc., the tenant currently occupying the Additional Premises or the term of the
Lease for the replacement tenant for Suite 870 (as hereinafter defined), Tenant
shall have a one-time right of first offer to lease from Landlord approximately
1,861 square feet of space in the Building as identified on SCHEDULE A-1 ("Suite
870"), on the same terms as contained in this Lease for the Premises, except
that the per square foot Annual Basic Rent for Suite 870 shall be equal to the
per square foot rate of Annual Basic Rent in effect for the Premises at the time
that Tenant takes occupancy of the Additional Premises, which per square foot
Annual Basic Rental shall, thereafter, be subject to the same per square foot
graduations of Annual Basic Rental set forth in Section 1.B.(1) at the times set
forth therein.
In addition, subject to (i) the provisions set forth hereinafter, (ii) the
superior rights of third parties, and (iii) the term of the Lease of the next
tenant occupying Suite 890 (as hereinafter defined), Tenant shall have a
one-time right of first offer to lease from Landlord approximately 1,465 square
feet of space in the Building as identified on SCHEDULE A-1 ("Suite 890"), on
the same terms as contained in this Lease for the Premises, except that the per
square foot Annual Basic Rent for Suite 890 shall be equal to the per square
foot rate of Annual Basic Rent in effect for the Premises at the time that
Tenant takes occupancy of Suite 890, which per square foot Annual Basic Rental
shall, thereafter, be subject to the same per square foot graduations of Annual
Basic Rental set forth in Section 1.B.(1) at the times set forth therein. Tenant
acknowledges that Suite 890 is presently vacant and Tenant declined to include
Suite 890 with the Premises and Tenant's rights herein are subject to the term
of a lease of the next tenant to occupy the space regardless of the length of
time Suite 890 is vacant before Landlord obtains a tenant.
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Tenant agrees to accept Suite 870 and/or Suite 890 in their as-is
condition as of the date of delivery of Suite 870 and/or Suite 890 by Landlord
to Tenant and further acknowledges that Landlord is not obligated to provide any
improvements whatsoever to either Suite 870 or Suite 890.
Tenant shall exercise its right of first offer by written notice to
Landlord within fifteen (l5) days following receipt of written notice from
Landlord that Suite 870 and/or Suite 890 is available for lease. In the event
that Tenant exercises the right granted herein, Landlord and Tenant shall enter
into an amendment to this Lease to incorporate Suite 870 and/or Suite 890 and to
make necessary adjustments to the Annual Basic Rent and similarly affected
provisions of this Lease. In the event Tenant declines to exercise its right as
above provided for, or fails to deliver notice thereof within the time period
stipulated above, or fails to execute the requisite amendment to this Lease,
this right of first offer shall lapse and be of no further force and effect.
The foregoing right of first offer shall not be severed from this
Lease or separately sold, assigned or transferred and shall be subject to the
following additional conditions, namely: (a) that the lease term for any
additional space shall run concurrently with this Lease; (b) that the rental for
Suite 870 and/or Suite 890 shall be as set forth hereinabove; (c) that there
shall be no abatement of rent; (d) that, unless otherwise set forth in this
Section, Landlord shall not be obligated to construct, pay for or grant an
allowance with respect to tenant improvements; (d) that, at the time that Tenant
exercises this right of first offer for any additional space, an Event of
Default by Tenant shall not exist under this Lease; (e) that, at the time Tenant
exercises this right of first offer, Tenant shall be in occupancy and possession
of the Premises, subject to Section 25.1.; (f) that Tenant shall enter into an
amendment to this Lease to incorporate the additional space and make
corresponding modifications to the provisions of this Lease; (g) that Landlord
and Tenant shall enter into an amendment to this Lease to incorporate the
Additional Premises and make corresponding modifications to the provisions of
this Lease regarding Annual Basic Rent and Base Operating Costs; and (h) the
holders of any superior rights to the Additional Premises have not exercised
such rights.
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4. TERM AND COMMENCEMENT OF TERM.
4.1. TERM. The Term shall be for the period of time specified in Section
1.D.(1) plus the part of the month, if any, from the Lease Commencement Date to
the first day of the first full calendar month in the Term, unless earlier
terminated pursuant to any other provision of this Lease or pursuant to law.
4.2. OPTION TO RENEW. Provided Tenant is in possession of at least fifty
percent (50%) of the Premises (subject to Section 25.1.) and is not in default
of any term, covenant or condition of this Lease, Tenant shall have one (1)
option to renew the Term of this Lease for one (1) additional period of five (5)
years ("Renewal Term") to commence immediately upon the expiration of the
initial Term , upon the same terms, covenants and conditions as contained in
this Lease, except that (i) the Annual Basic Rent during said Renewal Term shall
be at ninety-five percent (95%) of the "Prevailing Market Rate" and (ii) there
shall be no further option to renew except as specifically provided herein and
(iii) Landlord shall not be obligated to construct, pay for or grant an
allowance with respect to tenant improvements unless otherwise specifically
provided for in this Lease. "Prevailing Market Rate" shall mean the current
market rental rate for the Premises as determined by Landlord but shall not be
more than the rate at which Landlord would offer such space or space of
approximately the same size and location to a third party and shall include
concessions being offered by Landlord in the business community including rent
abatements. In no event, however, shall the Annual Basic Rent during the Renewal
Term be less than the Annual Basic Rent reserved under this Lease for the Rental
Year immediately preceding the Renewal Term for which the determination is being
made.
In order to exercise the option granted herein, Tenant shall notify
Landlord, in writing, not less than six (6) months prior to the expiration of
the initial Term that it is considering exercising its option to renew the Term.
On receipt of such notice, Landlord will, in writing, not later than thirty (30)
days after receipt of the notice from Tenant, quote to Tenant what the new
Annual Basic Rent will be for the ensuing Renewal Term. Tenant shall then notify
Landlord, in writing, not later than fifteen (15) days after notice received of
such Annual Basic Rent, as to whether or not it will exercise the option herein
granted and if no such notice of exercise of the option is received, the option
shall be deemed waived. In the event Tenant exercises the option, Landlord and
Tenant shall execute a modification to this Lease acknowledging such renewal and
setting forth the new Annual Basic Rent.
The option shall be void if, at the time of exercise of such option,
Tenant is not in possession of at least fifty percent (50%) of the Premises or
there is an Event of Default under this Lease or if Tenant fails to deliver the
requisite notice thereof within the time period specified above. The option
granted herein shall not be severed from this Lease, separately sold, assigned
or transferred.
5. TENANT IMPROVEMENTS AND ACCEPTANCE OF PREMISES.
5.1. TENANT IMPROVEMENTS. Landlord shall, at its sole expense, in a manner
agreed upon by Landlord and Tenant, perform the improvements to the Premises set
forth in the Plans and Specifications attached as or described in SCHEDULE B
hereto ("Tenant Improvements"). Landlord shall diligently pursue completion of
the construction of the Tenant Improvement and complete such construction as
soon as possible but in no event later than April 1, 1996. All materials shall
be building-standard materials unless otherwise specified in SCHEDULE B. Except
as otherwise specifically provided in this Lease, Landlord shall not be
responsible for performing or paying for the moving or installation of telephone
and computer systems, wiring or cabling, or the acquisition, moving or
installation of Tenant's furnishings, fixtures and equipment in the Premises.
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Any other initial improvements to the Premises not shown on SCHEDULE B are
subject to Landlord's prior written approval which approval shall not
unreasonably be withheld, conditioned or delayed and such improvements shall be
performed by Landlord, the cost thereof to be paid by Tenant to Landlord within
thirty (30) days following receipt of Landlord's invoice for same. SCHEDULE B
may be modified by the parties, provided they mutually agree to (i) the
modifications to be made; (ii) the cost, if any, of the modifications; and (iii)
the manner in which any additional cost shall be paid or reflected in the rent.
Modification of the Plans and Specifications, where requested by Tenant, shall
not affect Tenant's obligation to pay rent. Any amounts payable by Tenant
hereunder shall include Landlord's standard construction management fee computed
on the total cost of construction, including but not limited to the cost of
developing, preparing and modifying construction drawings.
Landlord shall have the right to enter the Premises to construct the
Tenant Improvements, and such entry and work by Landlord, its agents, servants,
employees or contractors for such purpose shall not constitute an actual or
constructive eviction, in whole or in part, entitle Tenant to any abatement or
diminution of rent, relieve Tenant of any of its obligations under this Lease,
be deemed an interference with Tenant's right to peaceful and quiet enjoyment of
the Premises, or impose any liability upon Landlord or its agents, employees or
contractors except for damage caused by its negligence or willful misconduct.
Landlord shall use all reasonable efforts not to disrupt Tenant during such
period of construction.
In the event the Tenant Improvements are not completed on or before April
1, 1996, subject to the provisions of Section 24 and except for delays caused by
Tenant, Tenant shall have the right, with notice to Landlord at the notice
address, to complete the Tenant Improvements and Landlord shall reimburse Tenant
for the reasonable cost of the Tenant Improvements completed by Tenant.
5.2. ACCEPTANCE OF PREMISES. After substantial completion of the Tenant
Improvements by Landlord, Landlord and Tenant shall conduct a joint inspection
of the Premises during which they shall develop a mutually agreeable punchlist
of items to be completed by Landlord which shall be completed by Landlord within
thirty (30) days unless requested materials or parts are special or back ordered
items. Landlord shall have the right to enter the Premises to complete or repair
any such punchlist items and entry by Landlord, its agents, servants, employees
or contractors for such purpose shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent or relieve Tenant of any of its obligations under this Lease, or impose
any liability upon Landlord or its agents, servants, employees or contractors.
6. RENT.
6.1. ANNUAL BASIC RENT. Tenant shall pay to Landlord during each Rental
Year of the Term fixed rent equal to the Annual Basic Rent as set forth in
Section 1.B.(1). Annual Basic Rent shall be payable in advance on the first day
of each month of the Term in equal monthly installments, without notice, demand,
abatement (except as otherwise specifically provided in this Lease), deduction
or set-off. If the Term of this Lease shall commence on a day other than the
first day of a month, the first payment shall include any prorated Annual Basic
Rent for the period from the Lease Commencement Date to the first day of the
first full calendar month of the Term.
"Rental Year" shall mean each successive twelve (12) calendar month period
occurring during the Term of this Lease, or portion of such a period, with the
first Rental Year commencing as of the Lease Commencement Date and ending on the
last day of the twelfth full calendar month thereafter and the last Rental Year
ending on the Termination Date. For any Rental Year of less or more than twelve
full months, Annual Basic Rent shall be adjusted accordingly. All Annual Basic
Rent and Additional Rent shall be paid to Landlord at the Landlord Payment
Address.
6.2. INTENTIONALLY OMITTED.
6.3. ADDITIONAL RENT. Tenant shall pay to Landlord as additional rent
("Additional Rent") all other sums of money which shall become due and payable
hereunder, including but not limited to the payment of Tenant's Share of
Increased Operating Costs. Unless a date for payment is otherwise specified
herein, all Additional Rent shall be due and payable within thirty (30) days of
invoicing by Landlord.
6.4. ADVANCE RENT AND SECURITY DEPOSIT.
A. ADVANCE RENT. Tenant shall, upon execution of this Lease, pay to
Landlord an amount equal to the Advance Rent which shall be held by Landlord as
security for the performance by Tenant of all of its obligations occurring prior
to the Lease Commencement Date. If Tenant shall default in the performance of
such obligations, Landlord may retain the Advance Rent as an offset against any
damages thereby incurred by Landlord provided that the retention of such Advance
Rent shall not preclude Landlord from pursuing any other remedy which it might
have against Tenant. If no default shall occur by Tenant then the Advance Rent
shall be applied against the installment of Annual Basic Rent payable for the
month identified in Section 1.B.(2).
B. SECURITY DEPOSIT. Tenant shall, upon execution of this Lease, deposit
with Landlord the Security Deposit to assure Tenant's performance of all terms,
provisions and conditions of this Lease. Landlord shall have the right, but not
the obligation, at any time, to apply the Security Deposit to cure any breach by
Tenant under this Lease and, in that event, Tenant shall immediately pay
Landlord any amount necessary to restore the Security Deposit to its original
amount. To the extent permitted by law, Landlord shall be entitled to the full
use of the Security Deposit and shall not be required either to keep the
Security Deposit in a separate account or to pay interest on account thereof.
Any portion of the Security Deposit which is not utilized by Landlord for any
purpose permitted under this Lease shall be returned to Tenant within sixty (60)
days after the end of the Term provided Tenant has performed all of the
obligations imposed upon Tenant pursuant to this Lease.
6.5. LATE CHARGE. If Tenant fails to make any payment of Annual Basic
Rent, Additional Rent, or other sums required to be paid hereunder on or before
the date when payment is due, Tenant shall pay to Landlord, as Additional Rent,
a late charge to cover extra administrative costs and loss of use of funds equal
to (a) six percent (6%) of the amount due for the first month or portion thereof
that such amount is past due plus (b) interest on the amount remaining unpaid
thereafter at the rate of eighteen percent (18%) per annum or six percent (6%)
above the prime rate charged by Citibank, N.A., as of the due date of such
amount, whichever rate is the greater; provided, however, that should such late
charge at any time violate any applicable law, the late charge shall be reduced
to the highest rate permitted by law (the foregoing rate being herein referred
to as the "Default Rate"). Landlord's acceptance of any rent after it has become
due and payable shall not excuse any delays with respect to future rental
payments or constitute a waiver of any of Landlord's rights under this Lease.
Notwithstanding the above, the late charge set forth above shall be waived
up to two (2) times in any twelve (12) month period, provided that Tenant pays
the above described sums within five (5) days after the date due.
7. OPERATING COST ESCALATIONS.
7
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7.1. DEFINITIONS. For purposes of this Lease, the following
definitions shall apply:
a. "Operating Year" means each respective calendar year or part
thereof during the Term of this Lease or any renewal thereof, or at the option
of Landlord, any other twelve month period or part thereof designated by
Landlord during the Term of this Lease or any renewal thereof.
b. "Property" means the Building, the land upon which the Building
is situated, the Common Area, and such additional facilities in subsequent years
as may be determined by Landlord to be reasonably necessary or desirable for the
management, maintenance or operation of the Building.
c. "Operating Costs" means all expenses and costs (but not specific
costs which are allocated or separately billed to and paid by specific tenants)
of every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with owning, operating, managing, painting,
repairing, insuring and cleaning the Property, including, but not limited to,
the following:
(i) cost of all supplies and materials used, and labor charges
incurred, in the operation, maintenance, decoration, repairing and cleaning of
the Property, including janitorial service for all floor area leased to tenants;
(ii) cost of all equipment purchased or rented which is utilized
in the performance of Landlord's obligations hereunder, and the cost of
maintenance and operation of any such equipment;
(iii) cost of all maintenance and service agreements for the
Property and the equipment therein, including, without limitation, alarm
service, security service, window cleaning, and elevator maintenance;
(iv) accounting costs, including the cost of audits by certified
public accountants, outside legal and engineering fees and expenses incurred in
connection with the operation and management of the Property;
(v) wages, salaries and related expenses of all on-site and
off-site agents or employees engaged in the operation, maintenance, security and
management of the Property; provided, however, the wages, salaries and related
expenses of any agents or employees not exclusively engaged in the operation,
maintenance, security and management of the Property shall be apportioned as
deemed appropriate by Landlord;
(vi) cost of all insurance coverage for the Property from time
to time maintained by Landlord, including but not limited to the costs of
premiums for insurance with respect to personal injury, bodily injury, including
death, property damage, business interruption, workmen's compensation insurance
covering personnel and such other insurance as Landlord shall deem necessary,
which insurance Landlord may maintain under policies covering other properties
owned by Landlord in which event the premium shall be reasonably allocable;
(vii) cost of repairs, replacements and general maintenance to
the Property, including without limitation the mechanical, electrical and
heating, ventilating and air-conditioning equipment and/or systems (excluding
alterations attributable solely to tenants, capital improvements unless they are
included under c(xi), and repairs and general maintenance paid by proceeds of
insurance or by tenants or other third parties);
8
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(viii) any and all Common Area maintenance, repair or
redecoration (including repainting) and exterior and interior landscaping;
(ix) cost of removal of trash, rubbish, garbage and other refuse
from the Property as well as removal of ice and snow from the sidewalks on or
adjacent to the Property;
(x) all charges for electricity, gas, water, sewerage service,
heating, ventilation and air-conditioning and other utilities furnished to the
Property (including legal, architectural and engineering fees incurred in
connection therewith);
(xi) amortization of capital improvements made to the Building
after the year of substantial completion of the Building, which improvements
were undertaken by Landlord with the reasonable expectation that the same would
result in more efficient operation of the Building or are made by Landlord
pursuant to any governmental law, regulation or action not applicable to the
Building at commencement of construction of the Building; provided that the cost
of each such capital improvement, together with any financing charges incurred
in connection therewith, shall be amortized over the useful life thereof and
only that portion attributable to each Operating Year shall be included herein
for such Operating Year;
(xii) a management fee for the operation and management of
the Property;
(xiii) costs and expenses incurred in order to comply with
covenants and conditions contained in liens, encumbrances and other matters of
public record affecting the Property; and
(xiv) all real estate taxes, assessments (special or otherwise),
levies, ad valorem charges, benefit charges, water and sewer rents, rates and
charges, privilege permits and any other governmental liens, impositions or
charges of a similar or dissimilar nature, and any payments in lieu of such
charges, regardless of whether any such items shall be extraordinary or
ordinary, general or special, foreseen or unforeseen, levied, assessed, or
imposed on or with respect to all or any part of the Property or upon the rent
due and payable hereunder by any governmental authority (all of the aforesaid
being hereinafter referred to as "Taxes"); provided, however, that if at any
time during the Term or any extension thereof the method of taxation prevailing
at the commencement of the Term shall be altered or eliminated so as to cause
the whole or any part of the above items which would otherwise be included in
Taxes to be replaced by a levy, assessment or imposition, which is (A) a tax
assessment, levy, imposition or charge based on the rents received from the
Property whether or not wholly or partially a capital levy or otherwise, or (B)
a tax, assessment, levy, imposition or charge measured by or based in whole or
in part upon all or any portion of the Property and imposed on Landlord, or (C)
a license fee measured by the rent payable by Tenant to Landlord, or (D) any
other tax, levy, imposition, charge or license fee, however described or
imposed, then such levy, assessment or imposition shall be included in Taxes;
provided, however, in no event shall Tenant be required to pay any inheritance,
estate, succession, income, profits or franchise taxes unless they are in lieu
of or in substitution for any of the above items which would otherwise be
included in Taxes;
Any of the foregoing costs which under generally accepted accounting
principles would be considered capital expenditures shall be amortized in
accordance with generally accepted accounting principles.
Notwithstanding the above, Operating Costs shall not include:
9
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(a) payments of principal, interest, points and fees on any mortgages,
deeds of trust or other financing instruments relating to the financing of the
Property;
(b) leasing commissions or brokerage fees;
(c) costs associated with preparing; improving or altering space
for any leasing or releasing of any space within the Building;
(d) any increase in real estate taxes based on a re-assessment of
the Property resulting from the sale of the Property;
(e) any ground lease rental;
(f) costs of capital improvements and equipment, except for those
as set forth in subsection c(xi) above;
(g) rentals for items (except when needed in connection with normal
repairs and maintenance of permanent systems) which if purchased, rather than
rented, would constitute a capital improvement which is specifically excluded in
Subsection (f) above (excluding, however, equipment not affixed to the Building
which is used in providing janitorial or similar services);
(h) costs incurred by Landlord for the repair of damage to the
Building, to the extent that Landlord is reimbursed by insurance proceeds;
(i) costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements in the Building or
incurred in renovating or otherwise improving, decorating, painting or
redecorating vacant leasable space for tenants or other occupants of leasable
premises in the Building;
(j) depreciation, amortization and interest payments, except as
provided herein and except on materials, tools, supplies and vendor-type
equipment purchased by Landlord to enable Landlord to supply services Landlord
might otherwise contract for with a third party where such depreciation,
amortization and interest payments would otherwise have been included in the
charge for such third party's services, all as determined in accordance with
generally accepted accounting principles, consistently applied, and when
depreciation or amortization is permitted or required, the item shall be
amortized over its reasonably anticipated useful life;
(k) marketing costs, including leasing commissions, attorney's fees in
connection with the negotiation and preparation of letters, deal memos, letters
of intent, leases, subleases and/or assignments, space planning costs, and other
costs and expenses incurred in connection with lease, sublease and/or assignment
negotiations and transaction with present or prospective tenants or other
occupants of the Building;
(l) costs incurred by Landlord for alterations which are considered
capital improvements, and replacements under generally accepted accounting
principles, consistently applied, except as permitted in (f) and (g) above;
(m) costs of a capital nature, including without limitation, capital
improvements, capital repairs, capital equipment and capital tools, all as
determined in accordance with generally accepted accounting principles,
consistently applied, excepted as permitted in (f) and (g) above;
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(n) costs incurred by Landlord due to a violation by any other
tenant of the terms and conditions of any lease;
(o) any amounts paid by Landlord for, materials, labor or equipment
shall be limited to the amounts which would have been paid for the aforesaid,
based upon their procurement from an unaffiliated party in an arms length
transaction;
(p) Landlord's general corporate overhead and corporate general and
administrative expenses, to the extent such overhead and expenses exceeds the
management fee;
(q) any compensation paid to clerks, attendants or other persons,
rendering services on behalf of Landlord in commercial concessions operated by
Landlord, or any compensation paid to attendants working in a parking garage in
the Building or any other parking facility operated by Landlord;
(r) except for making repairs or keeping permanent systems in
operation while repairs are being made, rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other equipment
ordinarily considered to be of a capital nature, except equipment not affixed to
the Building which is used in providing janitorial or similar services;
(s) All items and services for which Tenant or any other tenant in the
Building reimburses Landlord (other than through Tenant's Percentage Share of
Operating Expenses), or which Landlord provides selectively to one or more
tenants (other than Tenant) without reimbursement;
(t) Advertising of a non-employment nature and promotional
expenditures, and procurement costs of signs in or on the Building
identifying the owner of the Building;
(u) Electric power costs for which any tenant directly contracts
with the local public service company;
(v) Tax penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payments when due;
(w) Costs incurred in curing a violation of environmental laws
regarding the storage, use or disposal of hazardous materials or substances (as
defined by applicable laws) in effect in or about the Building or Property
including, without limitation, hazardous substances in the ground water or soil,
unless such violation of environmental laws are caused by Tenant;
(x) Costs arising from Landlord's charitable or political
contributions;
(y) Costs arising from latent defects in the base, shell or core
of the Building or the Premises;
(z) Costs for procuring sculpture, paintings or other objects of
art;
(aa) attorney fees, costs, and disbursements (including settlements)
and other expenses incurred in connection with proposals, negotiations, or
disputes with other tenants or occupants or prospective tenants or other
occupants, or associated with the enforcement of any leases or the defense of
Landlord's title to or interest in the Premises, the Building or its
appurtenances, or any part thereof.
Landlord further agrees that since one of the purposes of Operating
Expenses and the Increase in Operating Costs provision is to allow the Landlord
to require the Tenant to pay for the costs attributable to its Premises,
Landlord agrees that (i) Landlord will not collect or be entitled to collect
Operating Costs from all of its tenants in an amount which is in excess of 100%
of the Operating Costs actually paid by Landlord in connection with the
operation of the Building.
For any Operating Year during which less than ninety-five percent
(95%) of the Rental Area of the Building is occupied, the calculation of that
portion of Operating Costs which vary with occupancy shall be adjusted to equal
the Operating Costs which Landlord projects would have been incurred had the
Building been ninety-five percent occupied during such Operating Year. Landlord
represents that the Building is completely constructed and improved and fully
assessed for tax purposes.
d. "Fractional Share" shall mean a fraction, the numerator of which
is the Rental Area of the Premises and the denominator of which is the total
Rental Area of the Building. For the purposes of this subparagraph, the Rental
Area of the Building shall mean the sum of the Rental Area of all floors of the
Building as determined by Landlord. As of the Lease Commencement Date, Tenant's
Fractional Share is equal to 4.98%.
7.2. PAYMENT OF OPERATING COST ESCALATION. For each Operating Year,
commencing January 1, 1997, Tenant shall pay to Landlord, in the manner provided
herein, Tenant's Share of Increased Operating Costs which shall be computed by
multiplying the Operating Costs for the Operating Year by Tenant's Fractional
Share and subtracting the Base Operating Costs from the result obtained;
provided, however, that for the Operating Years during which the Term begins and
ends, Tenant's Share of Increased Operating Costs shall be prorated based upon
the actual number of days Tenant occupied, or could have occupied, the Premises
during each such Operating Year. Notwithstanding the foregoing, Tenant's Share
of Increased Operating Costs (excluding taxes, insurance, utilities and snow
removal costs) for the 1997 Operating Year shall not exceed eight percent (8%)
of the Base Operating Costs (excluding taxes, insurance, utilities and snow
removal costs). For purposes of calculating Tenant's Share of Increased
Operating Costs for the 1997 Operating Year , Operating Costs shall not exceed
one hundred eight percent (108%) of the Base Operating Costs. For each Operating
Year thereafter, Tenant's Share of Increased Operating Costs (excluding taxes,
insurance, utilities and snow removal costs) shall not exceed ten percent (10%)
of the of the Operating Costs for the preceding Operating Year. For purposes of
calculating Tenant's Share of Increased Operating Costs, Operating Costs shall
not exceed one hundred ten percent (110%) of the preceding Operating Costs.
Tenant's Share of Increased Operating Costs shall be paid, in advance,
without notice, demand, abatement (except as otherwise specifically provided in
this Lease), deduction or set-off, on the first day of each calendar month
during the Term, said monthly amounts to be determined on the basis of estimates
prepared by Landlord on an annual basis and delivered to Tenant prior to the
commencement of each Operating Year. If, however, Landlord fails to furnish any
such estimate prior to the commencement of an Operating Year, then (a) until the
first day of the month following the month in which such estimate is furnished
to Tenant, Tenant shall pay to Landlord on the first day of each month an amount
equal to the monthly sum payable by Tenant to Landlord under this subsection 7.2
in respect of the last month of the preceding Operating Year; (b) promptly after
such estimate is furnished to Tenant, Landlord shall give notice to Tenant
whether the installments of Tenant's Share of Increased Operating Costs paid by
Tenant for the current Operating Year have resulted in a deficiency or
overpayment compared to payments which would have been paid under such estimate,
and Tenant, within ten (10) days after receipt of such estimate, shall pay any
deficiency to Landlord and any overpayment shall be credited against future
payments required by Tenant under such estimate; and (c) on the first day of the
month following the month in which such estimate is furnished to Tenant and
monthly thereafter throughout the remainder of the Operating Year, Tenant shall
pay to Landlord the monthly payment shown on such estimate. Landlord may at any
time or from time to time furnish to Tenant a revised estimate of Tenant's Share
of Increased Operating Costs for such Operating Year, and in such case, Tenant's
monthly payments shall be adjusted and paid or credited, as the case may be,
substantially in the same manner as provided in the preceding sentence.
After the end of each Operating Year, Landlord shall determine actual
Operating Costs for such Operating Year and shall provide to Tenant an
"Operating Costs Statement" setting forth the actual Tenant's Share of Increased
Operating Costs for such Operating Year. Within thirty (30) days after delivery
of the Operating Costs Statement, Tenant shall pay Landlord any deficiency
between the amount shown as Tenant's Share of Increased Operating Costs in the
Operating Costs Statement and the total of the estimated payments made by Tenant
during the Operating Year. In the event of overpayment, such amount shall be
credited against future payments required on account of Tenant's Share of
Increased Operating Costs, or if the Term has expired, Landlord shall refund to
Tenant the amount of any overpayment within sixty (60) days.
Each Operating Costs Statement provided by Landlord shall be conclusive
and binding upon Tenant unless within thirty (30) days after receipt thereof,
Tenant notifies Landlord that it disputes the correctness thereof, specifying
those respects in which it claims the Operating Costs Statement to be incorrect.
Unless resolved by the parties, such dispute shall be determined by arbitration
in accordance with the then prevailing rules of the American Arbitration
Association. If the arbitration proceedings result in a determination that the
Operating Costs Statement contained an aggregate discrepancy of less than five
percent (5%), Tenant shall bear all costs in connection with such arbitration.
If the arbitration proceedings result in a determination that the Operating
Costs Statement contained an aggregate discrepancy of greater than five percent
(5%), Landlord shall bear all costs in connection with such arbitration. Pending
determination of the dispute, Tenant shall pay any amounts due from Tenant in
accordance with the Operating Costs Statement, but such payment shall be without
prejudice to Tenant's claims. Tenant, for a period of ninety (90) days after
delivery of the Operating Costs Statement in each Operating Year and upon at
least ten (10) days written notice to Landlord, shall have reasonable access
during normal business hours to the books and records of Landlord relating to
Operating Costs for the purpose of verifying the Operating Costs Statement,
Tenant to bear all costs relating to such inspection. Tenant shall reimburse
Landlord for any cost for photocopying that it desires.
8. USE, CARE AND REPAIR OF PREMISES BY TENANT.
8.1. PERMITTED USES. Tenant shall use and occupy the Premises solely for
general office purposes in accordance with applicable zoning regulations and for
no other purpose. Tenant shall not do anything or permit anything to be done in
or on the Premises, or bring or keep anything therein which will, in any way,
obstruct, injure, annoy or interfere with the rights of Landlord or other
tenants, or subject Landlord to any liability for injury to persons or damage to
property, or interfere with the good order of the Building, or conflict with the
laws, rules or regulations of any Federal, state or city authority.
8.2. CARE OF PREMISES. Tenant shall, at its sole expense, keep the
Premises and the improvements and appurtenances therein in good order and
condition consistent with the operation of a first-class office building, and at
the expiration of the Term, or at the sooner termination of this Lease as herein
provided, deliver up the same broom clean and in as good order and condition as
at the beginning of the Term, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant, at its sole expense, shall promptly replace damaged
or broken doors and glass in and about the interior of the Premises and shall be
responsible for the repair and maintenance of all Tenant Improvements and
Alterations, including, without limitation, the repair and replacement of
appliances and equipment installed specifically for Tenant such as
refrigerators, disposals, computer room air conditioning, sinks and special
plumbing, special light fixtures and bulbs for those fixtures, non-standard
outlets and plug-in strips, and special cabinetry. Consistent with the
provisions of Section 22, Tenant shall pay for all damage
to the Property and any fixtures and appurtenances related thereto, as well as
for all property damage sustained by other tenants or occupants of the Building,
due to any waste, misuse or neglect of the Premises and any fixtures and
appurtenances related thereto or due to any breach of this Lease by Tenant, its
employees, agents, representatives or invitees.
8.3. HAZARDOUS SUBSTANCES. For purposes of this provision, "Hazardous
Substances" shall mean any hazardous or toxic substance, material or waste, now
or hereafter defined or regulated under the Resource Conservation and Recovery
Act (42 U.S.C. ss. 6901 ET SEQ.), the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 ET SEQ.), the Clean Water
Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET
SEQ.), and the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET seq.), and
all similar federal, state and local statutes, laws, rules and regulations in
connection with environmental conditions, health and safety, including without
limitation, asbestos and petroleum products (collectively, "Environmental
Laws"). Tenant covenants and agrees that it will not use or allow the Premises
to be used for the storage, use, treatment or disposal of any Hazardous
Substance, without Landlord's prior written consent. Notwithstanding the
foregoing, Landlord's prior written consent shall not be required with respect
to Tenant's use, storage or sale of certain supplies or products, which might
contain or might be considered a Hazardous Substance, in the normal course of
Tenant's business in accordance with the specific use permitted by this Lease,
provided, however, that Tenant shall (i) comply with all other provisions of
this Section; (ii) notify Landlord in writing from time to time of the identity
and approximate quantity of such Hazardous Substance; and (iii) keep each such
Hazardous Substance on the Premises in quantities as small as reasonably
practicable, but in no event large enough to activate reporting requirements
under any Environmental Law.
Tenant shall indemnify and hold harmless Landlord, its partners,
affiliates and agents from and against any damages, claims, judgments, fines,
penalties, costs, liabilities (including sums paid in settlement of claims) or
loss including reasonable attorneys' fees, reasonable consultants' fees, and
reasonable expert fees incurred by any of them to the extent resulting from
Tenant's use, handling, generation, treatment, storage, disposal, other
management or release of any Hazardous Substance at or from the Premises or the
Property, whether or not Tenant has acted negligently with respect to such
Hazardous Substance. This indemnity shall survive the expiration or earlier
termination of this Lease.
Landlord warrants and represents to Tenant that to Landlord's actual
knowledge, there are no Hazardous Substances in violation of any Environmental
Regulations in the Property of which the Premises are a part.
From and after the date of execution of this Lease, Landlord will not use
or allow the Property to be used for the storage, use, treatment or disposal of
any Hazardous Substance, in violation of any Environmental Regulations. Landlord
shall promptly contain and remediate any release of a Hazardous Substance on the
Property to the extent such release arises directly from the actions of
Landlord, its agents, servants and employees, and not solely from Landlord's
position as an owner or operator of the Property.
Landlord shall indemnify, hold harmless and defend Tenant, its agents,
servants and employees, from and against all claims, actions, losses and
expenses made or incurred by third parties (including attorneys' and other
professional fees), arising from any conduct, activity, act, omission, or
operation involving the use, handling, generation, treatment, storage, disposal,
or release of any Hazardous Substance in, from, or to the Property, to the
extent caused directly by the actions of Landlord, its agents, servants, and
employees, and not arising solely out of Landlord's position as an owner or
operator of the Property. This indemnity shall survive the expiration or earlier
termination of this Lease.
8.4. COMPLIANCE WITH LAWS.
Tenant, at its sole cost and expense, shall conform to and comply with and
shall cause the Premises to conform to and comply with all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, and ordinances applicable to Tenant or resulting from Tenant's use
or occupancy of the Premises or the Property or any part thereof.
Landlord warrants and represents to Tenant that, as of the Lease
Commencement Date, Landlord is in the process of implementing a compliance plan
for the Building, in accordance with the requirements of The Americans With
Disabilities Act of 1990, and Landlord will proceed to execute such plan
throughout the Term, subject to the provisions of Sections 7 and 15.1 of this
Lease.
9. RULES AND REGULATIONS.
Tenant and its agents and invitees shall abide by and observe the rules
and regulations attached hereto as SCHEDULE C for the operation and maintenance
of the Building or any new rules and regulations which may from time to time be
issued by Landlord ("Rules and Regulations"), provided that any new rules or
regulations are not inconsistent with the provisions of this Lease. Nothing in
this Lease shall be interpreted to impose upon Landlord any duty or obligation
to enforce any such rules and regulations against any other tenant in the
Building, and Landlord shall not be liable to Tenant for any violation of these
rules and regulations by any other tenant or its agents or invitees.
All rules and regulations promulgated by Landlord shall be reasonable,
shall not materially alter the terms of this Lease and any enforcement shall be
uniform with respect to all tenants' use and occupancy of the Building and
Common Area.
10. COMMON AREA.
10.1. DEFINITION OF COMMON AREA. As used herein, "Common Area" mean those
areas and facilities which may be furnished by Landlord on or near the Property,
as designated by Landlord from time to time, intended for the general common use
and benefit of all tenants of the Building and their agents, representatives,
licensees, employees and invitees, including, without limitation, any and all
stairs, landings, roofs, utility and mechanical rooms and equipment, service
closets, corridors, elevators, lobbies, lavatories and other public areas of the
Building and all parking areas, access roads, pedestrian walkways, plazas and
landscaped areas.
10.2. USE OF COMMON AREA. Tenant shall have the non-exclusive right to use
the Common Area in common with Landlord, other tenants in the Building, and
others entitled to the use thereof, subject to such reasonable rules and
regulations governing the use of the Common Area as Landlord may from time to
time prescribe and subject to such easements therein as Landlord may from time
to time grant to others so long as there is not material interference of
Tenant's use of the Common Areas. Tenant shall not obstruct in any way any
portion of the Common Area or in any way interfere with the rights of other
persons entitled to use the Common Area and shall not, without the prior written
consent of Landlord, use the Common Area in any manner, directly or indirectly,
for the location or display of any merchandise or property belonging to Tenant
or for the location of signs relating to Tenant's operations in the Premises.
The Common Area shall at all times be subject to the exclusive control and
management of Landlord.
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10.3. ALTERATIONS TO THE COMMON AREA. Landlord reserves the right at any
time and from time to time (i) to change or alter the location, layout, nature
or arrangement of the Common Area or any portion thereof, including but not
limited to the arrangement and/or location of entrances, passageways, doors,
corridors, stairs, lavatories, elevators, parking areas, and other public areas
of the building, and (ii) to construct additional improvements on the Property
and make alterations thereof or additions thereto and build additional stories
on or in any such buildings or build adjoining same; provided, however, that no
such change or alteration shall deprive Tenant of access to the Premises,
materially interfere with Tenant's use of the Premises or reduce the Rental Area
of the Premises, unless such reduction is required by Federal, State or local
laws or regulations, in which event, a reduction in the Premises shall be
permitted with a commensurate reduction in rent. Landlord shall have the right
to close temporarily all or any portion of the Common Area to such extent as
may, in the reasonable opinion of Landlord, be necessary to prevent a dedication
thereof to the public, provided that Tenant is not thereby denied access to the
Premises, or for repairs, replacements or maintenance to the Common Area,
provided such repairs, replacements or maintenance are performed expeditiously
and in such a manner as not to deprive Tenant of access to the Premises.
10.4. MAINTENANCE. Landlord covenants to keep, maintain, manage and
operate the Common Area in a manner consistent with the operation of a first
class office building and to keep the sidewalks and driveways, if any,
constituting a portion of the Common Area clean and reasonably clear of snow and
ice. Landlord reserves the right of access to the Common Area through the
Premises for the purposes of operation, decoration, cleaning, maintenance,
safety, security, alterations and repairs.
11. SERVICES AND UTILITIES.
So long as Tenant is not in an Event of Default under this Lease, Landlord
shall provide the following facilities and services to Tenant as part of
Landlord's Operating Costs (except as otherwise provided herein):
a. At least one elevator (if the building contains an elevator) subject to
call at all times, including Sundays and holidays. The holidays observed by
Landlord are New Year's Day, Memorial Day observed, Independence Day, Labor Day,
Thanksgiving, and Christmas.
b. During "normal business hours" as hereinafter defined, central heating
and air conditioning during the seasons of the year when these services are
normally and usually furnished, and within the temperature ranges and in such
amounts normally or usually furnished in comparable office buildings in the
immediate vicinity. For the purposes of this paragraph b, the term "normal
business hours" shall mean the periods from 8:00 a.m. until 6:00 p.m. on
business days and from 9:00 a.m. until 1:00 p.m. on Saturdays. Landlord shall
provide the aforesaid services at other times, at Tenant's expense, provided
Tenant gives Landlord notice by 1:00 p.m. on weekdays for after-hour service on
the next weekday, by 1:00 p.m. the day before a holiday for service on a
holiday, and by 1:00 p.m. on Friday for after-hour service on Saturday or
service on Sunday. Such after-hour, holiday or special weekend service shall be
charged to Tenant at rates to be calculated by Landlord based on Landlord's
costs, which rates is currently Twenty-Five Dollars ($25.00) per hour. Landlord
reserves the right to adjust, from time to time, the rate at which such services
shall be provided corresponding to adjustments in Landlord's costs. Tenant shall
pay for such service, as Additional Rent, promptly upon receipt of an invoice
with respect thereto.
c. Reasonable amounts of electric current for lighting and normal and
customary items of office equipment (subject to the provisions of Section 12
below).
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d. Cleaning in Landlord's standard manner.
e. Replacement of light tubes or bulbs for building standard lighting
fixtures. All light tube or bulb replacements for special non-standard lighting
fixtures shall be furnished and installed by Landlord at Tenant's expense.
f. Rest room facilities and necessary lavatory supplies, including hot and
cold running water at the points of supply, as provided for general use of all
tenants in the Building and routine maintenance, painting, and electric lighting
service for all public areas of the Building in such manner as Landlord deems
reasonable.
Any failure by Landlord to furnish the foregoing services, resulting from
circumstances beyond Landlord's reasonable control or from interruption of such
services due to repairs or maintenance, shall not render Landlord liable in any
respect for damages to either person or property, nor be construed as an
eviction of Tenant, nor cause an abatement of rent hereunder, nor relieve Tenant
from any of its obligations hereunder. If any public utility or governmental
body shall require Landlord or Tenant to restrict the consumption of any utility
or reduce any service for the Premises or the Building, Landlord and Tenant
shall comply with such requirements, whether or not the utilities and services
referred to in this Section 11 are thereby reduced or otherwise affected,
without any liability on the part of Landlord to Tenant or any other person or
any reduction or adjustment in rent payable hereunder. Landlord and its agents
shall be permitted reasonable access to the Premises for the purpose of
installing and servicing systems within the Premises deemed necessary by
Landlord to provide the services and utilities referred to in this Section 11 to
Tenant and other tenants in the Building. In the event any failure to supply
services continues uninterrupted for a period of greater than fourteen (14)
consecutive calendar days and thereby renders the Premises wholly or partially
untenantable, the rent shall be abated to the extent of such untenantability.
Landlord acknowledges that Tenant may require an additional HVAC unit for
a portion of the Premises and Landlord agrees, at Tenant's sole cost and
expense, to install such supplemental HVAC equipment upon written notice from
Tenant of its additional HVAC requirements.
Landlord reserves the right to charge Tenant the reasonable cost, based on
usage, of the removal of all trash and the reasonable cost of water/sewerage or
electric service to the extent Tenant's trash disposal, water/sewerage and/or
electrical usage exceeds, in Landlord's reasonable opinion, normal usage for an
office tenant.
12. ELECTRIC CURRENT.
Landlord shall be under no obligation to furnish electrical energy to
Tenant in amounts greater than needed for lighting and normal and customary
items of equipment for general office purposes, and Tenant shall not install or
use on the Premises any electrical equipment, appliance or machine which shall
require amounts of electrical energy exceeding the standard wattage (4.5. watts
per square foot exclusive of HVAC) provided for the Building, unless the
installation and use of such additional electrical equipment, appliance, or
machine has been approved by Landlord pursuant to terms and conditions set forth
in a separate agreement, which approval may be conditioned upon the payment by
Tenant, as Additional Rent, of the cost of the additional electrical energy and
modifications to the Building's electrical system required for the operation of
such electrical equipment, appliance, or machine.
13. LOSS, DAMAGE AND INJURY.
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To the maximum extent permitted by law, Tenant shall occupy and use the
Premises, the Building and the Common Area at Tenant's own risk. Consistent with
the provisions of subsection 16.4, Tenant's Personal Property and the property
of those claiming by, through or under Tenant, located in or on the Premises or
the Building, shall be and remain at the sole risk of Tenant or such other
person.
No representation, guaranty, assurance, or warranty is made or given by
Landlord that the communications or security systems, devices or procedures
used, if any, will be effective to prevent injury to Tenant or any other person
or damage to, or loss (by theft or otherwise) of any of Tenant's Personal
Property or of the property of any other person, and Landlord reserves the right
to discontinue or modify at any time such communications or security systems,
devices, or procedures without liability to Tenant.
14. REPAIRS BY LANDLORD.
Landlord shall keep the Premises and the Building and all machinery,
equipment, fixtures and systems of every kind attached to, or used in connection
with the operation of, the Building, including all electrical, heating,
mechanical, sanitary, sprinkler, utility, power, plumbing, cleaning,
refrigeration, ventilating, air conditioning and elevator systems and equipment
(excluding, however, lines, improvements, systems and machinery for water, gas,
steam and electricity owned and maintained by any public utility company or
governmental agency or body) in good order and repair consistent with the
operation of the Building as a first-class office building. Landlord, at its
expense (subject to reimbursement by Tenant pursuant to Section 7), shall make
all repairs and replacements necessary to comply with its obligations set forth
in the immediately preceding sentence, except for (a) repairs required to be
made by Tenant pursuant to Section 8 and (b) notwithstanding the provisions of
Section 16.4, repairs caused by the negligence or willful misconduct of Tenant,
its agents, employees, invitees and guests, which repairs shall be made by
Landlord at the cost of Tenant, and for which Tenant shall pay promptly, as
Additional Rent, upon receipt of an invoice setting forth the cost of such
repairs. There shall be no abatement in rents due and payable hereunder and no
liability on the part of Landlord by reason of any inconvenience or annoyance
arising from Landlord's making repairs, additions or improvements to the
Building in accordance with its obligations hereunder.
In an emergency, Landlord shall use all reasonable efforts to commence the
repair within twenty-four (24) hours after notification from Tenant and shall
diligently work to complete the same. In all other instances, Landlord shall
commence repairs as soon as reasonably possible after notice from Tenant and
shall diligently work to complete the same. In the event Landlord fails to
commence and diligently pursue any repairs or provide services for which
Landlord is responsible within thirty (30) days after written notice from Tenant
of the need for repair or such services, Tenant shall have the right with notice
to Landlord at the notice address to perform the repairs or provide such
services and Landlord shall reimburse Tenant for the reasonable cost of repair
or provision of services.
15. ALTERATIONS, TITLE AND PERSONAL PROPERTY.
15.1. ALTERATIONS. Tenant shall in no event make or permit to be made any
alteration, modification, substitution or other change of any nature to the
mechanical, electrical, plumbing, HVAC and sprinkler systems within or serving
the Premises. After completion of Tenant's Improvements within the Premises,
Tenant shall not make or permit any other improvements, alterations, fixed
decorations, substitutions or modifications, structural or otherwise, to the
Premises or the Building ("Alterations") without the prior written approval of
Landlord. Landlord shall not unreasonably withhold or delay its consent to
Alterations which do not affect the structural, mechanical, plumbing or
electrical elements or systems of the Building and which are not visible from
outside the Premises, provided such work conforms with the design criteria,
standards and architectural guidelines for the Building. Landlord's approval
shall include the conditions under which acceptable Alterations may be made.
Alterations shall include, but not be limited to, the installation or
modification of carpeting, walls, partitions, counters, doors, shelves, lighting
fixtures, hardware, locks, ceiling, window and wall coverings; but shall not
include the initial Tenant's Improvements placed within the Premises pursuant to
Section 5.1. All Alterations shall be based on complete plans and specifications
prepared and submitted by Tenant to Landlord for approval, except in the
instance of cosmetic changes, such as painting and carpeting, in which case
Tenant shall provide Landlord with samples showing colors, styles, etc. All
Alterations shall be made by Landlord at Tenant's sole cost, payable by Tenant,
as Additional Rent, within thirty (30) days after receipt of an invoice for same
from Landlord, which cost shall include Landlord's standard construction
management fee. Tenant shall be responsible for the cost of any additional
improvements within the Premises or the Common Area required by The Americans
with Disabilities Act of 1990 as a result of Tenant's Alterations.
If Tenant makes any Alterations without the prior consent of Landlord,
then, in addition to Landlord's other remedies, Landlord may correct or remove
such Alterations and Tenant shall pay the cost thereof, as Additional Rent,
within ten (10) days of receipt of invoice from Landlord.
15.2. TITLE. The Tenant Improvements, all Alterations and all equipment,
machinery, furniture, furnishings, and other property or improvements installed
or located in the Premises by or on behalf of Landlord or Tenant, other than
Tenant's Personal Property, (a) shall immediately become the property of
Landlord and (b) shall remain upon and be surrendered to Landlord with the
Premises as a part thereof at the end of the Term. Notwithstanding the
foregoing, Landlord may, upon notice to Tenant at the time Alterations are made,
elect that any Alterations be removed at the end of the Term, and thereupon,
Landlord shall at Tenant's sole expense, cause such Alterations to be removed
and restore the Premises to its condition prior to the making of such
Alterations, reasonable wear and tear excepted. Tenant shall promptly reimburse
Landlord, as Additional Rent, for the cost of such work, which reimbursement
obligation shall survive termination of the Lease.
15.3. TENANT'S PERSONAL PROPERTY. "Tenant's Personal Property" means all
equipment, machinery, furniture, furnishings and/or other property now or
hereafter installed or placed in or on the Premises by and at the sole expense
of Tenant with respect to which Tenant has not been granted any credit or
allowance by Landlord and which (a) is not used, or was not procured for use, in
connection with the operation, maintenance or protection of the Premises or the
Building; (b) is removable without damage to the Premises or the Building; and
(c) is not a replacement of any property of Landlord, whether such replacement
is made at Tenant's expense or otherwise. Notwithstanding any other provision of
this Lease, Tenant's Personal Property shall not include any Alterations or any
improvements or other property installed or placed in or on the Premises as part
of Tenant's Improvements, whether or not installed at Tenant's expense. Tenant
shall promptly pay all personal property taxes on Tenant's Personal Property, as
applicable. Provided that Tenant is not then in default of any of its
obligations under this Lease, Tenant may remove all Tenant's Personal Property
from the Premises at the termination of this Lease. Any property belonging to
Tenant or any other person which is left in the Premises after the date the
Lease is terminated for any reason shall be deemed to have been abandoned. In
such event, Landlord shall have the right to declare itself the owner of such
property and to dispose of it in whatever manner Landlord considers appropriate
without waiving its right to claim from Tenant all expenses and damages caused
by Tenant's failure to remove such property, and Tenant shall not have any right
to compensation or claim against Landlord as a result.
16. INSURANCE.
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16.1. TENANT'S INSURANCE. Tenant, at its expense, shall obtain and
maintain in effect as long as this Lease remains in effect and during such other
time as Tenant occupies the Premises or any part thereof insurance policies in
accordance with the following provisions.
A. COVERAGE.
(i) commercial general liability insurance policy, including
insurance against assumed or contractual liability under this Lease, with
respect to the Property, to afford protection with limits, per occurrence, of
not less than One Million Dollars ($1,000,000), combined single limit, with
respect to personal injury, bodily injury, including death, and property damage
and Two Million Dollars ($2,000,000) aggregate (occurrence form), such insurance
to provide for no deductible;
(ii) all-risk property insurance policy, including theft, written at
replacement cost value and with replacement cost endorsement, covering all of
Tenant's Personal Property in the Premises, and covering loss of income
resulting from casualty, such insurance to provide for no deductible greater
than Five Thousand Dollars ($5,000).
(iii) worker's compensation or similar insurance policy offering
statutory coverage and containing statutory limits, which policy shall also
provide Employer's Liability Coverage of not less than Five Hundred Thousand
Dollars ($500,000) per occurrence.
(iv) Tenant shall require any construction contractor retained by it
to perform work on the Premises to carry and maintain, at no expense to
Landlord, during such times as contractor is working in the Premises, a
non-deductible (a) commercial general liability insurance policy, including, but
not limited to, contractor's liability coverage, contractual liability coverage,
completed operations coverage, broad form property damage endorsement and
contractor's protective liability coverage, to afford protection with limits per
person and for each occurrence, of not less than Two Million Dollars
($2,000,000), combined single limit, and with respect to personal injury and
death and property damage, Four Million Dollars ($4,000,000) aggregate
(occurrence form) and Two Million Dollars ($2,000,000) aggregate completed
operations; (b) automobile liability insurance in the amount of One Million
Dollars ($1,000,000) combined single limit for bodily injury and property
damage; (c) worker's compensation insurance or similar insurance in form and
amounts as required by law; and (d) any other insurance reasonably required of
Tenant by Landlord or any Mortgagee.
(v) Notwithstanding anything set forth above in this subsection 16.1
to the contrary, with prior written notice to Tenant, all dollar limits
specified herein shall be increased from time to time as reasonably necessary to
effect economically equivalent insurance coverage, or coverage deemed adequate
in light of then existing circumstances.
B. POLICIES.
Such policies shall be maintained with companies licensed to do business
in the State where the Premises are located and in form reasonably acceptable to
Landlord and will be written as primary policy coverage and not contributing
with, or in excess of, any coverage which Landlord shall carry. Such policies
shall be provided on an occurrence form basis unless otherwise approved by
Landlord and shall include Landlord and its managing agent as additional insured
as to coverage under paragraphs 16.1.A.(i) and 16.1.A.(iv). Such policies shall
also contain a waiver of subrogation provision and a provision stating that such
policy or policies shall not be canceled, non-renewed, reduced in coverage or
materially altered except after thirty (30) day's written notice, said notice to
be given in the manner required by this Lease to Landlord, Attention: Risk
Management Department. All such policies of insurance shall be effective as of
the date Tenant occupies the Premises and shall be maintained in force at all
times during the Term of this Lease and all other times during which Tenant
shall occupy the Premises. Tenant shall deposit the policy or policies of such
required insurance or certificates thereof with Landlord prior to the Lease
Commencement Date.
16.2. TENANT'S FAILURE TO INSURE. If Tenant shall fail to obtain insurance
as required under this Section 16, Landlord may, but shall not be obligated to,
obtain such insurance, and in such event, Tenant shall pay, as Additional Rent,
the premium for such insurance upon demand by Landlord.
16.3. COMPLIANCE WITH POLICIES. Tenant shall not do or allow to be done,
or keep, or allow to be kept, anything in, upon or about the Premises which will
contravene Landlord's policies insuring against loss or damage by fire, other
casualty, or any other cause, including without limitation, public liability, or
which will prevent Landlord from procuring such policies in companies acceptable
to Landlord. If any act or failure to act by Tenant in and about the Building
and the Premises shall cause the rates with respect to Landlord's insurance
policies to be increased beyond those rates that would normally be applicable
for such limits of coverage, after notice to Tenant of such increase and
verification from Landlord's insurance carrier, Tenant shall pay, as Additional
Rent, the amount of any such increases upon demand by Landlord.
16.4. WAIVER OF RIGHT OF RECOVERY. Except as provided in Section 8.3,
neither party, including Landlord's managing agent, shall be liable to the other
party, including Landlord's managing agent, or to any insurance company (by way
of subrogation or otherwise) insuring the other party, for any loss or damage to
any building, structure or other tangible property, or loss of income resulting
therefrom, or losses under worker's compensation laws and benefits even though
such loss or damage might have been occasioned by the negligence of such party,
its agents or employees. The provisions of this Section 16.4 shall not limit the
indemnification for liability to third parties pursuant to Section 22.
16.5. LANDLORD'S INSURANCE. Landlord shall carry comprehensive
general liability insurance with regard to the Property and all-risk property
insurance on the Property, including Tenant Improvements and Alterations but
excluding Tenant's Personal Property.
Landlord shall not be obligated to repair any damage to Tenant's Personal
Property or replace the same.
17. DAMAGE AND DESTRUCTION.
17.1. LANDLORD'S OBLIGATION TO REPAIR AND RECONSTRUCT. If, as the result
of fire, the elements, accident or other casualty (any of such causes being
referred to herein as a "Casualty"), the Premises shall be rendered wholly or
partially untenantable (damaged to such an extent as to preclude Tenant's use of
the Premises for the purposes originally intended), then, subject to the
provisions of subsection 17.2, Landlord shall cause such damage to be repaired,
including Tenant Improvements and Alterations, to the extent insurance proceeds
are paid to Landlord, and the Annual Basic Rent and Additional Rent (but not any
Additional Rent due Landlord either by reason of Tenant's failure to perform any
of its obligations hereunder or by reason of Landlord's having provided Tenant
with additional services hereunder) shall be abated proportionately as to the
portion of the Premises rendered untenantable during the period of such
untenantability. All such repairs shall be made at the expense of Landlord,
subject to the availability of insurance proceeds and Tenant's responsibilities
set forth herein. Landlord shall not be liable for interruption to Tenant's
business or for damage to or replacement or repair of Tenant's Personal
Property, all of which replacement or repair shall be undertaken and completed
by Tenant, at Tenant's expense.
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If the Premises shall be damaged by Casualty, but the Premises shall not
be thereby rendered wholly or partially untenantable, Landlord shall promptly
cause such damage to be repaired and there shall be no abatement of rent
reserved hereunder.
17.2. TERMINATION OF LEASE. If the Premises are (a) rendered wholly
untenantable, or (b) damaged as a result of any cause which is not covered by
Landlord's insurance, or if the Building is damaged to the extent of fifty
percent (50%) or more of the gross leasable area thereof, or if, for reasons
beyond Landlord's control or by virtue of the terms of any financing of the
Building, sufficient insurance proceeds are not available for the reconstruction
or restoration of the Building or Premises, then, in any of such events,
Landlord may elect to terminate this Lease by giving to Tenant notice of such
election within sixty (60) days after the occurrence of such event, or after the
insufficiency of such proceeds becomes known to Landlord, whichever is
applicable. If such notice is given, the rights and obligations of the parties
shall cease as of the date set forth in such notice, and the Annual Basic Rent
and Additional Rent (but not any Additional Rent due Landlord either by reason
of Tenant's failure to perform any of its obligations hereunder or by reason of
Landlord's having provided Tenant with additional services hereunder) shall be
adjusted as of the date set forth in such notice, or, if the Premises were
rendered untenantable, as of the date of the Casualty.
Within sixty (60) days following a Casualty, Landlord shall notify Tenant
in writing of the date on which Landlord, in its best professional judgment,
estimates restoration will be substantially completed. If restoration is
expected to exceed one hundred eighty (180) days from the date of Landlord's
notice, then Tenant shall have the right to terminate this Lease on written
notice to Landlord within fifteen (15) days after receipt of Landlord's notice.
17.3. DEMOLITION OF THE BUILDING. If the Building shall be so
substantially damaged that it is reasonably necessary, in Landlord's judgment,
to demolish the Building for the purpose of reconstruction, Landlord may
demolish the same, in which event the Annual Basic Rent and Additional Rent (but
not any Additional Rent due Landlord either by reason of Tenant's failure to
perform any of its obligations hereunder or by reason of Landlord's having
provided Tenant with additional services hereunder) shall be abated to the same
extent as if the Premises were rendered wholly untenantable by a Casualty.
17.4. INSURANCE PROCEEDS. If the Lease is not terminated pursuant to
subsection 17.2, Landlord shall, subject to the terms of any Mortgage, disburse
and apply any insurance proceeds received by Landlord to the restoration and
rebuilding of the Building in accordance with subsection 17.1 hereof. All
insurance proceeds payable with respect to the Premises and the Building shall
belong to and shall be payable to Landlord.
18. CONDEMNATION.
18.1. TERMINATION. If either the entire Premises or the Building shall be
acquired or condemned by any governmental authority under its power of eminent
domain for any public or quasi-public use or purpose, this Lease shall terminate
as of the date of vesting or acquisition of title in the condemning authority
and the rents hereunder shall be abated on that date. If less than the whole but
more than fifty percent (50%) of the Rental Area of the Premises or more than
fifty percent (50%) of the total area of the Building (even if the Premises are
unaffected) or such portion of the Common Area as shall render the Premises or
the Building untenantable should be so acquired or condemned, Landlord and
Tenant shall each have the option to terminate this Lease by notice given to the
other within ninety (90) days of such taking. In the event that such a notice of
termination is given, this Lease shall terminate as of the date of vesting or
acquisition of title in the condemning authority and the Annual Basic Rent and
Additional Rent (but not any Additional Rent due Landlord either by reason of
Tenant's failure to perform any of its obligations hereunder, or by reason of
Landlord's having provided Tenant with additional services hereunder) shall be
adjusted as of such date.
If (a) neither Landlord nor Tenant shall exercise their respective options
to terminate this Lease, as hereinabove set forth, or (b) some lesser portion of
the Premises or the Building or Common Area, which does not give rise to a right
to terminate pursuant to this subsection 18.1, is taken by the condemning
authority, this Lease shall continue in force and effect, but from and after the
date of the vesting of title in the condemning authority, the Annual Basic Rent
payable hereunder during the unexpired portion of the Term shall be reduced in
proportion to the reduction in the total Rental Area of the Premises, and any
Additional Rent (but not any Additional Rent due Landlord either by reason of
Tenant's failure to perform any of its obligations hereunder, or by reason of
Landlord's having provided Tenant with additional services hereunder) payable
pursuant to the terms hereof shall be adjusted to reflect the diminution of the
Premises and/or the Building, as the case may be.
18.2. RIGHTS TO AWARD. Tenant shall have no claim against Landlord arising
out of the taking or condemnation, or arising out of the cancellation of this
Lease as a result of any such taking or condemnation, or for any portion of the
amount that may be awarded as damages as a result of any taking or condemnation,
or for the value of any unexpired portion of the Term, or for any property lost
through condemnation, and Tenant hereby assigns to Landlord all its right, title
and interest in and to any such award with regard to the Premises; provided,
however, that, in the event of a total taking, Tenant may assert any claim it
may have against the condemning authority for compensation for Tenant's Personal
Property lost thereby, loss of income, and for any relocation expenses
compensable by statute and receive such awards therefor as may be allowed in the
condemnation proceedings provided that such awards shall be made in addition to,
and stated separately from, the award made for the Building, the underlying land
and the Premises. Landlord shall have no obligation to contest any taking or
condemnation.
19. BANKRUPTCY.
19.1. EVENT OF BANKRUPTCY. For purposes of this Lease, each of the
following shall be deemed an "Event of Tenant's Bankruptcy":
(a) if Tenant becomes insolvent, as defined in the Bankruptcy
Code, or under the Insolvency Laws;
(b) the commencement of any action or proceeding for the
dissolution or liquidation of Tenant or for the appointment of
a receiver or trustee of the property of Tenant, whether
instituted by or against Tenant, if not bonded or discharged
within thirty (30) days of the date of the commencement of
such proceeding or action;
(c) if Tenant files a voluntary petition under the Bankruptcy
Code or Insolvency Laws;
(d) if there is filed an involuntary petition against Tenant as
the subject debtor under the Bankruptcy Code or Insolvency
laws, which is not dismissed within sixty (60) days of filing,
or results in issuance of an order for relief against the
debtor; and
(e) if Tenant makes or consents to an assignment of its assets, in
whole or in part, for the benefit of creditors, or to a common
law composition of creditors.
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As used herein, (i) "Bankruptcy Code" means title 11 of the United States
Code, 11 U.S.C. Section 101 et. seq. as amended or any successor statute and
(ii) Insolvency Laws means the insolvency laws of any state or territory of the
United States.
19.2. ASSUMPTION BY TRUSTEE. If Tenant becomes the subject debtor in a
case pending under the Bankruptcy Code, Landlord's right to terminate this Lease
under Section 20 hereof shall be subject to the applicable rights (if any) of
the Trustee in Bankruptcy to assume or assign this Lease as then provided for in
the Bankruptcy Code. However, the Trustee in Bankruptcy must give to Landlord
and Landlord must receive proper written notice of the Trustee's assumption or
rejection of this Lease, within sixty (60) days (or such other applicable period
as is provided for in the Bankruptcy Code) after the date of the Trustee's
appointment. The failure of the Trustee to give notice of the assumption within
the period shall conclusively and irrevocably constitute the Trustee's rejection
of this Lease and waiver of any rights of the Trustee to assume or assign this
Lease. The Trustee shall not have the right to assume or assign this Lease
unless the Trustee (i) promptly and fully cures all defaults under this Lease,
(ii) promptly and fully compensates Landlord for all monetary damages incurred
as a result of such default, and (iii) provides to Landlord adequate assurance
of future performance. In the event Tenant is unable to: (i) cure its defaults,
(ii) reimburse Landlord for its monetary damages, or (iii) pay the Rent due
under this Lease on time, then Tenant hereby agrees in advance that it has not
met its burden to provide adequate assurance of future performance, and this
Lease may be terminated by Landlord in accordance with Section 20.
19.3. TENANT'S GUARANTOR'S BANKRUPTCY. Notwithstanding any of the other
provisions of this Lease, in the event Tenant's obligations under this Lease are
guaranteed by a guarantor, and said guarantor shall voluntarily or involuntarily
come under the jurisdiction of the Bankruptcy Code, and thereafter said
guarantor or its trustee in bankruptcy, under the authority of and pursuant to
applicable provisions thereof, shall determine to assign the guarantee
obligations of said guarantor hereunder, Tenant and its said guarantor agree
that (a) said guarantor or its trustee will provide Landlord sufficient
information enabling it to independently determine whether Landlord will incur
actual and substantial detriment by reason of such assignment, and (b) "adequate
assurance of future performance" in regard to such guarantee obligations of said
guarantor, as that term is generally defined under the Bankruptcy Code, will be
provided to Landlord by said guarantor or its trustee and its assignee as a
condition of said assignment.
20. DEFAULT PROVISIONS AND REMEDIES.
20.1. EVENTS OF DEFAULT. Each of the following shall be deemed an
Event of Default by Tenant under this Lease:
a. failure of Tenant to pay Annual Basic Rent, Additional Rent, or
any other sum required to be paid under the terms of this Lease, including late
charges, within ten (10) days after notice from Landlord of non-payment;
b. failure by Tenant to perform or observe any other term, covenant,
agreement or condition of this Lease, on the part of Tenant to be performed
(other than those obligations of Tenant set forth in subsection 16.2 for which
Tenant shall be entitled to receive no prior notice, and other than the
conditions set forth in paragraphs 20.1.a, c, d, e, f and g, which shall be
governed solely by the provisions set forth herein), within thirty (30) days
after notice thereof from the Landlord, unless such performance shall reasonably
require a longer period, in which case Tenant shall not be deemed in default if
Tenant commences the required performance promptly and thereafter pursues and
completes such action diligently and expeditiously and in any event within not
more than thirty (30) days;
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c. the filing of a tax or mechanic's lien against any property
of Tenant which is not bonded or discharged within thirty (30) days of the
date such lien is filed;
d. abandonment of the Premises by Tenant; provided, however, that
Tenant shall not be deemed to be in default hereunder so long as Tenant shall
continue the payment of Annual Basic Rent and Additional Rent under this Lease;
e. an Event of Tenant's Bankruptcy;
f. the sale of Tenant's interest in the Premises under
attachment, execution or similar legal process; and
g. the failure of Tenant to vacate the Premises upon the
expiration of the Term, or the earlier termination thereof pursuant to the
other provisions hereof.
20.2. REMEDIES. Upon the occurrence of an Event of Default, Landlord,
without notice to Tenant in any instance (except where expressly provided for
below or by applicable law) may do any one or more of the following:
(a) Intentionally deleted
(b) perform, on behalf and at the expense of Tenant, any
obligation of Tenant under this Lease which Tenant
has failed to perform and of which Landlord shall
have given Tenant notice, the cost of which
performance by Landlord, together with interest
thereon at the Default Rate from the date of such
expenditure, shall be payable by Tenant to Landlord,
as Additional Rent, upon demand. Notwithstanding the
provisions of this clause (b) and regardless of
whether an Event of Default shall have occurred,
Landlord may exercise the remedy described in clause
(b) without any notice to Tenant if Landlord, in its
good faith judgment, believes it would be materially
injured by failure to take rapid action or if the
unperformed obligation of Tenant constitutes an
emergency;
(c) elect to terminate this Lease and the tenancy created
hereby by giving notice of such election to Tenant,
and reenter the Premises, by summary proceedings or
otherwise, and remove Tenant and all other persons
and property from the Premises, and store such
property in a public warehouse or elsewhere at the
cost of and for the account of Tenant without resort
to legal process and without Landlord being deemed
guilty of trespass or becoming liable for any loss or
damage occasioned thereby;
(d) declare any option which Tenant may have to renew the
Term or expand the Premises to be null and void and of
no further force and effect; or
(e) exercise any other legal or equitable right or remedy
which it may have.
Any costs and expenses incurred by Landlord (including, without
limitation, reasonable attorneys' fees) in enforcing any of its rights or
remedies under this Lease shall be paid to Landlord by Tenant, as Additional
Rent, upon demand.
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20.3. DAMAGES. If this Lease is terminated by Landlord pursuant to Section
20.2.(c), Tenant nevertheless shall remain liable for (a) any Annual Basic Rent,
Additional Rent, and damages which may be due or sustained prior to such
termination, and (b) all reasonable costs, fees and expenses including, but not
limited to, attorneys' fees, costs and expenses incurred by Landlord in pursuit
of its remedies hereunder or in renting the Premises to others from time to
time. In addition, Landlord may recover from Tenant additional damages to
compensate Landlord for loss of rent resulting from termination of the Lease,
which, at the election of Landlord, shall be either:
(i) An amount equal to the rent which, but for
termination of this Lease, would have become due
during the remainder of the Term, less the amount of
rent, if any, which Landlord shall receive during
such period from others to whom the Premises may be
rented (other than any Additional Rent received by
Landlord as a result of any failure of such other
person to perform any of its obligations to
Landlord), in which case such damages shall be
computed and payable in monthly installments, in
advance, on the first day of each calendar month
following termination of the Lease and continuing
until the date on which the Term would have expired
but for such termination; any suit or action brought
to collect any such damages for any month shall not
in any manner prejudice the right of Landlord to
collect any damages for any subsequent month by a
similar proceeding; or
(ii) an amount equal to the present worth (as of the date
of such termination) of rent which, but for
termination of this Lease, would have become due
during the remainder of the Term, in which case such
damages shall be payable to Landlord in one lump sum
on demand and shall bear interest at the Default Rate
until paid. For purposes of this clause (ii),
"present worth" shall be computed by discounting such
amount to present worth at a discount rate equal to
one percentage point above the discount rate then in
effect at the Federal Reserve Bank nearest to the
location of the Property. Notwithstanding anything
to the contrary contained in this paragraph, Landlord
agrees to limit its right to accelerate and collect
the present worth of Annual Basic Rent due, to
successive eighteen (18) month periods following the
date of the Default until the Lease Termination
Date.
Damages shall be due and payable immediately upon demand by Landlord
following any termination of this Lease pursuant to Section 20.2.
If this Lease is terminated pursuant to Section 20.2., Landlord may
re-lease the Premises or any part thereof, alone or together with other
premises, for such term(s) (which may be greater or less than the period which
otherwise would have constituted the balance of the Term) and on such terms and
conditions (which may include concessions or free rent and alterations of the
Premises) as Landlord, in its sole discretion, may determine. The failure or
refusal of Landlord to re-lease the Premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. Notwithstanding anything
to the contrary in this Section 20.3, Landlord shall use reasonable efforts to
re-lease the Premises, provided that Landlord shall not be required to (i) use
methods or procedures other than its usual methods and procedures for finding
tenants for comparable space in the Building; (ii) lease the Premises in
preference to any other space in the Building available for lease, regardless of
when such other space became available for lease; (iii) lease the Premises at
rents lower than the rate at which Landlord would otherwise offer such space to
a third party; (iv) to make improvements to the Premises at Landlord's expense;
and (v) lease the Premises for any purpose or use other than that specifically
permitted by this Lease. Landlord shall not be liable to Tenant for Landlord's
failure to re-lease the Premises despite the exercise of reasonable efforts
pursuant to this paragraph, and no such re-leasing shall relieve Tenant of its
obligations under the terms of this Lease, including, without limitation, the
payment of rent as set forth herein.
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove and obtain in proceedings for the termination of this Lease by
reason of bankruptcy or insolvency, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, or less than the amount of the loss or damages referred to
above.
20.4. NO WAIVER. No act or omission by Landlord shall be deemed to be an
acceptance of a surrender of the Premises or a termination of Tenant's
liabilities hereunder, unless Landlord shall execute a written release of
Tenant. Tenant's liability hereunder shall not be terminated by the execution by
Landlord of any new lease for all or any portion of the Premises or the
acceptance of rent from any assignee or subtenant.
20.5. REMEDIES NOT EXCLUSIVE. All rights and remedies of Landlord set
forth in this Lease shall be cumulative, and none shall exclude any other right
or remedy, now or hereafter allowed by or available under any statute,
ordinance, rule of court, or the common law, either at law or in equity, or
both. For the purposes of any suit brought or based hereon, this Lease shall be
construed to be a divisible contract, to the end that successive actions may be
maintained on this Lease as successive periodic sums shall mature hereunder. The
failure of Landlord to insist, in any one or more instances, upon a strict
performance of any of the covenants, terms and conditions of this Lease or to
exercise any right or option herein contained shall not be construed as a waiver
or a relinquishment for the future, of such covenant, term, condition, right or
option, but the same shall continue and remain in full force and effect unless
the contrary is expressed by Landlord in writing. The receipt by Landlord of
rents hereunder, with knowledge of the breach of any covenant hereof or the
receipt by Landlord of less than the full rent due hereunder, shall not be
deemed a waiver of such breach or of Landlord's right to receive the full rents
hereunder, and no waiver by Landlord of any provision hereof shall be deemed to
have been made unless expressed in writing and signed by Landlord.
20.6. PERSISTENT FAILURE TO PAY RENT. In addition to any other remedies
available to Landlord pursuant to this Lease or by law, Landlord may, at any
time throughout the Term of this Lease, terminate this Lease upon Tenant's
default on three (3) separate occasions during any twelve (12) month period
under subsection 20.1.a, regardless of whether or not such prior defaults have
been cured. Termination, pursuant to this subsection 20.6, shall be effective
upon Landlord's delivery to Tenant of a notice of termination.
21. Intentionally deleted.
22. INDEMNITY.
To the maximum extent permitted by law, Tenant shall indemnify, hold
harmless and (at Landlord's option) defend Landlord, its agents, servants and
employees from and against all claims, actions, losses, costs and expenses
(including attorneys' and other professional fees), judgments, settlement
payments, and, whether or not reduced to final judgment, all liabilities,
damages, or fines paid, incurred or suffered by any third parties to the extent
arising directly or indirectly from (a) any default by Tenant under the terms of
this Lease, (b) the use or occupancy of the Property by Tenant or any person
claiming through or under Tenant, and/or (c) any acts or omissions of Tenant or
any contractor, agent, employee, invitee or licensee of Tenant in or about the
Property. The foregoing indemnity is in addition to, and not in substitution
for, any indemnity given by Tenant to Landlord under Section 8.3.
To the maximum extent permitted by law, Landlord shall indemnify, hold
harmless and defend Tenant, its agents, servants and employees from and against
all claims, actions, losses, costs and expenses (including attorneys' and other
professional fees), judgments, settlement payments, and, whether or not reduced
to final judgment, all liabilities, damages, or fines paid, incurred or suffered
by said third parties to the extent arising directly or indirectly from (a) any
default by Landlord under the terms of this Lease, (b) the use or occupancy of
the Common Area by Landlord or its contractors, agents, or employees, and/or (c)
any acts or omissions of Landlord or any contractor, agent, or employee of
Landlord in or about the Common Area.
23. LIMITATION ON LANDLORD LIABILITY.
The term "Landlord" as used in this Lease shall mean only the owner or the
Mortgagee or its trustees, as the case may be, then in possession of the
Property so that in the event of any transfer by Landlord of its interest in the
Property, the Landlord in possession immediately prior to such transfer shall
be, and hereby is, entirely released and discharged from all covenants,
obligations and liabilities of Landlord under this Lease accruing after such
transfer provided that such new owner assumes all of Landlord's obligations
under the Lease. In consideration of the benefits accruing hereunder, Tenant,
for itself, its successors and assigns, covenants and agrees that, in the event
of any actual or alleged failure, breach or default hereunder by the Landlord,
and notwithstanding anything to the contrary contained elsewhere in this Lease,
the remedies of Tenant under this Lease shall be solely and exclusively limited
to Landlord's interest in the Property and where applicable, proceeds from sale.
24. LANDLORD AND TENANT OBLIGATIONS.
Landlord agrees to perform all of its obligations under this Lease in a
first class manner consistent with the standards applicable to similar buildings
in the vicinity of the Building. Landlord and Tenant shall be excused for the
period of any delay in the performance of any of its obligations (except for
monetary obligations) when the delay is due to any cause or causes beyond it's
control which include, without limitation, acts of God, all labor disputes,
governmental regulations or controls, civil unrest, war, adverse weather
condition, fire or other casualty, inability to obtain any material, services,
or financing unless otherwise provided for in this Lease. Except where
specifically set forth in this Lease, there shall be no abatement, set-off or
deduction of Annual Basic Rent or Additional Rent due under this Lease.
25. ASSIGNMENT AND SUBLETTING.
25.1. PROHIBITED WITHOUT LANDLORD'S CONSENT. Tenant agrees for itself and
its permitted successors and assigns in interest hereunder that it will not (a)
assign or otherwise transfer, mortgage or otherwise encumber this Lease or any
of its rights hereunder; (b) sublet the Premises or any part thereof or permit
the occupancy or use of the Premises or any part thereof by any person other
than Tenant; and/or (c) permit the assignment or other transfer of this Lease or
any of Tenant's rights hereunder by operation of law (each of the events
referred to in the foregoing clauses (a), (b) and (c) being hereinafter referred
to as a "Transfer"), without the prior written consent of Landlord in each
instance first obtained, which consent may be given or withheld in Landlord's
sole and absolute subjective discretion, and any consent given shall not
constitute a consent to any subsequent Transfer. Any attempted Transfer without
Landlord's consent shall be null and void and shall not confer any rights upon
any purported transferee, assignee, mortgagee, sublessee, or occupant. No
Transfer, regardless of whether Landlord's consent has been granted or withheld,
shall be deemed to release
Tenant from any of its obligations hereunder or to alter, impair or release the
obligations of any person guaranteeing the obligations of Tenant hereunder.
Tenant hereby indemnifies Landlord against liability resulting from any claim
made against Landlord by any assignee or subtenant or by any broker claiming a
commission in connection with the proposed Transfer. In the event Landlord shall
consent to a Transfer of this Lease, any option which Tenant may have to renew
the Term shall be null and void unless Tenant continues to occupy at least fifty
percent (50%) of the Premises.
Notwithstanding the foregoing, Landlord shall not unreasonably
withhold its consent to a sublet or assignment of this Lease by Tenant provided
that: (a) the proposed transferee has a financial capacity and net worth
sufficient to fulfill the terms of this Lease, as determined by Landlord based
on financial information about such transferee provided by Tenant or such
transferee; (b) the proposed use of the Premises by the proposed transferee is
permitted by this Lease and is compatible with the operation of the Building;
(c) the proposed transferee is not an existing tenant in the Building or was not
a prospect for the Building within six (6) months prior to the proposed
Transfer, and (d) an Event of Default does not exist under this Lease.
Provided Tenant is not in default of any term, covenant or condition
of this Lease, Tenant shall have the right to assign this Lease or sublet the
Premises to a parent, subsidiary or affiliate corporation of Tenant as long as
the proposed transferee has a financial capacity and net worth equal to Tenant
without the consent of Landlord. Tenant shall deliver written notice to Landlord
of any such Transfer. The foregoing waiver of right to consent does not
constitute a waiver of the right of Landlord to consent to any Transfer not
specifically permitted hereby.
25.2. STOCK TRANSFER. If Tenant or any Guarantor is a privately-held
corporation, then each of the following events shall be deemed a prohibited
Transfer under this Section 25 if such event results in a change in control of
Tenant or Guarantor: any transfer of Tenant's or Guarantor's issued and
outstanding capital stock; any issuance of additional capital stock; or the
redemption of any issued and outstanding stock. If Tenant or any Guarantor is a
partnership, any Transfer of any interest in the partnership or any other change
in the composition of the partnership, which results in a change in management
of Tenant or Guarantor from the person or persons managing the partnership as of
the date hereof, shall be deemed a prohibited Transfer under this Section 25.
25.3. RENTS FROM TRANSFER. In the event Landlord shall consent to a
Transfer of this Lease and the amount of the rents (or other compensation) to be
paid to Tenant by any such transferee is greater than the rents required to be
paid by Tenant to Landlord pursuant to this Lease or a premium is to be paid to
Tenant for an assignment of this Lease, Tenant shall pay to Landlord fifty
percent (50%) of any such excess or any such premium, as the case may be, less
(a) any improvement allowance or other economic concession (planning allowance,
moving expense, etc.), paid by Tenant to sublessee; (b) broker's commissions;
(c) reasonable attorneys' fees; and (d) costs of advertising and/or promoting
the space for sublease, upon receipt thereof by Tenant from such transferee.
25.4. PROCEDURE FOR OBTAINING LANDLORD'S CONSENT.
A. In the event that, at any time or from time to time prior to or during
the Term, Tenant desires to Transfer this Lease in whole or in part, whether by
operation of law or otherwise, Tenant shall submit to Landlord for its
consideration (a) in writing, the name and address of the proposed subtenant or
assignee, a reasonably detailed statement of the proposed subtenant's or
assignee's business and reasonably detailed financial references and information
concerning the financial condition of the proposed subtenant or assignee, (b) a
disclosure of the rents to be paid by any subtenant in excess of the rents
reserved hereunder or the premium to be paid for the assignment, and (c) if a
subletting, a description of the area of the Premises to be sublet. Tenant
agrees to pay Landlord, as Additional Rent, all costs incurred by Landlord in
connection with any actual or proposed Transfer, including, without limitation,
the costs of making investigations as to the acceptability of a proposed
subtenant or assignee and legal costs incurred in connection with any requested
consent.
B. Landlord's consent to an assignment of this Lease shall be effective
upon the execution by Tenant, the assignee, and Landlord of an assignment
document prepared by Landlord in which the assignee shall agree to assume,
observe, perform, and be bound by, all of Tenant's obligations under this Lease
and Tenant shall agree to remain primarily liable for such obligations.
Any consent by Landlord to a subletting of all or a portion of the
Premises shall be deemed to have been given only upon the delivery by Landlord
to Tenant of a consent document prepared and executed by Landlord expressly
consenting to such subletting.
26. HOLDING OVER.
Tenant agrees to vacate the Premises at the end of the Term, and Landlord
shall be entitled to the benefit of all summary proceedings to recover
possession of the Premises at the end of the Term. If Tenant remains in
possession of the Premises after the expiration of the Term, such action shall
not renew this Lease by operation of law and nothing herein shall be deemed as a
consent by Landlord to Tenant's remaining in the Premises. If Tenant fails to
vacate the Premises as required, Landlord may consider Tenant as either (a) a
"Tenant-at-Will" (i.e. month-to-month tenant) liable for the payment of rent at
the then market rate as reasonably determined by Landlord or (b) as a
"Tenant-Holding Over" liable for an amount equal to the actual damages incurred
by Landlord as a result of Tenant's holding over, including, without limitation,
all incidental, prospective and consequential damages and attorney's fees, but
in no event shall such amount be less than an amount equal to one hundred fifty
percent (150%) of the Annual Basic Rent, and Additional Rent, reserved hereunder
applicable to the period of the holdover. In either event, all other covenants
of this Lease shall remain in full force and effect.
27. SUBORDINATION AND ATTORNMENT.
This Lease is subject and subordinate to the liens of all mortgages, deeds
of trust and other security instruments hereafter placed upon the Building or
the Property or any portion thereof and all ground and other underlying leases
from which Landlord's interest is derived (said mortgages, deeds of trust, other
security instruments, and ground leases being hereinafter referred to as
"Mortgages" and the mortgagees, beneficiaries, secured parties, and ground
lessors thereunder from time to time being hereinafter called "Mortgagees"), and
to any and all renewals, extensions, modifications, or refinancings thereof,
without any further act of the Tenant. If requested by Landlord, however, Tenant
shall promptly execute any certificate or other document confirming such
subordination. Tenant agrees that, if any proceedings are brought for the
foreclosure of any of the Mortgages, Tenant, if requested to do so by the
purchaser at the foreclosure sale, shall attorn to the purchaser, recognize the
purchaser as the landlord under this Lease, and make all payments required
hereunder to such new landlord without any deduction or set-off of any kind
whatsoever. Tenant waives the provisions of any law or regulation, now or
hereafter in effect, which may give, or purport to give, Tenant any right to
terminate this Lease or to alter the obligations of Tenant hereunder in the
event that any such foreclosure or termination or other proceeding is prosecuted
or completed.
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Notwithstanding anything contained herein to the contrary, any Mortgagee
may at any time subordinate the lien of its Mortgages to the operation and
effect of this Lease without obtaining the Tenant's consent thereto, by giving
the Tenant written notice thereof, in which event this Lease shall be deemed to
be senior to such Mortgages without regard to the respective dates of execution
and/or recordation of such Mortgages and this Lease and thereafter such
Mortgagee shall have the same rights as to this Lease as it would have had were
this Lease executed and delivered before the execution of such Mortgages. Upon
Tenant's written request, Landlord shall use reasonable efforts, excluding the
payment of money, to obtain a subordination of mortgage agreement from
Landlord's Mortgagee with respect to this Lease. Landlord agrees to submit to
such Mortgagee on Tenant's behalf the form of agreement attached hereto as
SCHEDULES D-1 and D-1, however, Landlord makes no representation that its
Mortgagee will execute any such agreement.
If, in connection with obtaining financing for the Building, a Mortgagee
shall request reasonable modifications in this Lease as a condition to such
financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not materially adversely increase
the obligations of Tenant hereunder, or materially adversely affect the
leasehold interest hereby created or Tenant's use and enjoyment of the Premises,
or increase the amount of Annual Basic Rent and Additional Rent payable
hereunder.
28. ESTOPPEL CERTIFICATES.
Tenant shall, without charge, at any time and from time-to-time, within
fifteen (15) days after receipt of request therefor by Landlord, execute,
acknowledge and deliver to Landlord a written estoppel certificate, in such form
as may be determined by Landlord, certifying to Landlord, Landlord's Mortgagee,
any purchaser of Landlord's interest in the Building, or any other person
designated by Landlord, as of the date of such estoppel certificate, the
following, without limitation: (a) whether Tenant is in possession of the
Premises; (b) whether this Lease is in full force and effect; (c) whether there
have been any amendments to this Lease, and if so, specifying such amendments;
(d) whether there are then existing any set-offs or defenses against the
enforcement of any rights hereunder, and if so, specifying such matters in
detail; (e) the dates, if any, to which any rent or other charges have been paid
in advance and the amount of any Security Deposit held by Landlord; (f) that
Tenant has no knowledge of any then existing defaults of Landlord under this
Lease, or if there are such defaults, specifying them in detail; (g) that Tenant
has no knowledge of any event having occurred that authorizes the termination of
this Lease by Tenant, or if such event has occurred, specifying it in detail;
and (h) the address to which notices to Tenant under this Lease should be sent.
Any such certificate may be relied upon by the person or entity to whom it is
directed or by any other person or entity who could reasonably be expected to
rely on it in the normal course of business. The failure of Tenant to execute,
acknowledge and deliver such a certificate in accordance with this Section 28
within fifteen (15) days after a request therefor by Landlord shall constitute
an acknowledgment by Tenant, which may be relied on by any person who would be
entitled to rely upon any such certificate, that such certificate as submitted
by Landlord to Tenant is true and correct.
29. PEACEFUL AND QUIET POSSESSION.
Tenant, if and so long as it pays all rents due hereunder and performs and
observes the other terms and covenants to be performed and kept by it as
provided in this Lease, shall have the peaceable and quiet possession of the
Premises during the Term free of any claims of Landlord or anyone lawfully
claiming by, through or under Landlord, subject, however, to the terms of this
Lease and to matters of public record existing as of the date of this Lease.
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30. LANDLORD'S ACCESS TO PREMISES.
Landlord and its agents may at any reasonable time and without incurring
any liability to Tenant, other than liability for personal injuries and damages
resulting solely from the negligence of Landlord or its agents, enter the
Premises to inspect them or to make alterations or repairs or for any purpose
which Landlord considers necessary for the repair, operation, or maintenance of
the Building; provided, however, that in the case of an emergency, Landlord may
enter the Premises at any time. Tenant shall allow the Premises to be exhibited
by Landlord (a) at any time to any representative of a lender or to any
prospective purchaser of the Building or Landlord's interest therein or (b)
within six (6) months of the end of the Term to any persons who may be
interested in leasing the Premises.
31. Intentionally deleted.
32. BROKERS, COMMISSIONS, ETC.
Landlord and Tenant acknowledge, represent and warrant each to the other
that, except as listed in Section 1.F., no broker or real estate agent brought
about or was involved in the making of this Lease and that no brokerage fee or
commission is due to any other party as a result of the execution of this Lease.
Each of the parties hereto agrees to indemnify and hold harmless the other
against any claim by any broker, agent or finder based upon the execution of
this Lease and predicated upon a breach of the above representation and
warranty.
33. RECORDATION.
Neither Landlord nor Tenant shall record this Lease, any amendment to this
Lease or any other memorandum of this Lease without the prior written consent of
the other party, which consent may be withheld in the sole discretion of either
party and, in the event such consent is given, the party requesting such consent
and recording shall pay all transfer taxes, recording fees and other charges in
connection with such recording. Notwithstanding the above, Tenant covenants that
if at any time any mortgagee or ground lessor relating to the financing of the
Property shall require the recordation of this Lease, or if the recordation of
this Lease shall be required by any valid governmental order, or if any
governmental authority having jurisdiction in the matter shall assess and be
entitled to collect transfer taxes, documentary stamp taxes, or both, on this
Lease, Tenant, upon the request of Landlord, shall execute such instruments,
including a Memorandum of this Lease, as may be necessary to record this Lease,
and shall pay all recording fees, transfer taxes and documentary stamp taxes,
payable on, or in connection with, this Lease or such recordation; provided,
however, if Landlord's Mortgagee requires such recordation, Landlord shall pay
all such recording fees, transfer taxes and documentary stamp taxes.
34. MISCELLANEOUS.
34.1. SEPARABILITY. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or 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
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
34.2. APPLICABLE LAW. This Lease shall be given effect and construed
by application of the laws of the state where the Property is located, and
any action or proceeding arising hereunder shall be brought in the courts of
the State where the Premises are located.
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34.3. AUTHORITY. If Tenant is a corporation or partnership, the person
executing this Lease on behalf of Tenant represents and warrants that Tenant is
duly organized and validly existing; that this Lease has been authorized by all
necessary parties, is validly executed by an authorized officer or agent of
Tenant and is binding upon and enforceable against Tenant in accordance with its
terms.
The undersigned agent of Landlord represents and warrants that it is
authorized and empowered to enter into this Lease Agreement on behalf of the
Landlord.
34.4. NO DISCRIMINATION. It is Landlord's policy to comply with all
applicable state and federal laws prohibiting discrimination in employment based
on race, age, color, sex, national origin, disability, religion, or other
protected classification. It is further intended that the Building shall be
operated so that all perspective tenants thereof, and all customers, employees,
licensees and invitees of all tenants shall have equal opportunity to obtain all
the goods, services, accommodations, advantages, facilities and privileges of
the Building without discrimination because of race, age, color, sex, national
origin, disability, or religion. To that end, Tenant shall not discriminate in
the conduct and operation of its business in the Premises against any person or
group of persons because of the race, age, color, sex, religion, national origin
or other protected classification of such person or group of persons.
34.5. INTEGRATION OF AGREEMENTS. This writing is intended by the parties
as a final expression of their agreement and is a complete and exclusive
statement of its terms, and all negotiations, considerations and representations
between the parties hereto are incorporated herein. No course of prior dealings
between the parties or their agents shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Lease. Acceptance of, or
acquiescence to, a course of performance rendered under this Lease or any prior
agreement between the parties or their agents shall not be relevant or
admissible to determine the meaning of any of the terms or covenants of this
Lease. Other than as specifically set forth in this Lease, no representations,
understandings or agreements have been made or relied upon in the making of this
Lease. This Lease can only be modified by a writing signed by each of the
parties hereto.
34.6. THIRD PARTY BENEFICIARY. Except as expressly provided elsewhere
in this Lease, nothing contained in this Lease shall be construed so as to
confer upon any other party the rights of a third party beneficiary.
34.7. CAPTIONS; GENDER. The captions used in this Lease are for
convenience only and do not in any way limit or amplify the terms and provisions
hereof. As used in this Lease and where the context so requires, the singular
shall be deemed to include the plural and the masculine shall be deemed to
include the feminine and neuter, and vice versa.
34.8. SUCCESSORS AND ASSIGNS. Subject to the express provisions of this
Lease to the contrary (e.g., Section 25), the terms, provisions and covenants
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and assigns.
34.9. WAIVER OF JURY TRIAL. Landlord and Tenant hereby expressly waive
trial by jury in any action or proceeding or counterclaim brought by either
party hereto against the other party on any and every matter, directly or
indirectly arising out of or with respect to this Lease, including, without
limitation, the relationship of Landlord and Tenant, the use and occupancy by
Tenant of the Premises, any statutory remedy and/or claim of injury or damage
regarding this Lease.
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34.10. JOINT AND SEVERAL LIABILITY. In the event that two (2) or more
persons (i.e., natural persons, corporations, partnerships, associations and
other legal entities) shall sign this Lease as Tenant, the liability of each
such party to pay all rents due hereunder and perform all the other covenants of
this Lease shall be joint and several. In the event Tenant is a general
partnership or a limited partnership with two or more general partners, the
liability of each partner, or general partner, under this Lease shall be joint
and several.
34.11. NOTICES. All notices, demands and requests required under this
Lease shall be in writing. All such notices, demands and requests shall be
deemed to have been properly given if sent by United States certified mail,
return receipt requested, postage prepaid, or hand delivered, or overnight
delivery, addressed to Landlord or Tenant, at the Landlord Notice Address and
Tenant Notice Address, respectively. Either party may designate a change of
address by written notice to the other party, in the manner set forth above.
Notice, demand and requests which shall be served by certified mail in the
manner aforesaid, shall be deemed to have been given three (3) days after
mailing. Notices sent by overnight delivery shall be deemed to have been given
the day after sending. Without intending to limit the generality of the
foregoing requirement that all notices, demands and requests be in writing,
there are certain provisions in this Lease where, for emphasis alone, such
requirement is reiterated.
34.12. EFFECTIVE DATE OF THIS LEASE. Unless otherwise expressly
provided, all terms, conditions and covenants by Tenant contained in this
Lease shall be effective as of the date first above written.
34.13. MECHANICS' LIENS. In the event that any mechanics' or materialmen's
liens shall at any time be filed against the Premises purporting to be for work,
labor, services or materials performed or furnished to Tenant or anyone holding
the Premises through or under Tenant, Tenant shall cause the same to be
discharged of record or bonded within thirty (30) days after the filing thereof.
If Tenant shall fail to cause such lien to be discharged within thirty (30) days
after the filing thereof, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same by
paying the amount claimed to be due; and the amount so paid by Landlord, and all
costs and expenses, including reasonable attorneys' fees incurred by Landlord in
procuring the discharge of such lien, shall be due and payable by Tenant to
Landlord, as Additional Rent, on the first day of the next succeeding month.
Notice is hereby given that Landlord shall not be liable for any labor or
materials furnished to Tenant upon credit and that no mechanics', materialmen's
or other liens for any such labor or materials shall attach to or affect the
estate or interest of Landlord in and to the land and improvements of which the
Premises are a part.
34.14. WAIVER OF RIGHT OF REDEMPTION. Tenant hereby expressly waives (to
the extent legally permissible) for itself and all persons claiming by, through
or under it, any right of redemption or right to restore the operation of this
Lease under any present or future law in the event Tenant is dispossessed for
any proper cause, or in the event Landlord shall obtain possession of the
Premises pursuant to the terms of this Lease. Tenant understands that the
Premises are leased exclusively for business, commercial and mercantile purposes
and therefore shall not be redeemable under any provision of law.
34.15. MORTGAGEE'S PERFORMANCE. If requested by any Mortgagee, Tenant
shall give such Mortgagee written notice of any default by Landlord under this
Lease and a reasonable opportunity to cure such default. Tenant shall accept
performance of any of Landlord's obligations hereunder by any ground lessor or
mortgagee relating to the financing of the Property.
34.16. MORTGAGEE'S LIABILITY. No mortgagee or ground lessor relating
to the financing of the Property, not in possession of the Premises or the
Building, shall have any liability whatsoever hereunder.
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34.17. SCHEDULES. Each writing or plat referred to herein as being
attached hereto as a schedule or exhibit is hereby made a part hereof, with the
same full force and effect as if such writing or plat were set forth in the body
of this Lease.
34.18. TIME OF ESSENCE. Time shall be of the essence of this Lease
with respect to the performance by Tenant of its obligations hereunder.
34.19. AMENDMENT. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto. No amendments of this Lease entered
into by Landlord and Tenant, as aforesaid, shall impair or otherwise affect the
obligations of any guarantor of Tenant's obligations hereunder, all of which
obligations shall remain in full force and effect and pertain equally to any
such amendments, with the same full force and effect as if the substance of such
amendments was set forth in the body of this Lease.
34.20. AUTOMOBILE PARKING. Landlord shall provide unreserved parking for
Tenant and its customers and employees and customers either in structured or
surface parking areas near the Building at a ratio of four (4) spaces per one
thousand (1,000) square feet of the Premises.
34.21. CONTINGENCY. Tenant acknowledges and understands that this Lease is
contingent upon the existing tenant for the Premises, SSM Coal North America,
Inc., surrendering and releasing the Premises on or before December 31, 1995. In
the event Landlord is unable to deliver the Premises to Tenant on January 1,
1996, the Lease Commencement Date shall be delayed until the date when Landlord
delivers the Premises to Tenant, and the Termination Date shall be adjusted
accordingly. Landlord shall have no liability to Tenant for any delay in
delivery of the Premises.
If Landlord, despite its reasonable good-faith efforts, in unable to
deliver the Premises to Tenant on or before June 1, 1996, this Lease will
automatically terminate and the rights and obligations of the parties hereunder
shall thereupon cease and terminate without the need for the execution of any
further or other instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
their respective seals as of the day and year first above written.
ATTEST: LANDLORD:
COLUMBIA MALL, INC.
By: COLUMBIA MANAGEMENT, INC.,
Managing Agent
- ----------------------------------
By:_____________________________(SEAL)
Assistant Secretary Vice President
ATTEST: TENANT:
EXCALIBUR TECHNOLOGIES
CORPORATION
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- ----------------------------------
By:_____________________________(SEAL)
Secretary of Corporation President
<PAGE>
SCHEDULE C
RULES AND REGULATIONS
1. Tenant shall not obstruct or encumber the Common Area, and the
sidewalks, driveways, and other public portions of the Property (herein "Public
Areas") and such Public Areas shall not be used for any purpose other than
ingress and egress to and from its Premises. Tenant shall not permit any of its
employees, agents, licensees or invitees to congregate or loiter in any of the
Public Areas. Tenant shall not invite to, or permit to visit, its Premises
persons in such numbers or under such conditions as may interfere with the use
and enjoyment by others of the Public Areas. Fire exits and stairways are for
emergency use only, and they shall not be used for any other purpose. Landlord
reserves the right to control, operate, restrict and regulate the use of the
Common Areas, public facilities, and any facilities furnished for the common use
of the tenants in such manner as it deems best for the benefit of the tenants,
including but not limited to the allocation of elevators for delivery service,
and the right to designate which Building entrances shall be used for
deliveries. No doormat of any kind whatsoever shall be placed or left in any
public hall or outside any entry door of the Premises.
2. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades or screens shall be attached to,
hung in, or used in connection with any window or door of its Premises, without
the consent of Landlord. Such window or door coverings must be of a quality,
type, design and color approved by Landlord and further they must be installed
in a manner approved by Landlord. In order that the Building can and will
maintain a uniform appearance to those persons outside of the Building, each
tenant occupying the perimeter areas of the Building shall (a) use only
building-standard lighting in areas where lighting is visible from the outside
of the Building and (b) use only building-standard blinds in window areas which
are visible from the outside of the Building.
3. Tenant shall be permitted an interior sign in accordance with the
Building's sign criteria which Landlord shall provide at its sole cost. Except
as set forth herein, no sign, insignia, advertisement, lettering, notice or
other object shall be exhibited, inscribed, painted or affixed by Tenant on any
part of the exterior or interior of the Premises or the Building or on doors,
corridor walls, the Building directory or in the elevator cabs without the prior
approval of Landlord. Landlord shall review the size, color, style, content and
location of any proposed signage. Landlord shall have the right to prohibit any
advertising or identifying sign by Tenant which, in the sole judgment of
Landlord, impairs the appearance, reputation, or the desirability of the
Building as a first-class office building. Upon Landlord's approval, Tenant
shall obtain all necessary approvals and permits from governmental or
quasi-governmental authorities in connection with such signs. Further, approved
signs shall be inscribed, painted or affixed by signmakers approved by Landlord
at Tenant's sole cost. In the event of a violation of the foregoing by Tenant,
upon written notice from Landlord, Tenant shall refrain from and discontinue
such advertising or identifying sign. In the event that Tenant does not promptly
correct said violation, Landlord may remove such signs without any liability,
and may charge the expense incurred in such removal to the Tenant violating this
Rule and Tenant hereby agrees to pay Landlord, as Additional Rent, any such
expense promptly upon demand.
4. No bicycles, vehicles, animals (except seeing eye dogs), fish or birds
of any kind shall be brought into or kept in or about the Premises.
5. Nothing shall be done or permitted by Tenant which would impair or
interfere with the use or enjoyment by any other occupant of the Building,
including the playing of music.
<PAGE>
6. Nothing shall be done or permitted in the Premises and nothing shall be
brought into, installed or kept in or about the Premises, which would impair or
interfere with any of the HVAC, plumbing, electrical, structural components of
the Building or the services of the Building or the proper and economic heating,
cleaning or other services of the Building or the Premises. Tenant nor its
employees, agents, licensees or invitees shall at any time bring or keep upon
the Premises any flammable, combustible or explosive fluid, chemical or
substance.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in locks or the
mechanism thereof. Duplicate keys for the Premises and restrooms shall be
procured only from Landlord and Landlord may make a reasonable charge therefor.
Tenant shall, upon the termination of the Lease, turn over to Landlord all keys
to stores, offices and restrooms. In the event of the loss of any keys furnished
by Landlord, Tenant shall pay to Landlord the cost of replacement locks and
Tenant hereby agrees to pay said cost to Landlord, as Additional Rent, promptly
upon demand.
8. Any delivery or moving of any safes, freight, furniture, packages,
boxes, crates or any other such object shall take place at such time and in such
manner so as not to interfere with other occupants of the Building. Tenant
hereby acknowledges that this may involve overtime work for Landlord's
employees. Further, Tenant hereby agrees to reimburse Landlord for extra costs
incurred by Landlord including, but not limited to, Landlord's right to inspect
all objects to be brought into the Building and to exclude from the Building any
objects which may in Landlord's sole discretion violate the Lease and/or any of
these Rules and Regulations. Tenant hereby agrees to pay any such costs to
Landlord, as Additional Rent, promptly upon demand.
No hand trucks shall be used for such moving activities except for those
equipped with rubber tires, side guards and such other safeguards as Landlord
shall require.
Landlord may require any person leaving the Building with any package or
other object to submit a statement indicating the tenant from whose premises the
package or object is being removed, however, Landlord and Tenant hereby
acknowledge that the establishment and enforcement of such requirement does not
impose any responsibility on Landlord for the protection of Tenant against the
removal of property from the Premises of Tenant. Landlord shall in no way be
liable to Tenant for damages or loss arising from the admission, exclusion or
ejection of any person to or from the Premises or the Building under the
provisions of this Rule.
9. Tenant shall not use or occupy its Premises, or permit any portion
thereof to be used or occupied for telephone or secretarial service, messenger
service, wholesale or discount shop for sale of merchandise, retail service
shop, labor union, company engaged in the business of renting office or desk
space, a hiring or employment agency, or for any use which constitutes a
nuisance, or is hazardous, or, in Landlord's opinion, likely to injure the
reputation of a first-class office building. No tenant shall engage or pay any
employee on its Premises, except those actually employed by such tenant, nor
advertise for laborers giving an address at the Building. Except as specifically
approved by Landlord in writing, no tenant shall use or permit the use of its
Premises or any part thereof as a restaurant, shop, booth or other stand, or for
the conduct of any business or occupation which predominantly involves direct
patronage of the general public, manufacturing, or the sale at auction of
merchandise, goods or property of any kind.
10. Tenant, before closing and leaving its Premises at any time, shall see
that all lights, typewriters, copying machines and other electrical equipment
are turned off. All entrance doors in Tenant's Premises shall be kept locked
when not in use. Entrance doors shall not be left open at any time.
11. If Tenant shall request Landlord to perform any work on the Premises
or Property, Tenant shall make such request at the management office for the
Building. Tenant shall not request employees of Landlord to perform any work or
do anything outside of their regular duties, unless under special instructions
from Landlord.
12. Canvassing, soliciting and peddling in the Building are prohibited
and Tenant shall cooperate to prevent the same.
13. Tenant shall not cause or permit any odors of cooking or other
processes, or any unusual or objectionable odors, to emanate from its Premises
which would annoy other tenants or create a public or private nuisance. No
cooking shall be done in Tenant's Premises, except for a household microwave
oven or as is expressly permitted in the Lease, or otherwise consented to in
writing by the Landlord.
14. All paneling, doors, trim or other wood products not considered
furniture shall be treated with fire-retardant materials. Before installation of
any such materials, certification of the materials' fire-retardant
characteristics shall be submitted to and approved by Landlord, and all such
materials shall be installed in a manner approved by Landlord.
15. Whenever Tenant submits any plan, agreement or other document for the
consent or approval of Landlord, Landlord may charge, on demand, a reasonable
processing fee for the review thereof, which shall include the cost of any
services of an architect, engineer or attorney employed by Landlord to review
such plan, agreement or document. Tenant hereby agrees to pay any such
processing fee to Landlord, as Additional Rent, promptly upon demand.
16. No contract of any kind with any supplier of towels, water, ice,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
papers, rubbish or garbage, or any other cleaning, janitorial or like service
shall be entered into by Tenant without the prior written consent of Landlord.
Landlord shall not be responsible to Tenant for any loss of property from
its Premises however occurring, or for any damage done to the effects of Tenant
by Landlord's janitors or any of its employees, or by any other person or any
other cause. The janitor's service furnished by Landlord does not include the
beating or cleaning of carpets or rugs.
17. When electric wiring of any kind is introduced, it must be connected
as directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. The number and locations of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval. Tenant shall not lay linoleum or other similar floor
covering so that the same shall be in direct contact with the floor of the
Premises; and if linoleum or other similar floor covering is desired to be used,
an interlining of builder's deadening felt shall be first affixed to the floor
by a paste or other material, the use of cement or other similar adhesive
material being expressly prohibited.
18. Landlord hereby reserves to itself any and all rights not granted to
Tenant hereunder, including, but not limited to, the following rights which are
reserved to Landlord for its purposes in operating the Building:
2
<PAGE>
(a) the exclusive right to use of the name of the Building for all
purposes, except that Tenant may use the name as its business
address and for no other purpose;
(b) the right to change the name or address of the Building, without
incurring any liability to Tenant for so doing;
(c) the right to install and maintain a sign or signs on the exterior
of the Building;
(d) the exclusive right to use or dispose of the use of the roof of
the Building;
(e) the right to limit the space on the directory of the Building to
be allotted to Tenant; and
(f) the right to grant anyone the right to conduct any particular
business or undertaking in the Building.
19. Tenant and its employees shall park their cars only in those portions
of the parking area designated by Landlord.
20. Tenant shall not permit undue accumulations of garbage, trash, rubbish
or any other refuse, and will keep such refuse in proper containers in the
interior of the Tenant's Premises or other places designated by the Landlord.
21. Tenant shall not conduct or permit any bankruptcy sales, unless
directed by order of a court of competent jurisdiction, or any fictitious fire
or going out of business sale.
22. Landlord shall have the right to close and securely lock the Building
during generally accepted holidays and during such other times as Landlord may,
in its sole discretion, deem advisable for the security of the Building and its
tenants. Landlord shall give Tenant twenty-four (24) hours notice before so
closing and securely locking the Building except in an emergency.
23. Landlord reserves the right to rescind, alter, waive or add any rule
or regulation at any time prescribed for the Building when Landlord deems it
necessary or desirable for the reputation, safety, character, security, care,
appearance or interests of the Building, the preservation of good order therein,
the operation or maintenance of the Building or the equipment thereof, or the
comfort of tenants or others in the Building. No rescission, alteration, waiver
or addition of any rule or regulation with respect to one tenant shall operate
as a rescission, alteration or waiver in respect of any other tenant.
24. In the event of a conflict between the Rules and Regulations and the
terms of the Lease, the terms of the Lease shall govern the parties.
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SCHEDULE X
METHOD OF BUILDING MEASUREMENT FOR OFFICE SPACE
I. SINGLE-TENANCY FLOORS
The Rental Area of a single-tenancy floor shall be the area within the
outside walls computed by measuring from the inside surface of the window glass
to the inside surface of the opposite window glass including columns and
projections necessary to the building as well as accessory areas within and
exclusively serving only that floor, with their enclosing walls, toilets,
janitors closets, electrical closets, air-conditioning rooms and fan rooms and
telephone closets, together with four percent (4%) of the sum so determined as a
"Common Area Factor". Rental Area will not include penetrations made by public
stairs, fire towers, public elevator shafts, flues, vents, stacks, pipe shafts
and vertical ducts.
II. DIVIDED FLOORS
The Rental Area of an individual office or a portion of a divided floor
shall be the area computed by measuring from the inside surface of the window
glass to the finished surface of the corridor side of corridor partitions and
from center to center of the partitions that separate the Premises from
adjoining Rental Areas including columns and projections necessary to the
Building together with twelve percent (12%) of the sum so determined as a
"Common Area Factor".
<PAGE>
TABLE OF CONTENTS
SCHEDULES
A - Plat showing location of the Premises B - Plans and Specifications for
Tenant Improvements C - Rules and Regulations X - Method of Floor
Measurement
<PAGE>
MARYLAND FULL-SERVICE OFFICE LEASE
30 COLUMBIA CORPORATE CENTER
by and between
COLUMBIA MALL, INC., Landlord
by COLUMBIA MANAGEMENT, INC., Managing Agent,
and
EXCALIBUR TECHNOLOGIES CORPORATION, Tenant
LEASE
BY THIS LEASE, MHPP, Inc., a California Corporation ("Landlord"), hereby leases
Excalibur Technologies Corporation, a Delaware Corporation ("Tenant"), and
Tenant hereby leases from Landlord, that certain real property, including all
improvements therein or to be provided by Landlord under the terms of this
Lease, and commonly known by the street address of 1959 Palomar Oaks Way,
Carlsbad, located in the County of San Diego, State of California ("Building")
and generally described as a three-story, 46,407 square foot office building,
subject to all of the terms and conditions hereinafter set forth.
1. BASIC LEASE PROVISIONS.
1.1 DATE OF LEASE FOR REFERENCE PURPOSES. September 1, 1995
1.2 TENANT: Excalibur Technologies Corporation
1.3 TENANT'S ADDRESS PRIOR TO COMMENCEMENT DATE.
9255 Towne Centre, 9th Floor
San Diego, CA 92121
Telephone No: (619) 625-7900
1.4 PREMISES. The entire ground floor and entire third floor of
the building.
1.5 AREA.
(a) Usable Area: approximately 27,704 square feet ("USF")
(b) Rentable Area: approximately 31,029 square feet ("RSF)
1.6 BASE RENT. Base Rent shall be paid in monthly installments,
payable on the first day of each month according to the following schedule:
Months 1-2 $0.00 per month. $0.00 per RSF per month.
Months 3-24 $41,889.15 per month. $1.35 per RSF per month.
Months 25-48 $45,922.92 per month. $1.48 per RSF per
month.
Months 49-72 $50,577.27 per month. $1.63 per RSF per
month.
1.7 SCHEDULED COMMENCEMENT DATE. November 15, 1995
1.8 EXPIRATION DATE. Seventy-two months after the Commencement Date,
as hereinafter defined.
Term: See section 2.1 of lease
Options: See section 2.3 of lease
1.9 USE OF PREMISES. The operation of a business for corporate
office use, marketing, product shipping, software research and related office
uses. consistent with the zoning use.
1.10 PARKING. Tenant shall be entitled to 4.0 parking spaces per
1,000 square feet leased. Tenant shall be provided seven(7) spaces designated
for visitor parking and two (2) designated for loading.
1.11 SECURITY DEPOSIT. None required, as long as tenant is not late,
after the fifth of the month, in rent payments two times in any calendar year in
which case a Security Deposit equal to one months rent will be required.
1.12 PROPERTY MANAGEMENT FEE. A 4% property management fee is
included in the calculation of the building operating expenses as outlined in
article 3.2.
1.13 BROKERS. CB/Madison Advisory Group for Tenant and Business Real
Estate Brokerage Company for Landlord.
2. COMMENCEMENT.
2.1 COMMENCEMENT AND EXPIRATION OF TERM. The Term of this Lease and
Tenant's obligation to perform all obligations and make all payments under this
Lease shall commence on the date determined according to the terms and
provisions of Section 1.7 or one (1) business day after substantial completion
of Tenant Improvements, whichever is latter.
(a) In the event the actual Commencement Date shall be other
than the first day of the month, all obligations of Tenant for monetary payments
shall be paid for the fractional month on a per diem basis (calculated on the
basis of a thirty (30) day month) including but not limited to, the rent
pursuant to paragraph 3, and thereafter all monetary obligations shall be paid
in equal monthly installments on the first of each and every month in advance.
All Lease expirations, renewal dates, notices of option to renew, and any other
provisions hereof relating to the Commencement Date of this Lease shall be
determined by reference to the Commencement Date as herein defined.
(b) The Commencement Date shall be confirmed by Landlord in
writing, but any delay or failure to do so shall not affect the validity of this
Lease or the obligations of Tenant hereunder. The Term of this Lease shall end
on the Expiration Date shown in subparagraph 1.8 of the Basic Lease Provisions,
unless sooner terminated pursuant to any other provision hereof.
2.2 RENEWAL OPTIONS. Tenant shall have the option to extend the
Lease on all the provisions contained in this Lease except for rent, for a total
of two (2) consecutive five (5) year periods ("Extended Term") following
expiration of the Term by giving Landlord written notice of the Option ("Renewal
Option Notice") at least six (6) months, but not more than twelve (12) months,
before the expiration of the Term. If Tenant is in default on the date of the
Renewal Option Notice is given, the Renewal Option Notice Shall, at Landlord's
option, be deemed ineffective, or if Tenant is in default on the date the
Extended Term is to commence, the Extended Term shall, at the Landlord's option,
not commence and this Lease shall expire at the end of the Term. The Base Rent
for the option periods shall be at 100% of fair market value. Tenant shall
receive a new Base Year for Common Expenses commensurate with the then current
calendar year in which the majority of the first year of the Extended Term would
fill under. In the event of renewal or exercising of this option, Landlord shall
pay a two percent (2%) commission to CB/Madison Advisory Group, and a 1.0%
commission to Business Real Estate Brokerage Company.
3. RENT.
3.1 BASE RENT. Tenant agrees to pay the Base Rent for the Premises
the sum shown in subparagraph 1.6 of the Basic Lease Provisions. All sums due
hereunder shall be payable in lawful money off the United States of America in
advance, without notice, demand, deduction, or offset, except as hereinafter
provided, as described in subparagraph 1.6 commencing on the Commencement Date
and continuing on the first day of each calendar month thereafter.
3.2 COMMON EXPENSE ADJUSTMENTS
(a) The Usable Area of the Premises as of the date hereof is
approximately 27,704 square feet as set forth in paragraph 1.5 of the Basic
Lease Provisions and the Usable Area of the Building as of the date hereof is
approximately 41,435 square feet. The "Load Factor" for this building shall be
deemed 1.12 or one hundred twelve percent (112%). Landlord shall, based upon
Tenant's approved space plan, compute the actual Usable Area of the Premises
and, based upon as built drawings for the Building, the actual Usable Area of
the Building. Such computations shall be determined by Landlord's architect and
verified by Tenant, applying BOMA standards of measurement. Landlord shall,
after making such computations, give written notice to Tenant of the actual
Usable Area of the Premises; the Rentable Area of the Premises (compute by
multiplying the Usable Area of the Premises by the Load Factor); Common Expense
Percentage (computed as the quotient derived by dividing (i) the product of the
Usable Area of the Premises times the Load Factor by (ii) the product of the
Usable Area of the Building times the Load Factor.
(b) The term "Common Expenses" as used herein shall mean the
aggregate amount of total costs and expense paid or incurred by Landlord in
connection with the operation of the Building, and/or the operation repair
and/or maintenance of the Building, including without limitation, (i) parking
areas, loading and unloading areas, trash areas, roadways, driveways, walkways,
landscaped areas, striping, bumpers, lighting facilities, elevator facilities
air conditioning for Common Areas (as hereinafter defined), fences and gates;
(ii) the cost of fire, extended coverage, boiler, sprinkler, public liability,
property damage, earthquake, and other insurance obtained by landlord in
connection with the Building and the deductible portion of any insured loss
otherwise covered by such insurance (or the costs of any uninsured loss, as the
case may be); (iii) the cost of trash disposal services; (iv) the cost of
maintaining tenant directories; (v) the cost of operating, repairing, and
maintaining life safety systems including, without limitation, sprinkler
systems; (vi) the cost of security services, if provided by Landlord; (vii) the
cost of water, sewer, electricity for Common areas only, gas, and any other
utilities used in connection with the operation, maintenance, and/or repair of
the Common Areas and the Building; (viii) permits, licenses, inspection fees,
and certificates necessary to operate the Building; (ix) legal, accounting, and
consulting fees and expenses associated with building operations; (x) property
management costs including, without limitation, the Property Management Fee, and
any administrative expense related to the Building; (xi) the cost of any capital
improvements amortized over their useful life (excluding roofs) made to the
Building, as a labor saving device or to affect other economies in the operation
or maintenance of the Building, or made to the Building or the Center after the
date of this Lease, which are required under any governmental law or regulation
that was not applicable to the Building or the Center at the time that permits
for the construction thereof were obtained, such cost to be amortized over their
useful life; (xii) the cost of any other service generally provided to the
tenants of the Building by Landlord; (xiii) the cost of taxes; (xiv) the cost of
sewer charges; (xv) the cost of labor supplies, materials, equipment, tools,
machinery, and equipment used in connection with the maintenance and operation
of the Building; (xvi) fees or other charges incurred in conjunction with
membership in energy conservation; and (xvii) property owner's association dues,
fees, assessments and the like relating to the Building.
(c) The term "insurance premiums" as used herein shall include
all premiums on policies of insurance providing protection against any liability
or loss for property damage or personal injury or other matters usually covered
under comprehensive liability insurance; any peril included within the
classification of fire and extended coverage, together with insurance against
vandalism and malicious mischief, to the extent of the full replacement costs of
the Building, including any fixtures, equipment or plate glass installed
therein; and any other matters or coverage that a prudent owner, or the
beneficiary under any mortgage or deed of trust encumbering the Building (or any
portion thereof), might require.
(d) "Taxes" shall mean all taxes, assessments, and charges
levied upon or with respect tenant improvements the Center, including without
limitation, the Building or any personal property of Landlord used in the
operation thereof, or landlord's interest in the Building or such personal
property. Taxes shall include, without limitation, all general real property
taxes, supplemental taxes and general special assessments, charges, fees, or
assessments for transit housing, police, fire, or other governmental services or
benefits to the Building, service payments in lieu of taxes, and any tax, fee,
or excise on the act of entering into this Lease or any other lease of space in
the Building and the Center or on the occupancy of the Building and the Center
or any part thereof.
(e) Annual and other determinations of Common Expenses
hereunder shall be made in good faith by Landlord. In the event of any dispute
as to the amount thereof, Tenant shall have the right after reasonable notice to
inspect Landlord's accounting. If, after such inspection, Tenant still disputes
the Landlord's determination, certification as to the proper amount shall be
made by Landlord's independent certified public accountant. Tenant agrees to pay
the cost of such certification unless it is determined that Landlord's original
determination was in error to Tenant's disadvantage by more than five percent
(5%). Tenant agrees that the payment of any disputed sum and if applicable, the
deposit of the estimated cost of certification, shall be conditions precedent to
the initiation of the foregoing procedure.
3.3 LATE RENT. For the first occurrence in any one 12-month period,
the following shall apply; If any rent or other sums owed by Tenant whether a
portion of the Base Rent, or additional rent, which shall not be received by
Landlord, or Landlord's designee, within five (5) days after receipt of written
notice to Tenant, such sums shall bear interest at the rate of twelve (12%)
percent per annum retroactive to the due date until paid. Acceptance of any late
charge shall not constitute a waiver of the default or the right to collect any
such amounts or charges with respect to the overdue amount and shall not prevent
Landlord from exercising any of the other rights and remedies available to
Landlord.
For any additional occurrence in a 12-month period, the following
shall apply; Any rent or other sum owed by Tenant whether a portion of the Base
Rent, additional rent, or otherwise, which remains unpaid later than five (5)
business days after the same is due, provided Tenant has received written
notice, shall be deemed delinquent and shall constitute a breach and default
under this Lease, whereupon Tenant shall immediately pay to Landlord, as
additional rent due hereunder, a late charge equal to five percent (5%) of the
sum of the amount not paid. Should Tenant not have made such payment within
fifteen (15) days of the date such sum or amount is due, Tenant shall
immediately pay to Landlord, as additional rent hereunder, an additional late
charge equal to five percent (5%) of the sum or amount not so paid. Should
Tenant not have made such payment within thirty (30) days of such sum or amount
is due date, Tenant shall immediately pay to Landlord, as additional rent
hereunder, an additional late charge equal to five percent (5%) of the sum or
amount not so paid. The parties agree that if Tenant fails to pay such sum(s) or
amount(s) when due, Landlord will incur damages, including administrative
expenses, the exact amount of which is difficult to ascertain. The parties agree
that the late charges described above represent a reasonable estimate of such
damages and declare them to be liquidated damages and not a penalty or
forfeiture. Any payments received from Tenant shall be applied first to late
charges outstanding and overdue rent prior to its application to present rent
due. Acceptance of any late charge or any portion of the rent or other sum
without such late charge shall not constitute a waiver of the default or the
right to collect any such amounts or charges with respect to the overdue amount
and shall not prevent Landlord from exercising any of the other rights and
remedies available to Landlord.
4. SECURITY DEPOSIT. - SEE SECTION 1.11
5. REPAIRS AND MAINTENANCE.
5.1 BY LANDLORD. Subject to subparagraph 5.2, Landlord shall be
responsible for the maintenance of and repairs to the exterior walls,
subflooring, foundations, roof, and other structural elements of the Building;
the Building's elevators; the Building's plumbing, heating ventilation and air
conditioning, and electrical systems. However, Landlord shall not be obligated
to maintain, replace, or repair interior windows, doors, or interior surfaces of
exterior walls. Except as otherwise provided herein, there shall be no abatement
of rent and no liability of Landlord by reason of any injury to or interference
with Tenant's business arising from the making of any repairs, alterations, or
improvement in or to any portion of the Building or in or to fixtures,
appurtenances, and equipment therein or thereon. Landlord shall not be liable
for, and Tenant shall not be entitled to, any abatement of rent by reasons of
Landlord's failure to furnish any of the foregoing when such failure is caused
by accident, breakage, repairs, strikes, walkouts, or other labor disturbances
or labor disputes of any character, or by any other cause, similar or
dissimilar, beyond the reasonable control of Landlord but not to include the
bankruptcy or insolvency of Landlord. Landlord shall not be liable under any
circumstances of Force Majeure for a loss or injury to property, however
occurring, through or in connection with or incidental to failure to furnish any
of the foregoing.
5.2 BY TENANT. Tenant agrees that on a timely basis it will maintain
and make all repairs to the Premises, and shall keep the Premises in good order
and condition. In every instance, Tenant shall give Landlord at least five (5)
days prior written notice of its intention to fulfill the requirements of this
paragraph 5.2 so as to allow Landlord opportunity (exercisable at Landlord's
option) to post such notices at or around the Premise giving notice to those
performing work for Tenant of Landlord's non-responsibility for such work; and
Tenant shall indemnify and hold Landlord harmless, from, for and against any and
all such costs. Within thirty (30) days of receipt of Landlord's itemized
invoices, Tenant will pay for any repairs to the Building made necessary by any
negligence of Tenant or its assignees, subtenants, employees or their respective
agents, or other persons permitted to enter by Tenant, and related parking area,
and will maintain the Premises consistent with the maintenance standards
utilized by Landlord in maintaining the Building, and will leave the Premises
upon expiration or termination of this Lease in a safe, clean, neat, and
sanitary condition.
6. IMPROVEMENTS AND ALTERATIONS.
6.1 TENANT'S OBLIGATIONS. After the initial construction of tenant
improvements are completed, Tenant shall not make any alterations, additions, or
improvements to or of the Premises, or any part thereof in excess of $10,000.00
without the prior written consent of Landlord, which such consent may be given
or withheld by Landlord in its reasonable discretion. As a condition for giving
such consent Landlord may, but need not, require one or more of the following:
(a) That Tenant agree to remove some or all such alterations, improvements,
additions, and/or utility installations (collectively hereafter sometimes
referred to as the "Alterations") at the expiration or other termination of this
Lease and to restore the Premises, (b) to become the property of Landlord upon
expiration or other termination of this Lease, (c) and that some or all such
Alterations be made under the supervision of a competent architect, or licensed
structural engineer and by a general contractor approved by Landlord. Tenant
shall give Landlord written notice at least five (5) days prior to the
commencement of such Alterations, so that Landlord may, at its option, post a
notice of non-responsibility; provided, however, that whether or not Landlord
chooses to so post such notices, Tenant shall notify every entity performing
work for Tenant and every supplier thereof of Landlord's non-responsibility for
the costs of any such matter and Tenant shall indemnify and hold Landlord
harmless, from, for and against any and all such costs. All such Alterations,
(except movable furniture and trade fixtures) shall become the property of
Landlord and shall be surrendered with the Premises, as a part thereof, at the
expiration or earlier termination of the Term hereof. The same shall be made by
Tenant at Tenant's sole cost and expense. Landlord shall not impose any fees in
connection with construction of the Tenant improvements. Any contractor or
person making such alteration must first be approved in written by Landlord.
Upon the written demand by Landlord at its sole discretion, Tenant shall remove
by the Expiration Date or any other termination of this Lease and prior to
Tenant's vacation of the Premises, and at Tenant's sole cost and expense, any
Alterations, made by Tenant and designated by Landlord to be removed, and repair
and restore the Premises to their original condition, reasonable wear and tear
excepted.
6.2 FLOOR LOADS. Tenant shall not place a load upon any floor of the
Premises that exceeds the lesser of the floor load per square foot which such
floor was designed to carry, or the maximum floor load per square foot allowed
by law. Determinations of floor loads and the positioning of such loads within
the Premises shall be made by Landlord's structural engineer.
7. LIENS.
If a mechanic's or materialmen's lien shall be recorded against the Premises
owing to any repairs, alterations, additions, improvements or utility
installations made thereon at the request of Tenant, Tenant shall, at Tenant's
sole cost and expense, obtain within fifteen (15) days after written notice to
Tenant, the release of such lien, or provide to Landlord a surety bond in an
amount equal to one hundred percent (100%) of such lien to insure Landlord
against liability for such lien. Upon completion of the Tenant's work, Tenant
shall submit to Landlord a copy of a lien waiver that has been fully executed by
Tenant's contractor in connection with Tenant's Alterations work.
<PAGE>
8. USE OF PREMISES. SEE ADDENDUM I, SECTION -Building Warranty.
8.1 GENERAL RESTRICTIONS. Tenant may use the Premises only as set
forth in subparagraph 1.9 of the Basic Lease Provisions and shall not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord which shall not be unreasonably withheld. Tenant shall not
use or occupy the Premises in violation of law or of the certificate of
occupancy issued for the Building, and shall, upon five (5) days' receipt of
written notice from Landlord, discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be a violation of
law or of said certificate of occupancy. Tenant shall comply with any direction
of any governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant
or Landlord with respect to the Premises or with respect to the use or occupancy
thereof. Tenant shall not do or permit to be done anything which will invalidate
or increase the cost of any fire, extended coverage or any other insurance
policy covering the Building and/or property located therein and shall comply
with all rules, orders regulations and requirements of all applicable
governmental agencies and/or insurance related rating entities. Tenant shall be
notified by Landlord of any proposed premium increase due to Tenant's use, and
shall provide a thirty (30) day opportunity to Tenant to remedy same, after
which the Tenant shall reimburse Landlord, within thirty (30) days following
Landlord's written request, for the full amount of any additional premium
charged for such policy by reason of Tenant's failure to comply with the
provisions of this paragraph. Tenant shall not in any way obstruct or interfere
with the rights of other tenants or occupants of the Building or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral or
unlawful purpose, nor shall Tenant cause, maintain, or permit any nuisance in,
on, or about the Premises. Tenant shall not commit or suffer to be committed any
waste in or upon the Premises. Notwithstanding the foregoing, Landlord
understands that Tenant shall have unlimited access 24 hours per day, seven days
a week.
9. UTILITIES AND SERVICES.
9.1 FURNISHED BY LANDLORD. Landlord agrees to furnish or cause to be
furnished to the Premises the utilities and services hereinafter described in
this subparagraph 9.1, subject to the conditions and in accordance with the
standards set forth below:
(a) Landlord shall provide automatic elevator facilities on
generally accepted business days from 8:00 a.m. to 8:00 p.m., and on Saturdays
from 9:00 a.m. to 1:00 p.m. or such other hours may from time to time be
requested by Tenant AND HAVE AT LEAST ONE ELEVATOR AVAILABLE FOR USE AT OTHER
TIMES
(b) On generally accepted business days from 8:00 a.m. to 6:00
p.m., and on Saturdays from 9:00 a.m. to 1:00 p.m., or such other hours may from
time to time be requested by Tenant, Landlord shall provide ventilation heat or
air conditioning when it is required for the comfortable occupancy of the
Premises and/or the Common Areas during such days and hours, subject to any
requirements or standards relating to, among other things, energy conservation
imposed or established by governmental or cooperative organizations. Landlord
shall make available at Tenant's expense after-hours heat or air conditioning
for the Premises and/or the Common Areas..Tenant shall pay only the actual cost
which Landlord incurs for the after hours operation of the HVAC
(c) Landlord shall repair and maintain (including janitorial)
the Common Areas, including without limitation, parking areas, loading and
unloading areas, roadways, driveways, walkways, landscaped areas, lighting
facilities fences, and gates in a manner comparable to that provided in other
office buildings in the vicinity of the Building.
(d) Landlord shall provide five day a week janitorial services
to the Premises comparable to that provided in other first-class office
buildings in the area.
9.2 FURNISHED BY TENANT. Tenant shall, at Tenant's sole cost and
expense, be responsible for removal of all refuse and materials requiring any
special handling or not disposable through generally available trash removal
means including, but not limited to, hazardous materials.
9.3 CHARGES TO TENANT. Landlord shall furnish to the Premises, at
Tenant's sole cost, the utilities and services hereinafter described in this
subparagraph 9.1. Landlord may elect to separate for Tenant's individual charges
for such utilities and services (including, without limitation, heating,
ventilation, and air conditioning, whether provided for under this subparagraph
9.2 or subparagraph 9.1) or portions thereof ("Utilities Expenses"). Moreover
Landlord may, at its election, allocate the sum if all tenant's Utilities
Expenses operate in a manner deemed equitable by Landlord, including without
limitation, accruing to rentable square feet or estimated usage. Notwithstanding
the foregoing, separate meters for electrical energy may be installed for the
Premises at locations stipulated by Landlord. Tenant acknowledges that charges
for the other Utilities Expenses may be included within the Common Expenses.
(a) Landlord shall furnish to the Premises, subject to
interruptions beyond Landlord's control (but not to include Landlord's
bankruptcy or insolvency), separately metered electrical energy service.
(b) Landlord shall furnish water to the Premises, subject to
interruptions beyond Landlord's control (but not to include Landlord's
bankruptcy or insolvency) as required by Tenant.
(c) Landlord may impose additional charges for special
cooling, and ventilating needs in the Premises and Common Areas created by
Tenant by the use of computers, medical equipment, hybrid telephone equipment,
and other similar equipment or uses. Landlord may use a life cycle cost system
in full or reasonably modified form to determine the cost of such services.
(d) Except for separately metered electric, in the event
Landlord shall choose to not include any or all of the Utilities Expenses in the
Common Expenses for any given period, prior to the Commencement of the Lease
Term or any applicable calendar year (or portion thereof) thereafter Landlord
shall give Tenant a written estimate of Tenant's Utilities Expenses for the
ensuing year or portion thereof. Tenant shall pay such estimated Utilities
Expenses in twelve (12) equal monthly installments, in advance, concurrently
with the regular Minimum Monthly Rental Installments. In such event, within
ninety (90) days after the end of each calendar year, Landlord may elect to
determine, pursuant to the provisions of this subparagraph 9.2, Tenant's actual
Utilities Expenses. Landlord shall furnish to Tenant a statement showing in
reasonable detail the method of arriving at Tenant's actual Utilities Expenses
and the parties shall within thirty (30) days from receipt of a statement pay
any overpayment or increase due over the estimated Utilities Expenses incurred
by Landlord during such period.
9.4 ELECTRICAL EQUIPMENT. At no time shall Tenant's use of
electrical current ever exceed the capacity of the feeders to the Building or
the risers or wiring installation or the capacity of the service to the
Premises.
9.5 COOPERATION. Tenant agrees to cooperate fully at all times with
Landlord and to abide by all reasonably determined regulations and requirements
which Landlord may prescribe for the use of the above utilities and services.
9.6 INTERRUPTIONS. Landlord shall not be liable for, and Tenant
shall not be entitled to any abatement or reduction of rent by reason of
Landlord's failure to furnish any of the foregoing when such failure is caused
by accident, breakage, repairs, strikes, lockouts or other labor disturbance or
labor dispute of any character, governmental action, inability by exercise of
reasonable diligence to obtain electricity, water, or fuel or by any other cause
beyond Landlord's reasonable control, but not to include Landlord's bankruptcy
or insolvency.
9.7 MODIFICATIONS Notwithstanding anything hereinabove to the
contrary, Landlord reserves the right from time to time to make reasonable and
nondiscriminatory modifications to the above standards for utilities and
services.
10. RULES AND REGULATIONS.
Tenant agrees to abide by all reasonable rules and regulations of the
Center imposed by Landlord and incorporated herein by this reference ("Rules and
Regulations"), as the same may be reasonably changed from time to time by
Landlord upon reasonable advance written notice to Tenant. These Rules and
Regulations are imposed for cleanliness, good appearance, proper maintenance,
and good order and reasonable use of the Premises, the Building and the Center,
and as may be necessary for the enjoyment of the Building and the Center by all
tenants and their clients, customers and employees. Breach of the Rules and
Regulations shall not be grounds for termination of the Lease unless Tenant
continues to breach the same after thirty (30) days advance written notice by
Landlord; provided, however, that any such notice shall be in lieu of, and not
in addition to, any notice required under any California law. Landlord shall not
be liable for the failure if any tenant, its agents, or employees, to conform to
the Rules and Regulations; so long as Landlord shall take the same enforcement
steps against any other tenant as provided in this paragraph 10.
11. TAXES ON TENANT'S PROPERTY.
11.1 TENANT'S LIABILITY. If any taxes, levies and assessments on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Building is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant, and if Landlord pays the taxes levies, and assessments based
upon such increased assessment, which Landlord shall have the right to do
regardless of validity thereof, Tenant shall, within thirty (30) days receipt of
landlord's written notice, repay to Landlord the taxes, levies, and assessments
so levied against Landlord, or the proportion of such taxes, levies, and
assessments resulting from such increase in the assessment.
11.2 VALUATION OF TENANTS IMPROVEMENTS. If the Tenant Improvements
in the Premises, whether installed and/or paid for by Landlord or Tenant and
whether or not affixed to the real property so as to become a part thereof, are
assessed for real property tax purposes at a valuation higher than the valuation
at which Tenant Improvements conforming to Landlord's building standard is
assessed (for purposes herein defined to be $30.00 per square foot), then at
Landlord's option the real property taxes and assessments levied against
Landlord or the property by reason of such excess assessed valuation shall be
deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of subparagraph 11.1. If Landlord elects to make the
allocation authorized by this subparagraph and if the records of the County
Assessor are available and sufficiently detailed to serve as a basis for
determining whether said Tenant Improvements are assessed at a higher valuation
than Landlord's building standards, such records shall be binding on both
Landlord and Tenant; otherwise the actual cost of construction shall be the
basis for such determination
11.3 TAX RENTALS PAYABLE TO LANDLORD. If at any time during the
Lease Term the Premises are subject to a tax or excise on the rent or any other
tax, however described, on account of rentals payable to Landlord under this
Lease, such tax or excise shall be considered an assessment for which Tenant
shall be solely liable under subparagraph 11.1 (excluding, however from such tax
or excise any amount assessed against Landlord as state or federal income tax).
Without limiting the foregoing, Tenant acknowledges that Tenant is liable for
tax on rentals payable hereunder and Tenant shall remit an amount equal to any
and all such tax with any such rental payment.
12. TENANT'S INSURANCE.
12.1 TYPES OF INSURANCE. Commencing upon Tenant's initial entry into
the Premises, Tenant shall, at its own expense, provide and keep in force during
the Term of this Lease, with a company(ies) licensed in the State of California,
the following insurance
(a) Comprehensive general liability insurance insuring Tenant
against liability arising out of this Lease and the use, occupancy, or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be in the amount of $1,000,000 combined single limit for injury to or
death of one or more persons for each occurrence, and for damage to tangible
property, including loss of use for each occurrence The policy shall insure
against loss resulting from tenant's operations in the Premises, actions of
Tenant's independent contractors and Tenants contractual liability. The policy
shall contain a provision that the insurance provided the Landlord hereunder
shall be primary and non-contributing with any other insurance available to the
Landlord.
(b) All-risk insurance (excluding flood and earthquake
insurance, unless required by lender), including sprinkler leakage, in an amount
sufficient to cover the full cost of replacement of all improvements and
betterment to the Premises paid for by Tenant and all of Tenant's trade fixtures
and Tenant's other personal property.
(c) Worker's compensation and employer's liability insurance,
as required by state or local law.
12.2 CERTIFICATES OF INSURANCE. Tenant shall deliver to Landlord at
least thirty (30) days prior to the time such insurance is first required to be
carried by Tenant, and thereafter prior to expiration of each such policy,
certificates of insurance evidencing the above coverage with limits not less
than those specified above. Such certificates, with the exception of worker's
compensation, shall name Landlord as an additional insured, and shall expressly
provide that the interest of same therein shall not be affected by any breach by
Tenant of any policy provision for which such certificates evidence coverage.
Further, all such certificates shall expressly provide that no less than thirty
(30) days' prior written notice shall be given Landlord in the event of material
reduction in the required coverage for the leased premises to or cancellation of
the coverage evidenced by such certificates. The insurance required by this
paragraph 12 shall be the primary insurance as respects landlord (and any other
additional insured designated by Landlord) and not contributory with any other
available insurance. All policies shall be taken out with insurance companies
authorized to do business in the State of California. If Tenant shall fail to
procure and maintain said insurance, Landlord may, but shall not be required to
procure and maintain same but at the sole expense of Tenant and the cost of said
insurance shall be added to Tenant's monthly rent, but only for the prorate
period of noncompliance.
12.3 NO CO-LNSURANCE. As it applies to property coverage, if, on
account of the failure of Tenant to comply with the provisions of this paragraph
12, Landlord is adjudged a co-insurer by its insurance carrier, then any loss or
damage Landlord shall sustain by reason thereof shall be borne by Tenant and
shall be immediately paid by Tenant upon receipt of a bill therefor and evidence
of such loss.
12.4 INSURANCE LIMITS. Landlord makes no representation that the
limits of liability specified to be carried by Tenant under the terms of this
Lease are adequate to protect Tenant against Tenant's undertaking under this
Lease. In the event Tenant believes that any such insurance coverage called for
under this Lease is insufficient, Tenant shall provide at its own expense such
additional insurance as Tenant deems adequate. In no event shall the limits of
coverage maintained by Tenant pursuant to this paragraph 12 be considered as
limiting Tenant's ability under this Lease.
13. LANDLORD'S INSURANCE.
13.1 COVERAGE. Landlord may during the Term of this Lease maintain
in effect a policy or policies of all-risk insurance, together with sprinkler
leakage coverage covering the Building, including Landlord's interest in all
tenant improvements in the Premises. The cost of such insurance shall be
included in the Common Expenses to be reimbursed by Tenant to Landlord pursuant
to subparagraph 3.2.
13.2 PREMIUM INCREASES. If the presence of any substances or
equipment, including without limitation any medical substances or equipment,
maintained by Tenant on the Premises causes landlord's insurer(s) to reasonably
require that special safety precautions be taken, Tenant, at Tenant's sole cost
and expense, shall cause the safety precautions to be taken. If the presence of
such substances and equipment on the Premises causes Landlord's insurer(s) to
increase insurance premiums, Tenant shall reimburse Landlord for such increases
within thirty (30) days after receipt of Tenant's statement showing the amount
of increased premiums if after thirty (30) days written notice from Landlord
outlining the conditions causing the increase Tenant fails or refuses to correct
those causes. If the presence of such substances and equipment on the Premises
causes landlord's insurer(s) to cancel Landlord's insurance policies, and
Landlord is unable to obtain insurance from another insurer, Tenant shall be
obligated use any other substances and equipment generally accepted by Tenant's
substances and equipment generally accepted by Tenant's professional associates
which is acceptable to landlord's insurer(s). The provisions of this
subparagraph shall apply to all types of insurance maintained by landlord.
<PAGE>
14. WAIVER OF SUBROGATION RIGHTS.
Landlord and Tenant hereby release each other and their respective
authorized representatives, from any claims for injury, loss, or damage to any
person, the Premises and/or the Building, and to the fixtures, personal
property, improvements, and/or alterations of either party in or on the Premises
or the Building, that are caused by or result from any of the risks insured
against under any insurance policy(ies) carried by the parties as required under
the terms of this Lease and in force at the time of any such injury, loss or
damage, provided that such waiver is permitted by each party's insurance
policies or endorsements thereon without invalidation of such policies. The
foregoing reciprocal releases are, however, limited to the extent by which any
such claims are covered by said insurance policy(ies). Each party shall cause
each insurance policy obtained by it to provide that the insurer waives all
right of recovery by way of subrogation against either party in connection with
any injury, loss or damage covered by such policy.
15. WAIVER, LIMITATION OF LIABILITY. AND DEFENSE OF ACTIONS.
15.1 INDEMNIFICATION AND WAIVER. This Lease is made on the express
condition that, except as otherwise provided herein, Landlord shall not be
liable for or suffer loss by reason of injury to or death of any person or
injury to property from whatever cause, all or in any way connected with the
condition or use of the Premises or the installation or construction of
improvements or personal property therein, including without limitation any
liability for injury to the person or property of Tenant, its agents, officers,
employees or invitees, and any liability arising from any act or neglect of any
other tenant of the Building Tenant agrees to defend, indemnify, and hold
harmless Landlord, its agents, employees, contractors, from damage to persons or
property caused by and to the extent resulting from the negligence of Tenant or
its agents, employees or invitees. Tenant shall immediately notify Landlord in
writing in the event of any damage to the Premises or of any injury to persons
or damage to property occurring in or about the Premises.
In no event shall Tenant defend, indemnify and hold Landlord
harmless from any injury or damage that may result to any property on the
demised premises or to any person on the premises (I) if that injury or damage
is the result of the negligence or reckless or willful misconduct of Landlord,
Landlord's agents, servants, employees or contractors; and (ii) if such injury
or damage does not result or arise from the negligence of Tenant, its agents,
employees or contractors. Landlord agrees to defend, indemnify and hold Tenant
harmless from any loss or injury to persons or property arising from the
negligence of Landlord, its agents, employees or contractors in performance of
the obligations under this Lease.
Notwithstanding the foregoing, Tenant shall have no obligation to
indemnify Landlord with regard to any amount against which the Landlord has been
effectively insured, any amounts for which Landlord has the right of
compensation or indemnification by any other party, or for any claims to the
extent they arise from the negligent or intentional acts or omissions of
Landlord, its agents, employees or contractors.
The obligations of Tenant and Landlord under this paragraph 15
arising during the term shall survive any termination of this Lease.
15.2 DEFENSE OF ACTIONS. In case any action, suit, or proceeding is
brought against Landlord by reason of any occurrence in, on, or about the
Premises and which does not arise out of the act or omission of Landlord or its
agents, employees or contractors, Tenant, upon Landlord's request and at
Tenant's sole cost and expense subject to 15.1 second paragraph, shall resist,
defend, indemnify and hold Landlord free for, from and against, such action,
suit, or proceeding, or cause the same to be resisted and defended by counsel
designated by the insurer whose policy covers the occurrence or by counsel
designated by Tenant and approved by Landlord.
15.3 LIABILITY OF LANDLORD. The liability of Landlord hereunder or in
connection with the Premises, the Building or the Park shall be limited to its
interest herein, and in no event shall any other assets of Landlord or any
constituent partner of Landlord be subject to any claim arising out of or in
connection with the Lease or the Park.
16. COMMON AREAS.
Tenant, for the use and benefit of Tenant, its agents, employees,
customers, clients, licensees, and subtenants, shall have the nonexclusive right
in common with Landlord and other present and future owners, tenants, and their
agents, employees, customers, clients, licensees, and subtenants, to use common
entrances, lobbies, elevators, ramps, drives, stairs, and similar access,
service-ways and other common facilities within and around the Building (i.e.
such areas as are not intended to be leased or rented by landlord) ("Common
Areas"), subject to reasonable rules and regulations established by Landlord
from time to time.
17. PARKING.
17.1 USE. Tenant shall have the nonexclusive right to use the
Parking Facilities associated with the Building.
18. SIGNS.
No signs, placard, pictures, advertisement, name, or notice shall be
displayed, printed, inscribed or otherwise posted on or about the Premises, the
Building, or any of the Common Areas, so as to be visible from outside the
Building, without the prior written approval of Landlord, which will not be
unreasonably withheld or delayed. Any signs visible from a corridor or other
Common Areas, and the lobby directory, shall be of a size, color, and style
acceptable to Landlord and in accordance with Landlord's sole signage criteria
under this lease. Tenant may affix signs within the Premises provided that they
are not visible from outside the Premises.
Notwithstanding the foregoing, Landlord shall permit Tenant to install its
name and logo on as many highly visible prominent locations on the exterior of
the building and monument signage as allowed by the City of Carlsbad.
19. ENTRY BY LANDLORD.
Landlord reserves for itself and its agents the right to enter the Premises,
supplying janitorial services maintaining the Building, including the erection
and maintenance of such scaffolding, canopies, fences, add props as may be
required, posting notices of non-responsibility for alterations, additions, or
repairs, and/or upon reasonable notice to Tenant exhibiting the Premises to
existing or prospective purchasers, mortgagees, or tenants (during the last six
(6) months of the Term hereof) without any abatement of rent and without any
liability to Tenant for any loss of occupation or quiet enjoyment of the
Premises thereby occasioned. So long as the Landlord has given reasonable notice
to Tenant, any entry to the Premises obtained by Landlord for the purpose
described in this paragraph, shall not be construed or deemed to be a forcible
or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises or any portion thereof.
20. FIRE OR CASUALTY.
In the event the Premises, or access to them, are wholly or partially
destroyed by fire or other casualty covered by the form of fire and extended
coverage insurance maintained by Landlord, Landlord shall rebuild, repair, or
restore the Premises and access thereto substantially the same condition as when
the same were furnished to Tenant within 120 days from the date of damage,
excluding any improvements installed by Tenant or by Landlord at Tenant's
request and expense, and the Lease shall continue in full force and effect. In
the event, however, that the Premises, the Building or the Building are so
damaged or destroyed to the extent of more than one-third of its replacement
cost, or to any substantial extent by a casualty not so covered, Landlord may
elect to terminate this Lease in lieu of so restoring the Premises. Landlord
shall in no event be obligated to make any repairs or replacement of any items
other than those items installed by or at the expense of Landlord. If the
Premises are rendered partially or totally unusable by Tenant, rent shall abate
during the period of reconstruction. Notwithstanding anything to the contrary
contained in this paragraph, Landlord shall not have any obligation whatsoever
to rebuild, repair, or restore the Premises when the damage from any casualty
covered under this paragraph occurs during the last twelve (12) months of the
Term of this Lease.
21. ASSIGNMENT AND SUBLETTING.
21.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not, either
voluntarily or by operation of law, assign, transfer, mortgage, pledge,
hypothecate, or encumber this Lease or any interest herein, and shall not sublet
the Premises or any part thereof, without the written consent of Landlord, which
consent the parties expressly agree will not unreasonably withheld or delayed by
the Landlord. Without limiting the basis on which Landlord's consent may be
reasonably withheld, Landlord may withhold consent based upon the following
factors:
(i) The assignee's or sublessee's (collectively,
"Transferee") use of the Premises will be materially incompatible with the
provisions of his Lease and the operation of the Center as a whole;
(ii) The Transferee will materially affect the liability of
the Premises and the Center as a whole to compete with similar properties;
(iii) The financial stability and capacity, of the Transferee;
(iv) The business reputation of the Transferee;
(v) Whether the Transferee's intended use of the Premises
materials conflicts with those purposes set forth in subparagraph 1.09 of the
Basic Lease Provisions;
While this list of factors is not intended to be exclusive, failure
to satisfy Landlord relative to any one or more of those criteria shall be
deemed reasonable grounds for withholding consent. A consent to one transfer of
rights shall not be deemed to be a consent to any subsequent transfer of rights.
Any such transfer of rights without such consent shall be void and shall, at the
option of the Landlord, constitute a breach under this paragraph and a default
under this Lease. no permitted transfer of rights in this Lease shall relieve
other obligations to be performed by Tenant hereunder. Tenant's obligations and
liabilities under this Lease shall continue notwithstanding the fact that
Landlord may accept rent and other performance directly from any other person
shall not be deemed to be a waiver by landlord of any provision of this Lease or
be a consent to any transfer of rights.
Notwithstanding the foregoing, Tenant shall have the right to
sublease or assign its rights under the terms of this Lease to its subsidiaries,
affiliates, successor legal entities or subsidiaries or affiliates of Excalibur
Technologies Corp. without prior notice or consent of Landlord and without
further compliance with subparagraph 21.2 below. Such company shall assume
Tenant's obligations hereunder.
21.2 PROCEDURE AND LANDLORD'S OPTIONS. If Tenant desires at any time
to effect a transfer of rights under this Lease, it shall have first received or
procured a bona fide written offer to take an assignment or sublease which is
not inconsistent with this Lease, and the acceptance of which would not breach
any provision of this Lease if this paragraph is compiled with and being
compiled with, and Tenant shall notify Landlord in writing enclosing the bona
fide written offer. Tenant also shall provide Landlord with such financial and
other information as Landlord may reasonably request concerning the offeror of
the bona fide written offer. At any time within ten (10) days after Landlord's
receipt of the bona fide written offer, Landlord may by written notice to Tenant
elect to (i) sublease the Premises or portion thereof proposed to be subleased
by Tenant (if the proposed transfer of rights is a sublease), or take an
assignment of Tenant's leasehold estate hereunder or such part thereof as shall
be specified in said bona fide written offer, (if the proposed transfer of
rights is an assignment), on the same terms stated in this Lease, and in turn
sublease or assign to the proposed subtenant or assignee on the terms specified
in the bona fide written offer, or (ii) terminate this Lease as to the portion
(including all) of the Premises so proposed to be subleased or assigned, with a
proportionate abatement in the rent payable hereunder; provided, however, that
if the proposed sublease will cover less than 1/2 of the area of the Premises
covered by this Lease, will have a term (including all options to renew or
extend the same) of less than two years, and will terminate more than two years
prior to the Expiration Date, Landlord shall not be entitled to exercise option
(ii) above, but may exercise option (i). If Landlord shall not be entitled to
exercise any option set forth herein within said ten (10) day any option set
forth herein within said ten (10) day period, but instead notifies Tenant in
writing, that pursuant to the provisions of subparagraph 21.1 hereof, it
consents to Tenant accepting the bona fide offer, then Tenant may enter into a
valid assignment or sublease of the Premises or portion thereof, upon the terms
and conditions set forth in said bona fide written offer. Landlord and Tenant
agree to share equally in any profit that is derived from Tenants subleasing of
the space, after Tenants recovery of any cost incurred in such sublease.
21.3 DOCUMENTATION AND PAYMENT OF LANDLORD'S COSTS. Any permitted
transfer of rights shall be evidenced by a written instrument executed by a
Tenant in a form reasonably satisfactory to Landlord. Each transferee shall, if
required by Landlord, agree in writing for the benefit of Landlord to perform
all of Tenant's obligations under this Lease, including the payment of all
amounts due or to become due under this Lease directly to the Landlord. An
executed copy of such written instrument shall be delivered to Landlord. Tenant
shall pay to Landlord all of Landlord's reasonable attorney's fees and costs
arising from or relating to the review, drafting and preparation of the
documentation related to the proposed transfer of rights.
21.4 NO ADVERTISEMENT In no event shall Tenant display on or about
the Premises, the building, and/or the Center any signs for the purpose of
advertising the Premises for assignment, subletting, or other transfer rights.
22. TENANT'S DEFAULT.
The occurrence of any one or more of the following events shall constitute a
default and breach of this Lease by Tenant:
(a) The vacation or abandonment of the Premises by Tenant,
coupled with non-payment of rent when due.
(b) The failure by Tenant to make any payment of rent or make
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of five (5) days after receipt of
written notice thereof by Landlord to Tenant.
(c) Tenant's causing, permitting, or suffering, without the
prior consent of Landlord, any act for which this Lease requires Landlord's
prior written consent, or which is prohibited by this Lease; if such act
continues for a period of ten (10) days (or is not cured) after written notice
by Landlord to Tenant.
(d) The failure by Tenant to observe or perform any of the
material covenants, conditions, or provisions of this Lease to be observed or
performed by Tenant, other than described in subparagraph (b) above, where such
failure shall continue for a period of thirty (30) days after receipt of written
notice thereof by Landlord to Tenant.
(e) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged bankrupt, or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant; or the appointment of a trustee or a receiver to
take possession of substantially all of Tenant's assets located at the Premises,
or of Tenant's interest in this Lease, where possession is not restored to
Tenant within sixty (60) days; or the attachment, execution, or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenants interest in this Lease; provided, however, that if any provision of this
subparagraph (e) is contrary to applicable law, such provision shall be of no
force or effect except to the broadest extent permitted by law.
23. REMEDIES UPON DEFAULT.
23.1 LANDLORD'S Recovery. In the event of default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall so elect to terminate this Lease, then Landlord
may recover from Tenant:
(a) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination;
(c) At Landlord's election, such other amounts or addition to
or in lieu of the foregoing as may be permitted from time to time by applicable
California law.
23.2 REMOVAL AND STORAGE. In the event of any default by Tenant,
Landlord shall also have the right, with or without terminating this lease, to
re-enter the Premises and remove all persons and property from the Premises.
Such property may be removed and stored in a public warehouse or elsewhere at
the cost or and for the account of Tenant.
23.3 RELETTING, In the event of the vacation or abandonment of the
Premises by Tenant, as defined in Paragraph 23(a), or in the event that Landlord
shall elect to re-enter as provided above or shall take possession of the
Premises pursuant to legal proceedings or pursuant to any notice provided by
law, then, if Landlord does not elect to terminate this Lease as provided
herein, Landlord may from time to time, without terminating this Lease, either
recover all rental as it becomes due, or relet the Premises or any part thereof
for such term or terms and at such rental or rentals and upon such other terms
and conditions as Landlord in its sole discretion may deem advisable, with the
right to make alterations and repairs to the Premises. In the event that
Landlord shall elect to so relet, then rentals received by Landlord from such
reletting shall be applied: (I) first, to the payment of any cost of such
reletting; (ii) second, to the payment of the cost of any alterations and
repairs to the Premises; (iv) fourth, to the payment of rent due and unpaid
hereunder; and (v) the residue, if any, shall be held by Landlord and applied in
payment of future rent owing by Tenant as the same may become due and payable as
less than the rent payable during that month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord from time to time upon receipt of invoice.
Tenant also shall pay to Landlord, any reasonable costs and expenses incurred by
Landlord in reletting or in making alterations and repairs to the Premises upon
receipt of invoice.
23.4 RE-ENTRY NOT AN ELECTION TO TERMINATE. No reentry or taking
possession of the Premises by Landlord pursuant to this paragraph 24 shall be
construed as an election to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction. Notwithstanding any reletting without
termination by Landlord because of any default by Tenant, Landlord may at any
time after such reletting elect to terminate this Lease for any such default.
23.5 LANDLORD DEFAULT. In the event Landlord shall default in the
performance of any of the covenants, obligations or agreements of this Lease and
such default shall continue for five (5) days after receipt of written notice
setting forth such default, and Landlord is not engaged in diligently pursuing
to cure such default, Tenant shall have the right to cure such default and to
recover all costs of curing said default from Landlord.
In the event Tenant elects to cure said default, Tenant shall
invoice Landlord for all expenses reasonably incurred in curing said default. If
Landlord fails to reimburse Tenant within twenty (20) days after receipt of said
invoice, Tenant shall have the right to withhold rent and other amounts due
Landlord as an offset against the sums due Tenant. Any outstanding balance due
Tenant shall accrue interest at the existing prime rate of interest plus an
additional two percent (prime + 2%) annual percentage rate, compounded monthly.
Without limiting any of Tenant's rights and remedies hereunder, and
in addition to all other amounts, Landlord shall be obligated to pay it is
expressly agreed that Tenant shall be entitled to recover from Landlord all
costs and expenses, including actual and customary attorney's fees, incurred by
Tenant in enforcing this Lease from and after Landlord's default.
24. RIGHT TO CURE TENANT'S DEFAULT.
If Tenant shall default in the observance or performance or any term or
covenant on Tenant's part to be observed or performed under this Lease, and
shall not have cured such default within the respective periods specified
hereunder, Landlord may, but without obligation so to do, immediately or at any
time thereafter perform the same for the account of Tenant, and if Landlord
makes expenditures or incurs any obligation for the payment of money therewith
including, but not limited to, attorneys' fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred, with
interest shall be deemed to be additional rent hereunder and shall be paid by
Tenant to Landlord within 30 days after receipt of written request therefor.
25. ATTORNEY'S FEES.
In the event any action, suit, or proceeding is commenced under or in
connection with this Lease, the losing party shall pay to the prevailing party
in such action, suit, or proceeding a reasonable sum as attorneys' fees incurred
in connection therewith, together with all costs and expenses of said prevailing
party. The term "prevailing party" shall include, without limitation, a party
who obtains legal counsel or brings an action against the other by reason of the
other's breach or default and obtains substantially the relief sought, whether
by compromise, settlement, or judgment.
26. SURRENDER OF LEASE NOT MERGER.
The voluntary or other termination or surrender of this Lease by Tenant,
or a mutual cancellation hereof, shall not work a merger and shall, at the
option of Landlord, terminate all or any existing subleases and/or sub
tenancies, or may, at the option of Landlord, operate as an assignment to it of
any or all of such subleases or subtenancies.
Upon expiration or earlier termination of this Lease, any improvements to
or of the Premises including, but not limited, wall covering, paneling,
ceilings, carpeting, and built-in cabinet work, shall become part of the
Building and belong to the Landlord. However, any furniture (including all
panels or partitions), office equipment, ice makers, signage, refrigerators,
supplemental air conditioning systems, security cameras and systems, UPS
systems, generators, halon systems, raised flooring, cable wiring ladders,
employee lockers, other trade fixtures, etc. shall at the option of the Tenant,
remain the property of Tenant. Tenant shall have absolute right, but not
obligation to remove all property belonging to the Tenant, but Landlord also has
right to demand removal of all property belonging to the Tenant. Landlord shall
within thirty (30) days prior to such expiration or earlier termination have the
right to specify such property to be removed from the Premises by serving
written notice to Tenant. In the absence of such notice, Tenant shall not be
obligated to remove such property. In both cases, Tenant shall repair any damage
caused by removal and restore the Premises to their original condition,
reasonable wear and tear excepted.
27. CONDEMNATION.
If any part of the Premises or the Building be taken or condemned for
public or quasi-public use, or sold under threat of such taking, and a part
thereof remains which is susceptible to occupation hereunder, this Lease shall,
as to the part so taken, terminate as of the date title shall vest in the
condemnor, and the rent shall be equitably adjusted; but in such event Landlord
or Tenant shall have the option, at either parties sole discretion, to terminate
this Lease as of the date when title to the part so condemned vests in the
condemnor. If so much of the Premises is taken that there does not remain a
portion reasonably acceptable for occupation hereunder, this Lease shall
thereupon terminate.
If a part or all of the Premises be taken, all compensation awarded upon
such taking shall belong to Landlord, and Tenant shall have no claim thereto,
and Tenant hereby irrevocably assigns and transfers to Landlord any right to
compensation or damages to which Tenant may be entitled during the term hereof
by reason of the taking of all or a part of the Premises provided, however, that
Tenant shall be entitled to retain any award for Tenant's movable equipment,
furnishings and other move costs.
28. WAIVER.
The waiver by Landlord of the breach of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant, or condition herein contained. The
acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of
any preceding breach by Tenant of any term, covenant, or condition of this
Lease, other than the failure of Tenant to pay the particular payment so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
29. EFFECT OF HOLDING OVER.
If Tenant holds possession of the Premises after the expiration of the
term, Tenant shall become a Tenant at sufferance from month to month upon the
terms herein specified except that the rent shall be 125% of the rent last paid,
payable monthly in advance.
30. TENANT'S STATEMENT.
Tenant shall, at any time and from time to time, upon not less than twenty
(20) days' prior written request from Landlord, execute, acknowledge, and
deliver to Landlord a statement in writing (I) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified is in full
force and effect) and the date to which the rent and other charges are paid in
advance, if any; (ii) acknowledging that there are not, to Tenant's knowledge,
any uncured defaults on the part of Landlord, or specifying such defaults, if
any, as are claimed; (iii) setting forth the date of commencement of rent and
the Expiration Date; and (iv) setting forth such other matters known to Tenant
as reasonably may be requested by Landlord.
31. TENANT'S FINANCIAL STATEMENTS.
At any time during the term of this Lease, Tenant shall, upon thirty (30)
days prior written notice from Landlord, provide Landlord with a copy of its
most recent annual or quarterly report.
32. SALE OF BUILDING BY LANDLORD.
In the event of any sale of the Building by Landlord, Landlord shall be
and is hereby entirely freed and relieved of all liability under any and all of
its covenants and obligations contained in or derived from this Lease arising
out of any act, occurrence, or omission occurring after the consummation of such
sale; and the purchases at such sale or any subsequent sale of Building shall be
deemed, without any further agreement between the parties or their successors in
interest or between the parties and any such purchases, to have assumed and
agreed to carry out any and all of the covenants or obligations of Landlord
under this Lease.
33. SUBORDINATION, ATTORNMENT.
33.1 SUBORDINATION. Tenant hereby agrees that this Lease shall be
subordinate to the lien of any mortgage or deed of trust executed by Landlord
for the benefit of any bank, insurance company, individual, corporation,
partnership, unincorporated association, or other lending institution now or
hereafter in force against the Premises, and to all advances made hereafter to
be made upon the security of such mortgage or deed of trust. Within twenty (20)
days advance request of Landlord, Tenant shall, in a written document in
recordable form and upon receipt of a non disturbance agreement from any such
prospective successor Landlord, confirm subordination of its rights hereunder to
the lien of any mortgage or deed- of trust executed by Landlord for the benefit
of any bank, insurance company, individual, corporation, partnership,
unincorporated association, or other lending institution, now or hereafter in
force against the Premises and to all advances made or hereafter to be made upon
the security of such mortgage or deed of trust.
33.2 ATTORNMENT. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed of trust made by Landlord attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as Landlord under this Lease.
34. LANDLORD'S RIGHT TO ALTER BUILDING.
Landlord reserves and shall have, at all times, the unilateral right to
alter the Building and Common Areas for the enhancement or betterment of the
Building, or make any additions thereto, and may for that purpose erect
scaffolding and other necessary structures. In such event, Tenant shall not have
any right to damages for any injury or inconveniences occasioned thereby, nor
shall there be any abatement in the rent, provided any such work or alteration
shall be performed and completed in a manner which is both reasonably prompt and
reasonably prosecuted so as to minimize any inconvenience to Tenant in its use
of the Premises.
35. NOTICES.
Unless otherwise specifically provided herein, all notices, demands or
other communications given hereunder shall be in writing and shall be deemed to
have been duly delivered upon receipt by United States registered or certified
mail or private express delivery, return receipt requested, postage prepaid,
addressed as follows:
<PAGE>
If to Landlord.
Gerald W. Bosstick
MHPP, Inc.
c/o Madison Square Properties, Inc.
5414 Oberlin Drive, Suite 140
San Diego, CA 92121
If to Tenant after the Commencement Date:
Mr. Clyde Wooten
Vice President Image Engineering
Excalibur Technologies
1959 Palomar Oaks Way, Suite 300
Carlsbad, CA 92009
With a copy of default notices, if any to:
Mr. Pat Condo
Excalibur Technologies
2000 Corporate Ridge Suite # 1095
Mc Lean, VA 22102
Either party may change and designate a new address for notices hereunder
by giving written notice to the other party in the manner specified above.
36. GENERAL PROVISIONS.
36.1 RIDERS. Exhibits, clauses, plats, riders and addenda, if any.
36.2 VENUE. The county of San Diego, California shall be deemed a
proper place of jurisdiction and venue for actions hereunder.
36.3 JOINT AND SEVERAL OBLIGATIONS. If there be more than one
Tenant, the obligations hereunder imposed shall be joint and several.
36.4 MARGINAL HEADINGS. The titles to the paragraphs of this lease
are not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof. The use herein of (I) the neuter gender
includes the masculine and the feminine, and (ii) the singular number includes
the plural, whenever the context so requires.
36.5 TIME. Time is of the essence of this Lease and each and all of
its provisions in which performance at, by or within a stated time is a factor.
36.6 SUCCESSORS. The covenants and conditions herein contained,
subject to the provisions as to transfers of rights, apply to and bind the
heirs, successors, executors, administrators, and assigns of the parties hereto.
36.7 RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof, except at Landlord's request or with Landlord's consent which
may be withheld in Landlord's sole discretion.
36.8 ENTIRE AGREEMENT. This Lease contains all of the agreements of
the parties hereto with respect to any matters covered or mentioned in this
Lease, and no prior agreements or understandings pertaining to any such matters
shall be effective for any purpose. This Lease may not be amended except by an
agreement in writing signed by the parties hereto or their respective successors
in interest. This Lease shall not be effective or binding on any party until
fully executed and exchanged by both parties hereto.
36.9 FORCE MAJEURE. This Lease and the obligations of Tenant and
Landlord hereunder shall not be affected or impaired because Landlord or Tenant
is unable to fulfill any of its obligations hereunder or is delayed in doing so,
if such inability or delay is caused by reason of same, labor troubles, acts of
God or any other cause beyond the reasonable control of Landlord, or Tenant.
36.10 SEVERABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal, shall in no way affect, impair or invalidate any
other provisions hereof, and such other provisions shall remain in full force
and effect, to the extent permitted by law.
36.11 REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
36.12 APPLICABLE LAW. This Lease and any and all other documents
and/or instruments executed hereunder or in furtherance hereof shall be governed
by the laws of the State of California. Jurisdiction and venue of any action
concerning this Lease, shall be in San Diego County, California.
36.13 INTERPRETATION. This Lease and all documents executed
hereunder is/are the result of negotiations between the parties, each having had
adequate opportunity to consult such counsel as they deem appropriate. The terms
hereof shall be interpreted to give each its fair meaning.
36.14 BROKERS. The parties represent and warrant that they have had
no dealings with any real estate broker or agent in connection with this Lease,
excepting only the broker named in subparagraph 1.13 of the Basic Lease
Provisions, and that neither party knows of any other real estate broker or
agent who is or might be entitled to a commission in connection with this Lease.
Each party hereby agrees to defend, indemnify, and hold the other, its agents,
employees, contractors, and invitees harmless from any and all liability, loss,
cost, or obligation on account of or arising out of any breach of its
representation or warranty, including reasonable attorneys' fees and costs.
Landlord shall pay a Brokerage Commission of four percent (4%) of the aggregate
rental for months 1 through 60 and two percent (2%) for months 61 through 72 to
CB/Madison for representing Tenant in this Lease.
36.15 NO LIGHT, AIR OR VIEW EASEMENT. No diminution or shutting off
of view by any structure which may be erected on lands adjacent to or visible
from the Building shall in any way affect this Lease or impose any liability on
Landlord.
36.16 THIRD PARTY BENEFICIARIES. There are no third party
beneficiaries to this agreement, including, without limitation, any real estate
broker or salesperson.
36.17 CORPORATE AUTHORITY. If Tenant executes this Lease as a
corporation, each of the persons executing this Lease on behalf of Tenant does
hereby covenant and warrant that Tenant is a duly authorized and existing
corporation, that Tenant is qualified to do business in the State of California,
that the corporation has full right and authority to enter into this Lease, and
that each person signing on behalf of the corporation is authorized to do so.
36.18 COMPLIANCE WITH LAWS. Tenant hereby covenants and agrees to
comply with all the rules and regulations of the Board of Fire Underwriters,
Officers or boards of the City, County or State having jurisdiction over the
leased premises, and with all ordinances and regulations of governmental
authorities wherein the leased premises are located, at Tenant's sole cost and
expense, but only insofar as any such rules, ordinances and regulations pertain
to the manner in which the Tenant shall use the leased premises; the obligation
to comply in every other case, and also all cases where such rules, regulations
and ordinances require repairs, alterations, changes or additions to the
building (including the leased premises) or building equipment, or any part of
either, being hereby expressly assumed by Landlord and Landlord covenants and
agrees promptly and duly to comply with all such rules, regulations and
ordinances with which Tenant has not herein expressly agreed to comply. Other
Tenants in this project shall be subject to the terms of this clause.
36.19 QUIET ENJOYMENT. If Tenant is not in default of the Lease,
Landlord warrants that Tenant shall have the right to peacefully and quietly
have, hold and enjoy the Premises during the entire term without hindrance or
interruption by anyone claiming by, through or under Landlord, subject, however,
to the exceptions and provisions of the Lease
36.20 LEGAL HOLIDAYS. New Years Day, Memorial Day, July 4th, Labor
Day, Thanksgiving Day and Christmas Day.
IN WITNESS WHEREOF, this Lease has been deemed executed at Carlsbad,
California, as of the date set forth at the beginning hereof.
<PAGE>
LANDLORD:
MHPP, INC. a California corporation,
By: ____________________________________
Title: ____________________________________
TENANT:
EXCALIBUR TECHNOLOGIES CORPORATION
By: ____________________________________
Title:____________________________________
<PAGE>
ADDENDUM TO LEASE BETWEEN MHPP, INC. AND
EXCALIBUR TECHNOLOGIES CORP.
THIS ADDENDUM TO LEASE ("Addendum") is an integral portion of (and by this
reference incorporated into) that certain Lease to which this Addendum is
attached (which such lease, together with all exhibits, riders, attachments and
addendum attached thereto is collectively referred to as the "Lease") wherein
MHPP, Inc., a California Corporation, is named as "Landlord, and Excalibur
Technologies Corp. is named as "Tenant". The terms set forth in this Addendum
supplement, modify and/or amend the provision contained in the Lease. In the
event of any conflict between the provisions set forth herein and the provisions
of this Addendum shall govern and prevail.
1. GOVERNING LAW.
The Lease and any and all documents executed thereunder or in furtherance
thereof shall be governed by the laws of the State of California.
2. CONSTRUCTION OF TENANT IMPROVEMENTS.
(a) Tenant shall have plans and specifications prepared by Tenant's
architect for the tenant improvements to be constructed on the Property, and
shall submit said plans and improvements to Landlord for Landlord's approval,
which shall not be unreasonably withheld or delayed.
(b) Tenant shall have the improvements constructed by a contractor of
Tenant's own choosing, subject to Landlord's right to approve the contractor,
which approval shall not be unreasonably withheld or delayed.
(c) Landlord shall provide Tenant a Tenant Improvement Allowance of $3.00
per usable square foot, for Tenant's use in modifying the Premises to meet its
requirements. Tenant may, at Tenant's option receive a cash allowance of up to
an additional $50,000 contained in the Premises which allowance shall be
amortized over the remaining Term of the lease at twelve percent 12%.
3. CONTINGENCIES.
Tenant's obligations under this Lease are expressly contingent upon the
obtaining of building permits for the construction of the improvements and a
business license from the City of Carlsbad necessary for Tenant's operations.
Tenant shall use its best efforts to cause these contingencies to be satisfied
at the earliest possible date following execution of the Lease.
4. BASE YEAR EXPENSES.
(a) Tenant shall pay to Landlord, as "Additional Rental", for each square
foot of rentable area in the Premises, the amount by which Operating Costs (as
hereinafter defined) per square foot for each square foot for the Building
exceeds the actual Operating Costs for the calendar year 1996 per rentable
square foot for the Building (such excess if hereinafter referred to as "Excess
Operating Costs"). For purposes of this provision, "Operating Costs" shall mean
the aggregate anniversary calendar year cost per square foot for the Building
and the Land of the items. At the beginning of each calendar year during the
term of this Lease, or at such other time or times as Landlord shall require
including at the anniversary of commencement of the Term of the Lease (in the
event such commencement shall be at other than the beginning of a calendar
year), Landlord shall estimate the amount of Tenant's share of Excess Operating
Costs for such complete or partial calendar year, and shall provide Tenant with
an itemized statement of such amount. Tenant shall pay to Landlord such
estimated share in monthly installments with Tenant's payment of Base Rental. As
soon as is practical after the end of each calendar year, Landlord shall provide
an itemized statement to Tenant of the actual Excess Operating Costs for the
prior year. Tenant shall pay any deficiencies due to Landlord within thirty (30)
days of such notice. Any surplus payments shall be credited to payments of
estimated operating expenses for the current year. If the Building's average
occupancy during the year is less than 95%, then the Variable Operating Expenses
shall be adjusted to reflect 95 % occupancy.
(b) Operating Cost Exclusions. The following shall be excluded from
operating costs charged to Tenant:
(1) Salaries and other compensation paid to executive employees
above the grade of building manager, (including profit sharing, bonuses and 401
(k) savings plans); not including property manager;
(2) Expenses relating to the management of the partnership status of
Landlord, including accounting, auditing, and legal fees, and key man disability
insurance;
(3) Any expense for which Landlord is compensated through proceeds
of insurance or which Landlord would have been compensated for had Landlord
maintained insurance in an amount and type that a reasonably prudent owner of a
comparable building located in California would normally maintain;
(4) Expenditures for repairs, alterations, additions, changes,
replacements and other items which under generally accepted accounting
principles are properly classified as capital expenditures to the extent they
upgrade or improve the Building as opposed to replacing existing items which
have worn out unless such expenditures are mandated by law;
(5) Costs or expenses of or any special services or equipment
rendered or incurred for a tenant if the same are not generally rendered to
other tenants of the Building;
(6) The cost of repairs or replacements caused by the exercise of
the right of eminent domain;
(7) Expenses incurred in connection with the enforcement of the
terms of any Lease;
(8) The cost of procuring or relocating tenant, including attorneys'
fees and broker commissions;
(9) Any costs of initial construction;
(10) Property management fees in excess of four percent (4%) of the
gross rentals payable by tenants of the Building;
(11) Cost of repairs incurred through the willful misconduct of
Landlord;
(12) Cost for which Landlord is entitled to receive reimbursement
from other tenants as their share of operating expense;
(13) The cost of any special service required by an occupant of
premises in the Building, including heating and air conditioning outside of the
hours referred to in the Lease provided, however, this shall not apply to common
areas;
(14) Costs of decorating, redecorating, or special cleaning or other
services not typically provided or required on a regular basis to tenants of the
Building;
(15) Any excess representing an amount paid to a related
corporation, entity, or person which is in excess of the amount which would be
paid in the absence of such relationship;
(16) Any charge for Landlord's income taxes, excess profit taxes,
franchise taxes, or similar taxes on Landlord's business;
(17) The cost of tools and equipment used initially in the
construction of the Building;
(18) Contributions to operating expense reserves which are not
utilized during the term of this Lease;
(19) Charitable contributions for which no services or materials are
received;
(20) Costs or expenses for sculpture (unless required by Statute),
paintings or other works of art, including costs incurred with respect to the
purchase, ownership, leasing, showing, promotion, repair and/or maintenance of
same;
(21) Any other costs or expenses which according to good accounting
practice may not be included in "Operating Expenses".
(22) Any operating expense amount that would exceed an increase of
five percent (5%) of the prior years expenses, unless otherwise caused by a
Governmental or Federal Imposition.
In the event there exists a conflict as to an expense which is specified
to be included in Operating Costs and is also specified to be excluded from
Operating Expenses within the above Operating Costs Exclusions list, the
exclusions listed above shall prevail and the expense shall be deemed excluded.
5. BUILDING WARRANTY: Landlord represents, with the exception of work currently
being done in the building in compliance with the Americans with disabilities
Act of 1990, to Tenant that to Landlord's actual knowledge, without any
investigation, Landlord has received no notice that the building, Restrooms, and
common Areas are not in compliance with the Americans with Disabilities Act of
1990 and all other applicable building codes as of Initial Commencement Date of
the Lease. Landlord shall remedy any violation of this representation at its
sole cost, promptly following receipt of notice for any condition in existence
prior to the Initial Commencement Date but only to the extent required by law.
However, in the event that the governing authorities do not notify the Landlord
or the Tenant of an ADA violation, then Landlord shall not be required to make
any alterations. Landlord shall warrant that the building, Restrooms, and Common
Areas are in compliance with the Americans with Disabilities Act of 1990 and all
other applicable building codes as of Initial Commencement Date of the Lease.
Landlord shall remedy any violation of this Warranty at its sole cost, promptly
following receipt of notice. However, in the event that the governing
authorities do not notify the Landlord or the Tenant of an ADA violation, then
Landlord shall not be required to make any alterations.
6. RIGHT OF FIRST REFUSAL: Tenant shall have a continuing Right of First Refusal
to lease any space on the second floor of the Building which is currently
available or later becomes available during its lease terms and any extensions
thereof. The Right of First Refusal space should be offered to Tenant at the
same terms and conditions (inclusive of tenant improvement allowance,
commissions, base year, rental rate, etc.) as those proposed to and accepted by
an interested third party. Tenant will have five (5) business days after receipt
of Landlord's written notice of third party interest in which to exercise or not
exercise the Right of First Refusal. If Tenant elects not to exercise the
option, Landlord will have ninety (90) days to execute a lease with a third
party at similar terms offered to Tenant. If Landlord prepares to offer said
space at an effective rental rate (inclusive of rental rate, tenant
Improvements, Base Year, etc.) which is lower that that originally offered to
Tenant or if after ninety (90) days Landlord has failed to execute for the
proposed space, Tenant's Right of First Refusal shall be reinstated.
7. NON DISTURBANCE AGREEMENT: With respect to any existing or future first lien
mortgages, deeds of trust or other liens entered into by and between Landlord
and any such mortgage and/or any beneficiary of any deed of trust or other such
lien granted by Landlord (collectively referred to as "Landlord's Mortgagee"),
Landlord shall secure and deliver a non-disturbance agreement from and executed
by Landlord's Mortgagee for the benefit if Tenant.
8. ARBITRATION: The Lease shall provide that any disputes, including whether or
not any action or inaction would constitute a default, shall be resolved by
arbitration as described in detail under an arbitration provision to be included
in the Lease.
9. JANITORIAL SERVICE: Tenant shall have the right to choose its own janitorial
service. Landlord shall pay up to $.056 per rentable square foot for such
services. Any additional cost shall be at the expense of Tenant. Future cost
increase after the Base Year shall be passed through to Tenant subject to
Article 4 of the Addendum.
10. COMPUTER ROOM HVAC; Tenant at its sole cost and expense shall have the right
to remove the two existing air conditioning units in the computer room. if such
is left by the existing Tenant Peregrine Systems. All retrofitting shall be at
the expense of Tenant and Landlord shall be liable and responsible for the
storage of said units.
11. OPTION TO RENEW: Provided the Tenant is not been in default and Tenant is in
possession of the Premises, Tenant shall have two (2) five-year Options to
Extend the Term of this Lease at a Rental Rate which shall be the then
prevailing market rate for similar office space. Tenant must give notice in
writing to Landlord one hundred eighty (180) days prior to the expiration of the
Original Term of this Lease in order to exercise said Option. If Landlord and
Tenant are unable to reach a written agreement on the Rent of this extension
within forty-five (45) days, then the prevailing "Fair Market Rental Rate" shall
be determined by appraisers appointed as herein set forth, based on comparable
rentals then charged and collected in the area, taking into account items that
professional real estate appraisers customarily consider including location,
credit of the Tenants of other properties, size, age, design, utility and other
relevant factors on the property in the area as they compare to the Subject
Premises. The Option to Extend is personal to the Tenant and may not be
exercised or signed voluntarily or involuntarily by or to any person or entity
other than Tenant, except to an assignee not requiring Landlord's consent as
provided in the Lease.
Any required appraisal in regard to "Fair Market Rental Rate" shall be made as
follows:
If Landlord and Tenant are unable to come to a written agreement in regards to
the Base Rent for the Option Period within forty-five (45) days of the exercise
date, then Landlord and Tenant shall appoint in writing an independent qualified
real estate appraiser who shall be a member of the American Institute of Real
Estate Appraisers or equivalent. Each of these two (2) appraisers shall prepare
a written determination of "Fair Market Rental Rate" within thirty (30) days. If
the two (2) appraisals are within five percent (5%), then the average shall be
calculated and the value thus determined shall conclusively be deemed to be the
"Fair Market Rental Rate" of the Leased Premises for the purpose of this
paragraph and shall accrue from the first (1st) day of the Extended Term
thereof. However, if the two (2) appraisals are not within five percent (5%),
then upon mutual agreement Landlord and Tenant shall instruct each of their
appraisers to appoint a third (3rd) appraiser with qualifications as outlined
above within ten(10) days. Such independent third (3rd) appraiser shall have
twenty (20) days to make his own determination of "Fair Market Rental Rate"
which shall then conclusively be deemed to be the "Fair Market Rental Rate" of
the Leased Premises for the purposes of this Lease and shall accrue from the
first (1st) day of the Extended Term hereof. Each party shall pay for the cost
of its appointed appraiser at one-half (1/2) of the cost of the third (3rd)
appraiser. If either Landlord or Tenant fails to appoint an appraiser, then the
appraiser appointed by the party appointing an appraiser shall make the required
appraiser acting alone and the decision of such appraiser as to "Fair Market
Rental Rate" of the Premises, shall be conclusive and binding upon Landlord and
Tenant. In no event shall the delay of the determination of the "Fair Market
Rental Rate" of the Premises affect Tenant's obligation to pay the amount of
Rent as is then in effect or the amount of increase, if any, immediately upon
receipt of notification of the same.
12. Damage to Premises. Should there be extensive damage caused by Peregrine
Systems' move out, then Excalibur shall not be responsible for the damage and
repair thereof, if necessary.
DATED THIS _____________ day of 1995.
<PAGE>
LANDLORD:
MHPP, INC. a California corporation,
By:________________________________
Title:_______________________________
TENANT:
EXCALIBUR TECHNOLOGIES CORP.
By:________________________________
Title:_______________________________
<PAGE>
SUBLEASE
This Sublease is entered into as of the _____ day of December, 1995, by
and between AT&T Corp., a New York Corporation ("Sublessor") and Excalibur
Technologies, Inc., ("Sublessee").
WITNESSETH:
WHEREAS, Tysons Corner Associates II, as "Landlord," and AT&T
Communications, Inc., as agent for American Telephone and Telegraph Company, as
"Tenant" entered into a lease effective October 6, 1989, a copy of which
together with all amendments, modifications, extensions or renewals thereof, if
any, are attached hereto as Attachment "A" (all of which are hereinafter
collectively referred to as "Master Lease") in which Landlord leased to Tenant
and Tenant hired from Landlord certain space (the "Premises") in the Building
known as 1921 GALLOWS ROAD, VIENNA, VIRGINIA which is more particularly
described in the Master Lease; and
WHEREAS, American Telephone and Telegraph Company changed its name to
AT&T Corp. effective April 20, 1994.
NOW, THEREFORE, Sublessor, for and in consideration of the covenants and
agreement herein stated, hereby subleases to Sublessee a portion of the Premises
hereinafter referred to as ("Subleased Premises") and consisting of 11,125
rentable square feet located on the 2nd floor, and 3,075 rentable square feet
located on the 4th floor of the building (Attachment "B").
1. TERM
The term of this Sublease ("the Term") shall commence upon substantial
completion of the Leasehold Improvements as described in Attachment
"C" (the "Commencement Date") and shall expire on October 5, 1999.
However, in no event will the Commencement Date be later than April 1,
1996. The Leasehold Improvements shall be deemed "substantially
completed" upon the occurrence of all of the following:
(i) Construction of the Leasehold Improvements in accordance with
the plans and specifications listed in Attachment "B" and Attachment
"C" and made a part hereof, and delivery to Sublessee by Sublessee's
architect of a certificate to that effect;
(ii) Agreement by Sublessee that the utility services
contemplated by such plans and specifications have been fully
installed and are operational for use by Sublessee;
(iii) A final legally valid certificate of occupancy
(non-residential use permit) has been issued relating to the Subleased
Premises by all required governmental authorities; and
(iv) The remaining work to be done to render the Subleased
Premises fully completed shall consist solely of minor details of
construction, mechanical adjustments or decoration, which will not
interfere with Sublessee's use and enjoyment of the premises. Absent
delays caused by Sublessee, if the conditions in the preceding
sentence are not satisfied on or prior to 30 days after commencement
of the Term as defined herein, Sublessee may terminate this Sublease.
Furthermore, in the event that Sublessor has not vacated the Subleased
Premises on or prior to December 31, 1995, Sublessee may terminate
this Sublease. Sublessor shall use its diligent best efforts to assist
the Sublessee in meeting all of the conditions set forth above,
including, but not limited to communicating with the Landlord to
obtain its consent to the Leasehold Improvements.
<PAGE>
2. RENT
(a) Beginning on the Commencement Date and ending on October 5, 1999,
Sublessee shall pay to Sublessor as rent for the Subleased Premises
the sum of $252,050.01 per annum, in monthly installments of
$21,004.17. Rents for periods of occupancy of less than thirty (30)
days shall be prorated in proportion to the number of days of
occupancy in such period. Sublessor agrees to abate Sublessee's first
full month's rental payment.
(b) Beginning with the second lease year and continuing each year
thereafter, the annual rent shall increase by two and one half percent
(2.5%) of the previous year's base rent.
(c) Such rental shall be payable in advance, on the first day of each
moth of the Term of this Sublease, beginning one month after the
Commencement Date, without demand or set-off as the office of the
Sublessor herein designated as:
AT&T
Attention: Manager-Lease Administration
222 Mt. Airy Road
Basking Ridge, NJ 07920
3. USE
(a) The Subleased Premises shall be used for those purposes permitted
under the Master Lease.
(b) Sublessee, its agents or invitees, shall not perform any acts or
carry on any practices that may interfere with the conduct of the
Premises or the Building and shall keep the Subleased Premises in an
orderly and presentable condition.
4. CONDITION OF SUBLEASED PREMISES
The Sublessee's taking possession shall be conclusive evidence as
against the Sublessee that the Subleased Premises were in good order
and satisfactory condition when the Sublessee took possession.
Sublessee understands and agrees that it is taking the Subleased
Premises in "As Is" condition and all installations and improvements
now or hereafter placed on the Subleased Premises shall be for
Sublessee's account and at Sublessee's cost unless otherwise defined
herein.
5. LEASEHOLD IMPROVEMENTS
Sublessor shall provide Sublessee with Leasehold Improvement Allowance
of $10.00 per rentable square foot (approximately $142,000) for
Sublessee's desired improvements in connection with this Sublease.
Additionally, Sublessor shall allow Sublessee to amortize up to an
additional $10.00 per rentable square foot in Leasehold Improvement
costs passed through directly to Sublessee over the term of the
Sublease at an annual interest factor of ten percent (10%).
6. SECURITY DEPOSIT
Sublessee has deposited with Sublessor the amount of $21,004.17 as
security deposit in connection with this Sublease; such deposit to be
held in escrow throughout the term of the Sublease. Provided Sublessee
is not in default as defined herein, the security deposit will be
refunded upon expiration of this Sublease.
<PAGE>
7. REPAIRS
(a) During the Term, Sublessee shall maintain the Subleased Premises
in good order and condition, and shall promptly make repairs to
correct damage caused by Sublessee, its agents employees or invitees.
(b) Sublessee understands that, under the Master Lease, Sublessor and
Landlord have certain specified responsibilities to maintain and
repair the Premises in which the Subleased Premises are located and to
keep the Premises in good and tenantable condition. Sublessor agrees
to request that Landlord fulfill its responsibilities under the Master
Lease, should the need arise, and Sublessor agrees to proceed with due
diligence in its dealings with Landlord. It is specifically understood
and agreed, however, that Sublessor and Landlord have no obligation or
responsibility whatsoever with respect to maintenance or repair of
Subleased Premises.
8. ALTERATIONS AND MECHANICS LIENS
(a) Sublessee shall not make any alterations in or additions to the
Subleased Premises without first submitting the plans for such
alterations or additions to the Sublessor and Landlord and obtaining
the Sublessor's and Landlord's prior written consent to such
alterations or additions. Sublessor's consent shall not be
unreasonably withheld or delayed.
(b) Sublessee shall keep the Premises and the Subleased Premises free
from any liens arising out of any work performed, materials furnished
or obligations incurred by Sublessee. Landlord and Sublessor shall
have the right to post and keep posted on the Premises or the
Subleased Premises and notices that may be provided by the law or
which Landlord of Sublessor may deem proper for the protection of
Landlord or Sublessor, the Premises and the Subleased Premises.
(c) If any such lien is claimed against the Premises or Subleased
Premises, then, in addition to any other right or remedy of Sublessor,
Sublessor may, but shall not be obligated to, discharge same. Any
amount paid by Sublessor for such purposes shall be paid by Sublessee
to Sublessor as "Additional Rent" within ten (10) days of Sublessor's
demand therefore.
9. ADDITIONAL RENT
Sublessee shall pay to Sublessor as Additional Rent its proportionate
share of increases in real estate taxes and building operating
expenses over and above actual expenses incurred in the 1996 calendar
year, pursuant to paragraph 2.6 of the Master Lease.
10. LIABILITY FOR ACTS OR NEGLECT
If any damage to the Premises, the Subleased Premises, to the
Sublessor, his employees or agents, results from any act or neglect of
the Sublessee, or of the Sublessee's agents, employees, invitees or
licensees, the Sublessor may, at the Sublessor's option, repair such
damage and the Sublessee shall, upon demand by the Sublessor,
reimburse the Sublessor forthwith for the total cost of such repairs.
(Sublessee's payments to the Sublessor shall not prohibit Sublessor
from pursuing any other remedies that it may have under this Sublease
or law. Nor shall such payments relive Sublessee from any liability to
third parties.) All property belonging to the Sublessee shall be at
the risk of the Sublessee only and neither Sublessor nor Landlord
shall be liable for damage thereto or theft or misappropriation
thereof.
<PAGE>
11. WAIVER OF INDEMNITY
(a) Notwithstanding any provision of this Sublease to the contrary,
neither Sublessor nor its respective agents or employees shall be
liable to Sublessee, or to Sublessee's agents or agents, for:
(i) any damage to property or (except in the event of and to the
extent of the negligence or willful misconduct of Sublessor or its
duly authorized agents or employees) any injury to person due to the
condition or design of or any defect in the Subleased Premises or the
Premises or its mechanical systems and equipment which may exist or
occur, or due to the land upon which it is situated, or any part
thereof, becoming out of repair, or by defect in or failure of pipes
or wiring, or by the backing up of drains, or by the bursting or
leaking of pipes, faucets and plumbing fixtures, or by gas, water,
steam, electricity or oil leaking, escaping or flowing into the
Premises or Subleased Premises; or
(ii) any damage to property or (except in the event of and to the
extent of the negligence or willful misconduct of Sublessor, or its
duly authorized agents or employees) any injury to person that may be
occasioned by or through the acts of omissions or any other person
whatsoever; or
(iii) any loss or damage to an property or injury to any person
occasioned by theft, fire, Act of God, public enemy, injunction, riot,
insurrection, war, court order, requisition or order of government
authority, or any other matter beyond the control of Sublessor.
(b) Sublessee agrees that it will indemnify and hold and save
Sublessor and Landlord, and their respective agents and employees,
whole and harmless of, from and against;
(i) all fines, suits, losses, costs, liabilities, claims,
demands, actions and judgments of every kind and character by reason
of any breach, violation or non-performance of any term, provision,
convent, agreement or condition on the part of Sublessee under this
Sublease; and
(ii) all fines, suits, losses, costs, liabilities, claims,
demands, actions and judgments suffered by and recovered from, or
asserted against Sublessor or any of such indemnities, including
injuries to persons or property, occurring on or about the Subleased
Premises or in any way relating to Sublessee's occupancy or use of the
Subleased Premises and any other matters not due solely to the
negligence or willful misconduct of Sublessor.
(c) Sublessee covenants and agrees that in case Sublessor or any of
such indemnities shall be made a party to any litigation commenced by
or against such indemnities with respect to which Sublessee has agreed
to indemnify Sublessor and such other indemnities thereunder, or
relating to this Sublease or to the Premises or the Subleased
Premises, the Sublessee shall and will pay all reasonable costs and
expenses, including reasonable attorneys' fees and court costs,
incurred by Sublessor or such indemnities by virtue of any such
litigation, to the extent contemplated by such indemnification, and
the amount of such costs and expenses, including reasonable attorneys'
fees and the court costs, shall be a demand obligation owing by
Sublessee to Sublessor.
12. INSURANCE AND SUBROGATION
(a) Sublessee shall procure and maintain, at its own cost and expense
for the Term of this Sublease, policies of comprehensive general
public liability insurance in companies and substance satisfactory to
Sublessor, insuring Sublessee and, at Sublessor's option, including
Sublessor as additional named insured, against any liability arising
out of Sublessee's use or occupancy of the Premises. Such insurance
shall further provide coverage in terms of occurrence and aggregate as
follows:
Bodily Injury $1,000,000 each occurrence
$1,000,000 aggregate
Property Damage $500,000 aggregate
If Sublessee shall fail to procure and maintain said insurance,
Sublessor may, by shall not be required, to procure and maintain same,
but at the expense of Sublessee.
(b) Sublessee shall carry fire and extended coverage insurance
insuring its interest in the leasehold improvements in the Subleased
Premises and its interest in its office furniture, equipment, supplies
and any items stored on the Subleased Premises.
(c) The aforesaid insurance shall not be subject to change or
cancellation except after at least thirty (30) days prior written
notice to Sublessor. The original insurance policies (or certificates
thereof satisfactory to Sublessor together with copies of such
policies), together with satisfactory evidence of payment of the
premiums thereon, shall be deposited with Sublessor prior to the
commencement of the Term.
(d) Sublessee hereby waives all rights of action against the Sublessor
for loss or damage to the tenant improvements in the Subleased
Premises and to office furniture, equipment, supplies, vehicles and
any items stored on the Subleased Premises, which pursuant to this
Sublease shall be insured by a valid and collectible insurance policy
as required herein. The policies required by this Sublease shall
permit such waiver and shall be in form and content satisfactory to
Sublessor.
13. ASSIGNMENT AND SUBLETTING
Sublessee shall not, without the prior written consent of the
Sublessor and Landlord in each instance,
(i) assign, mortgage, pledge, hypothecate or otherwise transfer
or permit the transfer of this Sublease or the interest of Sublessee
in this Lease, in whole or in part, by operation of law or otherwise;
(ii) sublet any part of the Subleased Premises; or
(iii) permit the use or occupancy of all or any part of the
Subleased Premises for any purpose not permitted under Paragraph 4, or
by anyone other than Sublessee or Sublessee's employees or agents.
Consent to any of the above events by Sublessor shall not be
unreasonably withheld, delayed or conditioned.
14. EVENTS OF DEFAULT
Each of the following shall constitute an event of default by
Sublessee under this Sublease:
(i) Sublessee fails to pay any installment of Rent,
Additional Rent or any monetary sum required thereunder to be paid
to Sublessor when due;
(ii) Sublessee fails to observe or perform any of the other
covenants or provisions of this Sublease to be observed or performed
by Sublessee and fails to cure such default within ten (10) days after
notice to Sublessee; provided, that if such default is not susceptible
to being cured within such ten day (10) period, but Sublessee promptly
commences such cure, said ten (10) day period shall be extended so
long as Sublessee is actively, diligently and continuously attempting
to effectuate such cure, but in no event shall said ten (10) day
period be extended by more than thirty (30) days;
(iii) the interest of Sublessee in this Sublease is levied
upon under execution or other legal process;
(iv) a petition is filed by or against Sublessee to declare
Sublessee bankrupt or seeking a plan of reorganization or arrangement
under any Chapter of the Bankruptcy Code, or any amendment,
replacement or substitution for such Code;
(v) a receiver is appointed for Sublessee or Sublessee's
property;
(vi) Sublessee vacates the Subleased Premises; or
(vii) Sublessee, by its action or inaction, causes in whole or
part, directly or indirectly, any breach of the Maser Lease, by
Sublessor or Sublessee.
15. SUBLESSOR'S REMEDIES
(a) If any voluntary or involuntary petition or similar pleading under
any section or sections of any bankruptcy act shall be filed against
the Sublessee, or any voluntary or involuntary proceeding in any court
or tribunal shall be instituted to declare the Sublessee insolvent or
unable to pay the Sublessee's debts, and in the case of an involuntary
petition or proceeding, the petition or proceeding is not dismissed
within thirty (30) days from the date it is filed, the Sublessor may
elect, but is not required, and with or without notice of such
election and with or without entry or other action by the Sublessor,
to forthwith terminate this Sublease. Sublessor shall forthwith upon
such termination be entitled to recover damages in an amount equal to
the then present value of the Rent plus estimated Additional Rent for
the remaining portion of the Term of this Sublease.
(b) If the Sublessee defaults in the payment of Rent or any monetary
sum required thereunder or if the Sublessee defaults in the prompt and
full performance of any other provision of this Sublease, and the
Sublessee does not cure the default within ten (10) days (forthwith if
the default involves a hazardous condition) after written demand by
the Sublessor that the default be cured, or if the leasehold interest
of the Sublessee be levied upon under execution or be attached by
process of law, or if the Sublessee makes an assignment for the
benefit of creditors, or if a receiver be appointed for any property
of the Sublessee, or if the Sublessee vacates the Subleased Premises,
then and in any such event the Sublessor may, if the Sublessor so
elects, but not otherwise, and with or without notice of such election
and with or without any demand whatsoever, forthwith terminate this
Sublease and the Sublessee's right to possession of the Subleased
Premises or the Sublessor may terminate the Sublessee's right to
possession only, without terminating the Sublease.
(c) Upon any termination of this Sublease, whether by lapse of time or
otherwise, or upon any termination of the Sublessee's right to
possession without termination of the Sublease, the Sublessee shall
surrender possession and vacate the Subleased Premises immediately,
and deliver possession thereof to the Sublessor.
(d) If the Sublessee vacates the Subleased Premises or otherwise
entitles the Sublessor so to elect, and the Sublessor elects to
terminate the Sublessee's right to possession only, without
terminating the Sublease, the Sublessor may, at the Sublessor's
option, enter into the Subleased Premises, remove the Sublessee's
signs and other evidence of tenancy, and take and hold possession
thereof as in Paragraph (c) of this Paragraph 15 provided, without
such entry and possession terminating the Sublease or releasing the
Sublessee, in whole or in part, from the Sublessee's obligation to pay
the Rent thereunder for the Term, and in any such case the Sublessee
shall pay forthwith to the Sublessor, if the Sublessor so elects, a
sum equal to the entire amount of the Rent for the residue of the Term
plus any other sums then due thereunder.
(e) All rights and remedies of the Sublessor herein enumerated shall
be cumulative, and none shall exclude any other right or remedy
allowed by law.
16. UNTENANTABLITY
If the Subleased Premises are made untenantable by fire or other
casualty, the Sublessor may elect to terminate this Sublease as of the
date of the fire or casualty by written notice to the Sublessee within
ninety (90) days after that date. In the event of a termination of the
Sublease pursuant to this Paragraph 16, Rent shall be apportioned on a
per diem basis to be paid to the date of the fire or casualty.
17. EMINENT DOMAIN
If the Premises or any substantial portion thereof affecting the
Subleased Premises shall be taken or condemned by any competent
authority for any public use or purpose, the Term shall end upon, and
not before, the date when the possession of the part so taken shall be
required for such use or purpose, and without apportionment of the
condemnation award. The Sublessee shall have no right to share in such
award. Rent shall be apportioned as of the date of such termination.
If any condemnation proceeding shall be instituted in which it is
sought to take or damage any part of the Premises, the Subleased
Premises, or the land under it, or if the grade of any street or alley
adjacent to the Premises or the Subleased Premises or the Subleased
Premises is changed by a competent authority and such change of grade
makes it necessary or desirable to remodel the Premises or the
Subleased Premises to conform to the changed grade, the Sublessor
shall have the right to cancel this Sublease upon not less than ninety
(90) days notice prior to the date of cancellation designated in the
notice. No money or other consideration shall be payable by the
Sublessor to the Sublessee for the right of cancellation, and the
Sublessee shall have no right to share in the condemnation award or in
any judgment for damages caused by the change of grade.
18. SURRENDER OF SUBLEASED PREMISES
Upon termination of Sublessee's right to possession of the Subleased
Premises, Sublessee shall surrender and vacate the Subleased Premises
immediately, and deliver possession of the Subleased Premises to
Sublessor in clean, good and tenantable condition, ordinary wear
excepted. In the event possession of the Subleased Premises is not
immediately delivered to Sublessor, or if Sublessee so fails to remove
Sublessee's furniture, machinery, trade fixtures and other items of
movable personal property of every kind and description from the
Subleased Premises, Sublessor may remove same without any liability to
Sublessee. Any such property which may be removed from the Subleased
Premises by Sublessee but which is not so removed shall be
conclusively presumed to have been vacated by Sublessee and title to
such Property shall pass to Sublessor without any payment or credit,
and Sublessor may, at its option, and at Sublessee's expense, store
and/or dispose of such property.
19. HOLDING OVER
If Sublessee retains possession of the Subleased Premises or any part
thereof after the termination of this Sublease, by lapse of time or
otherwise, Sublessee shall pay Sublessor double the Rent and
Additional Rent for the month immediately preceding the holdover for
each thirty (30) day period or partial period which Sublessee retains
possession of all or any part of the Subleased Premises after the
expiration or termination of this Sublease and shall also pay all
damages actually sustained by Sublessor on account thereof. Sublessee
shall indemnify, defend and hold harmless Sublessor, its respective
officers, partners and employees from and against any and all claims,
liabilities, actions, losses, damages and expenses (including
attorneys' fees) asserted against or sustained by any such party and
arising from or by reason of such retention of possession. The
provisions of this paragraph shall not constitute a waiver by
Sublessor of any re-entry rights of Sublessor available under this
Sublease or by law.
20. NOTICES
(a) All notices and approvals to be given by one party to the other
party under this Sublease shall be given in writing, mailed or
delivered as follows:
If to Sublessor: AT&T
Manager-Lease Administration
222 Mount Airy Road
Basking Ridge, NJ 07920
If to Sublessee: Excalibur Technologies, Inc.
1921 Gallows Road,
Second Floor
Vienna, VA 22180
(b) Sublessor and Sublessee shall have the right to specify such other
person or persons or such other address or addresses upon giving five
(5) days written notice thereof.
(c) Notice shall be delivered by Unites States certified or
registered mail, postage prepaid, return receipt requested or
Overnight Delivery (e.g. Federal Express). Notices shall be
considered to have been given upon receipt.
21. BROKER
Sublessee represents to Sublessor that Sublessee has not dealt with
any real estate broker, salesman or finder in connection with this
Sublease, and no such person initiated or participated in the
negotiation of this Sublease, or showed the Subleased Premises to
Sublessee other than Spaulding & Slye and Cushman & Wakefield.
Sublessor will pay the brokerage fees by the terms of a separate
agreement between those parties. Sublessee agrees to indemnify, defend
and hold harmless Sublessor, and its respective officers, partners and
employees, from and against any and all claims, demands, liabilities,
actions, damages, costs and expenses (including reasonable attorneys'
fees) for brokerage commissions or fees arising out of a breach of
such representation.
22. RIGHT OF ENTRY
Sublessee shall permit Sublessor and/or Landlord and their respective
agents to enter into and upon the Subleased Premises at all reasonable
times for the purpose of inspecting same or for the purpose of
maintaining the Premises or Subleased Premises or for the purpose of
making repairs, alterations or additions to any other portion of the
Building, including the erection and maintenance of such scaffolding
canopies, fences and props as may be required, Sublessor or Landlord
shall conduct all their activities as allowed in this Paragraph 22 or
in a manner that will cause the least possible inconvenience,
annoyance or interference with Sublessee's use of Subleased Premises.
23. LIMITATION OF SUBLESSOR'S LIABILITY
It is expressly understood and agreed by Sublessee that none of
Sublessor's covenants, undertaking or agreements are made or intended
as personal covenants, undertakings or agreements by Sublessor or its
agents or employees, and any liability for damage or breach or
nonperformance by Sublessor shall be collectible only out of
Sublessor's interest in the Subleased Premises and no personal
liability is assumed by, nor at any time may be asserted against
Sublessor, its agents or employees or any of its successors or
assigns, all such liability, if any, being expressly waived and
released by Sublessee.
24. RIGHT TO SUBLEASE
Sublessor warrants that it has full right and authority to enter into
this Sublease. Sublessor and Sublessee agree that the submittal of
this Sublease document to Sublessee does not constitute an offer to
Sublease and shall not be binding on Sublessor until duly executed by
Sublessee.
25. SEVERABILITY
If any term or provision of this Sublease shall, to any extent, be
determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Sublease shall not be affected
thereby, and each term and provision of this Sublease shall be valid
and be enforceable to the fullest extent permitted by law.
26. MASTER LEASE
Sublessee acknowledges and agrees that this Lease is a Sublease by
Sublessor under the provisions of, and is subject and subordinate to,
all of the terms and conditions of the Master Lease, and Sublessee
assumes and agrees to duly perform all obligations of Sublessor under
the Master Lease, unless otherwise specifically provided herein. All
terms contained in this Sublease shall have the same meanings and
definitions ascribed to them in the Master Lease, unless any such term
is expressly defined in this Sublease.
27. MISCELLANEOUS
(a) This Sublease shall be governed by the laws of the State of
Virginia.
(b) This Sublease shall be binding upon and shall inure to the benefit
of each party's respective successors and assigns.
(c) This Sublease sets forth all the covenants, agreements,
representations and warranties between Sublessor and Sublessee
concerning the Subleased Premises and there are no representations
between them other than those stated in this Sublease. No subsequent
alteration, amendment, change or addition to this Sublease shall be
binding upon Sublessor or Sublessee in writing signed by both parties.
(d) Time is of the essence of this Sublease and the performance
of all obligations under this Sublease.
(e) Neither party shall record this Sublease.
(f) The captions of the paragraphs of this Sublease are for
convenience only and are not a part of this Sublease and shall have no
effect upon the construction and interpretation of this Sublease.
(g) Sublessee specifically acknowledges and agrees that this Sublease
shall not be effective unless and until Landlord has consented in
writing to this Sublease, anything herein to the contrary
notwithstanding.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this
Sublease to be executed as of date first above written.
WITNESS SUBLESSOR:
AT&T Corp.
- ------------------------------- ------------------------------
District Manager-Real Estate
WITNESS SUBLESSOR:
Excalibur Technologies, Inc.
/s/ Terry Yates /s/ James H. Buchanan
- ------------------------------- ------------------------------
Title: CFO
------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LANDLORD'S CONSENT AGREEMENT
Tysons Corner Associates II, (herein "Landlord"), hereby consents to the
foregoing Sublease and the terms and conditions thereunder. Landlord's consent
shall not modify or affect the Master Lease or Sublease, or relieve AT&T Corp.
from any liability thereunder.
LANDLORD:
Tysons Corner Associates II
------------------------------------------
Title:
-------------------------------------
<PAGE>
ATTACHMENT B (Second Floor)
(Floorplan)
<PAGE>
ATTACHMENT B (Fourth Floor)
(Floorplan)
<PAGE>
ATTACHMENT C (Leasehold Improvements)
Page 1
POWER/DATA/TEL
1. All offices and work stations to have typical office level
electricity/tel/data outlets.
2. In Training Room provide power/tel/data at each table.
3. Ring and string for tel/data.
4. Voice and cabling to be provided by tenant.
5. Dedicated outlet for copier in Copy/Mail Room.
6. Workstations will have power base. all workstations will be fed from
column or adjacent wall. No floor outlets required.
PLUMBING
1. Existing kitchen to remain.
2. Install 1/4" line to coffee maker in Main Kitchen and at coffee area in
Training Room.
3. Relocate sprinkler heads as required by new layout.
HVAC
1. Modify layout of air diffuser as required by new layout.
2. Provide double cfm in Training Room, Conference Room and Lan Room.
FINISHES
1. Provide and install loop carpet throughout space. Allow $16/yd.-
installed.
2. Install bldg. std. 2" vinyl base throughout.
3. All walls to be painted bldg. std. paint.
4. ADD ALTERNATE: Wallcovering (allow $1.20/yd-installed) in Executive
Office, Conference Room and wall behind reception desk.
MILLWORK
1. Install 6 linear feet of bldg. std. base and wall cabinets in Training
Room coffee area.
MISC.
1. Install tenant's white boards at (12) locations.
This outline constitutes the architect's understanding of the Tenant's
requirements. It is not intended for incorporation into a lease but, instead,
should be used as a basis for discussion.
<PAGE>
Attachment C (Leasehold Improvements)
Page 2
September 26, 1995
TENANT FIT UP DESCRIPTION
Excalibur Technologies, Inc.
1921 Gallows Roads-2nd Floor
Space Plan 9-25-95
GENERAL
1. The contractor is expected to visit the site prior to submitting any
pricing.
2 Extent of demolition not shown on plan.
PARTITIONS
1. All interior partitions to be bldg. std. (3-1/2"), ceiling high.
2. G.C. to confirm that demising partitions are deck high per base bldg.
requirements.
3. The following rooms to have insulated walls: Conference Rooms (3), Demo
Room and Training Room
4. All workstations indicated with dashed line are by tenant.
DOORS AND HARDWARE
1. Existing glass entry to remain.
2. All new interior doors to be bldg. std.- match existing.
3. All new secondary suite doors to be bldg. std.
4. All hardware to be bldg. std. lever type ADA approved. All interior
doors to have passage sets.
5. ADD ALTERNATE: Install one (3'x8') glass side light in cased gypsum
board opening in entry to executive area.
CEILING AND LIGHTING
1. Existing suspended ceiling throughout to remain. Replace any damaged
tile or portions of grid as required.
2. Relocate existing and provide new base bldg. light fixtures 2'x4', (18)
cell parabolic as required by new layout.
3. Provide and install approximately (12) compact fluorescent downlights in
large Conference Room.
Exhibit 22.01
SUBSIDIARIES OF EXCALIBUR TECHNOLOGIES CORPORATION
JANUARY 31, 1996
1.Excalibur Technologies International, Ltd.
2.Excalibur Acquisition Corp.
Exhibit 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-3, File Nos. 33-79794, 33-90734, 33-65333 and
333-01595 and on Form S-8, File no. 33-89144.
ARTHUR ANDERSEN LLP
Washington, D.C.
April 26, 1996
Exhibit 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (Nos. 33-79794,
33-90734, 33-65333, 333-01595) and in the Registration Statement on Form S-8
(No. 33-89144) of Excalibur Technologies Corporation of our report dated April
15, 1994, relating to the financial statements of ConQuest Software, Inc. as of
and for the year ended December 31, 1993, which appears on page F-2 in this Form
10-K of Excalibur Technologies Corporation.
PRICE WATERHOUSE LLP
Washington, D.C.
April 26, 1996
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