<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------
FORM 10 - Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________________ TO ___________________
COMMISSION FILE NUMBER 0-11630
INTELECT COMMUNICATIONS SYSTEMS LIMITED
(Exact Name of Registrant as Specified in Its Charter)
BERMUDA N/A
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1100 EXECUTIVE DRIVE, RICHARDSON, TEXAS
75081
(Address of Principal Executive Offices, Zip Code)
972-367-2100
(Registrant's Telephone Number, Including Area Code)
-----------------------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
There were 17,545,048 shares of Common Stock, par value $.01 per share,
outstanding on April 30, 1997.
================================================================================
<PAGE> 2
INTELECT COMMUNICATIONS SYSTEMS LIMITED
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets of the Company
at March 30, 1997 (unaudited) and December 31, 1996 2
Consolidated Statements of Operations of the Company
(unaudited) for the three months ended March 31, 1997 and 1996 3
Consolidated Statements of Cash Flows of the Company
(unaudited) for the three months ended March 31, 1997 and 1996 4
Notes to the Consolidated Financial Statements 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTELECT COMMUNICATIONS SYSTEMS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands of dollars, except share data)
<TABLE>
<CAPTION>
Assets March 31, 1997 December 31, 1996
------ -------------- -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 433 $ 4,863
Marketable securities 912 854
Accounts receivable, net 3,736 2,427
Inventories 3,538 2,978
Prepaid expenses 745 472
-------- --------
Total current assets 9,364 11,594
Property and equipment, net 4,985 4,285
Goodwill, net 14,241 14,573
Software development costs, net 1,852 1,389
Deferred financing costs, net 2,173 582
Other intangible assets, net 2,857 2,879
Other assets 710 716
-------- --------
$ 36,182 $ 36,018
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,537 $ 1,878
Accrued liabilities 3,297 3,302
Net liabilities of discontinued operations 400 400
Deferred income taxes 48 48
Current maturities of long-term debt 10,258 4,125
Current installments of obligations under capital leases 56 57
-------- --------
Total current liabilities 17,596 9,810
Long-term obligations under capital leases, net of current installments 45 59
Deferred income taxes 305 267
Long-term debt, net of current maturities 738 3,238
Convertible debentures 6,374 14,913
-------- --------
25,058 28,287
-------- --------
Shareholders' equity:
Common shares, $.01 par value, 80,000,000 shares authorized
17,439,604 and 15,027,728 shares issued and outstanding
in 1997 and 1996 174 150
Additional paid-in capital 47,653 36,849
Unrealized gain (loss) on marketable securities (2) 18
Accumulated deficit (36,701) (29,286)
-------- --------
Total shareholders' equity 11,124 7,731
-------- --------
$ 36,182 $ 36,018
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
INTELECT COMMUNICATIONS SYSTEMS LIMITED AND SUBSIDIARIES
Consolidated Statements of Operations
(Thousands of Dollars, except share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
--------- ----------
(Unaudited)
<S> <C> <C>
Net revenues:
Product sales $ 2,205 $ 1,636
Services 1,821 1,294
Contract revenue 511 442
-------- --------
4,537 3,372
-------- --------
Cost of revenues:
Product sales 2,046 1,679
Services 1,284 776
Contract revenue 384 760
-------- --------
3,714 3,215
-------- --------
Gross profit 823 157
-------- --------
Operating expenses:
Selling, general and administrative 4,332 2,357
Engineering and development 2,470 177
Amortization of intangible assets 396 268
-------- --------
7,198 2,802
-------- --------
Operating loss (6,375) (2,645)
-------- --------
Other income (expense):
Interest expense (945) (57)
Interest and other income 36 163
-------- --------
(909) 106
-------- --------
Loss from continuing operations before income taxes (7,284) (2,539)
Income taxes 38 (553)
-------- --------
Loss from continuing operations (7,322) (1,986)
Loss on disposal of discontinued operations (93) (9)
-------- --------
Net loss $ (7,415) $ (1,995)
======== ========
Loss per share (primary and fully diluted):
Continuing operations $ (.44) $ (.16)
Discontinued operations (.01) (.00)
-------- --------
Net loss $ (.45) $ (.16)
======== ========
Weighted average number of shares and common stock equivalents
outstanding (in thousands) 16,594 12,928
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
INTELECT COMMUNICATIONS SYSTEMS LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Thousands of dollars, except share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
-------- ----------
<S> <C> <C>
Cash flows from operating activities: (Unaudited)
Net loss $ (7,415) $ (1,995)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of intangible assets 666 389
Deferred income taxes 38 (553)
Noncash compensation -- 500
Stock option compensation 60 117
Amortization of deferred financing costs 725 --
Other 6 22
Change in operating assets and liabilities, net of effects of acquired
companies:
Accounts receivable (1,309) (564)
Inventories (560) (982)
Other assets (273) (194)
Accounts payable and accrued liabilities 1,654 2,147
Net liabilities of discontinued operations -- (26)
-------- --------
Net cash used in operating activities (6,408) (1,139)
-------- --------
Cash flows from investing activities:
Purchase of other intangible assets (16) --
Capital expenditures (970) (932)
Purchase of marketable securities (78) (55)
Payments for other assets -- (71)
Software development costs (489) (1,632)
Payment for acquisition of DNA, net of cash acquired -- (3,009)
Loan receivable -- 600
Payment for acquisition of IVC, net of cash acquired _ - (2,135)
-------- --------
Net cash used in investing activities (1,553) (7,234)
-------- --------
Cash flows from financing activities:
Debt issuance costs (160) --
Proceeds from issuance of notes payable 3,833 --
Payments of principal on capital lease obligations (15) (22)
Payments of long-term debt (200) (100)
Proceeds from issuance of common shares -- 734
Exercise of employee stock options 73 --
-------- --------
Net cash provided by financing activities 3,531 612
-------- --------
Net decrease in cash and cash equivalents (4,430) (7,761)
Cash and cash equivalents, beginning of period 4,863 15,086
-------- --------
Cash and cash equivalents, end of period $ 433 $ 7,275
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
INTELECT COMMUNICATIONS SYSTEMS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
by the Company without audit in accordance with generally accepted accounting
principles for interim financial statements and with instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included.
The accompanying consolidated financial statements do not include
certain footnotes and financial presentations normally required under generally
accepted accounting principles and, therefore, should be read in conjunction
with the audited financial statements included in the Company's Annual Report
on Form 10-K as at December 31, 1996.
INVENTORIES
The components of inventories are as follows (thousands of US Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- -----------
<S> <C> <C>
Raw materials $3,402 $2,727
Work in progress 504 292
Finished goods 782 1,213
------ ------
4,668 4,232
Less: allowance for obsolescence 1,130 1,254
====== ======
$3,538 $2,978
====== ======
</TABLE>
CREDIT FACILITY AND RELATED FINANCING MATTERS
On February 18, 1997, the Company signed a letter of intent with a
private lender to provide a credit facility (the "Credit Facility"), of up to
$15,000,000. On March 31,1997, $5,000,000 was outstanding under the Credit
Facility. As of May 10,1997, the Company had borrowed a total of $6,000,000
under the Credit Facility, secured by all outstanding shares of DNA
Enterprises, Inc. ("DNA"), a wholly owned subsidiary of the Company. In
conjunction with the Credit Facility, the Company has issued warrants to
purchase 300,000 common shares at $5.00, exercisable at any time until February
26, 2002, warrants to purchase 300,000 common shares at $3.25, exercisable at
any time until March 28, 2002, and warrants to purchase 150,000 common shares
at $3.25, exercisable at any time until April 24, 2002. The quoted market price
of the Company's common stock was $4.6875, $2.5625 and $1.65625 on February 26,
1997, March 27, 1997 and April 24, 1997, respectively. The Credit Facility is
due March 27, 1998, including principal and interest at the rate of 2% over
prime. The prime rate at March 31, 1997 was 8.5%. The fair value of the
warrants at date of issuance, totaling $2,156,000, was credited to additional
paid-in capital and is being charged to operations using the effective interest
method over the loan period.
5
<PAGE> 7
On May 8, 1997, the Company terminated the unimplemented portion of
the Credit Facility, replacing it with a financing arrangement through a trust
unit of The Coastal Corporation Pension Plan ("Coastal Plan") structured to
provide the Company with an aggregate of $10,000,000 of debt and equity
funding. As of May 10, 1997, the Company had borrowed $5,000,000 under the
Coastal Plan. The loan bears interest at 2% over prime and matures on March 27,
1998. In connection with the loan, the Coastal Plan received warrants to
purchase 750,000 shares of common stock at $2.00 (derived from the trailing
five day average closing bid price of the Company's Common Stock, namely
$1.975), exercisable at any time until May 7, 2002. The quoted market price of
the Company's Common Stock on May 7, 1997 was $2.3125. The $5,000,000 loan is
secured by all the outstanding shares of three of the Company's wholly-owned
subsidiaries, DNA, Intelect Visual Communications Corp. ("IVC"), and Intelect
Network Technologies Company("INT"). The remaining $5,000,000 of the Coastal
Plan financing is contemplated to consist of an issuance of preferred stock and
is subject to completion of Coastal Plan due diligence and documentation. The
preferred stock is expected to be convertible into approximately 2,480,000
shares of common stock, as may be adjusted for certain anti-dilution provisions.
Upon execution of the preferred stock portion of the Coastal Plan financing, the
$5,000,000 loan may be exchanged for additional shares of the same class of
preferred stock.
In conjunction with the implementation of the Coastal Plan and
pursuant to anti-dilution provisions governing the 750,000 warrants previously
issued under the Credit Facility, the Company agreed to reduce the exercise
price of each such warrant previously issued in connection with the Credit
Facility to $2.00 per common share to match the pricing of the warrants issued
under the Coastal Plan. The lenders under the Credit Facility and the Coastal
Plan agreed that collateral consisting of all outstanding shares of DNA, IVC and
INT would be shared in pari passu. In terminating the unimplemented portion of
the Credit Facility, the Company issued the lender thereunder warrants to
purchase an additional 50,000 shares of common stock at $2.00 exercisable at any
time until May 8, 2002. The effects of the Coastal Plan related to the
adjustment of the exercise price and the issuance of additional warrants to the
Credit Facility will be recorded in the Company's Consolidated Financial
Statements in the second quarter as of the date such events were consummated.
6
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 1997
NET REVENUES
Net revenue for the three months ended March 31, 1997 increased 142%
over the prior year period, excluding $1,501,000 of sales in 1996 of
information security products, a line of business subsequently disposed of. The
product sales increase was due to the emergence of the SONETLYNX product line,
of which $2,023,000 was sold, compared to none in the prior year. Service
revenue increased by 41% primarily due to the inclusion for the entire quarter
of the engineering services business of DNA Enterprises acquired on February
13, 1996.
GROSS PROFIT
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---------- ----------
(Thousands of US Dollars)
<S> <C> <C>
Product sales $ 159 $ (43)
Services 537 518
Contract revenue 127 (318)
----- -----
$ 823 $ 157
===== =====
</TABLE>
Gross profit increased by $666,000, or 424% from year to year. Gross
profit improvement on product sales was due to SONETLYNX products which were
delivered with a direct cost margin of 39%. 1997 gross profits on services were
reduced by the costs of increasing professional staff for the startup of new
contracts. Margins on contract revenues improved over the prior year because
progress on air traffic control switches was not burdened with the
extraordinary costs of completing the Iceland program.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling expenses increased to $2,244,000 from $732,000 in the prior
year. The expense included $1,645,000 primarily to promote sales of SONETLYNX
products including the development of a partnership program and supporting
materials to broaden distribution of the product line. In addition, $479,000
was directed toward market development for the videoconferencing product line.
G&A expenses were $2,088,000, up from $1,440,000 in the prior year's
first quarter. The expense in 1997 consisted of $890,000 corporate expense
including extraordinary professional fees and travel costs associated with the
transition of the corporate office from Bermuda to Texas, $310,000 at the
company's principal manufacturing site, $430,000 in support of the engineering
services business and $280,000 in connection with the videoconferencing
business.
ENGINEERING AND DEVELOPMENT EXPENSE (E&D)
Engineering and Development Expenses increased to $2,470,000, from
$177,000 in the prior year. Combining capitalized software development costs
with E&D expense, total spending for product development increased 63% to
$2,959,000 compared to $1,809,000 in the three months ended March 31, 1996.
7
<PAGE> 9
Of these amounts, SONETLYNX increased to $1,077,000 from $410,000, CS4 spending
continued at the same rate ($1,278,000 versus $1,222,000), S4 products
accounted for $366,000, and videoconferencing product development costs were
$283,000.
During the quarter, SONETLYNX modules were introduced for OC-3
applications. In addition, enhancements were made to achieve interoperability
with the public switched telephone network. The CS4 development focused
primarily on the service creation environment and applications technology. S4
work included the development of a lower cost universal console.
Videoconferencing developments continued LANscape and ViewBridge modifications
to previously acquired technology.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets is comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------- -------
(Thousands of US Dollars)
<S> <C> <C>
Amortization of Goodwill $332 $243
Technology Amortization 64 25
---- ----
$396 $268
==== ====
</TABLE>
Goodwill is amortized over periods of 10-15 years. Technology
amortization relates to intellectual properties purchased in 1995 and 1996.
INTEREST EXPENSE
Interest expense in 1997 includes $220,000 of cash interest on
convertible debentures issued in August and October 1996. Interest expense in
the prior year was attributable to short-term indebtedness which has been
repaid. Non-cash expenses in 1997 consisted of $582,000 allocated to beneficial
conversion features of the convertible debentures issued in 1996 and $143,000
of amortized deferred financing costs in connection with the St. James Credit
Facility executed in 1997 (see Notes to Consolidated Financial Statements).
BACKLOG
The Company's backlog of orders increased to $7,858,000 at March 31,
1997 from $3,632,000 at December 31, 1996. Substantially all the March 31, 1997
backlog was scheduled for delivery by June 30, 1997. Of this amount, $6,269,000
was for SONETLYNX product and $1,244,000 was for engineering services.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 1997, cash used in operations
($6,408,000) and by investing activities ($1,553,000) was funded by $4,430,000
of available cash balances and by securing new financing, net of repayment, of
$3,351,000. Working capital is negative due to (i) the conversion by certain
selling shareholders of DNA of their warrants into cash obligations, (ii) the
company's decision to defer payment of all the DNA purchase obligations, and
(iii) borrowing under the St. James Credit Facility which is due in one year.
8
<PAGE> 10
Operating Activities
Net cash used in operations was $6,408,000 in the three months ended
March 31, 1997, consisting primarily of operating losses. The losses were
attributable to (i) an operating cost structure which could support a higher
level of sales as indicated by approximately $700,000 of under-applied
overhead, (ii) product development expenses of $2,470,000, the majority of
which did not contribute to current period sales, (iii) sales and marketing
expenses of $2,244,000 primarily of a market development nature.
The Company maintained these levels of expenditure because (1) the
product developments were directed at markets believed to have very large
growth potential, and (2) near-term sales and production growth opportunities
appeared to justify investment to stimulate the sales and prepare for
production. The revenue increases in the first quarter met the Company's
expectations and backlog is at a level consistent with near-term growth plans.
Investing Activities
Investment spending included fixed asset expenditures of $970,000, of
which $400,000 was for software and equipment to support CS4 development,
$350,000 was for equipment to support engineering and operations growth for
SONETLYNX products, and $170,000 was for equipment and software to support
growth of the engineering services business. Software development costs for
SONETLYNX were capitalized in the amount of $489,000.
Financing Activities
A new credit facility with St. James Capital Corp. was the primary
source of financing during the quarter. Of the $5,000,000 facility available,
$3,833,000 was used. The credit facility was increased to $6,000,000 on
April 24, 1997. See Notes to Consolidated Financial Statements.
Outlook and Financial Strategy
The Company operates under a financial plan which indicates a peak
cash requirement from external sources of approximately $12,000,000 in 1997. The
Company currently has secured $11,000,000 of financing, $6,000,000 from the St.
James credit facility and $5,000,000 from the Coastal Plan, with an additional
$5,000,000 anticipated from the Coastal Plan as discussed below. See Notes to
Consolidated Financial Statements. The Company's financial plan assumes that the
$2,300,000 balance of obligations to pay former owners of DNA will be paid
during 1997 and that no payments will be made to the licensor of video
conferencing technology pursuant to a license agreement which is in dispute (see
Notes 8 and 24 to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K). In the event that working capital requirements exceed
sources, the Company has contingency plans to curtail spending on product
development and marketing activities, with priority given to spending that is
not in pursuit of near term benefits.
On May 8, 1997, the Company arranged a $10,000,000 financing made up
of debt and convertible preferred stock (the Coastal Plan). The first
$5,000,000 has been committed and funded. The balance is subject to completion
of due diligence by the lender. See Notes to Consolidated Financial Statements.
Financial plans do not anticipate any significant payments for
maturing Convertible Debentures in August or October 1998. Due to the
experience of $10,087,000 converted in 1996, $8,539,000 converted in the first
quarter of 1997, and $1,060,000 converted in April 1997, the Company expects
the debenture holders to convert the balance of $5,314,000 before maturity.
9
<PAGE> 11
A collaborative approach is being undertaken subject to March 31, 1997
with respect to the CS4 product development. The Company has begun discussions
with several major telecommunications companies regarding the possibility of
forming an alliance or partnering for the combined purposes of (a) endorsing or
branding versions of the CS4 product with a major trade name, (b) permitting
some preferred access to the product by one or more large customers, and (c)
funding a substantial portion of continuing development expenses. Any funding
from such sources would likely be accompanied by an upward revision in planned
expenses so that market entry could be accelerated. Funding by the proposed
partnering process would be in addition to traditional financing previously
discussed.
Conclusion
Considering the financing resources available and potentially
available, the outlook for cash available from customer collections, the
outlook for cash uses in operations and investing, and the options available to
reduce spending, the Company believes it has the financial resources to meet
its business requirements through the current year. There can be no assurance,
however, that the proposed financings or the business results assumed in the
financial plan will be realized.
CONTINGENT LIABILITIES
As discussed in ITEM 3, Legal Proceedings in the Company's Annual
Report on Form 10-K, the Company is exposed to certain contingent liabilities
which, if resolved adversely to the Company, would adversely affect its
liquidity, its results of operations and/or its financial position.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE LIQUIDITY AND OPERATING RESULTS
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934 as amended. Actual events and
results could differ materially from those set forth in the forward-looking
statements. In particular, the recent growth in production and sales may not be
sustained if production is interrupted by a planned facility relocation,
materials (including those supplied from sole sources) are not available, the
sales force does not identify new customers, the Company's credit condition
inhibits major customers, or new SONETLYNX and videoconferencing product
developments are delayed. The financial plan includes commitments to
significant amounts of spending for product development, sales and marketing
activity, and manufacturing capacity predicated on a high rate of sales growth
each quarter. If the rate of sales growth is not sustained, certain of the
expenses will not be sufficiently controllable in the short term to avoid a
negative cash flow impact. There can be no assurance that the currently high
level of credit quality among the Company's customers can be sustained.
Accordingly, customer collections may not achieve the assumptions of the plan.
In order to meet increasing levels of demand for manufactured products the
Company must make estimates of future orders with enough precision to insure
the availability of certain components with long lead times. Any inaccuracy in
such estimates could affect the expected operating results. In general, there
can be no assurance that component parts will be available in sufficient
quantity and on suitable credit terms to support the planned growth in
production rates. Adequacy of the financial plan is partly dependent on the
Company's ability to renegotiate payment obligations to former owners of DNA
and to renegotiate a technology license with a major computer company. There
can be no assurance that either of these assumed negotiations will be
accomplished with the cash flow consequences assumed in the plan. External
business conditions may also contribute risk to achieving the plan, especially
the rate at which telecommunications companies adopt certain new products and
the demand for engineering design services which are contingent on the
development budgets of others. Funding plans include uncertainties, namely, the
balance of the
10
<PAGE> 12
Coastal Plan may not become available, alternative external sources of
financing may not be secured in a timely manner or on terms acceptable to the
Company or at all, availability of external sources may be affected by general
market price volatility, holders of Convertible Debentures may not convert
remaining balances to equity, and/or partner funding of CS4 development may not
be secured soon enough to avoid development delays. The Company's ability to
raise funds from external sources may be restricted by adverse resolution of
legal proceedings discussed in Contingent Liabilities.
11
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. The Financial Statements and Financial Statement Schedules filed as
part of this report are listed and indexed on Page 1. Schedules other than
those listed in the index have been omitted because they are not applicable or
the required information has been included elsewhere in this report.
B. Listed below are all Exhibits filed as part of this report. Certain
Exhibits are incorporated by reference to documents previously filed by the
Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32
under the Securities Exchange Act of 1934, as amended.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.30 Promissory Note dated as of February 26, 1997 to St. James Capital Corp. from the Company(1)
10.31 Pledge Agreement dated as of February 26, 1997 between the Company and St. James Capital Corp. (1)
10.32 Warrant to Purchase Common Stock of the Company Expiring February 26, 2002(1)
10.33 Registration Rights Agreement dated February 26, 1997 between the Company and St. James Capital Corp. (1)
Amended and Restated Promissory Note dated as of February 26, 1997 to St. James Capital Corp. from the
10.34 Company(1)
First Amendment to Pledge Agreement dated as of March 27, 1997 between the Company and St. James Capital
10.35 Corp. (1)
10.36 Warrant to Purchase Common Stock of the Company Expiring March 27, 2002(1)
Amendment No. 1 to Registration Rights Agreement dated as of March 27, 1997 between the Company and St.
10.37 James Capital Corp. (1)
10.41 Lease Agreement between TCIT Dallas Industrial and Intelect Network Technologies dated February 25, 1997
10.42 Lease Agreement between Campbell Place One Joint Venture and DNA Enterprises dated February 1, 1997
11 Calculation of Earnings Per Share
Letter of Resignation of Peter Leighton as Director dated March 5, 1997, incorporated herein by
17.1 reference to the Form 8-K filed March 28, 1997(2) Letter from Peter Leighton to the Company dated March
21,1997, requesting disclosure of March 5, 1997
17.2 letter of resignation(2)
27 Financial Data Schedule
</TABLE>
(1) Incorporated herein by reference to the Form 10-K for the fiscal year ended
December 31, 1996
(2) Incorporated herein by reference to the Registrant's Form 8-K dated March
28, 1997
C. Reports on Form 8-K: The Registrant filed on March 28, 1997a report
on Form 8-K, reporting the resignation of Peter Leighton as a Director of the
Registrant.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
(Registrant)
Date: May 15, 1997 By: /s/ EDWIN J. DUCAYET, JR.
---------------------------------------
Edwin J. Ducayet, Jr.
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: May 15, 1997 By: /s/ HERMAN M. FRIETSCH
--------------------------------------
Herman M. Frietsch
Chief Executive Officer and Director
(Principal Executive Officer)
13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.30 Promissory Note dated as of February 26, 1997 to St. James Capital Corp. from the Company(1)
10.31 Pledge Agreement dated as of February 26, 1997 between the Company and St. James Capital Corp. (1)
10.32 Warrant to Purchase Common Stock of the Company Expiring February 26, 2002(1)
10.33 Registration Rights Agreement dated February 26, 1997 between the Company and St. James Capital Corp. (1)
Amended and Restated Promissory Note dated as of February 26, 1997 to St. James Capital Corp. from the
10.34 Company(1)
First Amendment to Pledge Agreement dated as of March 27, 1997 between the Company and St. James Capital
10.35 Corp. (1)
10.36 Warrant to Purchase Common Stock of the Company Expiring March 27, 2002(1)
Amendment No. 1 to Registration Rights Agreement dated as of March 27, 1997 between the Company and St.
10.37 James Capital Corp. (1)
10.41 Lease Agreement between TCIT Dallas Industrial and Intelect Network Technologies dated February 25, 1997
10.42 Lease Agreement between Campbell Place One Joint Venture and DNA Enterprises dated February 1, 1997
11 Calculation of Earnings Per Share
Letter of Resignation of Peter Leighton as Director dated March 5, 1997, incorporated herein by
17.1 reference to the Form 8-K filed March 28, 1997(2) Letter from Peter Leighton to the Company dated March
21,1997, requesting disclosure of March 5, 1997
17.2 letter of resignation(2)
27 Financial Data Schedule
</TABLE>
(1) Incorporated herein by reference to the Form 10-K for the fiscal year ended
December 31, 1996
(2) Incorporated herein by reference to the Registrant's Form
8-K dated March 28, 1997
<PAGE> 1
Exhibit 10.41
LEASE
BY AND BETWEEN
TCIT DALLAS INDUSTRIAL, INC., A DELAWARE CORPORATION
AS LANDLORD
AND
INTELECT NETWORK TECHNOLOGIES COMPANY,
A NEVADA CORPORATION
AS TENANT
<PAGE> 2
MULTI-TENANT INDUSTRIAL GROSS (BY) LEASE
REFERENCE PAGE
<TABLE>
<S> <C>
BUILDING: 1600 Distribution (1201-1299 Commerce Drive)
-------------------------------------------------------------
LANDLORD: TCIT Dallas Industrial, Inc.. a Delaware Corporation
-------------------------------------------------------------
LANDLORD'S ADDRESS: 1406 Halsev Wav, Suite 110, Carrollton. TX 75007
-------------------------------------------------------------
LEASE REFERENCE DATE: January 31, 1997
-------------------------------------------------------------
TENANT: Intelect Network Technologies Company, a Nevada Corporation
-------------------------------------------------------------
TENANTS ADDRESS:
(a) As of beginning of Term: 1225 Commerce Drive, Richardson, TX 75081
-------------------------------------------------------------
(b) Prior to beginning of Term (if different): 1100 Executive Drive. Richardson. TX 75081
-------------------------------------------------------------
PREMISES IDENTIFICATION: Suite Number 1225
-------------------------------------------------------------
(for outline of Premises see Exhibit A)
PREMISES RENTABLE AREA: approximately 28.590 sq. ft.
-------------------------------------------------------------
USE: Light manufacturing and assembly of telecommunications
equipment
-------------------------------------------------------------
SCHEDULED COMMENCEMENT DATE: April 15, 1997
-------------------------------------------------------------
TERMINATION DATE: June 30, 2002
-------------------------------------------------------------
TERM OF LEASE: five (5) years, two (2) months and fifteen (15) days beginning on the
Commencement Date and ending on the Termination Date (unless
sooner terminated pursuant to the Lease)
INITIAL ANNUAL RENT (Article 3): $ See Article 39
INITIAL MONTHLY INSTALLMENT OF $ See Article 39
ANNUAL RENT (Article 3):
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
-------------------------------------------------------------
BASE YEAR (DIRECT EXPENSES): 1997
-------------------------------------------------------------
BASE YEAR (TAXES): 1997
-------------------------------------------------------------
TENANT'S PROPORTIONATE SHARE: 24.61 %
-------------------------------------------------------------
SECURITY DEPOSIT: $ 16,081.00
-------------------------------------------------------------
ASSIGNMENT/SUBLETTING FEE: $ 1,000.00
-------------------------------------------------------------
REAL ESTATE BROKER DUE COMMISSION: Fults Companies & Mohr Partners
-------------------------------------------------------------
</TABLE>
The Reference Page information is incorporated into and made a part of the
Lease. In the event of any conflict between any Reference Page information
and the Lease, the Lease shall control. This Lease includes Exhibit A
through C, all of which are made a part of this Lease.
LANDLORD: TENANT:
TCIT Dallas Industrial, Inc., Intelect Network Technologies
a Delaware corporation Company, a Nevada corporation
By: RREEF Management Company,
a California corporation
By: By:
--------------------------------------- --------------------------
Robert W. Rice Pete Ianace
Title: District Manager Title: President
------------------------------------ -------------------------
Dated: Dated:
------------------------------------ -------------------------
<PAGE> 4
LEASE
By this Lease Landlord leases to Tenant and Tenant leases from
Landlord the Premises in the Building as set forth and described on the
Reference Page. The Reference Page, including all terms defined thereon, is
incorporated as par of this Lease.
1. USE AND RESTRICTIONS ON USE.
1.1 The Premises are to be used solely for the purposes stated on the
Reference Page. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or injure, annoy, or
disturb them or allow the Premises to be used for any improper, immoral,
unlawful, or objectionable purpose. Tenant shall not do, permit or suffer
in, on, or about the Premises the sale of any alcoholic liquor without
the written consent of Landlord first obtained, or the commission of any
waste. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises and its occupancy and
shall promptly comply with all governmental orders and directions for the
correction, prevention and abatement of any violations in or upon, or in
connection with, the Premises, all at Tenant's sole expense. Tenant shall
not do or permit anything to be done on or about the Premises or bring or
keep anything into the Premises which will in any way increase the rate
of, invalidate or prevent the procuring of any insurance protecting
against loss or damage to the Building or any of its contents by fire or
other casualty or against liability for damage to property or injury to
persons in or about the Building or any part thereof. Landlord shall
maintain the exterior of the Building (but not doorways) in compliance
with the Americans With Disabilities Act of 1990, as amended.
1.2 Tenant shall not and shall not direct, suffer or permit any of its
agents, contractors, employees, licensees or invitees to at any time
handle, use, manufacture, store or dispose of in or about the Premises or
the Building any (collectively "Hazardous Materials") flammables,
explosives, radioactive materials, hazardous wastes or materials, toxic
wastes or materials, or other similar substances, petroleum products or
derivatives or any substance subject to regulation by or under any
federal, state and local laws and ordinances relating to the protection
of the environment or the keeping, use or disposition of environmentally
hazardous materials, substances, or wastes, presently in effect or
hereafter adopted, all amendments to any of them, and all rules and
regulations issued pursuant to any of such laws or ordinances
(collectively "Environmental Laws"), nor shall Tenant suffer or permit
any Hazardous Materials to be used in any manner not fully in compliance
with all Environmental Laws, in the Premises or the Building and
appurtenant land or allow the environment to become contaminated with any
Hazardous Materials. Notwithstanding the foregoing, and subject to
Landlord's prior consent, Tenant may handle, store, use or dispose of
products containing small quantities of Hazardous Materials (such as
aerosol cans containing insecticides, toner for copiers, paints, paint
remover and the like) to the extent customary and necessary for the use
of the Premises for general office purposes; provided that Tenant shall
always handle, store, use, and dispose of any such Hazardous Materials in
a safe and lawful manner and never allow such Hazardous Materials to
contaminate the Premises, Building and appurtenant land or the
environment. Tenant shall protect, defend, indemnify and hold each and
all of the Landlord Entities (as defined in Article 30) harmless from and
against any and all loss, claims, liability or costs (including court
costs and attorney's fees) incurred by reason of any actual or asserted
failure of Tenant to fully comply with all
<PAGE> 5
applicable Environmental Laws, or the presence, handling, use or
disposition in or from the Premises of any Hazardous Materials (even
though permissible under all applicable Environmental Laws or the
provisions of this Lease), or by reason of any actual or asserted failure
of Tenant to keep, observe, or perform any provision of this Section 1.2.
2. TERM
2.1 The Term of this Lease shall begin on the date ("Commencement Date")
which shall be the Scheduled Commencement l;)ate as shown on the
Reference Page and the date that Landlord shall tender possession of the
Premises to Tenant. Landlord shall tender possession of the Premises with
all the work, if any, to be performed by Landlord pursuant to Exhibit B
to this Lease substantially completed. Tenant shall deliver a punch list
of items not completed within 30 days after Landlord tenders possession
of the Premises and Landlord agrees to proceed with due diligence to
perform its obligations regarding such items. Landlord and Tenant shall
execute a memorandum setting forth the actual Commencement Date and
Termination Date.
2.2 Tenant agrees that in the event of the inability of Landlord to
deliver possession of the Premises on the Scheduled Commencement Date,
Landlord shall not be liable for any damage resulting from such
inability, but Tenant shall not be liable for any rent until the time
when Landlord can, after notice to Tenant, deliver possession of the
Premises to Tenant. No such failure to give possession on the Scheduled
Commencement Date shall affect the other obligations of Tenant under this
Lease, except that if Landlord is unable to deliver possession of the
Premises within one hundred twenty (120) days of the Scheduled
Commencement Date (other than as a result of strikes, shortages of
materials or similar matters beyond the reasonable control of Landlord
and Tenant is notified by Landlord in writing as to such delay), Tenant
shall have the option to terminate ,this Lease unless said delay is as a
result of: (a) Tenant's failure to agree to plans and specifications; (b)
Tenant's request for materials, finishes or installations other than
Landlord's standard except those, if any, that Landlord shall have
expressly agreed to furnish without extension of time agreed by Landlord;
(c) Tenant's change in any plans or specifications; or, (d) performance
or completion by a party employed by Tenant If any delay is the result of
any of the foregoing, the Commencement Date and the payment of rent under
this Lease shall be accelerated by the number of days of such delay.
2.3 In the event Landlord shall permit Tenant to occupy the Premises
prior to the Commencement Date, such occupancy shall be subject to all the
provisions of this Lease Said early possession shall not advance the
Termination Date.
3. RENT.
3.1 Tenant agrees to pay to Landlord the Annual Rent in effect from time
to time by paying the Monthly Installment of Rent then in effect on or
before the first day of each full calendar month during the Term, except
that the first month's rent shall be paid upon the execution of this
Lease. The Monthly Installment of Rent in effect at any time shall be
one-twelfth of the Annual Rent in effect at such time. Rent for any
period during the
<PAGE> 6
Term which is less than a full month shall be a prorated portion of the
Monthly Installment of Rent based upon a thirty (30) day month. Said rent
shall be paid to Landlord, without deduction or offset and without notice
or demand, at the Landlord's address, as set forth on the Reference Page,
or to such other person or at such other place as Landlord may from time
to time designate in writing
3.2 Tenant recognizes that late payment of any rent or other sum due
under this Lease will result in | administrative expense to Landlord, the
extent of which additional expense is extremely difficult and
economically impractical to ascertain. Tenant therefore agrees that if
rent or any other sum is not paid three (3) days after it becomes due and
payable pursuant to this Lease, a late charge shall be imposed in an
amount equal to the greater of: (a) Fifty Dollars (S50.00), or (b) a sum
equal to five percent (5%) per month of the unpaid rent or other payment.
The amount of the late charge to be paid by Tenant shall be reassessed
and added to Tenant's obligation for each successive monthly period until
paid. The provisions of this Section 3.2 in no way relieve Tenant of the
obligation to pay rent or other payments on or before the date on which
they are due, nor do the terms of this Section 3.2 in any way affect
Landlord's remedies pursuant to Article 19 in the event said rent or
other payment is unpaid after date due.
4. RENT ADJUSTMENTS.
4.1 For the purpose of this Article 4. the following terms are defined
as follows:
4.1.1 Lease Year. Each calendar year falling partly or wholly within
the Term.
4.1.2 Direct Expenses: All direct costs of operation, maintenance,
repair and management of the Building (including the amount of any
credits which Landlord may grant to particular tenants of the
Building in lieu of ; providing any standard services or paying any
standard costs described in this Section 4.1.2 for similar
tenants), as determined in accordance with generally accepted
accounting principles, including the following costs by way of
illustration, but not limitation: water and sewer charges;
insurance charges of or relating to all insurance policies and
endorsements deemed by Landlord to be reasonably necessary or
desirable and relating in any manner to the protection,
preservation, or operation of the Building or any part thereof;
utility costs, including, but not limited to, the cost of heat,
light, power, steam, gas, and waste disposal; the cost of
janitorial services; the cost of security and alarm services
(including any central station signaling system); window cleaning
costs; labor costs; costs and expenses of managing the Building
including management fees; air conditioning maintenance costs;
elevator maintenance fees and supplies; material costs; equipment
costs including the cost of maintenance, repair and service
agreements and rental and leasing costs; purchase costs of
equipment other than capital items; current rental and leasing
costs of items which would be amortizable capital items if
purchased; tool costs; licenses, permits and inspection fees; wages
and salaries; employee benefits and payroll taxes; accounting ant
legal fees; any sales, use or service taxes incurred in connection
therewith. Direct Expenses shall not include depreciation or
<PAGE> 7
amortization of the Building or equipment in the Building except as
provided herein, loan principal payments, costs of alterations of
tenants' premises, leasing commissions, interest expenses on
long-term borrowings, advertising costs or management salaries for
executive personnel other than personnel located at the Building.
In addition, Landlord shall be entitled to amortize and include as
an additional rental adjustment: (i) an allocable portion of the
cost of capital improvement items which are reasonably calculated
to reduce operating expenses; (ii) fire sprinklers and suppression
systems and other life safety systems; and (iii) other capital
expenses which are required under any govenmental laws, regulations
or ordinances which were not applicable to the Building at the time
it was constructed. All such costs shall be amortized over the
reasonable life of such improvements in accordance with such
reasonable life and amortization schedules as shall be determined
by Landlord in accordance with generally accepted accounting
principles, with interest on the unamortized amount at one percent
(1%) in excess of the prime lending rate announced from time to
time as such by The Northern Trust Company of Chicago, Illinois.
4.1.2a Notwithstanding the foregoing provisions of this Article to
the contrary, Landlord agrees that major repairs or replacements to
the roof of the Building which are capitalized on Landlord's
financial books and records shall not be included within the
definition of Direct Costs.
4.1.3 Taxes: Real estate taxes and any other taxes, charges and
assessments which are levied with respect to the Building or the
land appurtenant to the Building, or with respect to any
improvements, fixtures and equipment or other property of Landlord,
real or personal, located in the Building and used in connection
with the operation of the Building and said land. any payments to
any ground lessor in reimbursement of tax payments made by such
lessor; and all fees, expenses and costs incurred by Landlord in
investigating, protesting, contesting or in any way seeking to
reduce or avoid increase in any assessments, levies or the tax rate
pertaining to any Taxes to be paid by Landlord in any Lease Year.
Taxes shall not include any corporate franchise, or estate,
inheritance or net income tax, or tax imposed upon any transfer by
Landlord of its interest in this Lease or the Building
4.2 If in any Lease Year, (i) Direct Expenses paid or incurred shall
exceed Direct Expenses paid or incurred in the Base Year (Direct Expenses)
and/or (ii) Taxes paid or incurred by Landlord in any Lease Year shall
exceed the amount of such Taxes which became due and payable in the Base
Year (Taxes), Tenant shall pay as additional for such ear Tenant's
Proportionate Share of such excess.
4.3 The annual determination of Direct Expenses shall be made by
Landlord and, if certified by a nationally recognized firm of public
accountants selected by Landlord, shall be binding upon Landlord and
Tenant. Tenant may review the books and records supporting such
determination in the office of Landlord, or Landlord's agent, during
normal business hours, upon giving Landlord five (5) days advance written
notice within sixty (60) days after receipt of such determination, but in
no event more often than once in any one year
<PAGE> 8
period. In the event that during all or any portion of any Lease
Year, the Building is not fully rented and occupied Landlord may make
any appropriate adjustment in occupancy-related Direct Expenses for
such year for the purpose of avoiding distortion of the amount of
such Direct Expenses to be attributed to Tenant by reason of
variation in total occupancy of the Building, by employing sound
accounting and management principles to determine Direct Expenses
that would have been paid or incurred by Landlord had the Building
been fully rented and occupied, and the amount so determined shall be
deemed to have been Direct Expenses for such Lease Year.
4.4 Prior to the actual determination thereof for a Lease Year, Landlord
may from time to time estimate Tenant's liability for Direct Expenses
and/or Taxes under Section 4.2, Article 6 and Article 29 for the Lease
Year or portion thereof. T Landlord will give Tenant written notification
of the amount of such estimate and Tenant agrees that it will pay, by
increase of its Monthly Installments of Rent due in such Lease Year,
additional rent in the amount of such estimate. Any such increased rate of
Monthly Installments of Rent pursuant to this Section 4.4 shall remain in
effect until further written notification to Tenant pursuant hereto.
4.5 When the above mentioned actual determination of Tenant's liability
for Direct Expenses and/or Taxes is made for any Lease Year and when
Tenant is so notified in writing, then:
4.5.1 If the total additional rent Tenant actually paid pursuant to
Section 4.3 on account of Direct Expenses and/or Taxes for the
Lease Year is less than Tenant's liability for Direct Expenses
and/or Taxes, then Tenant shall pay such deficiency to
Landlord as additional rent in one lump sum within thirty (30)
days of of Landlord's bill therefor; and
4.5.2 If the total additional rent Tenant actually paid pursuant to
Section 4.3 on account of Direct Expenses and/or Taxes for the
Lease Year is more than Tenant's liability for Direct Expenses
and/or Taxes, then Landlord shall credit the difference
against the then next due payments to be made by Tenant under
this Article 4. Tenant shall not be entitled to a credit by
reason of actual Direct Expenses and/or Taxes in any Lease
Year being less than Direct Expenses and/or Taxes in the Base
Year (Direct Expenses and/or Taxes).
4.6 If the Commencement Date is other than January 1 or if the
Termination Date is other than December 31, Tenant's liability for Direct
Expenses and Taxes for the Lease Year in which said Date occurs shall be
prorated based upon a three hundred sixty-five (365) day year.
5. SECURlTY DEPOSIT.
Tenant shall deposit the Security Deposit with Landlord upon the execution of
this Lease. Said sum shall be held by Landlord as security for the faithful
performance by Tenant of all the terms,
<PAGE> 9
covenants and conditions of this Lease to be kept and performed by Tenant and
not as an advance rental deposit or as a measure of Landlord's damage in case of
Tenant's default. If Tenant defaults with respect to any provision of this
Lease, Landlord may use any part of the Security Deposit for the payment of any
rent or any other sum in default, or for the payment of any amount which
Landlord may spend or become obligated to spend by reason of Tenant's default,
or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant's default. If any portion is so used, Tenant shall within
five (5) days after written demand therefor, deposit with Landlord an amount
sufficient to restore the Security Deposit to its original amount and Tenant's
failure to do so shall be a material breach of this Lease. Except to such
extent, if any, as shall be required by law, Landlord shall not be required to
keep the Security Deposit separate from its general funds, and Tenant shall not
be entitled to interest on such deposit. The Security Deposit or any balance
thereof shall be returned to Tenant at such time after termination of this Lease
when Landlord shall have determined that all of Tenant's obligations under this
Lease have been fulfilled.
6. ALTERATIONS
6.1 Except for those, if any, specifically provided for in Exhibit B to
this Lease, Tenant shall not make or suffer to be made any alterations,
additions, or improvements, including, but not limited to, the attachment
of any fixtures or equipment in, on, or to the Premises or any part
thereof or the making of any such improvements as required by Article 7,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. When applying for such consent, Tenant shall, if
requested by Landlord, furnish complete plans and specifications for such
alterations, additions and improvements.
6.2 In the event Landlord consents to the making of any such alteration,
addition or improvement by Tenant, the same shall be made using Tenant's
contractor, subject to approval by Landlord, at Tenant's sole cost and
expense. If Tenant shall employ any Contractor other than Landlord's
contractor and such other Contractor or any subcontractor of such other
Contractor shall employ any non-union labor or supplier, Tenant shall be
responsible for any and all delays, damages and extra costs suffered by
Landlord as a result of any dispute with any labor unions concerning the
wage, hours, terms or conditions of the employment of any such labor. In
any event Landlord may charge Tenant a reasonable charge to cover its
overhead as it related to such proposed work.
6.3 All alterations, additions or improvements proposed by Tenant shall be
constructed in accordance with all governmental laws, ordinances, rules
and regulations and Tenant shall, prior to construction, provide the
additional insurance required under Article 11 in such case, and also all
such assurances to Landlord, including but not limited to, waivers of
lien, surety company performance bonds and personal guaranties of
individuals of substance as Landlord shall require to assure payment of
the costs thereof and to protect Landlord and the Building and appurtenant
land against any loss from any mechanic's, materialmen's or other liens.
Tenant shall pay in addition to any sums due to pursuant to Article 4, any
increase in real estate taxes attributable to any such alteration,
addition or improvement for so long, during the Term as such increase is
ascertainable; at Landlord's election said sums shall be paid in the same
way as sums due under Article 4.
6.4 All alterations, additions, and improvements in, on, or to the
Premises made or installed by Tenant, including carpeting, shall be and
remain the property of Tenant during the Term but,
<PAGE> 10
excepting furniture, furnishings, movable partitions of less than full
height from the floor to ceiling and other trade fixtures shall become a
part of the realty and belong to Landlord without compensation to Tenant
upon the expiration or sooner termination of the Term, at which time title
shall pass to Landlord under this Lease as by a bill of sale, unless
Landlord elects otherwise. Upon such election by Landlord, Tenant shall
upon demand by Landlord, at Tenant's sole cost and expense, forthwith and
with all due diligence remove any such alterations, additions or
improvements which are designated by Landlord to be removed (other than
demising walls which Tenant will not be required to move), and Tenant
shall forthwith and with all due diligence, as its sole cost and expense,
repair and restore the Premises to their original condition, reasonable
wear and tear and damage by fire or other casualty expected.
7. REPAIR
7.1 Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises, except as specified in Exhibit B if
attached to this Lease and expect that Landlord shall repair and maintain
the structural portions of the roof, walls and foundation of the Building.
By taking possession of the Premises, Tenant accepts them as being in good
order, condition and repair and in the condition in which Landlord is
obligated to deliver them. It is hereby understood and agreed that no
representations respecting the condition of the Premises or the building
have been made by landlord to Tenant, except as specifically set forth in
this Lease. Landlord shall not be liable for any failure to make any
repairs or to perform any maintenance unless such failure shall persist
for an unreasonable time after written notice of the need of such repairs
or maintenance is give to Landlord by Tenant.
7.2 Tenant shall at its own cost and expense keep and maintain all parts
of the Premises and such portion of the Building and improvements as are
within the exclusive control of the Tenant in good condition, promptly
making all necessary repairs and replacements, whether ordinary or
extraordinary, with materials and workmanship of the same character, kind
and quality as the original (including, but not limited to, repair and
replacement of all fixtures installed by Tenant, water heaters serving the
Premises, windows, glass and plate glass, doors, exterior stairs,
skylights, and special office entries, interior walls and finish work,
floors and floor coverings, heating and air conditioning systems serving
the Premises, electrical systems and fixtures, sprinkler systems, dock
boards, truck doors, dock bumpers, plumbing work and fixtures, and
performance of regular removal of trash and debris). Tenant as part of its
obligations hereunder shall keep the Premises in a clean and sanitary
condition. Tenant will, as far as possible keep all such parts of the
Premises from deterioration due to ordinary war and from falling
temporarily out of repair, and upon termination of this Lease in any way
Tenant will yield up the Premises to Landlord in good condition and
repair, loss by fire or other casualty expected (but not excepting any
damage to glass). Tenant shall, at its own cost and expense, repair any
damage to the Premises or the Building resulting from and/or caused in
whole or in part by the negligence or misconduct of Tenant, its agents,
employees, invitees, or any other persons entering upon the Premises as a
result of Tenant's business activities or caused by Tenant's default
hereunder.
7.3 Except as provided in Article 22, 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 improvements in or to any portion of the Building or the
<PAGE> 11
Premises or to fixtures, appurtenances and equipment in the Building.
Except to the extent, if any, prohibited by law, Tenant waives the right
to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect.
7.4 Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance
contractor approved by Landlord for servicing all heating and air
conditioning systems and equipment serving the Premises (and a copy
thereof shall be furnished to Landlord). The service contract must include
all services suggested by the equipment manufacturer in the
operation/maintenance manual and must become effective within thirty (30)
days of the date Tenant takes possession of the Premises. Landlord may,
upon notice to Tenant, enter into such a maintenance/ service contract on
behalf of Tenant or perform the work and in either case, charge Tenant the
cost thereof along with a reasonable amount for Landlord's overhead.
7.4a Notwithstanding the foregoing provisions of this Article, Tenant may
use its own qualified resources or purchased maintenance services for the
heating and air conditioning systems, provided that such resources or
services are at least equal to those suggested by the equipment
manufacturers. Finally, Landlord agrees that the heating and air
conditioning system to be provided pursuant to Article 40 below
will exclusively service the Premises.
8. LIENS.
Tenant shall keep the Premises, the Building and appurtenant land and Tenant's
leasehold interest in the Premises free from any liens arising out of any
services, work or materials performed, furnished, or contracted by tenant, or
obligations incurred by Tenant. In the event that Tenant shall not, within
thirty (30) days following the imposition of any such lien, either cause the
same to be released of record or provide T Landlord with insurance against the
same issued by a major title insurance company or such other protection against
the same as Landlord shall accept, Landlord shall have the right to cause the
same to be released by such means as it shall deem proper, including payment of
the claim giving rise to such lien. All such sums paid by Landlord and all
expenses incurred by it in connection therewith shall be considered additional
rent and shall be payable to it by Tenant on demand.
9. ASSIGNENT AND SUBLETTING.
9.1 Tenant shall not have the right to assign or pledge this Lease or to
sublet the whole or any part of the Premises whether voluntarily or by
operation of law, or permit the use or occupancy of the Premises by anyone
other than Tenant, and shall not make, suffer or permit such assignment,
subleasing or occupancy, without the prior written consent of Landlord,
and said restrictions shall be binding upon any and all assignees of the
Lease and subtenants of the Premises. In the event Tenant desires to
sublet, or permit such occupancy of, the Premises, or any portion thereof,
or assign this Lease, Tenant shall give written notice thereof to Landlord
at least ninety (90) days but no more than one hundred eighty (180) days
prior to the proposed commencement date of such subletting or assignment,
which notice shall set forth the name of the proposed subtenant or
<PAGE> 12
assignee, the relevant terms of any sublease or assignment and copies of
financial reports and other relevant financial reports and other relevant
financial information of the proposed subtenant or assignee.
9.2 Notwithstanding any assignment or subletting, permitted or otherwise,
Tenant shall at all times remain directly, primarily and fully responsible
and liable for the payment of the rent specified in this Lease and for
compliance with all of its other obligations under the terms, provisions
and covenants of this Lease. Upon the occurrence of an Event of Default,
if the Premises or any part of them are then assigned or sublet, Landlord,
in addition to any other remedies provided in this Lease or provided by
law, may, at its option, collect directly from such assignee or subtenant
all rents due and becoming due to Tenant under such assignment or sublease
and apply such rent against any sums due to Landlord from Tenant under
this Lease, and no such collection shall be construed to constitute a
novation or release of Tenant from the further performance of Tenant's
obligations under this Lease.
9.3 In addition to Landlord's right to approve of any subtenant or
assignee, Landlord shall have the option, in its sole discretion, in the
event of any proposed subletting or assignment, to terminate this Lease,
or in the case of a proposed subletting of less than the entire Premises,
to recapture the portion of the Premises to be sublet, as of the date the
subletting or assignment is to be effective. The option shall be
exercised, if at all, by Landlord giving Tenant written notice given by
Landlord to Tenant within sixty (60) days following Landlord's receipt of
Tenant's written notice as required above. If this Lease shall be
terminated with respect to the entire Premises pursuant to this Section,
the Term of this Lease shall end on the date stated in Tenant's notice as
the effective date of the sublease or assignment as if that date had been
originally fixed in this lease for the expiration of the Term. If Landlord
recaptures under this Section only a portion of the Premises, the rent to
be paid from time to time during the unexpired Term shall abate
proportionately based on the proportion by which the approximate square
footage of the remaining portion of the Premises shall be less than that
of the Premises as of the date immediately prior to such recapture.
9.4 In the event that Tenant sells, sublets, assigns or transfers this
Lease, Tenant shall pay to Landlord as additional rent an amount equal to
one hundred percent (100%) of any Increased Rent (as defined below) when
and as such Increased Rent is received by Tenant. As used in this Section,
"Increased Rent" shall mean the excess of (i) all rent and other
consideration which Tenant is entitled to receive by reason of any sale,
sublease, assignment or other transfer of this Lease, over (ii) the rent
otherwise payable by Tenant under this Lease at such time. For purposes of
the foregoing, any consideration received by Tenant in form other than
cash shall be valued at its fair market value as determined by Landlord in
good faith.
9.5 Notwithstanding any other provision hereof, Tenant shall have no
right to make (and Landlord shall have the absolute right to refuse
consent to) any assignment of this Lease or
<PAGE> 13
sublease of any portion of the Premises if at the time of either Tenant's
notice of the proposed assignment or sublease or the proposed commencement
date thereof, there shall exist any uncured default of Tenant or matter
which will become a default of Tenant with passage of time unless cured,
or if the proposed assignee or subleasee is an entity: (a) with which
Landlord is already in negotiation as evidenced by the issuance of a
written proposal; (b) is already an occupant of the Building unless
Landlord is unable to provide the amount of space required by such
occupant; (c) is a governmental agency; (d) is incompatible with the
character of occupancy of the Building; or (e) would subject the Premises
to a use which would: (i) involve increased personnel or wear upon the
Building; (ii) violate any exclusive right granted to another tenant of
the Building; (iii) require any addition to or modification of the
Premises or the Building in order to comply with building code or other
governmental requirements; or, (iv) involve a violation of Section 1.2.
Tenant expressly agrees that Landlord shall have the absolute right to
refuse consent to any such assignment or sublease and that for the
purposes of any statutory or other requirement of reasonableness on the
part of Landlord such refusal shall be reasonable.
9.6 Upon any request to assign or sublet, Tenant will pay to Landlord the
Assignment/Subletting Fee plus, on demand, a sum equal to all of
Landlord's costs, including attorney's fees, incurred in investigating and
considering any proposed or purported assignment or pledge of this Lease
or sublease of any of the Premises (not to exceed $1,000, i.e., in
addition to the Assignment/Subletting fee) regardless of whether Landlord
shall consent to, refuse consent, or determine that Landlord's consent is
not required for, such assignment, pledge or sublease. Any purported sale,
assignment, mortgage, transfer of this Lease or subletting which does not
comply with the provisions of this Article 9 shall be void.
9.7 If Tenant is a corporation, partnership or trust, any transfer or
transfers of or change or changes within any twelve month period in the
number of the outstanding voting shares of the corporation, the general
partnership interests in the partnership or the identity of the persons or
entities controlling the activities of such partnership or trust resulting
in the persons or entities owning or controlling a majority of such
shares, partnership interests or activities of such partnership or trust
at the beginning of such period no longer having such ownership or control
shall be regarded as equivalent to an assignment of this Lease to the
persons or entities acquiring such ownership or control and shall be
subject to all the provisions of this Article 9 to the same extent and for
all intents and purposes as though such an assignment.
10. INDEMNIFICATION:
None of the Landlord Entities shall be liable and Tenant hereby waives all
claims against them for any damage to any property or any injury to any person
in or about the Premises or the Building by
<PAGE> 14
or from any cause whatsoever (including without limiting the foregoing, rain or
water leakage of any charactcr from the roof, windows, walls, basement, pipes,
plumbing works or appliances, the Building not being in good condition or
repair, gas, fire, oil, electricity or theft), except to the extent caused by or
arising from the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors. Tcnant shall protect, indemnify and hold the
Landlord Entities harmless from and against any and all loss, claims, liability
or costs (including court costs and attorney's fees) incurred by reason of (a)
any damage to any property (including but not limited to property of any
Landlord Entity) or any injury (including but not limited to death) to any
person occurring in, on or about the Premises or the Building to the extent that
such injury or damage shall be caused by or arisc from any actual or alleged
act, neglect, fault, or omission by or of Tenant, its agents, servants,
employees, invitees, or visitors to meet any standards imposed by any duty with
respect to the injury or damage; (b) the conduct or management of any work or
thing whatsoevcr done by the Tenant in or about the Premises or from
transactions of the Tcnant concerning the Premiscs; (c) Tenant's failure to
comply with any and all governmental laws, ordinanscs and regulations applicable
to the condition or use of the Premises or its occupancy; or (d) any breach or
default on the part of Tenant in the perforrnancc of any covenant or agrecment
on the part of the Tenant to be performed pursuant to this Lease. The provisions
of this Article shall survive the tcrmination of this Lease with respect to any
claims or liability accruing prior to such termination.
11. INSURANCE.
11.1 Tenant shall keep h force throughout the Term: (a) a Commercial
General Liability Insurance policy or policies to protect the Landlord
Entities against any liability to the public or to any invitee of Tenant
or a Landlord Entity incidental to the use of or resulting from any
accident occumng in or upon the Premises with a limit of not less than
$1,000,000.00 per occurrence and not less than S2,000,000.00 in the annual
aggregate, or such larger amount as Landlord may prudently require from
time to time, covering bodily injury and property damage liability and
S1,000,000 products/completed operations aggregate; (b) Business Auto
Liability covering owned, non-owned and hired vehicles with a limit of not
less than S1,000,000 per accident; (c) insurance protecting against
liability under Worker's Compensation Laws with limits at least as
required by statute; (d) Employers Liability with limits of S500,000 each
accident, S500,000 disease policy limit, S500,000 disease-each employee,
(e) All Risk or Special Form coverage protecting Tenant against loss of or
damage to Tenant's alteratdons, addidons, improvements, carpeting, floor
coverings, panelings, decorations, fixtures, inventory and other business
personal property situated in or about the Premises to the full
replacement value of the property so insured
11.2 Each of the aforesaid policies shall (a) be provided at Tenant's
expense; (b) name the Landlord and the building mangement company, if any,
as additional insureds; (c) be
<PAGE> 15
issued by an insuranse company with a minimum Best's rating of "A:VII"
during the Term; and (d) provide that said insurance shall not be canceled
unless thirty (30) days prior written notice (ten days for non-payment of
premium) shall have been given to Landlord; and said policy or policies or
certificates thereof shall be delivered to Landlord by Tenant upon the
Commencement Date and at least thirty (30) days prior to each renewal of
said insurance.
11.3 Whenever Tenant shall undertake any alterations, additions or
improvements in, to or about the Prernises ("Work") the aforcsaid
insurance protcction must extend to and include injuries to persons and
damage to property arising in connection with such Work, without
limitation including liability under any applicable structural work act,
and such other insurance as Landlord shall require; and the policies of or
certificates evidencing such insurance must be delivered to Landlord prior
to the commenencement of any such Work.
12. WAIVER OF SUBROGATION.
So long as their respective insurers so permit, Tenant and Landlord hereby
mutually waive their respective rights of recovery against each other for any
loss insured by fire, extended coverage, All Risks or other insurance now or
hereafter existing for the benefit of the respective party but only to the
extent of the net insuranse proceeds payable under such policies. Each party
shall obtain any special endorsements required by their insurer to evidence
compliance with the aforementioned waiver.
13. SERVICES AND UI L1TIES.
Tenant shall pay for all water, gas, heat, light, power, telephone, sewer,
sprinkler system charges and other utilities and services used on or from the
Premises, together with any taxes, penalties, and surcharges or the like
pertaining thereto and any maintenance charges for utilities. Tenant shall
furnish all electric light bulbs, tubes and ballasts, battery packs for
emergency lighting and fire extinguishers. If any such services are not
separately metered to Tenant, Tenant shall pay such proportion of all charges
jointly metered with other premises as determined by Landlord, in its sole
discretion, to be reasonable. Any such charges paid by Landlord and assessed
against Tenant shall be immediately payable to Landlord on demand and shall be
additional rent hereunder. Landlord shall in no event be liable for any
interruption or failure of utility services on or to the Premises.
14. HOLDING OVER.
Tenant shall pay Landlord for each day Tenant retains possession of the
Premises or part of them after termination of this Lease by lapse of time or
otherwise at the rate ("Holdover Rate") which shall be one-hundred twenty five
percent (125%) of the amount of the Annual Rent for the last period prior to
the date of such terminadon plus all Rent Adjustments under Article 4; prorated
<PAGE> 16
on a daily basis, and also pay all damages sustained by Landlord by reason of
such retention. If Landlord gives notice to Tenant of Landlord's election to
that effect, such holding over shall constitute renewal of this Lease for a
period from month to month or one year; whichever shall be specified in such
notice, in either case at the Holdover Rate, but if the Landlord does not so
elect, no such renewal shall result notwithstanding acotptance by Landlord of
any sums due hereunder after such termination; and instead, a tenancy at
sufferanse at the Holdover Rate shall be deemed to have been created. In any
event, no provision of this Article 14 shall be deemed to waive Landlord's
right of reentry or any other right under this Lease or at law.
15. SUBORDINATION.
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be subject and
subordinate at all times to ground or underlying leases and to the lien of any
mortgages or deeds of trust now or hereafter placed on, against or affecting
the Building, Landlord's interest or estate in the Building, or any ground or
underlying lease; provided, however, that if the lessor, mortgagee, trustee, or
holder of any such mortgage or deed of trust elects to have Tenant's interest
in this Lease be superior to any such instrument, then, by notice to Tenant,
this Lease shall be deemed superior, whether this Lease was executed before or
after said instrument. Notwithstanding the foregoing, Tenant covenants and
agrees to execute and deliver upon demand such further instrurnents evidencing
such subordination or superiority of this Lease as may be required by Landlord.
16. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with all the rules and regulations
as set forth in Exhibit C to this Lease and all reasonable modifications of and
additions to them from time to time put into effect by Landlord with notice to
Tenant. Landlord shall not be responsible to Tenant for the non-performance by
any other tenant or occupant of the Building of any such rules and regulations.
17. REENTRY BY LANDLORD.
17.1 Landlord reserves and shall at all times during normal business
hours and with prior notice except in the case of an emergency have the
right to re-enter the Premises to inspect the same, to show said Premises
to prospective purchasers, mortgagees or tenants, and to alter, improve or
repair the Premises and any portion of the Building, without abatement of
rent, and may for that purpose erect, use and maintain scaffolding, pipes,
conduits and other necessary structures and open any wall, ceiling or
floor in and through the Building and Premises where reasonably required
by the character of the work to be performed, provided entrance to the
Premises shall not be blocked thereby, and further provided that the
business of Tenant shall not be interfered with unreasonably.
17.2 Landlord shall have the right at any time to change the arrangement
and/or location of entrances, or passageways, doors and doorways, and
corridors, windows, elevators, stairs, toilets in any portions of the
Building which do not include the Premises, or other public parts of the
Building and to change the name, number or designation by which the
<PAGE> 17
Building is commonly known. In the event that Landlord damages any portion
of any wall or wall covering, ceiling, or floor or floor covering within
the Premises, Landlord shall repair or replace the damaged portion to
match the original as nearly as commercially reasonable but shall not be
required to repair or replace more than the portion actually damaged.
17.3 Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Prernises, and any other loss
occasioned by any action of Landlord authorized by this Article 17. Tenant
agrees to reimburse Landlord, on demand, as additional rent, for any
expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease.
17.4 For each of the aforesaid puxposes, Landlord shall at all times have
and retain a key with which to unlock all of the doors in the Premises,
excluding Tenant's vaults and safes or special security areas (designated
in advance), and Landlord shall have the right to use any and all means
which Landlord may deem proper to open said doors in an emergency to
obtain entry to any portion of the Premises.
18. DEFAULT.
18.1 Except as otherwise provided in Article 20, the following events
shall be deemed to be Events of Default under this Lease:
18.1.1 Tenant shall fail to pay when due any sum of money becoming
due to be-paid to Landlord under this T ease, whether such sum be any
initallment of the rent reserved by this Lease, any other amount
treated as additional rent under this Lease, or any other payment or
reimbursement to Landlord required by this Lease, whether or not
treated as additional rent under this Lease, and such failure shall
continue for a period of five days after written notice that such
payment was five made when due, but if any such notice shall be
given, for the twelve month period commencing with the date of such
notice, the failure to pay within five days after due any additional
sum of money becoming due to be paid to Landlord under this Lease
during such period shall be an Event of Default, without notice.
18.1.2 Tenant shall fail to comply with any term, provision or
covenant of this Lease which is not provided for in another Section
of this Article and shall not cure such failure within thirty (30)
days (forthwith, if the failure involves a hazardous condition) after
written notice of such failure to Tenant.
18.1.3 Tenant shall fail to vacate the Premises immediately upon
termination of this Lease, by lapse of time or otherwise, or
upon termination of Tenant's right to possession only.
18.1.4 Tenant shall become insolvent, admit in writing its inability
to pay its debts
<PAGE> 18
generally as they become due, file a petition in bankruptcy or a
petition to take advantage of any insolvency statute, make an
assignment for the benefit of creditors, make a transfer in fraud of
creditors, apply for or consent to the appointment of a receiver of
itself or of the whole or any substantial part of its property, or
file a petition or answer seeking reorganization or arrangement under
the federal bankruptcy laws, as now in effect or hereafter amended,
or any other applicable law or statute of the United States or any
state thereof.
18.1.5 A court of competent jurisdiction shall enter an order,
judgment or decree adjudicating Tenant bankrupt, or appointing a
receiver of Tenant, or of the whole or any substantial part of its
property, without the consent of Tenant, or approving a petition
filed against Tenant seeking reorganization or arrangement of Tenant
under the bankruptcy laws of the United States, as now in effect or
hereafter amended, or any state thereof, and such order, judgment or
decree shall not be vacated or set aside or stayed within thirty (30)
days from the date of entry thereof.
19. REMEDIES.
9.1 Except as otherwise provided in Article 20, upon the occurrence of
any of the Events of Default described or referred to in Article 18,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever, concurrently or
consecutively and not alternatively:
19.1.1 Landlord may, at its election, terminate this Lease or
terminate Tenant's right to possession only, without terminating the
Lease.
19.1.2 Upon any termination of this Lease, whether by lapse of time
or otherwise, or upon any termination of Tenant's right to possession
without termination of the Lease, Tenant shall surrender possession
and vacate the Premises immediately, and deliver possession thereof
to Landlord, and Tenant hereby grants to Landlord full and free
license to enter into and upon the Premises in such event and to
repossess Landlord of the Premises as of Landlord's former estate and
to expel or remove Tenant and any others who may be occupying or be
within the Premises and to remove Tenant's signs and other evidence
of tenancy and all other property of Tenant therefrom without being
deemed in any manner guilty of trespass, eviction or forcible entry
or detained, and without incurring any liability for any damage
resulting therefrom, Tenant waiving any right to claim damages for
such re-entry and expulsion, and without relinquishing Landlord's
right to rent or any other right given to Landlord under this Lease
or by operation of law.
19.1.3 Upon any termination of this Lease, whether by lapse of time
or otherwise, Landlord shall be entitled to recover as damages, all
rent, including any amounts treated as additional rent under this
Lease, and other sums due and payable by Tenant on the date of
termination, plus as liquidated damages and not as a penalty,
<PAGE> 19
an amount equal to the sum of: (a) an amount equal to the then
present value of the rent reserved in this Lease for the residue of
the stated Term of this Lease including any amounts treated as
additional rent under this Lease and all other sums provided in this
Lease to be paid by Tenant, minus the fair rental value of the
Premises for such residue; (b) the value of the time and expense
necessary to obtain a replacement tenant or tenants, and the
estimated expenses described in Section 19.1.4 relating to recovery
of the Premises, preparation for reletting and for reletting itself;
and (c) the cost of performing any other covenants uld have
otherwise been performed by Tenant.
19.1.4 Upon any termination of Tenant's right to possession only without
termination of the Lease:
19.1.4.1 Neither such termination of Tenant's right to possession
nor Landlord's taking and holding possession thereof as provided in
Section 19.1.2 shall terminate the Lease or release Tenant, in whole
or in part, from any obligation, including Tenant's obligation to pay
the rent, including any amounts treated as additional rent, under
this Lease for the full Term, and if Landlord so elects Tenant shall
pay forthwith to Landlord the sum equal to the entire amount of the
rent, including any amounts treated as additional rent under this
Lease, for the remainder of the Term plus any other sums provided in
this Lease to be paid by Tenant for the remainder of the Term.
19.1.4.2 Landlord may, but need not, relet the Premises or any part
thereof for such rent and upon such terms as Landlord, in its sole
discretion, shall determined (including the right to relet the
premises for a greater or lesser term than that remaining under this
Lease, the right to relet the Premises as a part of a larger area,
and the right to change the character or use made of the Premises).
In connection with or in preparation for any reletting, Landlord may,
but shall not be required to, make repairs, alterations and additions
in or to the Premises and redecorate the same to the extent Landlord
deems necessary or desirable, and Tenant shall, upon demand, pay the
cost thereof, together with Landlord's expenses of reletting,
including, without limitation, any commission incurred by Landlord.
If Landlord decides to relet the Premises or a duty to relet is
imposed upon Landlord by law, Landlord and Tenant agree that
nevertheless Landlord shall at most be required to use only the same
efforts Landlord then uses of lease premises in the Building
generally and that in any case that Landlord shall not be required to
give any preference or priority to the showing or leasing of the
Prerniscs over any other space that Landlord may be leasing or have
available and may place a suitable prospective tenant in any such
other space regardless of when such other spar; becomes available.
Landlord shall not be required to observc any instruction given by
Tenant about any reletting or accept any tenant offered by Tenant
unless such offered tenant has a credit-worthiness acceptable to
Landlord and leascs the entire Premises upon terms and conditions
including a rate of rent (after giving effect to all expenditures by
Landlord for tenant
<PAGE> 20
improvements, broker's commissions and other leasing costs) all no
less favorable to Landlord than as called for in this Lease, nor
shall Landlord be required to make or permit any assignmcnt or
sublcase for more than the current term or which Landlord would not
be required to permit under the provisions of Article 9.
19.1.4.3 Until such time as Landlord shall elect to terrninate the
Lease and shall thercupon be entitled to recover the amounts
specified in such case in Section 19.13, Tenant shall pay to Landlord
upon demand the full amount of all rent, including any arnounts
treated as additional rent under this Lease and other sums reserved
in this Lcase for the remaining Term, together with the costs of
repairs, alterations, additions, redecorating and Landlord's expenses
of reletting and the collection of the rent accruing therefrom
(including attorney's fees and broker's commissions), as the same
shall then be due or become due from time to time, less only such
consideration as Landlord may have received from any reletting of the
Premises; and Tenant agrees that Landlord may file suits from time to
time to recover any sums falling due under this Article 19 as they
become due. Any proceeds of reletting by Landlord in excess of the
amount then owed by Tenant to Landlord from time to time shall be
credited against Tenant's future-obligations under this Lcase but
shall not otherwise be refunded to Tenant or inure to Tenant's
benefit.
19.2 Landlord may, at Landlord's option, enter into and upon the Premises
if Landlord determine on its reasonable discretion that Tenant is not
acting within a commercially reasonable time to maintain, repair or
replace anything for which Tenant is responsible under this Lease and
correct the same, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without incurring any
liability for any damage or interruption of Tenant's business resulting
therefrom. If Tenant shall have vacated the Premises, Landlord may at
Landlord's option re-enter the Premises a. any time during the last six
months of the then current Term of this Lease and make any and all such
changes, alterations, revisions, additions and tenant and other
improvemcnts in or about the Premises as Landlord shall elect, all without
any abatement of any of the rent otherwise to be paid by Tenant under this
Lease.
19.3 If, on account of any breach or default by Tcnant in Tenant's
obligations under the terms and conditions of this Lease, it shall become
necessary or appropriate for Landlord to employ or consult with an
attorney concerning or to enforece or defend any of Landlord's rights or
remedics arising under this Lcase, Tenant agrees to pay all reasonable
attorney's fees so incurred. Tenant expressly waives any right to: (a)
trial by jury; and (b) service of any notice required by any present or
futurc law or ordinance applicable to landlords or tenants but not
required by the tcrms of this Lease.
19.4 Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies provided in this Lcasc or any other
remedies provided by law (all such
<PAGE> 21
remedies being cumulative), nor shall pursuit of any remedy provided in
this Lcase constitute a forfeiturc or waiver of any rcnt due to Landlord
under this Leasc or of any damages accruing to Landlord by reason of the
violation of any of the terms, provisions and covenants contained in this
Lease.
195 No act or thing donc by Landlord or its agents during the Term shall be
deemcd a termination of this Lcase or an acceptance of the surrender of the
Premises, and no agreemcnt to tcrminate this Lease or accept a surrcnder of said
Premises shall be valid, unless in writing signed by Landlord. No waiver by
Landlord of any violation or breach of any of the tcrms, provisions and
covenants contained in this Lcase shall be deemed or construed to constitute a
waiver of any other violation or breach of any of the terms, provisions and
covenants contained in this Lease. Landlord's acceptance of the paymcnt of
rcntal or other payments aftcr the occurrcnce of an Event of Dcfault shall not
be construed as a waiver of such Default, unless Landlord so notifies Tenant in
writing. Forbearance by Landlord in enforcing one or more of the remedies
provided in this Lease upon an Event of Default shall not be deemed or construed
to constitute a waiver of such Default or of Landlord's right to enforce any
such remedies with respect to such Default or any subsequent Default.
19.6 To secure the payment of all rentals and other sums of money
becoming due from Tenant under this Lease, Landlord shall have and Tenant
grants to Landlord a first lien upon the leasehold interest of Tenant
under this Lease, which lien may be enforced in equity, and a continuing
security interest upon all goods, wares, equipment, fixture, furniture,
inventory, accounts, contract rights, chattel paper and other personal
property of Tenant situated on the Premiscs, and such property shall not
be removed therefrom without the consent of Landlord until all arrearages
in rent as well as any and all other sums of money then due to Landlord
under this Lease shall first have been paid and discharged. In the event
of a Default under this Lease, Landlord shall have, in addition to any
other remedies provided in this Lease or by law, all rights and remedies
under the Uniform Commercial Code, including without limitation the right
to sell the property described in this Section 19.6 at public or private
sale upon five (5) days' notice to Tenant. Tenant shall execute all such
financing statements and other instruments as shall be deemed necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created.
19.6 A Notwithstanding the foregoing provisions of this Article to the
contrary, Landlord agrees that it will subordinate its security interest
and landlord's lien to the security interest of Tenant's institutional
financial source, provided that such subordination must be limited to a
specified transaction and specified items of fixtures, equipment or
inventory involved in the transaction.
19.7 If and all property which may be removed from the Premises by
Landlord pursuant to the authority of this r; Ace or of '_w, to which
Tenant is or may be entitled, may be handled, removed and/or stored, as
the case may be, by or at the direction of Landlord but at the risk,
<PAGE> 22
cost and expense of Tenant, and Landlord shall in no event be responsible
for the value, preservation or safekeeping thereof. Tenant shall pay to
Landlord, upon demand, any and all expenses incurred in such removal and
all storage charges against such property so long as the same shall be in
Landlord's possession or under Landlord's control. Any such property of
Tenant not retaken by Tenant from storage within thirty (30) days after
removal from the Premises shall, at Landlord's option, be deemed conveyed
by Tenant to Landlord under this Lease as by a bill of sale without
further payment or credit by Landlord to Tenant.
20. TENANTS BANKCRUPTCY OR lNSOLVENCY.
20.1 If at any time and for so long as Tenant shall be subjected to the
provisions of the United States Bankruptcy Code or other law of the United
States or any state thereof for the protection of debtors as in effect at
'such tirne (each a "Debtor's Law"):
20.1.1 Tenant, Tenant as debtor-in-possession, and any trustee or
receiver of Tenant's assets (each a "Tenant's Representative") shall
have no greater right to assume or assign this Lease or any interest
in this Lease, or to sublease any of the Premises than accorded to
Tenant in Article 9, except to the extent Landlord shall be required
to permit such assumption, assignment or sublease by the provisions
of such Debtor's Law. Without limitation of the generality of the
foregoing, any right of any Tenant's Representative to assume or
assign this Lease or to sublease any of the Premiscs shall be subject
to the conditions that:
20.1.1.1 Such Debtor's Law shall provide to Tenant's
Representative a right of assumption of this Lease which
Tenant's Representative shall have timely exercised and Tenant's
Representative shall have fully cured any default of Tenant
under this Lease.
20.1.1.2 Tenant's Representative or the proposed assignee, as
the case shall be, shall have deposited with Landlord as
security for the timely payment of rent an amount equal to the
larger of: (a) three months' rent and other monetary charges
accruing under this Lease; and (b) any sum specified in Article
5; and shall have provided Landlord with adequate other
assurance of the future performance of the obligations of the
Tenant under this Lease>ce. Without limitation, such assurances
shall include, at least, in the case of assumption of this
Lease,; demonstration to the satisfaction of the Landlord that
Tenant's Representative has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations
and administrative expenses to assure Landlord that Tenant's
Representative will have sufficient funds to fulfill the
obligations of Tenant under this Lease; and, in the case of
assignment, submission of current financial statements of the
proposed assignee, audited by an independent certified public
accountant reasonably acceptable to Landlord and showing a net
worth and working capital in amounts determined by Landlord to
be sufficient to assure the future
<PAGE> 23
performance by such assignee of all of the Tenant's obligations
under this Lease.
20.1.1.3 The assumption or any contemplated assignment of this
Lease or subleasing any part of the Premises. as shall be the
case, will not breach any provision in any other lease,
mortgage, financing agreement or other agreement by which
Landlord is bound.
20.1.1A - Landlord shall have, or would have had absent the
Debtor's Law, no right under Article 9 to refuse consent to the
proposed assignment or sublease by reason of the identity or
nature of the proposed assignee or subleassee or the proposed
use of the Premises concerned.
21. QUET ENJOYMENT.
Landlord represents and warrants that it has full right and authority to enter
into this Lease and that Tenant, while paying the rental and performing its
other covenants and agreements contained in this Lease, shall peaceably and
quietly have, hold and enjoy the Premises for the Term without hindrance or
molestation from Landlord subject to the terms and provisions of this Lease.
Landlord shall not be liable for any interference or disturbance by other
tenants or third persons, nor shall Tenant be released from any of the
obligations of this Lease because of such interference or disturbance.
22. DAMAGE BY FIRE, ETC.
22.1 In the event the Premises or the Building are damaged by fire or
other cause and in Landlord's 5 reasonable estimation such damage can be
materially restored within one hundred eighty (180) days, Landlord shall
forthwith repair the same and this Lease shall remain in full force and
effect, except that Tenant shall be entitled to a proportionate abatement
in rent from the date of such darnage. Such abaternent of rent shall be
made pro rata in accordance with the extent to which the damage and the
making of such repairs shall interfere with the use and occupancy by
Tenant of the Premise from time to time. Within forty-five (45) days from
the date of such damage, Landlord shall notify Tenant, in writing, of
Landlord's reasonable estimation of the length of time within which
material restoration can be made, and Landlord's determination shall be
binding on Tenant. For purposcs of this Lease, the Building or Prernises
.shall be deemed "materially restored" if they are in such condition as
would not prevent or materially interfere with Tenant's use of the
Prernises for the purpose for which it was being used immediately before
such damage.
22.2 If such repairs cannot, in Landlord's reasonable estimation, be made
within two hundred fifty (250) days, Landlord and Tenant shall each have
the option of giving the other, at any time within sixty (60) days after
such damage, notice terminating this Lease as of the date of such damage.
In the event of the giving of such notice, this Lease shall expire and all
interest of the Tenant in the Premises shall terminate as of the date of
such damage as
<PAGE> 24
if such date had been originally fixed in this Lease for the expiration of
the Term. In the event that neither Landlord nor Tenant exercises its
option to terminate this Lease, then Landlord shall repair or restore such
damage, this Lease continuing in full force and effect, and the rent
hereunder shall be proportionately abated as provided in Section 22.1.
22.3 Landlord shall not be required to repair or replace any damage or
loss by or from fire or other cause to any panelings, decorations,
partitions, additions, railings, ccilings, floor coverings, office
fixtures or any other property or improvernents installed on the Premises
or belonging to Tenant. Any insurance which may be carried by Landlord or
Tenant against loss or damage to the Building or Prernises shall be for
the sole benefit of the party carrying such insurance and under its sole
control.
22.4 In the event that Landlord should fail to complete such repairs and
material rcstoration within sixty (60) days after the date ectimated by
Landlord therefor as extended by this Section 22.4, Tenant may at its
option and as its sole remedy terminate this Lease by delivering written
notice to Landlord, within fifteen (15) days after the expiration of said
period of time, whereupon the Lease shall end on the date of such notice
or such later date fixed in such notice as if the date of such notice was
the date originally fixed in this Lease for the expiration of the Term;
provided, however, that if construction is delayel because of changes,
deletions or additions in construction requested by Tenant, strikes,
lockouts, casualties, Acts of God, war, material or labor shortages,
government regulation or control or other causes beyond the reasonable
control of Landlord, the period for restoration, repair or rebuilding
shall be extended for the amount of time Landlord is so delayed.
22.5 Notwithstanding anything to the contrary contained in this Article:
(a) Landlord shall not have any l obligation whatsoever to repair,
reconstruct, or restore the Premises when the damages resulting from any
casualty covered by the provisions of this Article 22 occur during the
last twelve (12) months of the Term or any extension thereof, but if
Landlord determines not to repair such damages Landlord shall notify
Tenant within fourty-five (45) days of the damages and if such damages
shall render any material portion of the Premises untenantable Tenant
shall have the right to terminate this Lease by notice to Landlord within
fifteen (15) days after receipt of Landlord's notice effective as of the
date of the casualty; and (b) in the event the of any indebtedness secured
by a mortgage or deed of trust covering the Premises or Building requires
that any insurance proceeds be applied to such indebtedness, then Landlord
shall have the right to terminate this Lease by delivering written notice
of termination to Tenant within fifteen (15) days after such requirernent
is made by any such holder, whereupon this Lease shall end on the date of
such damage as if the date of such damage were the date originally fixed
in this Lease for the expiration of the Term.
22.6 In the event of any damage or destruction to the Building or
Premises by any peril covered by the provisions of this Article 22, it
shall be Tenant's responsibility to properly secure the Premises and upon
notice from Landlord to remove forthwith, at its sole cost and expense,
<PAGE> 25
such portion of all of the property belonging to Tenant or its licensees
from such portion or all of the Buildirg or Premises as Landlord shall
request.
23. EMINENT DOMAIN.
If all or any substantial part of the Premises shall be taken or appropriated
by any public or quasi-public authority under the power of eminent domain, or
conveyance in lieu of such appropriation, either party to this Lease shall have
the right, at its option, of giving the other, at any time within thirty (30)
days after such taking, notice terminating this Lease, except that Tenant may
only terminate this Lease by reason of taking or appropriation, if such taking
or appropriation shall be so substantial as to materially interfere with
Tenant's use and occupancy of the Premises. If neither party to this Lcase
shall so elect to terminate this Lease, the rental thereafter to be paid shall
be adjusted on a fair and equitable basis under the circumstances. In addition
to the rights of Landlord above, if any substantial part of the Building shall
be taken or appropriated by any public or quasi-public authority under the
power of eminent domain or conveyance in lieu thereof, and regardless of
whether the Prernises or any part thereof are so taken or appropriated,
Landlord shall have the right, at its sole option, to termination this Lease.
Landlord shall be entitled to any and all income, rent. award, or any interest
whatsoever in or upon any such sum, which may be paid or made in connection
with any such public or quasi-public use or purpose, and Tcnant hereby assigns
to
Landlord any interest it may have in or claim to all or any part of such sums,
other than any separate award which may be made with respect to Tenant's trade
fixtures and moving expenses; Tenant shall make no claim for the value of any
unexpired Term.
24. SALE BY LANDLORD.
In event of a sale or conveyance by Landlord of the Building, the same shall
operate to release Landlord from any future liability upon any of the covenants
or conditions, expressed or implied, contained in this Lease in favor of
Tenant, and in such event Tenant agrees to look solely to the responsibility of
the successor in interest of Landlord in and to this Lease. Except as set forth
in this Article 24, this Lease shall not be affected by any such sale and
Tenant agrees to attorn to the purchaser or assignee. If any security has been
given by Tenant to secure the faithful performance of any of the covenants of
this Lease, Landlord may transfer or deliver said security, as such, to
Landlord's successor in interest and thereupon Landlord shall be discharged
from any further liability with regard to said security.
25. ESTOPPEL CERTIFICATES.
Within ten (10) days following any written request which Landlord may make from
time to time, Tenant shall execute and deliver to Landlord or mortgagee or
prospective mortgagee a sworn statement certifying: (a) the date of
commencement of this Lease; (b) the fact that this Lease is unmodified and in
full force and effect (or, if there have been modifications to this Lease, that
this Lease is in full force and effect, as modified, and stating the date and
nature of such modifications); (c) the date to which the rent and other sums
payable under this Lease have been
<PAGE> 26
paid; (d) the fact that there are no current defaults under this Lease by either
Landlord or Tenant except as specified in Tenant's statement; and (e) such other
matters as may be requested ~, Landlord. Landlord and Tenant intend that any
statement delivered pursuant to this Article 25 may be relied upon by any
mortgagee, beneficiary or purchaser and Tenant shall be liable for all loss,
cost or expense resulting from the failure of any sale or funding of any loan
caused by any material misstatement contained in such estoppel certificate.
Tenant irrevocably agrees that if Tenant fails to execute and deliver such
certificate within such ten (10) day period Landlord or Landlord's beneficiary
or agent may execute and deliver such certificate on Tenant's behalf, and that
such certificate shall be fully binding on Tenant.
26. SURRENDER OF PREMISES.
26.1 Tenant shall, at least thirty (30) days before the last day of the
Term, arrange to meet Landlord for a joint inspection of the Premises. In
the event of Tenant's failure to arrange such joint inspection to be held
prior to vacating the Premises, Landlord's inspection at or after Tenant's
vacating the Premises shall be conclusively deemed correct for purposes of
determining Tenant's responsibility for repairs and restoration.
26.2 At the end of the Term or any renewal of the Term or other sooner
tcrmination of this Lease, Tenant will peaceably deliver up to Landlord
possession of the Premises, together with all improvements or additions
upon or belonging to the same, by whomsoever rnade, in the same conditions
received or first installed, broom clean and free of all debris, excepting
only ordinary wear and tear and damage by fire or other casualty. Tenant
may, and at Landlord's request shall, at Tenant's sole cost, remove upon
termination of this Lcase, any and all furniture, furnishings, movable
partitions of less than full height from floor to ceiling, trade fixtures
and other property installed by Tenant, title to which shall not be in or
pass automatically to Landlord upon such termination, repairing all damage
caused by such removal. Property not so rcmoved shall, unless requested to
be removed, bc deemed abandoned by the Tenant and title to the same shall
thereupon pass to Landlord under this Lcase as by a bill of sale. All
other alterations, additions and improvements h, on or to the Premises
shall be dealt with and disposed of as provided in Article 6.
26.3 All obligations of Tenant under this Lcase not fully performed as of
the expiration or earlier tcrmination of the Terrn shall survive the
expiration or earlier terrnination of the Term. In the event that Tenant's
failure to perform prevents Landlord from releasing the Premiscs, Tenant
shall continue to pay rent pursuant to the provisions of Article 14 until
such performance is complete. Upon the expiration or earlier termination
of the Term, Tenant shall pay to Landlord the amount, as estimated by
Landlord, necessary to repair and restore the Premises as provided in this
Lease and/or to discharge Tenant's obligation for unpaid amounts due or to
become due to Landlord. All such amounts shall bc uscd and held by
Landlord for paymcnt of such obligations of Tenant, with Tenant being
liable for any additional costs upon demand by Landlord, or with any
excess to be rcturned to Tenant after all such obligations havc been
determined and satisficd. Any otherwise unused Security Deposit shall be
credited against the amount payable by Tcnant under this Lease.
<PAGE> 27
27. NOTICES.
Any notice or documcnt required or perrnitted to be delivered under this Lcase
shall be addressed to the intended recipicnt, shall be transmitted personally,
by fully prepaid registered or certified United States Mail return receipt
requested, or by reputable independent contract delivery servicc furnishing a
written record of attempted or actual delivery, and shall be deemed to be
delivered when tendered for delivery to the addressee at its address set forth
on the Reference Page, or at such other address as it has then last specified
by written notice delivered in accordance with this Article 27, or if to Tenant
at either its aforesaid address or its last known registered office or home of
a general partner or individual owner, whether or not actually accepted or
received by the addressee.
28. TAXES PAYABLE BY TENANT.
In addition to rent and other charges to be paid by Tenant under this Lease,
Tenant shall reimburse to Landlord, upon demand, any and all taxes payable by
Landlord (other than net income taxes) whether or not now customary or within
the contemplation of the parties to this Lease: (a) upon, allocable to, or
measured by or on the gross or net rent payable under this Lease, including
without limitation any gross income tax or excise tax levied by the State, any
political subdivision thereof, or the Federal Government with respect to the
receipt of such rent; (b) upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy of the
Premises or any portion thereof, including any sales, use or service tax
imposed as a result thereof; (c) upon or measured by the Tenant's gross
receipts or payroll or the value of Tenant's equipment, furniture, fixtures and
other personal property of Tenant or leasehold improvements, alterations or
additions located in the Premises; or (d) upon this transaction or any document
to which Tenant is a party creating or transferring any interest of Tenant in
this Lease or the Premises. In addition to the foregoing, Tenant agrees to pay,
before delinquency, any and all taxes levied or assessed against Tenant and
which become payable during the term hereof upon Tenant's equipment, furniture,
fixtures and other personal property of tenant located in the Premises.
29. DEF1NED TERMS AND HEADINGS.
The Article headings shown in this Lease are for convenience of reference and
shall in no way define, increase, limit or describe the scope or intent of any
provision of this Lease. Any indemnification or insurance of Landlord shall
apply to and inure to the benefit of all the following "Landlord Entities",
being Landlord, Landlord's investment manager, and the trustees, boards of
directors, officers, general partners, beneficiaries, stocHholders, employees
and agents of each of them. Any option granted to Landlord shall also include
or be exercisable by Landlord's trustee, beneficiary, agents and employees, as
the case may be. In any case where this Lease is signed by more than one
person, the obligations under this Lease shall be joint and several. The terms
"Tenant" and "Landlord" or any pronoun used in place thereof shall indicate and
include the masculinc or femininc, the singular or plural number, individuals,
firms or corporations, and each of their respective successors, executors,
administrators and permitted assigns, according to the context hereof. The term
"rentable area" shall mean the rentable area of the Premises or the Building as
calculated by the Landlord on the basis of the plans and
<PAGE> 28
specifications of the Building including a proportionate share of any common
areas. Tenant hereby accepts and agrees to be bound by the figures for the
rentable space footage of the Premises and Tenant's Proportionate Share shown on
the Reference Page.
30. TENANTS AUTHORITY.
If Tenant signs as a corporation each of the persons executing this Lease on
behalf of Tenant represents and warrants that Tenant has been and is qualified
to do business in the state in which the Building is located, that the
corporation has full right and authority to enter into this Lease, and that all
persons signing on behalf of the corporation were authorized to do so by
appropriate corporate actions. If Tenant signs as a partnership, trust or other
legal entity, each of the persons executing this Lease on behalf of Tenant
represents and warrants that Tenant has complied with all applicable laws,
rules and governmental regulations relative to its right to do business in the
state and that such entity on behalf of the Tenant was authorized to do so by
any and all appropriate partnership, trust or other actions. Tenant agrees to
furnish promptly upon request a corporate resolution, proof of due
authorization by partners, or other appropriate documentation evidencing the
due authorization of Tenant to enter into this Lease.
31. COMMISSIONS.
Each of the parties represents and warrants to the other that it has not dealt
with any broker or finder in connection with this Lease, except as described on
the Reference Page.
32. TIME AND APPLICABLE LAW.
Time is of the essence of this Lease and all of its provisions. This Lease
shall in all respects be governed by the laws of the state in which the Building
is located.
33. SUCCESSORS AND ASSIGNS.
Subject to the provisions of Article 9, the terms, covenants and conditions
contained in this Lease shall be binding upon and inure to the benefit of the
heirs, successors, executors, administrators and assigns of the parties to this
Lease.
34. ENTIRE AGREEMENT.
This Lease, together with its exhibits, contains all agreernents of t},e
parties to this Lease and supersedes any previous negotiations. There have been
no representations rnade by the Landlord or understandings rnade between the
parties other than those set forth in this Lease and its exhibits. This Lease
may not be modified except by a written instrument duly executed by the parties
to this Lease.
<PAGE> 29
35. EXAMINATION NOT OPTION.
Submission of this Lease shall not be deemed to be a reservation of the
Premises. Landlord shall not be bound by this Lease until it has received a
copy of this Lease duly executed by Tenant and has delivered to Tenant a copy
of this Lease duly executed by Landlord, and until such delivery Landlord
reserves the right to exhibit and lease the Premises to other prospective
tenants. Notwithstanding anything contained in this Lease to the contrary,
Landlord may withhold delivery of possession of the Premises from Tenant until
such time as Tenant has paid to Landlord any security deposit required by
Article 5, the first month's rent as set forth in Article 3 and any sum owed
pursuant to this Lease.
36. RECORDATION.
Tenant shall not record or register this Lease or a short form memorandum
hereof without the prior written consent of Landlord, and then shall pay all
charges and taxes incident such recordirig or registration.
37. LIMITATION OF LANDLORD'S LIABILITYY.
Redress for any claim against Landlord under this Lease shall be limited to and
enforceable only against and to the extent of Landlord's interest in the
Building. The obligations of Landlord under Ws Lease are not intended to and
shall not be personally binding on, nor shall any resort be had to the private
properties of, any of its trustees or board of directors and officers, as the
case may be, its investment manager, the general partners thereof, or any
beneficiaries, stockholders, employees, or agents of Landlord or the investment
manager.
38. ANNUAL RENT AND MONTHLY INSTALLMENT OF ANNUAL RENT.
<TABLE>
Annual Rent Monthly Installment of Annual Rent
----------- ----------------------------------
<S> <C> <C>
4/15/97 - 5/31/97 $ 0.00 $0.00
6/1/97 - 4/30-99 $192,982,50 $16,081.88
5/1/99 - 4/30/00 $200,130.00 $16,677.50
5/1/00 - 6/30/02 $207,277.50 $17,273.13
</TABLE>
39. HVAC.
Notwithstanding anything to the contrary set forth in this Lease, Landlord
covenants that the heating and air conditioning systems within the Premises
will be in good condition and repair on the Commencement Date of this Lease.
From and after the Commencement Date, Tenant shall be solely responsible for
maintenance of the heating and air conditioning systems pursuant to Article 7.2
of this Lease. Landlord and Tenant shall mutually agree upon which portions of
the heating and air conditioning systems within the Premises will be utilized
by Tenant, and those and only those portions of the system will be brought into
compliance and maintained pursuant to this Article 40. Said systems to be
outlined and agreed to in a separate document.
<PAGE> 30
40. COMMENCEMENT DATE.
40.1 The term of this Lease and Tenant's obligations to make monthly
rental installments shall commence on April 15, 1997 (the "Commencement
Date'). Notwithstanding the foregoing, Landlord agrees that Tenant will be
entitled to one and one-half months of free rent under this Lease, so that
the first rental installment shall be due and payable by Tenant on June I,
1997.
40.2 Landlord agrees that Tenant may occupy the Premises prior to the
Commencement Date for the purposes of performing the construction
contemplated by this Lease and to conduct business operations to the
extent such construction is completed prior to the Commencement Date;
however, Tenant agrees that during such period all of the requirements
under the Lease (other than the payment of rentals) shall be applicable,
including, without limitation, the indemnity and insurance requirements
set forth in Articles 10 and 11, respectively.
LANDLORD: TENANT:
TCIT Dallas Industrial, Inc., Intelect Network Technologies Company,
a Delaware corporation a Nevada corporation
By: RREEF Management Company,
a California corporation
By: By:
---------------------------------- ---------------------------------
Robert W. Rice Pete Ianace
Title: District Manager Title: President
------------------------------- -----------------------------
Dated: Dated:
------------------------------ -----------------------------
<PAGE> 1
EXHIBIT 10.42
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 Parties. This lease agreement ("Lease") is entered into by and between
the following Lessor and Lessee:
CAMPBELL PLACE ONE JOINT VENTURE ("Lessor")
DNA ENTERPRISES, INC. ("Lessee")
1.02 Leased Premises. In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("leased premises"):
20,679 (Approximate square feet)
CAMPBELL PLACE (Name of building or project)
1240 E. CAMPBELL ROAD (Street address/suite number)
RICHARDSON, TX. 75081 (City, State, and Zip Code)
1.03 Term. Subject to and upon the conditions set forth herein, the term of
this Lease shall commence on ( FEBRUARY 1, 1997 the "commencement date") (the
"completion date", which Lessor shall use its best efforts to establish as
FEBRUARY 1, 1997 ), and shall terminate 84 months thereafter.
1.04 Base Rent and Security Deposit. Base rent is $ 16,371.00 per month.
Security deposit is $ 16,371.00 .
1.05 Addresses.
Lessor's Address: Lessee's Address
CAMPBELL PLACE ONE JOINT VENTURE DNA ENTERPRISES, INC.
P.O. BOX 795245 1240 E. CAMPBELL ROAD
DALLAS, TX. 75379 RICHARDSON, TX. 75081
<PAGE> 2
1.06 Permitted Use. GENERAL OFFICE AND STORAGE FOR TELECOMMUNICATIONS;
HARDWARE AND SOFTWARE TECHNOLOGY, SYSTEM ARCHITECTURE, AND SIGNAL PROCESSING
AND ANY OTHER GENERAL OFFICE AND STORAGE USE PERMISSIBLE BY LAW.
ARTICLE 2.00 RENT
2.01 Base Rent. Lessee agrees to pay monthly as base rent during the term of
this Lease the sum of money set forth in section 1.04 of this Lease which
amount shall be payable to Lessor at the address shown above or to such other
party or address as Lessor may from time to time designate. One monthly
installment of rent shall be due and payable on the date of execution of this
Lease by Lessee for the first month's rent and a like monthly installment shall
be due and payable on or before the first day of each calendar month succeeding
the commencement date or completion date during the term of this Lease;
provided, if the commencement date or the completion date should be a date
other than the first day of a calendar month, the monthly rental set forth
above shall be prorated to the end of that calendar month, and all succeeding
installments of rent shall be payable on or before the first day of each
succeeding calendar month during the term of this Lease. Lessee shall pay, as
additional rent, all other sums due under this Lease.
<PAGE> 3
2.02 Operating Expenses. In the event Lessor's operating expenses for the
building and/or project of which the leased premises are a part shall, in any
calendar year during the term of this Lease, exceed the sum of 1997 BASE YEAR
per square foot, Lessee agrees to pay as additional rent Lessee's pro rata
share of such excess operating expenses. However, notwithstanding any
provision to the contrary in this Lease, Lessee's prorata share of such
operating expenses other than taxes, insurance and utilities shall not increase
by more than seven percent (7%) per year over the base year during the term of
the Lease or any renewal thereof. Lessor may invoice Lessee monthly for
Lessee's pro rata share of the estimated operating expenses for each calendar
year, which amount shall be adjusted each year based upon anticipated operating
expenses. Within three months following the close of each calendar year,
Lessor shall provide Lessee an accounting showing in reasonable detail all
computations of additional rent due under this section. In the event the
accounting show that the total of the monthly payments made by Lessee exceeds
the amount of additional rent due by Lessee under this section, the accounting
shall be accompanied by a refund. In the event the accounting shows that the
total of the monthly payments made by Lessee is less than the amount of
additional rent due by Lessee under this section, the account shall be
accompanied by an invoice for the additional rent. Notwithstanding any other
provision in this Lease, during the year in which the Lease terminates, Lessor,
prior to the termination date, shall have the option to invoice Lessee for
Lessee's pro rata share of the excess operating expenses based upon the
previous year's operating expenses. If this Lease shall terminate on a day
other than the last day of a calendar year, the amount of any additional rent
payable by Lessee applicable to the year in which such termination shall occur
shall be prorated on the ratio that the number of days from the commencement of
the calendar year to and including their termination date bears to 365. Lessee
shall have the right at its own expense and during normal business hours, to
audit and photocopy Lessor's books relevant to the additional rent payable
under this section. Lessee agrees to pay any additional rent due under this
section within ten days following receipt of the invoice or accounting showing
additional rent due.
2.03 Definition of Operating Expenses. The term "operating expenses" includes
all expenses incurred by Lessor with respect to the maintenance and operation
of the building of which the leased premises are a part, including, but not
limited to, the following: maintenance, repair and replacement costs;
security; management fees, wages and benefits payable to employees of Lessor
whose duties are directly connected with the operation and maintenance of the
building; all services, utilities, supplies, repairs, replacements, or other
expenses for maintaining and operating the common parking and plaza areas; the
cost, including interest, amortized over its useful life, of
<PAGE> 4
any capital improvement made to the building by Lessor after the date of this
Lease which is required under any governmental law or regulation that was not
applicable to the building at the time it was constructed; the cost, including
interest, amortized over its useful life, of installation of any device or other
equipment which improves the operating efficiency of any system within the
leased premises and thereby reduces operating expenses; all other expenses which
would generally be regarded as operating and maintenance expenses which would
reasonably be amortized over a period not to exceed five years; all real
property taxes and installments of special assessments, including dues and
assessments by means of deed restrictions and/or owners' associations which
accrue against the building of which the leased premises are a part during
the term of this Lease; and all insurance premiums Lessor is required to pay or
deems necessary to pay, including public liability insurance, with respect to
the building. The term operating expenses does not include the following:
repairs, restoration or other work occasioned by fire, wind, the elements or
other casualty; income and franchise taxes of Lessor; expenses incurred in
leasing to or procuring of lessees, leasing commissions, advertising expenses
and expenses for the renovating of space for new lessees; interest or principal
payments on any mortgage or other indebtedness of Lessor; compensation paid to
any employee of Lessor above the grade of property manager; any depreciation
allowance or expense; or operating expenses assumed hereunder by Lessee.
2.04 Late Payment Charge. Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor on or
before the tenth day of the month for which the rent is due, or if any other
payment due Lessor by Lessee is not received by Lessor on or before the tenth
day of the month next following the month in which Lessee was invoiced, a late
payment charge of ten percent of such past due amount shall become due and
payable in addition to such amounts owed under this Lease.
2.05 Increase in Insurance Premiums. If an increase in any insurance premiums
paid by Lessor for the building is caused by Lessee's use of the leased
premises in a manner other than as set forth in section 1.06, or if Lessee
vacates the leased premises and causes an increase in such premiums, then
Lessee shall pay as additional rent the amount of such increase to Lessor.
2.06 Security Deposit. The security deposit set forth above shall be held by
Lessor for the performance of Lessee's covenants and obligations under this
Lease, it being expressly understood that the deposit shall not be considered
an advance payment of
<PAGE> 5
rental or a measure of Lessor's damage in case of default by Lessee. Upon the
occurrence of any event of default by Lessee or breach by Lessee of Lessee's
covenants under this Lease, Lessor may, from time to time, without prejudice to
any other remedy, use the security deposit to the extent necessary to make good
any arrears of rent, or to repair any damage or injury, or pay any expense or
liability incurred by Lessor as a result of the event of default or breach of
covenant, and any remaining balance of the security deposit shall be returned by
Lessor to Lessee upon termination of this Lease. If any portion of the security
deposit is so used or applied, Lessee shall upon ten days written notice from
Lessor, deposit with Lessor by cash or cashier's check an amount sufficient to
restore the security deposit to its original amount. Lessor shall not be
required to keep the security deposit separate from its other accounts and no
trust relationship is created with respect to the security deposit. No interest
shall be paid on the security deposit. Provided Lessee is not then in default,
the security deposit held by Lessor, if any, will be applied to the
thirty-sixth (36th) month of the lease term.
2.07 Holding Over. Lessee shall vacate the leased premises upon the
expiration of the Lease Term or earlier termination of this Lease. Lessee shall
reimburse Lessor for and indemnify Lessor against all reasonable damages
incurred by Lessor as a result of any delay by Lessee in vacating the leased
premises. If Lessee does not vacate the leased premises upon the expiration of
the Lease Term or earlier termination of the Lease, Lessee's occupancy of the
leased premises shall be a "month to month" tenancy, subject to all the terms of
Lease applicable to a month to month tenancy, except that Lessee shall pay
Lessor as Base Rent for the period of such holdover an amount equal to one and
one half times the Base Rent which would have been payable by Lessee had the
holdover period been a part of the original term of this Lease. No holding over
by Lessee, whether with or without the consent of Lessor shall operate to extend
the term of this Lease.
2.08 Good Funds Payments. If, for any reason whatsoever, any two or more
payments by check from Lessee to Lessor for rent are dishonored and returned
unpaid, thereafter, Lessor may, at Lessor's sole option, upon written notice to
Lessee, require that all future payments of rent for the remaining term of the
Lease shall be made by cash, cashier's check, or money order and that the
delivery of Lessee's personal or corporate check will no longer constitute
payment of rent as provided in this Lease. Any acceptance by Lessor of a
payment for rent by Lessee's personal check thereafter shall not be construed
as a waiver of Lessor's right to insist upon payment by good funds as set forth
in this section 2.08. Furthermore, if three consecutive monthly rental
payments or any five monthly rental payments during the
<PAGE> 6
Lease Term (or any renewal or extension thereof) are not received by Lessor on
or before the tenth day of the month for which such rent was due, the Base Rent
hereunder shall automatically become due and payable by Lessee in advance in
quarterly installments equal to three months' Base Rent each. The first of such
quarterly Base Rent payments shall be due an payable on the first day of the
next succeeding calendar month and on the first day of every third calendar
month thereafter. This remedy shall be cumulative of any other remedies of
Lessor under this Lease for non payment of Rent.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 Use. Lessee warrants and represent to Lessor that the leased premises
shall be used and occupied only for the purpose as set forth in section 1.06.
Lessee shall occupy the leased premises, conduct its business and control its
agents, employees, invitees and visitors in such a manner as is lawful,
reputable and will not create a nuisance. Lessee shall not permit any
operation which emits any odor or matter which intrudes into other portions of
the building, use any apparatus or machine which makes undue noise or causes
vibration in any portion of the building or otherwise interfere with, annoy or
disturb any other lessee in its normal business operations or Lessor in its
management of the building. Lessee shall neither permit any waste on leased
premises nor allow the leased premises to be used in any way which would, in
the reasonable opinion of Lessor, be extra hazardous on account of fire or
which would in any way increase or render void the fire insurance on the
building. If at any time during the term of this Lease the State Board of
Insurance or other insurance authority disallows any of Lessor's sprinkler
credits or imposes an additional penalty or surcharge in Lessor's insurance
premiums because of Lessee's original or subsequent placement or use of storage
racks or bins, method of storage or nature of Lessee's inventory
or any other act of Lessee, Lessee agrees to pay as additional rent the
increase (between fire walls) in Lessor's insurance premiums.
3.02 Signs. (A) Lessee shall not, without Lessor's prior written consent (a)
make any changes to or paint the store front; or (b) install any exterior
lighting, decorations or paintings; or (c) erect or install any signs, window
or door lettering, placards, decorations or advertising media of any type which
can be viewed from the exterior of the Demised Premises. All signs,
decorations and advertising media shall conform in all material respects to the
sign criteria established by Lessor for the Building from time to time in the
exercise of its sole discretion, and shall be subject to the prior
<PAGE> 7
written approval of Lessor as to construction, method of attachment, size,
shape, height, color and general appearance, which approval shall not be
unreasonably withheld or delayed. All signs shall be kept in good condition at
all times. Lessor reserves the right to designate a uniform type of sign for the
Building to be installed and paid for by Lessee. Notwithstanding this provision
or any provision to the contrary contained in this paragraph or elsewhere in
this Lease, (i) all signs installed by Lessee may be the maximum size permitted
by local law or ordinance, (ii) any changes to the sign initially approved by
Lessor and that Lessor may require thereafter shall be at Lessor's expense and
shall not require that Lessee sign be smaller than the maximum size permitted by
local law or ordinance.
(B) Lessee agrees to have erected and/or installed within sixty (60) days
of the Commencement Date of this Lease all signs in accordance with Lessor's
sign criteria. The Lessee, upon vacation of the Demised Premises, or the
removal or alteration of its sign for any reason, shall be responsible for the
repair, painting, and/or replacement of the building fascia surface where signs
are attached.
3.03 Compliance with Laws, Rules, and Regulations. Lessee, at Lessee's sole
cost and expense, shall comply with all laws, ordinances, orders, rules, and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction over use, condition and occupancy of the leased premises.
Notwithstanding this provision or any provision to the contrary contained in
this paragraph or elsewhere in this Lease, Lessee shall not be responsible for
modifying the exterior of the premises to comply with the American with
Disabilities Act of 1990 ("ADA"). Lessee will comply with the rules and
regulations of the building adopted by Lessor which are set forth on a schedule
attached to this Lease. Lessor shall have the right at all times to change and
amend the rules and regulations in any reasonable manner as may be deemed
advisable for the safety, care, cleanliness, preservation of good order and
operation or use of the building or the leased premises but not in
contravention of Lessor's agreements under this Lease. All changes and
amendments to the rules and regulations of the building will be sent by Lessor
to Lessee in writing and shall thereafter be carried out and observed by
Lessee.
3.04 Warranty of Peaceful Possession. Lessor warrants that it has the right
and authority to execute this Lease, and Lessee, upon payment of the required
rents and subject to the terms, conditions, covenants and agreements contained
in this Lease, shall have peaceful possession of the leased premises during the
full term of this Lease as well as any extension
or renewal thereof. Lessor shall not be responsible for the acts or omissions
of any other lessee that may interfere with Lessee's use and enjoyment of the
leased premises.
<PAGE> 8
3.05 Inspection. Lessor or its authorized agents shall with prior notice,
except in the case of an emergency, have the right to enter the leased premises
to inspect the same while accompanied by a representative of the Lessee, to
supply janitorial service or any other service to be provided by Lessor, to
show the leased premises to prospective purchasers or lessees during the last
one hundred eighty (180) days of the term of the Lease or any renewal term, and
to alter, improve or repair the leased premises or any other portion of the
building. Lessee hereby waives any claim for damages for injury or
inconvenience to or interference with Lessee's business, any loss of occupancy
or use of the leased premises, and any other loss occasioned thereby. Lessor
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the leased premises. Lessee shall not change Lessor's lock
system without providing to Lessor a key or in any other manner prohibit Lessor
from entering the leased premises. Lessor shall have the right to use any and
all means which Lessor may deem proper to open any door in an emergency without
liability therefor.
3.06 Exemptions from Liability. Except for Lessor's gross negligence or
wilful misconduct, Lessor shall not be liable for any damage or injury to the
person, business (or any loss of income therefrom), goods, wares, merchandise
or other property of Lessee, Lessee's employees, invitees, customers or any
other person in or about the leased premises, whether such damage or injury is
caused by results from: (a) fire, steam, electricity, water, gas or rain; (b)
the breakage, leakage, obstruction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures or any other
cause; (c) conditions arising on or about the leased premises or upon other
portions of any building of which the leased premises is a part, or from other
sources or places; or (d) any act or omission of any other tenant of any
building of which the leased premises is a part. Lessor shall not be liable
for any such damage or injury even though the cause of or the means of
repairing such damage or injury are not accessible to Lessee. Notwithstanding
Lessor's negligence or breach of this Lease, Lessor shall under no
circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 Building Services. Lessor shall provide the normal utility service
connections to the building. Lessee shall pay the cost of all utility
services, including, but not limited
<PAGE> 9
to, initial connection charges, all charges for gas, electricity, water,
sanitary and storm sewer service, and for all electric lights. However, in a
multi-occupancy building, Lessor may provide water to the leased premises, in
which case Lessee agrees to pay to Lessor its pro rate share of the actual cost
of such water. Lessee shall pay all costs caused by Lessee introducing
excessive pollutants or solids other than ordinary human waste into the sanitary
sewer system, including permits, fees and charges levied by any governmental
subdivision for any such pollutants or solids. Lessee shall be responsible for
the installation and maintenance of any dilution tanks, holding tanks, settling
tanks, sewer sampling devices, sand traps, grease traps or similar devices as
may be required by any governmental subdivision for Lessee's use of the sanitary
sewer system. If the leased premises are in a multi-occupancy building, Lessee
shall pay all surcharges levied due to Lessee's use of sanitary sewer or waste
removal services insofar as such surcharges affect Lessor or other lessees in
the building. Lessor shall not be required to pay for any utility services,
supplies or upkeep in connection with the leased premises .
4.02 Theft or Burglary. Except for Lessor's gross negligence or wilful
misconduct, Lessor shall not be liable to Lessee for losses to Lessee's
property or personal injury caused by criminal acts or entry by unauthorized
persons into the leased premises or the building.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 Property Condition. Except as otherwise provided in this Lease, Lessee
acknowledges that it has carefully inspected the Premises and that each portion
thereof is in good condition and Lessee hereby accepts the premises in their
condition existing as of the Lease commencement date or the date that Lessee
takes possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any covenants or
restrictions of record and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.
<PAGE> 10
5.02 Lessor Repairs. Lessor shall not be required to make any improvements,
replacements or repairs of any kind or character to the leased premises or the
project during the term of this Lease except as are set forth in this section
or elsewhere in this Lease. Lessor shall maintain only the roof, foundation,
parking and common areas, and the structural soundness of the exterior walls
(excluding windows, windowglass, plate glass and doors). Lessor's costs of
maintaining the items set forth in this section are subject to the additional
rent provisions in section 2.02. Lessor shall not be liable to Lessee, except
as expressly provided in this Lease, for any damage or inconvenience, and
Lessee shall not be entitled to any abatement or reduction of rent by reason of
any repairs, alterations or additions made by Lessor under this Lease.
5.03 Lessee Repairs. Except for the Hvac systems, which are the
responsibility of Lessor to the extent set out in Paragraph 17.07 hereof,
Lessee shall, at its sole cost and expense, maintain, repair and replace all
other parts of the leased premises in good repair and condition, including, but
not limited to, heating, ventilating and air conditioning systems, down spouts,
fire sprinkler system, dock bumpers, lawn maintenance, pest control and
extermination, trash pick-up and removal, and painting the building and exterior
doors. Lessee shall repair and pay for any damage caused by any act or omission
of Lessee or Lessee's agents, employees, invitees, licensees or visitors. If
the leased premises are in a multi-occupancy building or project, Lessor
reserves the right to perform, on behalf of Lessee, lawn maintenance, painting,
trash pick-up and removal; Lessee agrees to pay Lessor, as additional rent,
Lessee's pro rata share of the actual cost of such services within ten days from
receipt of Lessor's invoice, or Lessor may by monthly invoice direct Lessee to
prepay the estimated costs for the current calendar year, and such amount shall
be adjusted annually. If the leased premises are served by rail, Lessee agrees,
if requested by the railroad, to enter into a joint maintenance agreement with
the railroad and bear its pro rata share of the cost of maintaining the railroad
spur. If Lessee fails to make the repairs or replacements promptly as required
herein, Lessor may, at its option, make the repairs and replacements and the
actual cost of such repairs and replacements shall be charged to Lessee as
additional rent and shall become due and payable by Lessee within ten days from
receipt of Lessor's invoice. Costs incurred under this section are the total
responsibility of Lessee and do not constitute operating expenses under section
2.02.
5.04 Request for Repairs. All requests for repairs or maintenance that are
the responsibility of Lessor pursuant to any provision to this Lease must be
made in writing to Lessor at the address in section 1.05. Lessor shall
undertake such repairs or maintenance promptly, diligently, and in good faith.
If Lessor fails to complete such repairs or maintenance within a reasonable
time for doing so, Lessee may as its sole
<PAGE> 11
option make such repairs and be entitled to reimbursement for the actual
reasonable cost thereof within ten (10) days of receipt of the invoice and all
lien waivers.
5.05 Lessee Damages. Lessee shall not allow any waste to be committed on any
portion of the leased premises or building, and at the termination of this
Lease, by lapse of time or otherwise, Lessee shall deliver the leased premises
to Lessor in as good condition as existed at the commencement date of this
Lease, ordinary wear and tear excepted. The reasonable cost and expense of any
repairs necessary to restore the condition of the leased premises (ordinary
wear and tear excepted) shall be borne by Lessee.
5.06 Maintenance Contract. Lessee shall, at its sole cost and expense, during
the term of this Lease maintain a regularly scheduled preventative
maintenance/service contract with a maintenance contractor for the servicing of
all hot water, heating and air conditioning systems and equipment within the
leased premises. The maintenance contractor and contract must be approved by
Lessor, which approval shall not be unreasonably withheld and must include
monthly servicing, replacement of filters, replacement or adjustment of drive
belts, periodic lubrication and oil change and any other services suggested by
the equipment manufacturer.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 Lessor Improvements. INTENTIONALLY DELETED
6.02 Lessee Improvements. Lessee shall not make or allow to be made any
substantial alterations or physical additions in or to the leased premises and,
effecting the structure or exterior appearance of the building without first
obtaining the written consent of Lessor, which consent shall not be
unreasonably withheld or delayed. Any alterations, physical additions or
improvements of the leased premises made by Lessee shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease; provided, however, Lessor, at its option, may require Lessee to
remove any physical additions and/or repair any alterations in order to restore
the leased premises to the condition existing at the time Lessee took
possession other than the initial alterations agreed to by Lessor, all costs of
removal and/or alterations to be borne by Lessee. This clause shall not apply
to moveable equipment or furniture owned by Lessee, which may be removed by
Lessee at the end
<PAGE> 12
of the term of this Lease if Lessee is not then in default and if such equipment
and furniture are not then subject to any other rights, liens, and interest of
Lessor.
6.03 Mechanics Lien. Lessee will not permit any mechanic's or materialman's
lien(s) or other lien to be placed upon the leased premises or the building
without bonding around same during the pendency of any good faith attempt by
Lessee to contest the lien's validity and nothing in this Lease shall be deemed
or construed in any way as constituting the consent or request of Lessor,
express or implied, by inference or otherwise, to any person for the
performance of any labor or the furnishing of any materials to the leased
premises, or any part thereof, nor as giving Lessee any right, power, or
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to any mechanic's,
materialman's or other lien against the leased premises. In the event any such
lien is attached to the leased premises, then, in addition to any other right
or remedy of Lessor, Lessor may, in the event that Lessee does not either bond
around such lien or remove it within sixty (60) days after its date of filing,
but shall not be obligated to, obtain the release of or otherwise discharge the
same. Any amount paid by Lessor for any of the aforesaid purposes shall be
paid by Lessee to Lessor on demand as additional rent.
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 Substantial Destruction. If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be
damaged so that rebuilding cannot reasonably be completed within one hundred
twenty days after the date of written notification by Lessee to Lessor of the
destruction, this Lease shall terminate and the rent shall be abated for the
unexpired portion of the Lease, effective as of the date of the casualty.
7.02 Partial Destruction. If the leased premises should be partially damaged
by fire or other casualty, and rebuilding or repairs can reasonably be
completed within one hundred twenty days from the date of written notification
by Lessee to Lessor of the destruction, this Lease shall not terminate, and
Lessor shall at its sole risk and expense proceed with reasonable diligence to
rebuild or repair the building or other improvements to substantially the same
condition in which they existed prior to the damage. If the leased premises
are to be rebuild or repaired and are untenantable in whole or in part
following the damage, and the damage or destruction was not caused
<PAGE> 13
or contributed to by act or negligence of Lessee, its agents, employees,
invitees, the rent payable under this Lease during the period for which the
leased premises are untenantable shall be adjusted to such an extent as may be
fair and reasonable under the circumstances. In the event that Lessor fails to
complete the necessary repairs or rebuilding within one hundred twenty days from
the date of written notification by Lessee to Lessor of the destruction, Lessee
may at its option terminate this Lease by delivering written notice of
termination to Lessor, whereupon all rights and obligations under this Lease
shall cease to exist.
7.03 Property Insurance. Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance, issued by and binding upon
some insurance company, insuring the building against all perils included
within the classification of fire and extended coverage and any other perils
which Lessor deems necessary in such amount as Lessor deems reasonable in
relation to the age, location, type of construction and physical condition of
the building and the availability of such insurance at reasonable rates;
provided, Lessor shall not be obligated in any way or manner to insure any
personal property (including, but not limited to, any furniture, machinery,
goods or supplies) of Lessee upon or within the leased premises, any fixtures
installed or paid for by Lessee upon or within the leased premises, or any
improvements which Lessee may construct on the leased premises. Lessee shall
have no right in or claim to the proceeds of any policy of insurance maintained
by Lessor even though the cost of such insurance is borne by Lessee as set
forth in Article 2.00. Lessee shall, at Lessee's expense, maintain such
primary or additional insurance on its inventory, fixtures, equipment, and
building improvements as Lessee deems necessary to protect its interest.
Lessee shall not do or permit to be done anything which invalidates any such
insurance policies.
7.04 Liability Insurance. Lessee, at its own expense, shall maintain during
the term of this Lease a policy or policies of comprehensive general liability
insurance, including personal injury and property damage, with contractual
liability endorsement, in the amount of One Million Dollars ($1,000,000.00) for
property damage and One Million Dollars ($1,000,000.00) per occurrence for
bodily injuries, personal injuries or deaths of person occurring in or about
the Premises. Said policies shall (i) name Lessor as an additional insured and
insure Lessor's contingent liability under this Lease, (ii) be issued by an
insurance company which is acceptable to Lessor, and (iii) provide that said
insurance shall not be cancelled unless thirty (30) days prior written notice
shall have been given to Lessor. Said policy or policies or certificates
thereof shall be delivered to Lessor by Lessee upon commencement of the term of
the Lease and upon each renewal of said insurance.
<PAGE> 14
7.05 Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all right of recovery, claim, action or cause of action, against
each other, their agents, officers, and employees, for any loss or damage that
may occur to the leased premises, improvements to the building of which the
leased premises are a part, or personal property within the building, by reason
of fire or the elements, regardless of cause or origin, including negligence of
Lessor or Lessee and their agents, officers and employees. Lessor and Lessee
agree immediately to give their respective insurance companies which have
issued policies of insurance covering all risk of direct physical loss, written
notice of the terms of the mutual waivers contained in this section, and to
have the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverages by reason of the mutual waivers.
7.06 Hold Harmless. Except for Lessor's gross negligence or wilful
misconduct, Lessor shall not be liable to Lessee or to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for an injury
to person or damage to property on or about the leased premises caused by any
act or omission of Lessee, its agents, servants or employees, or of any other
person entering upon the leased premises under express or implied invitation by
Lessee, or caused by the improvements located on the leased premises becoming
out of repair, the failure or cessation of any service provided by Lessor
(including security service and devices), or caused by leakage of gas, oil,
water or steam or by electricity emanating from the leased premises. Lessee
agrees to indemnify and hold harmless Lessor of and from any loss, attorney's
fees, expenses or claims arising out of any such damage or injury except and to
the extent that such loss, attorney's fees, expenses, claims, damages or injury
arise in whole or in part from the gross negligence or wilful misconduct of
Lessor.
ARTICLE 8.00 CONDEMNATION
8.01 Substantial Taking. If all or substantial part of the leased premises
are taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the leased premises for the purpose for which it is then being used, this Lease
shall terminate and the rent shall be abated during the unexpired portion of
this Lease effective on the date physical possession is
<PAGE> 15
taken by the condemning authority. Lessee shall have no claim to the
condemnation award or proceeds in lieu thereof other than that portion of the
condemnation award or proceeds applicable to Lessee's trade fixtures.
8.02 Partial Taking. If a portion of the leased premises shall be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in section 8.01 above, Lessor shall at
Lessor's sole risk and expense, restore and reconstruct the building and other
improvements on the leased premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or proceeds in lieu thereof other than that portion of the
condemnation award or proceeds applicable to Lessee's trade fixtures.
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 Lessor Assignment. Lessor shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the building provided that such purchaser, transferee, or assignee agrees to
assume all duties and obligations of Lessor to Lessee under the terms,
covenants and conditions of Lease. Any such sale, transfer or assignment shall
operate to release Lessor from any and all liabilities under this Lease arising
after the date of such sale, assignment or transfer.
9.02 Lessee Assignment. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned, in whole or in part, by operation of law or
otherwise (including without limitation by transfer of a majority interest of
stock, merger, or dissolution, which transfer of majority interest of stock,
merger or dissolution shall be deemed an assignment) or mortgage or pledge the
same except to a bona fide third party lender providing financing of Lessee's
business or Lessee's inventory or personalty located on the premises, or sublet
the leased premises, in whole or in part, without the prior written consent of
Lessor which consent shall not be unreasonably withheld, and in no event shall
any such assignment or sublease ever release Lessee from any obligation or
liability hereunder. No assignee or sublessee of the leased
<PAGE> 16
premises or any portion thereof may assign or sublet the leased premises or any
portion thereof. Notwithstanding this provision, Lessee shall have the right to
assign or sublease to any parent, affiliate, subsidiary, or successor of Lessee,
whether by merger, consolidation, or otherwise, or to any person or entity that
purchases all of the assets of Lessee provided the net worth of the person or
entity to whom the Lease is assigned is equal to or greater than Lessee.
9.03 Conditions of Assignment. Except for an assignment or sublease not
requiring Lessor's prior approval as described in Paragraph 9.02 above, if
Lessee desires to assign or sublet all or any part of the leased premises, it
shall so notify Lessor at least thirty days in advance of the date on which
Lessee desires to make such assignment or sublease. Lessee shall provide
Lessor with a copy of the proposed assignment or sublease and such information
as Lessor might reasonably request concerning the proposed sublessee or
assignee to allow Lessor to make informed judgments as to the financial
condition, reputation, operations and general desirability of the proposed
sublessee or assignee. Within fifteen (15) days after Lessor's receipt of
Lessee's proposed assignment of sublease and all required information concerning
the proposed sublessee or assignee, Lessor shall have the following options: (1)
consent to the proposed assignment or sublease, and, if the rent due and payable
by any assignee or sublessee under any such permitted assignment or sublease (or
a combination of the rent payable under such assignment or sublease plus any
bonus or any other consideration or any payment incident thereto) exceeds the
rent payable under this Lease for such space, Lessee shall pay to Lessor all
such excess rent and other excess consideration within ten days following
receipt thereof by Lessee: or (2) refuse, in its sole and absolute discretion
and judgment, to consent to the proposed assignment or sublease, which refusal
shall be deemed to have been exercised unless Lessor gives Lessee written notice
providing otherwise. Upon the occurrence of an event of default, if all or any
part of the leased premises are then assigned or sublet, Lessor in addition to
any other remedies provided by this Lease or provided by law, may, at its
option, collect directly from the assignee or sublessee all rents becoming due
to Lessee by reason of the assignment or sublease, and Lessor shall have a
security interest in all properties on the leased premises to secure payment of
such sums. Any collection directly by Lessor from the assignee or sublessee
shall not be construed to constitute a novation or a release of Lessee or any
guarantor from the further performance of its obligations under this Lease.
9.04 Subordination. Lessee accepts this Lease subject and subordinate to any
recorded mortgage or deed of trust lien presently existing or hereafter created
upon the building or project and to all existing recorded restrictions,
covenants, easements and
<PAGE> 17
agreements with respect to the building or project. Lessee agrees upon ten (10)
days following written demand to execute additional instruments subordinating
this Lease as Lessor may require. If the interests of Lessor under this Lease
shall be transferred by reason of foreclosure or other proceedings for
enforcement of any first mortgage or deed of trust lien on the leased premises,
Lessee shall be bound to the transferee (sometimes called the "Purchaser") at
the option of the Purchaser, under the terms, covenants and conditions of this
Lease for the balance of the term remaining, including any extensions or
renewals, with the same force and effect as if the Purchaser were Lessor under
this Lease, and, if requested by the Purchaser, Lessee agrees to attorn to the
Purchaser, including the first mortgage under any such mortgage if it be the
Purchaser, as its Lessor. Notwithstanding the foregoing, Lessor agrees to
provide Lessee with a non-disturbance agreement from mortgagee substantially in
the form of Exhibit B attached hereto and made a part hereof
9.05 Estoppel Certificates. Lessee agrees to furnish, from time to time,
within ten days after receipt of a written request from Lessor or Lessor's
mortgagee, a statement certifying, if true and applicable, the following:
Lessee is in possession of the leased premises; the Lease is in full force and
effect; the Lease in unmodified; Lessee claims no present charge, lien, or
claim of offset against rent; the rent is paid for the current month, but is
not prepaid for more than one month and will not be prepaid for more than one
month in advance; there is no existing default by reason of some act or
omission by Lessor; and such other matters as may be reasonably required by
Lessor or Lessor's mortgagee. Lessee's failure to deliver such statement,
shall be an event of default under this Lease. Lessor agrees, within ten (10)
days after receipt of a written request therefor, to provide a statement
certifying, if true and applicable, the name and address of the Building, the
location of the Premises, that the Lease is in full force and effect and
unmodified, that Lessee is not in default under the Lease, the term remaining in
the Lease and existence and term of any renewal options, and such other matters
as may reasonably be required by Lessee or Lessee's mortgagee. Lessor's failure
to deliver such statement shall be an event of default hereunder.
9.06 Lessee's Financial Condition. Within ten (10) days after written request
from Lessor, Lessee shall deliver to Lessor such financial statements as are
reasonably required by Lessor to verify the net worth of Lessee, or any
assignee, or guarantor of Lessee. In addition Lessor shall deliver to any
lender designated by Lessor any financial statements required by such lender to
facilitate the financing or refinancing of the leased premises. Lessee
represents and warrants to Lessor that each such financial statement is a true,
complete, and accurate statement as of the date of such statement. All
financial statements shall be confidential and shall be used only for the
<PAGE> 18
purposes set forth herein. Notwithstanding the foregoing, Lessee shall not be
required to deliver financial statements to Lessor more than one time in any
calendar year.
ARTICLE 10.00 LIENS
10.01 Landlord's Lien. As security for payment of rent, damages and all other
payments required to be made by this Lease, Lessee hereby grants to Lessor a
lien upon all property of Lessee now or subsequently located upon the leased
premises. If Lessee abandons or vacates any substantial portion of the leased
premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in material default of any
other provision of this Lease ,taking into account any notice and cure
provisions in this Lease, Lessor may enter upon the leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with notice, to the
highest bidder for cash, and, on behalf of Lessee, sell and convey all or part
of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold. The
proceeds of the sale of the personal property shall be applied by Lessor toward
the reasonable costs and expenses of the sale, including reasonable attorney's
fees, and then toward the payment of all sums then due by Lessee to Lessor
under the terms of this Lease. Any excess remaining shall be paid to Lessee or
any other person entitled thereto by law.
10.02 Uniform Commercial Code. This Lease is intended as and constitutes a
security agreement within the meaning of the Uniform Commercial Code of the
state in which the leased premises are situated. Lessor, in addition to the
rights prescribed in this Lease, shall have all of the rights, titles, liens
and interests in and to Lessee's property, now or hereafter located upon the
leased premises, which may be granted a secured party, as that term is defined,
under the Uniform Commercial Code to secure to Lessor payment of all sums due
and the full performance of all Lessee's covenants under this Lease. Lessee
will on request execute and deliver to Lessor a financing statement for the
purpose of perfecting Lessor's security interest under this Lease or Lessor may
file this Lease a memorandum of as a financing statement. Unless otherwise
provided by law and for the purpose of exercising any right pursuant to this
section, Lessor and Lessee agree that reasonable notice shall be met if such
notice is
<PAGE> 19
given by ten days written notice, certified mail, return receipt requested, to
Lessor or Lessee at the addresses specified herein.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01 Default by Lessee. The following shall be deemed to be events of
default by Lessee under this Lease; (1) Lessee shall fail to pay more than ten
(10) days after due any installment of rent or any other payment required
pursuant to this Lease; (2) Lessee shall fail to comply with any term,
provision or covenant of this Lease, other than the payment of rent, and the
failure is not cured within thirty (30) days after written notice to Lessee;
(3) Lessee shall file a petition or be adjudged bankrupt or insolvent under any
applicable federal or state bankruptcy or insolvency law or admit that it
cannot meet its financial obligations as they become due; or a receiver or
trustee shall be appointed for all or substantially all of the assets of
Lessee; or Lessee shall make a transfer in fraud of creditors or shall make an
assignment for the benefit of creditors; or (4) Lessee shall do or permit to
be done any act which results in a lien being filed against the leased premises
or the building and/or project of which the leased premises are a part and such
lien shall remain uncured or unbonded for a period of sixty (60) days after the
date of filing of such lien.
11.02 Remedies for Lessee's Default. Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any one
or more of the following remedies without any notice or demand whatsoever:
(a) Lessor may terminate this Lease. If Lessor elects to terminate this
Lease, then Lessee shall immediately surrender the leased premises to Lessor
and shall be liable for and shall pay to Lessor the sum of all rent and other
indebtedness accrued to the date of such termination plus, as damages, an
amount equal to the total of (i) the reasonable cost of recovering the leased
premises, (ii) the reasonable cost of removing and storing Lessee's and other
occupants' property located therein, (iii) the reasonable cost of reletting the
leased premises, or a portion thereof, whether or not accomplished in one or
more phases (including, without limitation, brokerage commissions), (iv) the
reasonable cost of repairs to the leased premises, (v) the reasonable
cost of collecting such amounts from Lessee hereunder, and (vi) any other
reasonable sums of money or damages that may be owed to Lessor as the result of
a default by Lessee or the exercise of Lessor's rights at law or in equity.
<PAGE> 20
(b) Lessor may terminate Lessee's rights to occupy the leased premises
without terminating this Lease. If Lessor elects to terminate Lessee's right
to occupy the leased premises, Lessee shall remain liable for the payment of
the total rent due under this Lease for the remainder of the term of this
Lease. In addition, Lessee shall be liable for and shall pay to Lessor, on
demand, an amount equal to the costs described in subsection 11.02(a) above.
Lessor may file suit to recover any sums falling due under the terms hereof
from time to time, and unless otherwise agreed no delivery to or recovery by
Lessor of any portion of the sums due Lessor hereunder shall be a defense in any
action to recover any amount not theretofore reduced to judgment and/or
collected by Lessor. Lessor shall not be obligated to relet the leased premises
before leasing other portions of the building, it being the intent of the
parties that Lessee shall not be placed in a preferential position by reason of
Lessee's own default. Any sums received by Lessor through reletting shall
reduce the sums owing by Lessee hereunder, but in no event shall Lessee be
entitled to any excess of any sums obtained by reletting over and above the rent
to be paid by Lessee under this Lease. In the alternative, Lessor may elect
to immediately recover, as damages, a sum equal to the difference between (i)
the total rent due under this Lease for the remainder of the Lease term and (ii)
the then fair market rental value of the leased premises during such period,
discounted to present value at a commercially reasonable rate ("Discounted
Future Rent"). In such event, Lessor shall have no responsibility whatsoever to
attempt to relet the leased premises or to apply any rentals received by Lessor
as a result of any such reletting to Lessee's obligations hereunder; and the
aggregate amount of all damages due to Lessor, including the Discounted Future
Rent, shall be immediately due and payable to Lessor upon demand.
(c) Lessor may enter upon the leased premises and do whatever Lessee is
obligated to do under the terms of this Lease without terminating this Lease or
terminating Lessee's right to occupy the leased premises. In such event,
Lessee shall reimburse Lessor within ten (10) days after receipt of written
demand for any expenses which Lessor may incur in affecting compliance with
Lessee's obligations under this Lease, and Lessor shall not be liable for any
damages resulting to Lessee from such action other than and to the extent of
damages caused by the gross negligence or wilful misconduct of Lessor.
(d) Lessor may exercise all of the remedies available to Lessor at law
or in equity, including, without limitation, injunctive relief of all
varieties.
The provisions of this Section 11.02 shall be enforceable to the maximum
extent not prohibited by applicable law, and the unenforceability of any
portion thereof shall not thereby render unenforceable any other portion. No
act or thing done by Lessor or its agents during the Lease term shall be deemed
to be an acceptance of an
<PAGE> 21
attempted surrender of the leased premises, and no agreement to accept the
surrender of the leased premises shall be valid unless made in writing and
signed by Lessor. No re-entry or taking possession of the leased premises by
Lessor (including a termination of Lessee's right to occupy the leased premises
or a reletting subsequent to such election) shall be construed as an election on
Lessor's part to terminate this Lease unless a written notice of such
termination is given to Lessee. The failure of Lessor to insist at any time
upon the strict performance of any covenant or agreement herein or to exercise
any option, right, power, or remedy contained in this Lease shall not be
construed as a waiver or a relinquishment thereof for the future. No payment by
Lessee or receipt by Lessor of a lesser amount than the amount then due under
this Lease shall be deemed to be other than on account of the earliest
obligation of Lessee due hereunder, nor shall endorsement or statement on any
check or any letter accompanying any check or payment be deemed an accord and
satisfaction. Lessor may accept any such check or payment without prejudice to
Lessor's right to recover the balance of such obligation of Lessee or pursue any
other remedy provided in this Lease. All rights, privileges, and remedies
afforded Lessor by this Lease or by law shall be deemed cumulative, and the
remedies shall not be deemed to be a waiver of any other right, privilege, or
exercise of any one of such rights, privileges, or remedy provided for herein or
granted by law or in equity, except as may otherwise be expressly provided
pursuant to the terms of this Lease. In the event Lessor elects to terminate
this Lease or terminate Lessee's right to occupy the leased premises after a
default by Lessee, Lessor may, without prejudice to any other remedy which
Lessor may have, expel or remove Lessee and any other person who may be
occupying the leased premises or any part thereof. In addition, Lessor may
change or alter the locks and other security devices on the doors to the leased
premises; and Lessee hereby waives, to the fullest extent allowed by law, any
requirement that notice be posted on the leased premises as to the location of a
key to such new locks and any right to obtain such a key. In addition, to all
of the remedies set forth herein, Lessor shall, if applicable, be entitled to
receive a cash payment from Lessee on demand in an amount equal to all
"Reimbursable Costs" (as defined below) which have not yet vested in Lessee and
to terminate any remaining Lease concessions which have not yet accrued under
this Lease. As used herein, the term "Reimbursable Costs" shall mean the
total of (i) the difference between the average rent payable by Lessee over
the entire term of this Lease and the rate of rent payable by Lessee from the
commencement date to the date of default and (ii) the aggregate dollar amount
which had been paid by Lessor in connection with this Lease, including, without
limitation, amounts reimbursed to Lessee or paid on behalf of Lessee under this
Lease and any brokerage commission paid or payable by Lessor in connection with
the execution of this Lease. Because the Reimbursable Costs were incurred by
Lessor in reliance upon Lessee's fully performing Lessee's obligations under
this Lease, Lessee hereby acknowledges that Lessor will be damaged, upon a
default by Lessee, in an amount equal to the
<PAGE> 22
aggregate dollar value of the Reimbursable Costs which have not yet vested in
Lessee. Lessee shall vest as to Reimbursable Costs on a pro rata basis for
each calendar month during the Lease term for which Lessee has paid rent and is
not otherwise in default hereunder. No vesting shall occur with respect to any
month for which Lessee has not paid rent or for which Lessee is otherwise in
default hereunder.
11.03 Notice of Default. Lessee shall give written notice of any failure by
Lessor to perform any of its obligations under this Lease to Lessor and to any
ground lessor, mortgagee or beneficiary under any deed of trust encumbering the
Leased Premises whose name and address have been furnished to Lessee in
writing. Lessor shall not be in default under this Lease unless Lessor (or
such ground lessor, mortgagee or beneficiary) fails to cure such nonperformance
within thirty (30) days after receipt of Lessee's notice. However, if such
nonperformance reasonably requires more than thirty (30) days to cure, Lessor
shall not be in default if such cure is commenced within such 30-day period and
thereafter diligently pursued to completion.
ARTICLE 12.00 RELOCATION
INTENTIONALLY DELETED
ARTICLE 13.00 DEFINITIONS
13.01 Act of God or Force Majeure. An "act of God" or "force majeure" is
defined for purposes of this Lease as strikes, lockouts, sitdowns, material or
labor restrictions by any governmental authority, unusual transportation
delays, riots, floods, washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of public enemy, wars, insurrections and any other cause not reasonably within
the control of Lessor and which by the exercise of due diligence Lessor is
unable, wholly or in part, to prevent or overcome.
13.02 Building or Project. "Building" or "project" as used in this Lease
means the building and/or project described in section 1.02, including the
leased premises and the land upon which the building or project is situated.
<PAGE> 23
13.03 Commencement Date. "Commencement date" shall be the date set forth in
section 1.03. The commencement date shall constitute the commencement of the
term of this Lease for all purposes, whether or not Lessee has actually taken
possession.
13.04 Square Feet. "Square feet" or "square foot" as used in this Lease
includes the area contained within the leased premises together with a common
area percentage factor of the leased premises proportionate to the total
building area. Lessee hereby acknowledges that it has carefully inspected the
leased premises in the building forming the subject of the Lease and agrees
that said leased premises comprise approximately the square footage in section
1.02. Should it ever be determined that the building is larger or smaller than
said square footage, neither party shall have
any right, claim or action against the other by reason of that fact.
ARTICLE 14.00 ENVIRONMENTAL REPRESENTATIONS AND INDEMNITY
14.01 Hazardous Materials.
A. Hazardous Material Upon Premises Prohibited.
Lessee shall not cause or permit any Hazardous Material (as defined in
Paragraph 14.01) to be released, brought upon, stored, produced, disposed or
used upon, about or beneath the Premises by Lessee, its agents, employees,
contractors or invitees.
B. Indemnification of Lessor for Environmental Damages.
Lessee shall indemnify, defend and hold Lessor harmless from and against
any and all Environmental Damages which arise from (1) the presence upon, about
or beneath the Premises of any "Hazardous Materials" (as defined in this Lease)
or of any chemical substance requiring remediation under any federal, state or
local statute, regulation, ordinance or policy to the extent, and only to the
extent, that such hazardous materials are placed upon the Premises by Lessee or
its employees, agents, or invitees; or (2) the breach of any of the provisions
of this Lease. For the purpose of this Lease, "Environmental Damages" shall
mean (a) All claims, judgments, damages,
<PAGE> 24
penalties, fines, costs, liabilities and losses (including, without limitation,
diminutive in the value of the Premises, damages for the loss of or restriction
on use of rentable space or any amenity of the Premises and from any service
rentable or usable space or of any amenity of the Premises and from any adverse
impact on Lessor's marketing of space); (b) All sums paid for settlement of
claims, reasonable attorney's fees, reasonable consultant's fees and reasonable
expert's fees; and (c) All costs incurred by Lessor in connection with
investigation of Hazardous Material (as defined in this Lease) upon, about or
beneath the Premises, the preparation of any feasibility studies or reports and
the performance of any clean-up, remediation, removal or governmental agency or
political subdivision necessary for Lessor to make full economic use of the
Premises, or otherwise required under this Lease. Lessee's obligation under
this Section shall survive the expiration of this Lease. Lessor shall
indemnify and hold harmless Lessee from and against any and all environmental
damages to Lessee arising due to and only to the extent of the activities of
Lessor.
C. Obligation of Lessee to Remediate Premises.
Notwithstanding the obligation of Lessee to indemnify Lessor pursuant to
this Lease, Lessee shall, at its sole cost and expense, promptly take all
actions required by any federal, state or local governmental agency or
political subdivision or necessary for Lessor to make full economic use of the
Premises, which requirements or necessity arise from the presence upon, about
or beneath the Premises of any Hazardous Materials (as defined in this Lease),
provided that the introduction of such Hazardous Materials shall have
originated during the term of this Lease due to and only to the extent of the
activities of Lessee or its employees, agents, or invitees. Such actions shall
include, but not be limited to, the investigation of the environmental
condition of the Premises, the preparation of any feasibility studies or
reports and the performance of any clean-up, remedial, removal or restoration
work. Lessee shall take all actions necessary to restore the Premises to the
condition existing prior to the introduction of the Hazardous Material upon,
about or beneath the Premises, notwithstanding any lesser standard of
remediation allowable under applicable law or governmental policies. Lessee
shall nevertheless obtain Lessor's approval prior to undertaking any activities
required by this Section, which approval shall not be unreasonably withheld so
long as such actions would not potentially have a material adverse long-term or
short-term effect on the Premises. The obligations of Lessee pursuant to this
Section shall not apply to situations where Hazardous Materials are released,
brought upon, stored, produced, emitted, disposed of or used upon, about or
beneath the Premises at a time or times other than during the term of this
Lease or by persons other than Lessee or its employees, agents, or invitees
except where its agents, employees, contractors or invitees or as a result of
the acts or omissions of any agent,
<PAGE> 25
employee, contractor or invitee of any permitted sublessee or assignee of
Lessee, Lessee's obligations under this Section shall survive the expiration of
this Lease.
D. "Hazardous Material" Defined.
"Hazardous Material" means any material or substance (1) defined as a
hazardous substance pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and amendments
thereto ; (2) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.); (3) defined as a "hazardous waste" pursuant to the Federal
Resource Conservation and Recovery Act (42 U.S.C. Section 9601 et. seq.)
ARTICLE 15.00 MISCELLANEOUS
15.01 Waiver. Failure of Lessor to declare an event of default immediately
upon its occurrence, or delay in taking any action in connection with an event
of default, shall not constitute a waiver of the default, but Lessor shall have
the right to declare the default at any time and take such action as is lawful
or authorized under this Lease. Pursuit of any one or more of the remedies set
forth in Article 11.00 above shall not preclude pursuit of any one or more of
the other remedies provided elsewhere in this Lease or provided by law, nor
shall pursuit of any remedy constitute forfeiture or waiver of any rent damages
accruing to Lessor by reason of the violation of any of the terms, provisions
or covenants of this Lease. Failure by Lessor to enforce one or more of the
remedies provided upon an event of default shall not be deemed or construed to
constitute a waiver of the default or of any other violation or breach of any
of the terms, provisions and covenants contained in this Lease.
15.02 Act of God. Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
or prevented by an act of God, force majeure or by Lessee.
15.03 Attorney's Fees. In the event that either party defaults in the
performance of any of the terms, covenants, agreements or conditions contained
in this Lease and the
<PAGE> 26
other party places in the hands of an attorney the enforcement of all or any
part of this Lease, the collection of any rent due or to become due or recovery
of the possession of the leased premises, the non-prevailing party agrees to pay
the prevailing party's reasonable costs of collection, including reasonable
attorney's fees for the services of the attorney, whether suit is actually filed
or not.
15.04 Successors. This Lease shall be binding upon and inure to the benefit
of Lessor and Lessee and their respective heirs, personal representatives,
successors and assigns to the extent that assignment is permitted hereunder.
It is hereby covenanted and agreed that should Lessor's interest in the leased
premises cease to exist for any reason during the term of this Lease, then
notwithstanding the happening of such event this Lease nevertheless shall remain
unimpaired and in full force and effect, and Lessee hereunder agrees to attorn
to the then owner of the leased premises contingent upon delivery to Lessee of a
non-disturbance agreement substantially in the form of Exhibit B attached hereto
and made a part hereof.
15.05 Rent Tax. If applicable in the jurisdiction where the leased premises
are situated, Lessee shall pay and be liable for all rental, sales and use
taxes or other similar taxes, if any, levied or imposed by any city, state,
county, or other governmental body having authority, such payments to be in
addition to all other payments required to be paid to Lessor by Lessee under
the terms of this Lease. Any such payment shall be paid concurrently with the
payment of the rent, additional rent, operating expenses or other charge upon
which the tax is based as set forth above.
15.06 Captions. The captions appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
15.07 Notice. All rent and other payments required to be made by Lessee shall
be payable to Lessor at the address set forth in section 1.05. All payments
required to be made by Lessor to Lessee shall be payable to Lessee at the
address set forth in section 1.05, or at any other address within the United
States as Lessee may specify from time to time by written notice. Any notice
or document required or permitted under this Lease shall be in writing and
shall be personally delivered or shall be deemed to be delivered (whether or
not actually received) when deposited in the United States Mail, postage
prepaid, certified mail, return receipt requested, addressed to the parties at
the respective addresses set forth in section 1.05.
<PAGE> 27
15.08 Submission of Lease. Submission of this Lease to Lessee for signature
does not constitute a reservation of space or an option to lease. This Lease
is not effective until execution by and delivery to both Lessor and Lessee.
15.09 Corporate Authority. Lessee hereby represents and warrants that
Lessee is a duly authorized and existing corporation, that Lessee is qualified
to do business in the state in which the leased premises are located, 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.
Lessor hereby represents and warrants that it is a duly authorized and existing
joint venture and that the person signing for Lessor have all due authority to
execute and deliver the Lease.
15.10 Severability. If any provision of this Lease or the application thereof
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Lease and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
15.11 Lessor's Liability. If Lessor shall be in default under this Lease and,
if as a consequence of such default, Lessee shall recover a money judgment
against Lessor, such judgment shall be satisfied only out of the right, title
and interest of Lessor in the building as the same may then be encumbered and
neither Lessor nor any person or entity comprising Lessor shall be liable for
any deficiency. In no event shall Lessee have the right to levy execution
against any property of Lessor nor any person or entity comprising Lessor other
than its interest in the building as herein expressly provided.
15.12 Indemnity. Lessor agrees to indemnify and hold harmless Lessee from and
against any liability or claim, whether meritorious or not, arising with
respect to any broker whose claim arises by, through or on behalf of Lessor.
Lessee agrees to indemnify and hold harmless Lessor from and against any
liability or claim, whether meritorious or not, arising with respect to any
broker whose claim arises by, through or on behalf of Lessee.
<PAGE> 28
15.13 The laws of the State of Texas shall govern this Lease.
ARTICLE 16.00 AMENDMENT AND LIMITATION OF WARRANTIES
16.01 Entire Agreement. IT IS EXPRESSLY AGREED BY LESSEE, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE
OR TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN THIS LEASE.
16.02 Amendment. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
16.03 Limitation of Warranties. LESSOR AND LESSEE EXPRESSLY AGREE THAT THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND THERE ARE
NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS LEASE.
ARTICLE 17.00 OTHER PROVISIONS
17.01 Lessee shall be entitled to possession of the property on January 1,
1997 subject to all the terms and conditions in this lease other than the
payment of Base Rent for the period January 1, 1997 until January 31, 1997. In
addition, and notwithstanding any other provision in this Lease, in the event
that possession of all of the Premises is not delivered to Lessee on or before
February 28, 1997, Lessee shall have the right to
<PAGE> 29
terminate the Lease by delivery of notice to Lessor within ten (10) days of such
date, and the Lease shall terminate as of the date that such notice is deposited
in the manner for notice provided for hereunder.
17.02 Option to Extend Term: Lessor hereby grants to Lessee and the assignees
of Lessee permitted in Paragraph 9.02 hereof two (2) options ("Options") to
extend the Lease term for additional terms of five years (5) each
("Extensions"), on the same terms, conditions and covenants set forth in the
Lease Agreement, except as provided below. Each option shall be exercised only
by written notice delivered to the Lessor at least one hundred eighty (180) days
before the expiration of the Lease Term or the preceding Extension of the Lease
Term. If Lessee fails to deliver Lessor written notice of the exercise of an
Option within the prescribed time period, such Option and any succeeding Options
shall lapse, and there shall be no further right to extend the Lease Term. Each
Option shall be exercisable by Lessee on the express condition that at the time
of the exercise, and at all times prior to the commencement of such Extensions,
Lessee shall not be in default under any of the provisions of this Lease. The
foregoing Options are personal to Lessee and may not be exercised by any
assignee or subtenant.
A. Lessee shall have no further renewal options unless granted by Lessor in
writing: and
B. The rental for the first renewal term shall be $10.50 per square foot.
The rental for the second renewal term shall be based on the then prevailing
rental rates for properties of equivalent quality, size, utility and location,
with the length of the lease term, and credit standing of the Lessee herein, to
be taken into account. In no event shall the rental rate be less than the
rental rate payable for the month immediately preceding the date of any rent
adjustments.
17.03 Lessee will be permitted to post six (6) parking spaces at the front
entrance of its space for its exclusive use. All other parking spaces are
unreserved. Lessor will not enforce the exclusivity and Lessee cannot have
violator's cars towed or molested in any way. In addition to its reserved
parking spaces, Lessee shall provide 100 unreserved parking spaces, which shall
be available for Lessee's intended mixed office/storage use and sufficient to
comply with zoning law.
17.04 Leasehold Improvements.
<PAGE> 30
(A) Notwithstanding anything to the contrary in the Lease, except for the
HVAC systems, which are the responsibility of Lessor to the extent set out in
Paragraph 17.07 hereof, Lessee accepts the Leased Premises in their "AS IS"
condition. Lessee shall cause plans and specifications for the tenant
improvements to be prepared and submitted to Lessor for Lessor's approval, which
approval shall not be unreasonably withheld. All work shall be performed in
conformance with such approved plans and specifications and in a good and
workmanlike manner and in compliance with the American with Disabilities Act of
1990 ("ADA"). However, Lessee shall not be required to make any exterior
alterations in order to bring the Premises into compliance with the ADA. Any
changes or modifications to the approved plans and specifications shall be
signed by Lessor and Lessee constitute an amendment to this Lease. Lessor
agrees not to unreasonably withhold or delay its consent or approval to any such
requested change or modification to the approved plans specifications.
(B) Lessor agrees to provide Lessee with a leasehold improvements allowance
of $62,037.00 which amount is intended to include all costs associated with such
construction such as, permit fees, construction manager fees, architectural
fees, and all utility connections to the Leased Premises, (the "Allowance"). The
Allowance shall be paid to Lessee upon substantial completion of such
construction, as evidenced by a certification from Lessee's architect and upon
delivery of releases of liens from the contractor to Lessor. If any portion of
the allowance is unused, Lessee may use the remaining allowance towards moving
expenses or the unused amount will be applied towards rent.
(C) Lessee shall enter into a construction contract with a reputable general
contractor having at least five (5) years experience in tenant improvement
construction to perform the leasehold construction in accordance with the
approved plans and specifications.
17.05 Early Termination Election
Lessee may at Lessee's election terminate this Lease prior to the expiration of
the lease term set forth in Section 1.03, on January 31, 2002 ("Early
Termination Date") upon the terms and conditions set forth herein.
(i) Lessee shall give Lessor written notice of its election to terminate this
lease at least One Hundred Eighty (180) days prior to the Early Termination Date
upon which termination shall become effective.
<PAGE> 31
(ii) No material and uncured event of default by Lessee or no event that with
notice or the passage of time, or both, would constitute a material event of
default by Lessee shall have occurred on or before the Early Termination Date.
(iii) Concurrent with the giving of notice under Paragraph 17.05(i), Lessee
shall pay to Lessor in cash the sum of $ 98,226.00 (Ninety-eight thousand two
hundred twenty-six Dollars); and
(iv) Concurrent with the giving of notice under Paragraph 17.05(i), Lessee
shall pay to Lessor in cash the amount of the unamortized tenant improvements
and commissions using an interest factor of twelve percent (12%) per annum. By
way of example if the tenant improvements and commissions were $80,000 the
unamortized amount at January 31, 2002, would be $30,000.
17.06 Right of First Refusal.
I. Lessor and Lessee acknowledge that 1220 E. Campbell Road containing 20,
679 square feet is immediately adjacent to the Premises (hereinafter referred to
as "Adjacent Premises").
II. In the event that Lessor received a proposal from a third party to lease
the Adjacent Premises then Lessor shall, prior to preceding with negotiations or
concluding any lease, with such third party, will notify Lessee of the rent
which Lessor is willing to lease the Adjacent Premises which shall be the rent
being offered at the time ("Adjacent Premises Rent").
III. If Lessee within five (5) business days after receipt of Lessor's notice
as set forth in Paragraph 17.06 II above, indicates, in writing, its agreement
to lease the Adjacent Premises, then the Adjacent Premises shall be included
within the Premises and leased to Lessee at the Adjacent Premises Rent and
otherwise pursuant to the provisions of this lease without any obligations on
the part of the Lessor to make any alterations or repairs, and to afford any
rent abatement and without any contingency provisions. However, the rent
attributable to the Adjacent Premises shall be added to the rent payable under
this Lease. The parties shall immediately execute an amendment to this lease
stating the addition of the Adjacent Premises.
IV. If the Lessee does not deliver a notice, in writing, within five (5)
business days of receipt of Lessor's said notice, as set forth in Paragraph
17.06 II above, indicating its agreement to lease the Adjacent Premises, Lessor
thereafter shall have the right to lease
<PAGE> 32
the Adjacent Premises to any third party or parties and there shall be no
further obligation in the future to give Lessee any notice to lease or Right of
First Refusal.
17.07 Provided Lessee enters into a maintenance contract for the HVAC unit(s)
with a qualified HVAC contractor acceptable to Lessor, Lessor will warrant the
HVAC unit(s) for the first twelve (12) months of the Lease Agreement.
ARTICLE 18.00 SIGNATURES
Signed at DALLAS , this day of NOVEMBER , 1996.
LESSOR LESSEE
CAMPBELL PLACE ONE JOINT VENTURE DNA ENTERPRISES, INC.
BY: BY:
ROY H. GREENBERG,
(TYPED NAME AND TITLE) (TYPED NAME AND TITLE)
<PAGE> 33
RULES AND REGULATIONS
1. Lessor agrees to furnish Lessee two keys without charge. Additional keys
will be furnished at a nominal charge. Lessee shall not change locks or
install additional locks on doors without prior written consent of Lessor.
Lessee shall not make or cause to be made duplicates of keys procured from
Lessor without prior approval of Lessor. All keys to leased premises shall be
surrendered to Lessor upon termination of this Lease.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the leased premises for
Lessee to Lessor for Lessor's approval before performance of any contractual
service. Lessee's contractors and installation technicians shall comply with
Lessor's rules and regulations pertaining to construction and installation.
This provision shall apply to all work performed on or about the leased
premises or project, including installation of telephones, telegraph equipment,
electrical devices and attachments and installations of any nature affecting
floors, walls, woodwork, trim, windows, ceilings and equipment or any other
physical portion of the leased premises or project.
3. Lessee shall not at any time occupy any part of the leased premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the leased premises or in
any part of the building any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein, or place or use in or about the leased
premises or project any explosives, gasoline, kerosene, oil, acids, caustics,
or any flammable, explosive or hazardous material without written consent of
Lessor.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the leased premises or the project regardless
of whether such loss occurs when the area is locked against entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the leased premises or project.
<PAGE> 34
7. Employees of Lessor shall not receive or carry messages for or to any
Lessee or other person or contract with or render free or paid services to any
Lessee or to any of Lessee's agents, employees, or invitees.
8. None of the parking, plaza, recreation or lawn areas, entries, passages,
doors, elevators, hallways or stairways shall be blocked or obstructed or any
rubbish, litter, trash, or material of any nature placed, emptied or thrown
into these areas or such area used by Lessee's agents, employees or invitees at
any time for purposes inconsistent with their designation by Lessor.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or by the defacing or injury of any part of the
building shall be borne by the person who shall occasion it. No person shall
waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the building by the use of any
radios, record players, tape recorders, musical instruments, the making of
unseemly noises or any unreasonable use.
11. Nothing shall be thrown out of the windows of the building or down the
stairways or other passages.
12. Lessee and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Lessor. Lessee shall furnish Lessor
with state automobile license numbers of Lessee's vehicles and its employees'
vehicles within five days after taking possession of the leased premises and
shall notify Lessor of any changes within five days after such change occurs.
Lessee shall not leave any vehicle in a state of disrepair (including without
limitation, flat tires, out of date inspection stickers or license plates) on
the leased premises or project. If Lessee or its employees, agents or invitees
park their vehicles in areas other than the designated parking areas or leave
any vehicle in a state of disrepair, Lessor, after giving written notice to
Lessee of such violation, shall have the right to remove such vehicles at
Lessee's expense.
13. Parking in a parking garage or area shall be in compliance with all
parking rules and regulations including any sticker or other identification
system established by Lessor. Failure to observe the rules and regulations
shall terminate Lessee's right to use the parking garage or area and subject
the vehicle in violation of the parking rules and regulations to removal and
impoundment. No termination of parking privileges or removal of impoundment of
a vehicle shall create any liability on Lessor or be deemed to interfere with
Lessee's right to possession of its leased premises. Vehicles
<PAGE> 35
must be parked entirely within the stall lines and all directional signs, arrows
and posted speed limits must be observed. Parking is prohibited in areas not
striped for parking, in aisles, where "No Parking" signs are posted, on ramps,
in cross hatched areas, and in other areas as may be designated by Lessor.
Parking stickers or other forms of identification supplied by Lessor shall
remain the property of Lessor and not the property of Lessee and are not
transferable. Every person is required to park and lock his vehicle. All
responsibility for damage to vehicles or persons is assumed by the owner of the
vehicle or its driver.
14. Movement in or out of the building of furniture or office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or materials
which requires use of elevators or stairways, or movement through the building
entrances or lobby, shall be restricted to hours designated by Lessor. All
such movement shall be under supervision of Lessor and carried out in the
manner agreed between Lessee and Lessor by prearrangement before performance.
Such prearrangements will include determination by Lessor of time, method, and
routing of movement and limitations imposed by safety or other concerns which
may prohibit any article, equipment or any other item from being brought into
the building. Lessee assumes, and shall indemnify Lessor against, all risks
and claims of damage to persons and properties arising in connection with any
said movement.
15. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort or
duration in connection with the elevator service.
16. Lessee shall not lay floor covering within the leased premises without
written approval of the Lessor. The use of cement or other similar adhesive
materials not easily removed with water is expressly prohibited.
17. Lessee agrees to cooperate and assist Lessor in the prevention of
canvassing, soliciting and peddling within the building or project.
18. Lessor reserves the right to exclude from the building or project, between
the hours of 6:00p.m. and 7:00a.m. on weekdays and at all hours on Saturday,
Sunday and legal holidays, all persons who are not known to the building or
project security personnel and who do not present a pass to the building signed
by the Lessee. Each Lessee shall be responsible for all persons for whom he
supplies a pass.
19. It is Lessor's desire to maintain in the building or project the highest
standard of dignity and good taste consistent with comfort and convenience for
Lessees. Any action or condition not meeting this high standard should be
reported directly to
<PAGE> 36
Lessor. Your cooperation will be mutually beneficial and sincerely appreciated.
Lessor reserves the right to make such other and further reasonable rules and
regulations as in its judgment may from time to time be necessary, for the
safety, care and cleanliness of the leased premises and for the preservation of
good order therein.
<PAGE> 1
EXHIBIT 11
INTELECT COMMUNICATIONS SYSTEMS LIMITED AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
PRIMARY AND FULLY DILUTED LOSS PER SHARE
Shares in issue beginning of period 15,027,728 11,385,117
Shares issued (weighted average) 1,566,669 320,034
------------ ------------
Weighted average shares in issue end of period 16,594,397 11,705,151
Dilutive common stock equivalents:
Stock options using treasury stock method -- 822,860
------------ ------------
Total weighted average common shares and
common stock equivalents 16,594,397 12,528,011
============ ============
Loss for period (thousands of US Dollars) $ (7,415) $ (1,995)
============ ============
Loss per share $ (0.45) $ (0.16)
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 433
<SECURITIES> 912
<RECEIVABLES> 3,763
<ALLOWANCES> 27
<INVENTORY> 3,538
<CURRENT-ASSETS> 9,364
<PP&E> 6,168
<DEPRECIATION> 1,183
<TOTAL-ASSETS> 36,182
<CURRENT-LIABILITIES> 17,596
<BONDS> 6,374
0
0
<COMMON> 174
<OTHER-SE> 10,950
<TOTAL-LIABILITY-AND-EQUITY> 36,182
<SALES> 2,716
<TOTAL-REVENUES> 4,537
<CGS> 3,714
<TOTAL-COSTS> 3,714
<OTHER-EXPENSES> 7,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 945
<INCOME-PRETAX> (7,284)
<INCOME-TAX> 38
<INCOME-CONTINUING> (7,322)
<DISCONTINUED> (93)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,415)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
</TABLE>
