<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 June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File Number: 0-24858
WAVEPHORE, INC.
(Exact name of registrant as specified in its charter)
INDIANA 86-0491428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3311 NORTH 44TH STREET, PHOENIX, AZ 85018
(602) 952-5500
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
2601 WEST BROADWAY ROAD, TEMPE, AZ 85282
(former address changed since last report)
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 1964 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's common stock, as of July 31,
1996:
COMMON SHARES, NO PAR VALUE: 13,522,666 SHARES
<PAGE> 2
WAVEPHORE, INC.
INDEX
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995......................... 3
Condensed Consolidated Statements of Operations -
Three and six months ended June 30, 1996 and 1995........... 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995..................... 5
Notes to Condensed Consolidated Financial Statements ........... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 7
PART II OTHER INFORMATION
Item 4. Submissson of Matters to a Vote of Security Holders .. 9
Item 6. Exhibits and Reports on Form 8-K ...................... 9
SIGNATURES............................................................... 10
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WavePhore, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $10,831,758 $10,945,178
Accounts receivable 3,019,742 3,437,374
Inventories 2,754,903 2,194,673
Other receivables 103,052 159,028
Notes receivable from officers, including interest 476,017 40,757
Prepaid expenses and other 659,466 518,568
----------- -----------
Total Current Assets 17,844,938 17,295,578
Notes and other receivables 123,253 212,138
Property and equipment, net 2,123,816 2,013,655
Intangible assets of businesses acquired, net 17,517,566 18,467,252
Deposits and other assets 386,440 269,530
----------- -----------
$37,996,013 $38,258,153
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,448,454 $ 2,119,244
Accrued stock issuance expenses -- 1,977,000
Accrued expenses 543,305 813,285
Current portion of long-term debt 1,064,061 1,197,466
Other 131,125 190,000
----------- -----------
Total Current Liabilities 3,186,945 6,296,995
Long-term debt, less current portion 616,083 637,843
Other long-term liabilities 336,106 217,487
Deferred compensation -- 300,000
Stockholders' equity 33,856,879 30,805,828
----------- -----------
$37,996,013 $38,258,153
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
WavePhore, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 4,604,353 $ 335,538 $ 8,647,767 $ 521,487
Cost of revenues 2,801,302 113,663 5,300,776 288,541
------------ ------------ ------------ -----------
Gross margin 1,803,051 221,875 3,346,991 232,946
Operating expenses:
Product development 986,387 1,150,786 1,921,375 2,151,416
Sales and marketing 1,642,087 565,423 2,916,373 954,128
General and administrative 1,443,434 497,841 2,782,533 1,030,637
Charge for purchased research
and development -- -- -- 473,679
Amortization 483,693 -- 967,388 --
------------ ------------ ------------ -----------
4,555,601 2,214,050 8,587,669 4,609,860
------------ ------------ ------------ -----------
Loss from operations (2,752,550) (1,992,175) (5,240,678) (4,376,914)
Other (income) expense:
Interest expense 51,702 4,086 99,691 7,680
Interest income (180,969) (141,262) (370,853) (262,278)
Other (5,287) (77) (2,427) (4,416)
------------ ------------ ------------ -----------
(134,554) (137,253) (273,589) (259,014)
Net loss $ (2,617,996) $ (1,854,922) $ (4,967,089) $(4,117,900)
============ ============ ============ ===========
Net loss per share $ (0.22) $ (0.18) $ (0.42 $ (0.42)
============ ============ ============ ===========
Number of shares used in
per share calculation 12,082,552 10,085,134 11,865,786 9,908,455
============ ============ ============ ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
WavePhore, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
------------------------------
June 30, June 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (4,967,089) $ (4,117,900)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 1,466,361 85,840
Charge for purchased research and development -- 473,679
Amortization of unearned compensation -- 68,750
Provision for doubtful accounts 21,000 --
Changes in operating assets and liabilities (899,190) (202,066)
------------ ------------
Net cash used in operating activities (4,378,918) (3,691,697)
INVESTING ACTIVITIES:
Purchase of property and equipment (609,134) (389,690)
Purchase of treasury stock (2,036,419) (569,364)
Purchase of business, net of cash acquired -- (11,475)
Loans to officers, including interest (435,260) (666,173)
Repayments on loans to officers -- 1,600,796
------------ ------------
Net cash used in investing activities (3,080,813) (35,906)
FINANCING ACTIVITIES:
Issuance of preferred shares, net 5,499,276 --
Payment of preferred stock dividend (552,164) --
Issuance of common stock, net 2,564,733 1,568,399
Issuance of stock purchase warrants -- 100,000
Payments on notes payable (1,514,351) (116,447)
Borrowings under credit line; net 1,359,186 --
Other (10,369) (8,357)
Issuance of loan receivable -- (140,924)
Repayments on loan receivable -- 140,924
------------ ------------
Net cash provided by financing activities 7,346,311 1,543,595
Net decrease in cash and cash equivalents (113,420) (2,184,008)
------------ ------------
Cash and cash equivalents at beginning of period 10,945,178 10,324,921
------------ ------------
Cash and cash equivalents at end of period $ 10,831,758 $ 8,140,913
============ ============
Supplemental cash flow information:
- Issuance of common stock in connection
with purchase of business $ 1,135,065
============
- Issuance of common stock in connection
with dividend payment on preferred stock $ 527,812
============
</TABLE>
See accompanying notes.
5
<PAGE> 6
WAVEPHORE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, pursuant
to the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Certain
information and footnote disclosures normally included in financial statements
have been condensed or omitted pursuant to such rules and regulations. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. The results of operations for the three and
six month periods ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year. Effective January 1, 1996, the Company
discontinued the development stage.
(2) LOSS PER SHARE
Loss per share is based on the weighted average number of common shares
outstanding during each period. Common stock equivalents, which were
anti-dilutive, were not included in the computation of net loss per share.
(3) RECLASSIFICATIONS
Certain amounts presented for the three and six months ended June 30,
1995 have been reclassified to conform to June 30, 1996 presentation.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
Finished goods $ 616,713 $ 588,260
Work-in-process 1,373,402 1,334,567
Raw materials 764,788 271,846
---------- ----------
$2,754,903 $2,194,673
========== ==========
</TABLE>
6
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
WavePhore, Inc. including its recently acquired, wholly-owned
subsidiaries, WavePhore, Canada, Inc. and WavePhore Networks, Inc., (formerly
Mainstream Data, Inc.) collectively (the "Company"), is a developer and provider
of proprietary products and services for the low-cost, high speed distribution
of digital data via the existing worldwide television, radio and satellite
broadcast infrastructures. The year of 1995 marked a major transition in the
Company's evolution from a technology organization, principally a hardware and
network systems developer, to a fully integrated information solutions provider.
The Company had been in the development stage until the end of 1995. Effective
January 1, 1996, the Company discontinued the development stage.
On January 25, 1995, the Company purchased all of the outstanding
common stock of BleuMont Telecom Inc. of Montreal, Canada. Subsequent to the
acquisition, BleuMont Telecom Inc. was renamed WavePhore Canada, Inc.
("WavePhore Canada"). WavePhore Canada is involved in the research, development
and marketing of products and services for the transmission of data by
television signal. The acquisition was accounted for as a purchase and,
accordingly, the operating results of WavePhore Canada have been included in the
consolidated financial statements from the date of acquisition. The aggregate
purchase price of WavePhore Canada common stock was approximately $1.3 million,
consisting of $284,831 in cash (includes direct cost of acquisition) and the
issuance of 244,626 shares of the Company's common stock.
During the second quarter of 1995, the Company entered into an
agreement with Intel Corporation ("Intel") whereby it agreed to develop data
broadcasting technology for Intel. The agreement provides, among other things,
for the Company to license to Intel certain of the Company's proprietary
technologies and Intel granting the Company certain rights with respect to the
sale and distribution of products incorporating such technologies. In addition,
under a separate agreement, Intel acquired the right to purchase up to 250,000
common shares of the Company by May of 1997. In connection with the agreements,
Intel made payments to the Company aggregating $500,000 in cash, and agreed to
pay other license fees and royalties to the Company.
On December 29, 1995, the Company purchased all of the outstanding
common stock of WavePhore Networks, Inc. (formerly Mainstream Data, Inc.),
hereafter referred to as "WavePhore Networks". WavePhore Networks is a provider
of proprietary products and services for the distribution of digital data via
direct satellite links and local FM broadcast frequencies. In addition,
WavePhore Networks markets an information product known as Newscast. The
acquisition was accounted for as a purchase and, accordingly, the operating
results of WavePhore Networks have been included in the consolidated financial
statements from the date of acquisition. The aggregate purchase price was
approximately $29.4 million, consisting of $20.1 million in cash and the
issuance of 747,029 shares of the Company's common stock.
RESULTS OF OPERATION - THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues. Revenues are derived from datacasting services and equipment
sales and Newscast(TM) services. Revenues for the three months and six months
periods ended June 30, 1996 were $4,604,000 and $8,648,000, respectively
compared to $336,000 and $521,000, respectively for the comparable periods in
the prior year. The increase in revenues is the result of the increase in volume
in the datacasting services and Newscast businesses.
Cost of Revenues. Cost of revenues consists primarily of royalties paid
to third party information providers for the cost of news services sold to
customers, costs associated with transmitting news services to customer sites
and cost of computer hardware and software sold to customers. The increase in
cost of revenues is due to the increased business volume.
7
<PAGE> 8
Product Development. Product development expenses were $986,000 and
$1,921,000 for the three months and six months periods ended June 30, 1996,
respectively compared to $1,151,000 and $2,151,000, respectively, for the
comparable periods in the prior year. The product development expenses consists
primarily of design, testing and support of the Company's existing and
developing hardware, software and services. The Company anticipates continuing
to make significant expenditures in product development as it develops new and
enhanced services and provides services to a growing customer base.
Sales and Marketing. Sales and marketing expenses for the three and six
months periods ended June 30, 1996 were $1,642,000 and $2,916,000 respectively,
compared to $565,000 and $954,000, respectively, for the comparable periods of
the prior year. The increase relates primarily to additional sales personnel,
increased travel, and advertising and promotional costs.
General and administrative. General and administrative expenses for the
three and six months ended June 30, 1996 were $1,443,000 and $2,783,000,
respectively, compared to $498,000 and $1,031,000, respectively, for the
comparable periods of the prior year. The increase relates primarily to the
acquisition of WavePhore Canada in January 1995 and WavePhore Networks in
December 1995.
Charge for purchased research and development. The charge for purchased
research and development relates to the portion of the total cost to purchase
WavePhore Canada common stock which was allocated to research and development
that was being conducted by WavePhore Canada at the time of the purchase.
Interest Expense. Interest expense increased during the three and six
months periods ended June 30, 1996, compared to the same period of the prior
year, due to the average debt outstanding during the periods increasing in 1996
compared to 1995.
Interest Income. Interest income increased during the three and six
months periods ended June 30, 1996, compared to the same periods of the prior
year, due to the increase in cash and cash equivalents resulting from the cash
proceeds from the private offering of the Company's preferred stock in December
1995 and January 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the six months periods ended June 30, 1996 and 1995, the Company
used cash in its operations of $4,379,000 and $3,692,000, respectively. Cash
used in operations is less than the net losses primarily because of non cash
charges of depreciation and amortization and the charge for purchased research
and development. Cash flows used in investing activities was $3,081,000 for the
six months ended June 30, 1996, compared to cash used by investing activities of
$36,000 for the same period in the prior year. The Company made $609,000 of
purchases of property and equipment during the first six months of 1996. For the
six months ended June 30, 1996, the Company generated cash of $7,346,000 from
financing activities primarily from the issuance of preferred and common stock.
These sources of cash were offset by the payment of a preferred stock dividend
in the amount of $552,000.
The Company estimates that its present financial resources will be
sufficient to fund operating activities including the company's accelerated
internal growth beyond 1996. The Company will continue to evaluate business
acquisitions and the development of strategic partnerships to help accelerate
its growth. The pace at which these acquisitions and strategic partnerships
occur will have an impact on the capital resources of the Company to the extent
they are funded with cash, or upon the dilution of existing shareholder
interests to the extent they are entered into for equity.
Certain of the above statements are forward looking statements that
involve risks and uncertainties. Actual results could differ materially as a
result of a variety of factors, including technology change, competitive
developments and risk factors listed from time to time in the Company's SEC
reports.
8
<PAGE> 9
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders.
(a) On May 3, 1996, the Company held its Annual Meeting of Shareholders
at which the following matter was voted upon:
ELECTION OF DIRECTORS.
All six management nominees for election as directors were unopposed
and elected by the following votes:
DIRECTOR SHARES FOR SHARES WITHHELD
David E. Deeds 10,270,256 43,594
R. Glenn Williamson 10,270,256 43,594
Scott E. Calder 10,270,256 43,594
C. Roland Haden 10,269,056 44,794
Glenn Scolnik 10,270,256 43,594
J. Robert Collins 10,270,256 43,594
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein:
10.1 Office building lease between Flower Court General Partnership
and the Company, dated June 30, 1996
10.2 Office building lease between Kax Co., a General Partnership
and WavePhore, Networks, Inc., dated May 30, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the period.
9
<PAGE> 10
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.
WavePhore, Inc.
Date: July 31, 1996 By /s/ David E. Deeds
------------- -------------------
David E. Deeds,
President and Chief Executive Officer
(Duly Authorized Officer)
Date: July 31 , 1996 By /s/ Kenneth D. Swenson
-------------- ----------------------
Kenneth D. Swenson,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
10
<PAGE> 11
EXHIBIT INDEX
Exhibit Exhibit
Number Description
- ------- -----------
10.1 Office building lease between Flower Court General
Partnership and the Company, dated June 30, 1996.
10.2 Office building lease between Kax Co., a General
Partnership and WavePhore Networks, Inc., dated May 30,
1996.
27 Financial Data Schedule
11
<PAGE> 1
EXHIBIT 10.1
OFFICE BUILDING LEASE
This lease ("LEASE") between FLOWER COURT GENERAL PARTNERSHIP, an Arizona
general partnership ("LANDLORD"), and WAVE PHORE, INC. an Indiana corporation
authorized to do and doing business in the State of Arizona ("TENANT") is dated
June ___, 1996 .
SECTION 1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5) and the provisions of
this lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal lines on the floor plan attached hereto as EXHIBIT
"A," and further described at Paragraph 2 (k) . The Premises are located within
the Building and Project described in Paragraph 2 (l). Tenant shall have the
non-exclusive right (unless otherwise provided herein) in common with Landlord,
other tenants, subtenants, and invitees to use of the Common Areas (as defined
at Paragraph 2 (e)).
SECTION 2. DEFINITIONS.
As used in this Lease, the following terms shall have the following meanings:
a. BASE RENT: The fixed annual rents set forth in EXHIBIT "B."
b. BASE YEAR: The calendar year of 1996 .
c. BROKERS:
(i) LANDLORD'S BROKER: CB Commercial Real Estate Group, Inc.
(ii) TENANT'S BROKER: Koll CBS
d. COMMENCEMENT
DATE: August 1, 1996
e. COMMON AREAS: The building lobbies, common corridors and hallway,
restrooms, garage and parking areas, stairways,
elevators, and other generally understood public or
common areas. Landlord shall have the right to regulate
or restrict the use of Common Areas.
f. EXPENSE STOP: An amount equal to Project Operating Costs for the Base
Year, calculated under the assumption that throughout
the Base Year the Project is NINETY-FIVE PERCENT (95%)
occupied, and including the actual amount of real
property taxes assessed against the Building or Project
for the Base Year.
<PAGE> 2
g. EXPIRATION DATE: July 31, 2001, unless otherwise or sooner terminated in
accordance with the provisions of this Lease.
h. LANDLORD'S MAILING ADDRESS: c/o JM Management Company, Inc.
5141 North 40th Street
Suite 100
Phoenix, Arizona 85018
Donald L. Meyers
Law Offices Donald D. Meyers, P.C.
2398 East Camelback Road
Suite 900
Phoenix, Arizona 85016
i. TENANT'S MAILING ADDRESS: WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
j. PARKING: Landlord agrees to provide Tenant with approximately
forty-eight (48) covered, reserved parking spaces directly
underneath the Building at no cost to Tenant for the Term of the
Lease. Tenant agrees to abide by any and all parking regulations
and rules established from time to time by Landlord or Landlord's
parking operator.
k. PREMISES: That portion of the Building containing approximately
12,931 square feet of Rentable Area shown by diagonal lines on
EXHIBIT A, located in the Building.
l. PROJECT: The building of which the Premises are a part (the "BUILDING")
and any other buildings or improvements on the real
property (the "PROPERTY") located at 3311 North 44th Street,
Phoenix, Arizona. The Project is known as "FLOWER COURT."
m. RENTABLE
AREA: As to both the Premises and the Project , the respective
measurements of floor area as may from time to time
be subject to lease by Tenant and all tenants of the Project,
respectively, as determined by Landlord and applied on a
consistent basis throughout the Project.
n. SECURITY
DEPOSIT: The amount of $17,778.10 which is equal to ONE-TWELFTH (1/12)
of the first year's Base Rent.
o. STATE: The State of Arizona.
<PAGE> 3
p. TENANT'S
PROPORTIONATE
SHARE: 49.79 %. Such share is a fraction, the numerator of
which is the Rentable Area of the Premises, and the
denominator of which is the Rentable Area of the
Project, as determined by Landlord from time to time.
The Project consists of two (2) buildings, containing
a total Rentable Area of 25,907 square feet.
q. TENANT'S
USE CLAUSE: General Office
r. TERM: The period commencing on the Commencement Date and
expiring at midnight on the Expiration Date.
s. LEASEHOLD
IMPROVEMENT
ALLOWANCE: An amount equal to the product of Three Dollars
($3.00 ) multiplied by the number of square feet of
Rentable Area of the Premises, which will be paid
upon execution of this Lease.
Landlord agrees that it will clean the Premises and
touch up with paint all areas of obvious need to the
reasonable satisfaction of Tenant prior to the
Commencement Date. The cost for such cleaning and
painting shall not be included in the Leasehold
Improvement Allowance.
SECTION 3. EXHIBITS.
The exhibits listed below are incorporated by reference in this Lease:
a. EXHIBIT "A" - Floor Plan showing the Premises and Right of First Refusal
Space.
b. EXHIBIT "B" - Base Rent.
c. EXHIBIT "C" - Leasehold Improvements.
d. EXHIBIT "D" - Rules & Regulations.
SECTION 4. DELIVERY OF POSSESSION.
Tenant acknowledges that Bryant Universal is presently a Debtor in a pending
bankruptcy proceeding in the United States Bankruptcy Court for the District of
Arizona. In re Bryant Universal Roofing, No. 96-03726-PHX-CC. As a condition
precedent to the effectiveness and enforceability of this Lease, the issue of
appropriately and legally allowing Tenant to occupy the Premises by August 1,
1996 must be resolved satisfactorily in Landlord's sole discretion. In the event
Landlord cannot satisfy itself with respect to this issue on or before July 5,
1996, this Lease and all rights, duties and obligations thereunder shall
terminate and Landlord and Tenant shall owe no duties to the other.
<PAGE> 4
If for any other reason Landlord does not deliver possession of the Premises to
Tenant on the Commencement Date, Landlord shall not be subject to any liability
for such failure, the Expiration Date shall not change, and the validity of this
Lease shall not be impaired but Rent shall be abated until delivery of
possession. If Landlord permits Tenant to enter into possession of the Premises
before the Commencement Date, such possession shall be subject to the provisions
of this Lease, including, without limitation, the payment of Rent. Landlord
agrees to allow Tenant to enter onto the Premises prior to the Commencement Date
at such times as are reasonably permissible for the express purpose of wiring
the Premises for Tenant's reasonable business needs. No payment of rent shall be
required for the same.
SECTION 5. RENT.
5.1. Payment of Base Rent. Tenant agrees to pay the Base Rent for the Premises.
The Base Rent shall be $16.50 per square foot per year for the Term of the Lease
as set forth in EXHIBIT B, plus applicable taxes which shall include the
following: excise, privilege, and sales taxes and any tax levied on the rental.
The Base Rent shall be payable in TWELVE (12) monthly installments ("MONTHLY
INSTALLMENTS OF BASE RENT") in advance on the first day of each calendar month
of the Term. If the Term begins (or ends) on other than the first (or last) day
of a calendar month, the Base Rent for the partial month shall be prorated on a
per diem basis. Tenant shall pay Landlord the first Monthly Installment of Base
Rent on July 1, 1996 or upon Delivery of Possession.
5.2. Project Operating Costs.
a. In order that the Rent payable during the Term reflect any increase
in Project Operating Costs, Tenant agrees to pay to Landlord as Rent,
Tenant's Proportionate Share of all increases in costs, expenses and
obligations attributable to the Project and its operation, all as
provided below. Such increase shall be limited to five percent (5%) per
year of controllable expenses.
b. If during any calendar year during the Term, Project Operating Costs
exceed the Project Operating Costs for the Base Year, Tenant shall pay
to Landlord, in addition to the Base Rent and all other payments due
under this Lease, an amount equal to Tenant's Proportionate Share of
such excess Project Operating Costs in accordance with the provisions
of this Section.
1. The term "PROJECT OPERATING COSTS" shall include all those
items described in the following subparagraphs (a) and (b):
a. All taxes, assessments, water and sewer charges
and other similar governmental charges levied on or
attributable to the Building or Project or their
operation, including without limitation, (i) real
property taxes or assessments levied or assessed
against the Building or Project; (ii) assessments or
charges levied or assessed against the Building or
Project
<PAGE> 5
by any redevelopment agency, (iii) any tax measured
by gross rentals received from the leasing of the
Premises, Building or Project, excluding any net
income, franchise, capital stock, estate or
inheritance taxes imposed by the State or federal
government or their agencies, branches or
departments; provided that if at any time during the
Term any governmental entity levies, assesses, or
imposes on Landlord any (1) general or special, ad
valorem or specific, excise, capital levy or other
tax, assessment, levy or charge directly on the Rent
received under this Lease or on the rent received
under any other leases of space in the Building or
Project, or (2) any license fee, excise or franchise
tax, assessment, levy or charge measured by or based,
in whole or in part, upon such rent, or (3) any
transfer, transaction, or similar tax, assessment,
levy or charge based directly or indirectly upon the
transaction represented by this Lease or such other
leases, or (4) any occupancy, use, per capita or
other tax, assessment, levy or charge based directly
or indirectly upon the use or occupancy of the
Premises or other premises within the Building or
Project, then any such taxes, assessments, levies and
charges shall be deemed to be included in the term
Project Operating Costs. If at any time during the
Term the assessed valuation of or taxes on the
Project are not based on a completed Project having
at least NINETY-FIVE PERCENT (95%) of the Rentable
Area occupied, then the "taxes" component of the
Project Operating Costs shall be adjusted by Landlord
to reasonably approximate the taxes which would have
been payable if the Project were completed and at
least NINETY-FIVE PERCENT (95%) occupied.
b. Operating costs incurred by Landlord in
maintaining and operating the Building and Project,
including without limitation the following: costs of
(1) utilities; (2) supplies; (3) insurance (including
public liability, property damage, earthquake, and
fire and extended coverage insurance for the full
replacement cost of the Building and Project as
required by Landlord or its lenders for the Project;
(4) services of independent contractors; (5)
compensation (including employment taxes and fringe
benefits) of all persons who perform duties connected
with the operation, maintenance, repair or overhaul
of the Building or Project, and equipment,
improvements and facilities located within the
Project, including without limitation engineers,
janitors, painters, floor waxers, window washers,
security and parking persons and gardeners (but
excluding persons performing services not uniformly
available to or performed for substantially all
Building or Project tenants); (6) operation and
maintenance of a room for delivery and distribution
of mail to tenants of the Building or Project as
required by the U.S. Postal Service (including,
without limitation, an amount equal to the fair
market rental value of the mail room premises); (7)
management of the Building or Project, whether
managed by Landlord or an independent contractor
(including, without limitation, an amount equal to
the fair market value of any on-site
<PAGE> 6
manager's office); (8) rental expenses for (or a
reasonable depreciation allowance on) personal
property used in the maintenance, operation or repair
of the Building or Project; (9) costs, expenditures
or charges (whether capitalized or not) required by
any governmental or quasi-governmental authority;
(10) amortization of capital expenses (including
financing costs) (i) required by a governmental
entity for energy conservation or life safety
purposes, or (ii) made by Landlord to reduce Project
Operating Costs; and (11) any other costs or expenses
incurred by Landlord under this Lease and not
otherwise reimbursed by tenants of the Project. If at
any time during the Term, less than NINETY-FIVE
PERCENT (95%) of the Rentable Area of the Project is
occupied, the "operating costs" component of the
Project Operating Costs shall be adjusted by Landlord
to reasonably approximate the operating costs which
would have been incurred if the Project had been at
least NINETY-FIVE PERCENT (95%) occupied.
2. Tenant's Proportionate Share of Project Operating
Costs shall be payable by Tenant to Landlord as
follows:
a. Beginning with the calendar year following the
Base Year and for each calendar year thereafter
("COMPARISON YEAR"), Tenant shall pay Landlord an
amount equal to Tenant's Proportionate Share of the
Project Operating Costs incurred by Landlord in the
Comparison Year which exceeds the amount of the
Expense Stop. This excess is referred to as the
"EXCESS EXPENSES."
b. To provide for current payments of Excess
Expenses, Tenant shall, at Landlord's request,
pay as additional rent during each Comparison
year, an amount equal to Tenant's Proportionate
Share of the Excess Expenses payable during such
Comparison Year as estimated by Landlord from
time to time. Such payments shall be made in
monthly installments commencing on the first day of
the month following the month in which Landlord
notifies Tenant of the amount it is to pay hereunder
and continuing until the first day of the month
following the month in which Landlord gives Tenant a
new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time
the amount of the Excess Expenses for each
Comparison year and Tenant's Proportionate Share
thereof, and then to make an adjustment in the
following year based on the actual Excess Expenses
incurred for that Comparison Year.
c. On or before APRIL 1 of each Comparison Year after
the first Comparison Year (or as soon thereafter as
is practical), Landlord shall deliver to Tenant a
statement setting forth Tenant's Proportionate Share
of the Excess Expenses for the preceding Comparison
Year. If Tenant's
<PAGE> 7
Proportionate Share of the actual Excess Expenses for
the previous Comparison Year exceeds the total of the
estimated monthly payments made by Tenant for such
year, Tenant shall pay Landlord the amount of the
deficiency within TEN (10) DAYS of the receipt of the
statement, if such total exceeds Tenant's
Proportionate Share of the actual Excess Expenses for
such Comparison Year, then Landlord shall credit
against Tenant's next ensuing monthly installment(s)
of additional rent an amount equal to the difference
until the credit is exhausted. If a credit is due
from Landlord on the Expiration Date, Landlord shall
pay Tenant the amount of the credit. The obligations
of Tenant and Landlord to make payments required
under this Paragraph 5.2 shall survive the Expiration
Date.
d. Tenant's Proportionate Share of Excess Expenses in
any Comparison Year having less than 365 days shall
be appropriately prorated.
e. If any dispute arises as to the amount of any
additional rent due hereunder, Tenant shall have the
right after reasonable notice and at reasonable times
to inspect Landlord's accounting records at
Landlord's accounting office and, if after such
inspection Tenant still disputes the amount of
additional rent owed, a certification as to the
proper amount shall be made by Landlord's certified
public accountant, which certification shall be final
and conclusive. Tenant agrees to pay the cost of such
certification unless it is determined that Landlord's
original statement overstated Project Operating costs
by more than FIVE PERCENT (5%).
5.3. DEFINITION OF RENT. All costs and expenses which Tenant assumes or agrees
to pay to Landlord under this Lease shall be deemed additional rent (which,
together with the Base Rent is sometimes referred to as the "RENT"). The Rent
shall be paid to the Building manager (or other person) and at such place, as
Landlord may from time to time designate in writing, without any prior demand
therefor and without deduction or offset, in lawful money of the United States
of America.
5.4. RENT CONTROL. If the amount of Rent or any other payment due under this
Lease violates the terms of any governmental restrictions on such Rent or
payment, then the Rent or payment due during the period of such restrictions
shall be the maximum amount allowable under those restrictions. Upon termination
of the restrictions, Landlord shall, to the extent it is legally permitted,
recover from Tenant the difference between the amounts received during the
period of the restrictions and the amounts Landlord would have received had
there been no restrictions.
5.5 TAXES PAYABLE BY TENANT. In addition to the Rent and any other charges to be
paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for any
and all taxes payable by Landlord (other than net income taxes) which are not
otherwise reimbursable under this Lease, whether or not now customary or within
the contemplation of the parties, where such taxes are upon, measured by or
reasonably attributable to (a) the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the Premises, or the
cost or
<PAGE> 8
value of any leasehold improvements made in or to the Premises by or for Tenant,
other than BUILDING STANDARD WORK made by Landlord, regardless of whether title
to such improvements is held by Tenant or Landlord; (b) the gross or net Rent
payable under this Lease, including, without limitation, any rental or gross
receipts tax levied by any taxing authority with respect to the receipt of the
Rent hereunder; (c) the possession, leasing, operation, management, maintenance,
alteration, repair, use of occupancy by Tenant of the Premises or any portion
thereof; or (d) this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises. If it becomes
unlawful for Tenant to reimburse Landlord for any costs as required under this
Lease, the Base Rent shall be revised to net Landlord the same net Rent after
imposition of any tax or other charge upon Landlord as would have been payable
to Landlord but for the reimbursement being unlawful.
SECTION 6. INTEREST AND LATE CHARGES.
If Tenant fails to pay when due any Rent or other amounts or charges which
Tenant is obligated to pay under the terms of this Lease, the unpaid amounts
shall bear interest at the maximum rate then allowed by law. Tenant acknowledges
that the late payment of any Monthly Installment of Base Rent will cause
Landlord to lose the use of that money and incur costs and expenses not
contemplated under this Lease, including without limitation, administrative and
collection costs and processing and accounting expenses, the exact amount of
which is extremely difficult to ascertain. Therefore, in addition to interest,
if any such installment is not received by Landlord within FIVE (5) DAYS from
the date it is due, Tenant shall pay Landlord a late charge equal to TEN PERCENT
(10%) of such installment. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the loss suffered from such nonpayment by Tenant.
Acceptance of any interest or late charge shall not constitute a waiver of
Tenant's default with respect to such nonpayment by Tenant nor prevent Landlord
from exercising any other rights or remedies available to Landlord under this
Lease.
SECTION 7. SECURITY DEPOSIT.
Tenant agrees to deposit with Landlord the Security Deposit set forth at
Paragraph 2(n) upon execution of this Lease, as security for Tenant's faithful
performance of its obligations under this Lease. Landlord and Tenant agree that
the Security Deposit may be commingled with funds of Landlord and Landlord shall
have no obligation or liability for payment of interest on such deposit. Tenant
shall not mortgage, assign, transfer or encumber the Security Deposit without
the prior written consent of Landlord and any attempt by Tenant to do so shall
be void, without force or effect and shall not be binding upon Landlord.
If Tenant fails to pay any Rent or other amount when due and payable under this
Lease, or fails to perform any of the terms hereof, Landlord may appropriate and
apply or use all or any portion of the Security Deposit for Rent payments or any
other amount then due and unpaid, for payment of any amount for which Landlord
has become obligated as a result of Tenant's default or breach, and for any loss
or damage sustained by Landlord as a result of Tenant's default or breach, and
Landlord may so apply or use this deposit without prejudice to any other remedy
Landlord may have by reason of Tenant's default or breach. If Landlord so uses
any of the Security Deposit,
<PAGE> 9
Tenant shall, within TEN (10) DAYS after written demand therefor, restore the
Security Deposit to the full amount originally deposited; Tenant's failure to do
so shall constitute an act of default hereunder and Landlord shall have the
right to exercise any remedy provided for at Section 29 hereof. Within FIFTEEN
(15) DAYS after the Term (or any extension thereof) has expired or Tenant has
vacated the Premises, whichever shall last occur, and provided Tenant is not
then in default on any of its obligations hereunder, Landlord shall return the
Security Deposit to Tenant, or, if Tenant has assigned its interest under this
Lease, to the last assignee of Tenant. If Landlord sells its interest in the
Premises, Landlord may deliver this deposit to the purchaser of Landlord's
interest and thereupon be relieved of any further liability or obligation with
respect to the Security Deposit.
SECTION 8. TENANT'S USE OF THE PREMISES.
Tenant shall use the Premises solely for the purposes set forth in Tenant's Use
Clause. Tenant shall not use or occupy the Premises in violation of law or any
covenant, condition or restriction affecting the Building or Project or the
certificate of occupancy issued for the Building or Project, and shall, upon
notice from Landlord, immediately discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be a violation of
law or the certificate of occupancy. Tenant, at Tenant's own cost and expense,
shall comply with all laws, ordinances, regulations, rules and/or any directions
of any governmental agencies or authorities having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, impose any
duty upon tenant or Landlord with respect to the Premises or its use or
occupation. A judgment of any court of competent jurisdiction or the admission
by Tenant in any action or proceeding against Tenant that Tenant has violated
any such laws, ordinances, regulations, rules and/or directions in the use of
the Premises shall be deemed to be conclusive determination of that fact as
between Landlord and Tenant. Tenant shall not do or permit to be done anything
which will invalidate or increase the cost of any fire, extended coverage or
other insurance policy covering the Building or Project and/or property located
therein, and shall comply with all rules, orders, regulations, requirements and
recommendations of the Insurance Services Office or any other organization
performing a similar function. Tenant shall promptly upon demand reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant's failure to comply with the provisions of this Section. 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 Project, or injure or annoy them or use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose, nor shall
Tenant cause, maintain or permit any nuisance in, on or about he Premises.
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises.
SECTION 9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to furnish to
the Premises during generally recognized business days, and during hours
determined by Landlord in its sole discretion, and subject to the Rules and
Regulations of the Building or Project, electricity for normal desk top office
equipment and normal copying equipment, and heating, ventilation and air
conditioning ("HVAC") as required in Landlord's judgment for the comfortable use
and
<PAGE> 10
occupancy of the Premises. "Generally recognized business days" shall include
Monday through Friday 8:00 a.m. to 6:00 p.m., Saturday 7:00 a.m. to 12:00 p.m.
If Tenant desires HVAC at any other time, Landlord shall use reasonable efforts
to furnish such service upon reasonable notice from Tenant and Tenant shall pay
Landlord's charges therefor on demand. Landlord shall also maintain and keep
lighted the common stairs, common entries and restrooms in the Building.
Landlord shall not be in default hereunder or be liable for any damages directly
or indirectly resulting from, nor shall the Rent be abated by reason of (I) the
installation, use or interruption of use of any equipment in connection with the
furnishing of any of the foregoing service, (II) failure to furnish or delay in
furnishing any such services where such failure or delay is caused by accident
or any condition or event beyond the reasonable control of Landlord, or by the
making of necessary repairs or improvements to the Premises, Building or
Project, or (III) the limitation, curtailment or rationing of, or restrictions
on, use of water, electricity, gas or any other form of energy serving the
Premises, Building or Project. Landlord shall not be liable under any
circumstances for a loss or injury to property or business, however occurring,
through or in connection with or incidental to failure to furnish any such
services. If Tenant uses heat generating machines or equipment in the Premises
which affect the temperature otherwise maintained by the HVAC system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof including the cost of installation, operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.
Tenant shall not, without the written consent of Landlord, use any apparatus or
device in the Premises, including without limitation, electronic data processing
machines, punch card machines or machines using in excess of 120 volts, which
consumes more electricity than is usually furnished or supplied for the use of
premises as general office space, as determined by Landlord. Tenant shall not
connect any apparatus with electric current except through existing electrical
outlets in the Premises. Tenant shall not consume water or electric current in
excess of that usually furnished or supplied for the use of premises as general
office space (as determined by Landlord), without first procuring the written
consent of Landlord, which Landlord may refuse, and in the event of consent,
Landlord may have installed a water meter or electrical current meter in the
Premises to measure the amount of water or electric current consumed. The cost
of any such meter and of its installation, maintenance and repair shall be paid
for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand for
all such water and electric current consumed as shown by said meters, at the
rates charged for such services by the local public utility plus any additional
expense incurred in keeping account of the water and electric current so
consumed. If a separate meter is not installed, the excess cost for such water
and electric current shall be established by an estimate made by a utility
company or electrical engineer hired by Landlord at Tenant's expense.
Nothing contained in this Section shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. In the event
utilities are separately metered, Tenant shall pay promptly upon demand for all
utilities consumed at utility rates charged by the local public utility plus any
additional expense incurred by Landlord in keeping account of the utilities so
consumed. Tenant shall be responsible for the maintenance and repair of any such
meters at its sole cost.
<PAGE> 11
Landlord shall furnish elevator service, lighting replacement for building
standard lights, restroom supplies, window washing and janitor services in a
manner that such services are customarily furnished to comparable office
buildings in the area.
SECTION 10. CONDITION OF THE PREMISES.
Tenant's taking possession of the Premises shall be deemed conclusive evidence
that as of the date of taking possession the Premises are in good order and
satisfactory condition, except for such matters as to which Tenant gave Landlord
notice on or before the Commencement Date. No promise of Landlord to alter,
remodel, repair or improve the Premises, the Building or the Project and no
representation, express or implied, respecting any matter or thing relating to
the Premises, Building, Project or this Lease (including without limitation, the
condition of the Premises, the Building or the Project) have been made to Tenant
by Landlord or its Broker or Sales Agent, other than as may be contained herein
or in a separate exhibit or addendum signed by Landlord and Tenant.
SECTION 11. CONSTRUCTION, REPAIRS AND MAINTENANCE.
a. LANDLORD'S OBLIGATIONS. Landlord shall maintain in good order,
condition and repair the Building and all other portions of the
Premises not the obligation of Tenant or of any other tenant in the
Building.
b. TENANT'S OBLIGATIONS.
(1) Tenant at Tenant's sole expense shall, except for
services furnished by Landlord pursuant to Section 9 hereof,
maintain the Premises in good order, condition and repair,
including the interior surfaces of the ceilings, walls and
floors, all doors, all interior windows, all plumbing, pipes
and fixtures, electrical wiring, switches and fixtures,
Building Standard furnishings and special items and equipment
installed by or at the expense of Tenant.
(2) Tenant shall be responsible for all repairs and
alterations in and to the Premises, Building and Project and
the facilities and systems thereof, the need for which arises
out of (i) Tenant's use or occupancy of the Premises (ii) the
installation, removal, use or operation of Tenant's Property
(as defined in Section 13) in the Premises (iii) the moving of
Tenant's Property into or out of the Building, or (iv) the
act, omission, misuse or negligence of Tenant, its agents,
contractors, employees or invitees.
(3) If Tenant fails to maintain the Premises in good
order, condition and repair, Landlord shall give Tenant notice
to do such acts as are reasonably required to so maintain the
Premises. If Tenant fails to promptly commence such work and
diligently prosecute it to completion, then Landlord shall
have the right to do such acts and expend such funds at the
expense of Tenant as are reasonably
<PAGE> 12
required to perform such work. Any amount so expended by
Landlord shall be paid by Tenant promptly after demand with
interest at the prime commercial rate then being charged by
Bank of America NT & S plus TWO PERCENT (2%) per annum, from
the date of such work, but not to exceed the maximum rate then
allowed by law. Landlord shall have no liability to Tenant for
any damage, inconvenience, or interference with the use of the
Premises by Tenant as a result of performing any such work.
c. COMPLIANCE WITH LAW. Landlord and Tenant shall each do all acts
required to comply with all applicable laws ordinances, and rules of
any public authority relating to their respective maintenance
obligations as set forth herein.
d. WAIVER BY TENANT. Tenant expressly waives the benefits of any
statute not or hereafter in effect which would otherwise afford the
Tenant the right to make repairs at Landlord's expense or to terminate
this Lease because of Landlord's failure to keep the Premises in good
order, condition and repair.
e. LOAD AND EQUIPMENT LIMITS. Tenant shall not place a load upon any
floor of the Premises which exceeds the load per square foot which such
floor was designed to carry, as determined by Landlord or Landlord's
structural engineer. The cost of any such determination made by
Landlord's structural engineer shall be paid for by Tenant upon demand.
Tenant shall not install business machines or mechanical equipment
which cause noise or violation to such a degree as to be objectionable
to Landlord or other building tenants.
f. Except as otherwise expressly provided in this Lease, Landlord shall
have no liability to Tenant nor shall Tenant's obligations under this
Lease be reduced or abated in any manner whatsoever by reason of any
inconvenience, annoyance, interruption or injury to business arising
from Landlord's making any repairs or changes which Landlord is
required or permitted by this Lease or by any other tenant's lease or
required by law to make in or to any portion of the Project, Building
or the Premises. Landlord shall nevertheless use reasonable efforts to
minimize any interference with Tenant's business in the Premises.
g. Tenant shall give Landlord prompt notice of any damage to or
defective condition in any part or appurtenance of the Building's
mechanical, electrical, plumbing, HVAC or other systems located in, or
passing through the Premises.
h. Upon the expiration or earlier termination of this Lease, Tenant
shall return the Premises clean and in the same condition as on the
date Tenant took possession, except for normal wear and tear. Any
damage to the Premises, including any structural damage, resulting from
Tenant's use or from the removal of Tenant's fixtures, furnishings and
equipment pursuant to Paragraph 13(b) shall be repaired by Tenant at
Tenant's expense.
<PAGE> 13
SECTION 12. ALTERATIONS AND ADDITIONS.
a. Tenant shall not make any additions, alterations or improvements to
the Premises without obtaining the prior written consent of Landlord.
Landlord's consent may be conditioned on Tenant's removing any such
additions, alterations or improvements upon the expiration of the Term
and restoring the Premises to the same condition as of the date Tenant
took possession. All work with respect to any addition, alteration or
improvement shall be done in a good and workmanlike manner by properly
qualified and licensed personnel approved by Landlord, and such work
shall be diligently prosecuted to completion. Landlord may, at
Landlord's option, require that any such work be performed by a
mutually agreed-upon contractor, in which case the cost of such work
shall be paid for before commencement of the work.
b. Tenant shall pay the costs of any work done on the Premises pursuant
to Paragraph 12(a), and shall keep the Premises, Building and Project
free and clear of liens of any kind. Tenant shall indemnify, defend
against and keep Landlord free and harmless from all liability, loss,
damage, costs, attorneys fees and any other expense incurred on account
of claims by any person performing work or furnishing materials or
supplies for Tenant or any person claiming under Tenant.
Tenant shall keep Tenant's leasehold interest, and any additions or
improvements which are or become the property of Landlord under this
Lease, free and clear of all attachment or judgment liens. Before the
actual commencement of any work for which a claim or lien may be filed,
Tenant shall give Landlord notice of the intended commencement date a
sufficient time before that date to enable Landlord to post notices of
non-responsibility or any other notices which Landlord deems necessary
for the proper protection of Landlord's interest in the Premises,
Building or the Project and Landlord shall have the right to enter the
Premises and post such notices at any reasonable time.
c. Landlord may require, at Landlord's sole option, that Tenant provide
to Landlord, at Tenant's expense, a lien and completion bond in an
amount equal to at least ONE AND ONE-HALF (1 -1/2) TIMES the total
estimated cost of any additions, alterations or improvements to be made
in or to the Premises, to protect Landlord against any liability for
mechanic's and materialmen's liens and to insure timely completion of
the work. Nothing contained in this Paragraph 12(c) shall relieve
Tenant of its obligation under Paragraph 12(b) to keep the Premises,
Building and Project free of all liens.
d. Unless their removal is required by Landlord as provided in
Paragraph 12(a), all additions, alterations and improvements made to
the Premises shall become the property of Landlord and be surrendered
with the Premises upon the expiration of the Term; provided, however,
Tenant's equipment, machinery and trade fixtures which can be removed
without damage to the Premises shall remain the property of Tenant and
may be removed, subject to the provisions of Paragraph 13(b).
<PAGE> 14
e. Landlord shall permit Tenant to install and operate communications
antennas, including satellite dishes, on the Premises including, but
not limited to, the roof of the Premises, for the term of the Lease
including any extension or renewal thereof.
SECTION 13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.
a. Landlord shall provide Tenant $3.00 per square foot as the Leasehold
Improvements Allowance. This money may be used at Tenant's discretion.
Tenant must obtain Landlord's consent for all Leasehold Improvements.
Landlord's consent shall not be unreasonably withheld so long as the
Leasehold Improvements conform to Tenant's use.
b. All fixtures, equipment, improvements and appurtenances attached to
or built into the Premises at the commencement of or during the Term,
whether or not by or at the expense of Tenant ("LEASEHOLD
IMPROVEMENTS"), shall be and remain a part of the Premises, shall be
the property of Landlord and shall not be removed by Tenant, except as
expressly provided in Paragraph 13(b).
c. All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment located in the
Premises and acquired by or for the account of Tenant, without expense
to Landlord, which can be removed without structural damage to the
Building, and all furniture, furnishings and other articles of movable
personal property owned by Tenant and located in the Premises
(collectively, "TENANT'S PROPERTY") shall be and shall remain the
property of Tenant and may be removed by Tenant at any time during the
Term, provided that if any of Tenant's Property is removed, Tenant
shall promptly repair any damage to the Premises or to the Building
resulting from such removal.
SECTION 14. RULES AND REGULATIONS.
Tenant agrees to comply with (and cause its agents, contractors, employees and
invitees to comply with) the rules and regulations attached hereto as EXHIBIT D
and such reasonable modifications thereof and additions thereto as Landlord may
from time to time make. Landlord shall not be responsible for any violation of
said rules and regulations by other tenants or occupants of the Building or
Project. SECTION 15. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability to Tenant
for (a) damage or injury to property, person or business (b) causing an actual
or constructive eviction from the Premises, or (c) disturbing Tenant's use or
possession of the Premises:
a. To name the Building and Project and to change the name or street
address of the Building or Project;
<PAGE> 15
b. To install and maintain all signs on the exterior and interior of
the Building and Project;
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes;
d. At anytime during the Term, and on reasonable prior notice to
Tenant, to inspect the Premises, and to show the Premises to any
prospective purchaser or mortgagee of the Project, or to any assignee
of any mortgage on the Project; or to other having an interest in the
Project or Landlord, and during the last SIX (6) MONTHS of the Term, to
show the Premises to prospective tenants thereof; and
e. To enter the Premises for the purpose of making inspections,
repairs, alterations, additions or improvements to the Premises or the
Building (including, without limitation, checking, calibrating,
adjusting or balancing controls and other parts of the HVAC system),
and to take all steps as may be necessary or desirable for the safety,
protection, maintenance or preservation of the Premises or the Building
or Landlord's interest therein, or as may be necessary or desirable for
the operation or improvement of the Building or in order to comply with
laws, orders or requirements of governmental or other authority.
Landlord agrees to use its best efforts (except in an emergency) to
minimize interference with Tenant's business in the Premises in the
course of any such entry.
SECTION 16. ASSIGNMENT AND SUBLETTING.
No assignment of this Lease or sublease of all or any part of the Premises shall
be permitted, except as provided in this Section 16.
a. Tenant shall not, without the prior written consent of Landlord,
assign or hypothecate this Lease or any interest herein or sublet the
Premises or any part thereof, or permit the use of the Premises by any
party other than Tenant. Any of the foregoing acts without such consent
shall be void and shall, at the option of Landlord, terminate this
Lease. This Lease shall not nor shall any interest of Tenant herein, be
assignable by operation of law without the written consent of Landlord.
b. If at any time or from time to time during the Term Tenant desires
to assign this Lease or sublet all or any part of the Premises, Tenant
shall give notice to Landlord setting forth the terms and provisions of
the proposed assignment or sublease, and the identity of the proposed
assignee or subtenant. Tenant shall promptly supply Landlord with such
information concerning the business background and financial condition
of such proposed assignee or subtenant as Landlord may reasonably
request. Landlord shall have the option, exercisable by notice given to
Tenant within TWENTY (20) DAYS after Tenant's notice is given, either
to sublet such space from Tenant at the rental and on the other terms
set forth in this Lease for the term set forth in Tenant's notice, or
in the case of an assignment, to terminate this Lease. If Landlord does
not exercise such option,
<PAGE> 16
Tenant may assign the Lease or sublet such space to such proposed
assignee or subtenant on the following further conditions:
(1) Landlord shall have the right to approve such proposed
assignee or subtenant, which approval shall not be
unreasonably withheld;
(2) The assignment or sublease shall be on the same terms set
forth in the notice given to Landlord;
(3) No assignment or sublease shall be valid and no assignee
or sublessee shall take possession of the Premises until an
executed counterpart of such assignment or sublease has been
delivered to Landlord;
(4) No assignee or sublessee shall have a further right to
assign or sublet except on the terms herein contained; and
(5) Any sums or other economic consideration received by
Tenant as a result of such assignment or subletting, however
determined under the assignment or sublease, which exceed, in
the aggregate, (i) the total sums which Tenant is obligated to
pay Landlord under this Lease (prorated to reflect obligations
allocable to any portion of the Premises subleased), plus (ii)
any real estate brokerage commissions or fees payable in
connection with such assignment or subletting, shall be paid
to Landlord as additional rent under this Lease without
affecting or reducing any other obligations of Tenant
hereunder.
c. Notwithstanding the provisions of paragraphs "a" and "b" above,
Tenant may assign this Lease or sublet the Premises or any portion
thereof without Landlord's consent and without extending any recapture
or termination option to Landlord, to any corporation which controls,
is controlled by or is under common control with Tenant or to any
corporation resulting from a merger or consolidation with Tenant, or to
any person or entity which acquires all the assets of Tenant's business
as a going concern, provided that (i) the assignee or sublessee
assumes, in full, the obligations of Tenant under this Lease, (ii)
Tenant remains fully liable under this Lease; and (iii) the use of the
Premises under Section 8 remains unchanged.
d. No subletting or assignment shall release Tenant of Tenant's
obligations under this Lease or alter the primary liability of Tenant
to pay the Rent and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of Rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting in the event of
default by an assignee or subtenant to Tenant or any successor of
Tenant in the performance of any of the terms hereof. Landlord may
proceed directly against Tenant without the necessity of exhausting
remedies against such assignee, subtenant or successor. Landlord may
consent to subsequent assignments of the Lease or sublettings or
amendments or modifications to the Lease with assignees of Tenant,
without notifying Tenant, or any successor of Tenant,
<PAGE> 17
and without obtaining its or their consent thereto and any such actions
shall not relieve Tenant of liability under this Lease.
e. If Tenant assigns the Lease or sublets the Premises or requests the
consent of Landlord to any assignment or subletting or if Tenant
requests the consent of Landlord for any act that Tenant proposes to
do, then Tenant shall upon demand, pay Landlord an administrative fee,
if Landlord can show such fee is reasonably necessary, plus attorneys'
fees reasonably incurred by Landlord in connection with such act or
request.
SECTION 17. HOLDING OVER
If after expiration of the Term, Tenant remains in possession of the Premises
with Landlord's permission (express or implied), Tenant shall become a tenant
from month to month only, upon all the provisions of this Lease (except as to
Term and Base Rent), but the "Monthly Installments of Base Rent" payable to
Landlord shall be increased to the fair market value of comparable leased space.
Such monthly rent shall be payable in advance on or before the first day of each
month. If either party desires to terminate such month to month tenancy, it
shall give the other party not less than THIRTY (30) DAYs advance written notice
of the date of termination.
SECTION 18. OPTION TO RENEW.
18.1 Option Right. Provided that Tenant is not in default under this Lease as of
the date of exercise of an extension under this Section, Tenant shall have one
(1) option to extend the Term of this Lease for one (1) additional period of
FIVE (5) YEARS (the "OPTION TERM") upon Tenant giving to Landlord six (6) months
prior written notice of its intention to exercise as set forth below. Upon the
proper exercise of an option to extend, the Term of this Lease shall be extended
for FIVE (5) YEARS, subject to all of the terms and conditions of this Lease,
except that: (a) the applicable Option Rent shall be determined as set forth
below; and, (b) the Premises shall consist of the original Rentable Area set
forth in Paragraph 2(k) and any additional Rentable Area subsequently leased by
Tenant in accordance with Section 19.
18.2 Option Rent. The rent payable for the Premises by Tenant during the Option
Term (the "OPTION RENT") shall be equal to the "FAIR MARKET RENTAL RATE" for the
Premises. The term "FAIR MARKET RENTAL RATE" for the Premises during an Option
Term, shall mean and refer to the annual amount per square foot of Rentable Area
then being charged to tenants for comparable, non- subleased, non-encumbered,
non-equity space in the Building, and for similar type lease space in the "44TH
STREET CORRIDOR" area of Phoenix, Arizona, giving appropriate consideration to
appropriate concessions and to the annual rental rates per rentable square foot,
escalation clauses (including type, such as net, base year, or expense stop),
abatement provisions reflecting free rent, if any, and the length of the
relevant term.
18.3 Exercise of Option. The options contained in this Section shall be
exercised by Tenant in the following manner: (a) Tenant shall deliver notice to
Landlord (the "OPTION NOTICE") not later than 180 DAYS prior to the Expiration
Date stating that the Tenant may be exercising its option; (b) Landlord, within
THIRTY (30) DAYS from receipt of the Option Notice, shall deliver
<PAGE> 18
written notice (the "OPTION RENT NOTICE") to Tenant setting forth the Option
Rent; and (c) if Tenant wishes to exercise such option, Tenant shall, on or
before THIRTY (30) DAYS from Tenant's receipt of Option Rent Notice, exercise
the option by delivering written notice (the "ELECTION OF OPTION NOTICE") to
Landlord and, concurrent with such exercise, Tenant may, at its option, object
to the Option Rent contained in the Option Rent Notice. In the event Tenant so
objects to the Option Rent initially determined by Landlord, Landlord and Tenant
shall use their best good faith efforts to agree upon the Option Rent. If on or
before THIRTY (30) DAYS from Landlord's receipt of the Election of Option
Notice, Landlord and Tenant fail to reach agreement regarding the Option Rent,
then Tenant shall not have the option to extend the Term of this Lease pursuant
to this Section, and the Term of this Lease shall expire on the Expiration Date.
SECTION 19. RIGHT OF FIRST REFUSAL.
19.1 In the event the Landlord enters into bona fide lease negotiations to lease
to a third party all or a portion of that certain space in the Building and more
particularly described as "RIGHT OF FIRST REFUSAL SPACE" on EXHIBIT A consisting
of potential space in the north building, consisting of approximately 13,000
square feet of rentable space, when and if available, Landlord shall advise
Tenant of same in writing (the "OFFER NOTICE"). For purposes of this Section,
"BONA FIDE LEASE NEGOTIATIONS" shall mean that Landlord has provided a third
party with a written lease or written lease proposal with respect to all or a
portion of the Right of First Refusal Space which may become available. The
Offer Notice shall include the proposed rent and allowance and all other terms,
conditions, covenants, and provisions applying to the Right of First Refusal
Space. If Tenant desires to lease the entire Right of First Refusal Space
covered by the Offer Notice, Tenant shall have the right (the "FIRST RIGHT")
until 5:00 p.m. Mountain Standard Time on the THIRD (3RD) BUSINESS DAY after
Tenant's receipt of the Offer Notice (the "DEADLINE") to notify Landlord in
writing (the "ACCEPTANCE NOTICE") that Tenant will lease the Right of First
Refusal Space on the terms set forth in the Offer Notice (except as adjusted as
provided below). If Tenant fails to deliver the Acceptance Notice to Landlord
prior to the Deadline, then Landlord may lease the Right of First Refusal Space
to the third party at a rent and allowance no more favorable than those offered
to Tenant in the Offer Notice. If the lease to the third party is not
consummated within NINETY-FIVE (95) DAYS after Tenant's receipt of the Offer
Notice or the lease entered into with the third party expires or terminated
during the Term of this Lease, then First Right set forth herein shall be
reinstated.
19.2 If Tenant exercises its First Right, (a) the lease term for the Right of
First Refusal set forth in the Offer Notice shall be adjusted to be coterminous
with the Term of this Lease, and (b) any allowance for the construction of
leasehold improvements in the Right of First Refusal Space shall be the amount
of the Leasehold Improvement Allowance set forth in Paragraph 2(s) multiplied by
the number of square feet of Rentable Area in the Right of First Refusal Space
leased by Tenant, prorated based on the number of months remaining in the Term
of this Lease as compared to the total number of months in the Term of this
Lease set forth in paragraph 2(r).
19.3 Tenant acknowledges that the Right of First Refusal Space is currently
occupied by a tenant or tenants, and that Tenant's rights under this Section are
subject to the rights of such tenant or tenants.
<PAGE> 19
SECTION 20. SURRENDER OF PREMISES.
a. Tenant shall peaceably surrender the Premises to Landlord on the
Expiration Date, in broom-clean condition and in as good condition as
when Tenant took possession, except for (i) reasonable wear and tear,
(ii) loss by fire or other casualty, and (iii) loss by condemnation.
Tenant shall, on Landlord's request, remove Tenant's Property on or
before the Expiration Date and promptly repair all damage to the
Premises or Building caused by such removal.
b. If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any of Tenant's Property left on the
Premises shall be deemed to be abandoned, and, at Landlord's option,
title shall pass to Landlord under this Lease as by a bill of sale. If
Landlord elects to remove all or any part of such Tenant's Property,
the cost of removal, including repairing any damage to the Premises or
Building caused by such removal, shall be paid by Tenant. On the
Expiration Date, Tenant shall surrender all keys to the Premises.
SECTION 21. DESTRUCTION OR DAMAGE.
a. If the Premises or the portion of the Building necessary for
Tenant's occupancy is damaged by fire, earthquake, act of God, the
elements or other casualty, Landlord shall, subject to the provisions
of this Section, promptly repair the damage, if such repairs can, in
Landlord's opinion, be completed within NINETY (90) DAYS. If Landlord
determines that repairs can be completed within NINETY (90) DAYS, this
Lease shall remain in full force and effect, except that if such damage
is not the result of the negligence or willful misconduct of Tenant or
Tenant's agents, employees, contractors, licensees or invitees, the
Base Rent shall be abated to the extent Tenant's use of the Premises is
impaired, commencing with the date of damage and continuing until
completion of the repairs required of Landlord under Paragraph 21(d).
b. If in Landlord's opinion, such repairs to the Premises or portion of
the Building necessary for Tenant's occupancy cannot be completed
within NINETY (90) DAYS, Landlord may elect, upon notice to Tenant
given within THIRTY (30) DAYS after the date of such fire or other
casualty, to repair such damage, in which event this Lease shall
continue in full force and effect, but the Base Rent shall be partially
abated as provided in Paragraph 21(a). If Landlord does not so elect to
make such repairs, this Lease shall terminate as of the date of such
fire or other casualty.
c. If any other portion of the Building or Project is totally destroyed
or damaged to the extent that in Landlord's opinion repair thereof
cannot be completed within NINETY (90) DAYS, Landlord may elect upon
notice to Tenant given within THIRTY (30) DAYS after the date of such
fire or other casualty, to repair such damage, in which event this
Lease shall continue in full force and effect but the Base Rent shall
be partially abated as
<PAGE> 20
provided in Paragraph 21(a). If Landlord does not elect to make such
repairs, this Lease shall terminate as of the date of such fire or
other casualty.
d. If the Premises are to be repaired under this Section, Landlord
shall repair at its cost any injury or damage to the Building and
Building Standard Work in the Premises. Tenant shall be responsible at
its sole cost and expenses for the repair, restoration and replacement
of any other Leasehold Improvements and Tenant's Property. Landlord
shall not be liable for any loss of business, inconvenience or
annoyance arising from any repair or restoration or any portion of the
Premises, Building or Project as result of any damage from fire or
other casualty.
e. This Lease shall be considered an express agreement governing any
case of damage to or destruction of the Premises, Building or Project
by fire or other casualty, and any present or future law which purports
to govern the rights of Landlord and Tenant in such circumstances in
the absence of express agreement shall have no application.
SECTION 22. EMINENT DOMAIN.
a. If the whole of the Building or Premises is lawfully taken by
condemnation or in any other manner for any public or quasi-public
purpose, this Lease shall terminate as of the date of such taking, and
Rent shall be prorated to such date. If less than the whole of the
Building or Premises is so taken, this Lease shall be unaffected by
such taking, provided that (i) Tenant shall have the right to terminate
this Lease by notice to Landlord given within NINETY (90) DAYS after
the date of such taking IF TWENTY PERCENT (20%) or more of the Premises
is taken and the remaining area of the Premises is not reasonably
sufficient for Tenant to continue operation of its business, and (ii)
Landlord shall have the right to terminate this Lease by notice to
Tenant given within NINETY (90) DAYS after the date of such taking. If
either Landlord or Tenant so elects to terminate this Lease, the Lease
shall terminate on the THIRTIETH (30TH) DAY after either such notice.
The Rent shall be prorated to the date of termination. This Lease
continues in force upon such partial taking, the Base Rent and Tenant's
Proportionate Share shall be equally adjusted according to the
remaining Rentable Area of the Premises and Project.
b. In the event of any taking, partial or whole, all of the proceeds of
any award, judgment or settlement payable by the condemning authority
shall be the exclusive property of Landlord, and Tenant hereby assigns
to Landlord all of its right, title and interest in any award, judgment
or settlement from the condemning authority. Tenant, however, shall
have the right, to the extent that Landlord's award is not reduced or
prejudiced, to claim from the condemning authority (but not from
Landlord) such compensation as may be recoverable by Tenant in its own
right for relocation expenses and damage to Tenant's personal property.
c. In the event of a partial taking of the Premises which does not
result in a termination of this Lease, Landlord shall restore the
remaining portion of the Premises as nearly as
<PAGE> 21
practicable to its condition prior to the condemnation or taking, but
only to the extent of Building Standard Work. Tenant shall be
responsible at its sole cost and expense for the repair, restoration
and replacement of any other Leasehold Improvements and Tenant's
Property.
SECTION 23. INDEMNIFICATION.
a. Tenant shall indemnify and hold Landlord harmless against and from
liability and claims of any kind for loss or damage to property of
Tenant or any other person or for any injury to or death of any person,
arising out of: (1) Tenant's use and occupancy of the Premises, or any
work, activity or other things allowed or suffered by Tenant to be done
in, on or about the Premises; (2) any breach or default by Tenant of
any of Tenant's obligations under this Lease; or (3) any negligent or
otherwise tortious act or omission of Tenant, its agents, employees,
invitee or contractors. Tenant shall, at Tenant's expense, and by
counsel satisfactory to Landlord, defend Landlord in any action or
proceeding arising from any such claim and shall indemnify Landlord
against all costs, attorneys' fees, expert witness fees and any other
expenses incurred in such action or proceeding. As a material part of
the consideration for Landlord's execution of this Lease, Tenant hereby
assumes all risk of damage or injury to any person or property in, on
or about the Premises from any cause.
b. Landlord shall not be liable for injury or damage which may be
sustained by the person or property of Tenant, its employees, invitees
or customers, or any other person in or about the Premises, caused by
or resulting from fire, steam, electricity, gas, water or rain which
may leak or flow from or into any part of the Premises, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures,
whether such damage or injury results from conditions arising upon the
Premises or upon other portions of the Building or Project or from
other sources. Landlord shall not be liable for any damages arising
from any act or omission of any other tenant of the Building or
Project.
SECTION 24. TENANT'S INSURANCE.
a. All insurance required to be carried by Tenant hereunder shall be
issued by responsible insurance companies acceptable to Landlord and
Landlord's lender, and qualified to do business in the State. Each
policy shall name Landlord, and at Landlord's request any mortgagee of
Landlord, as an additional insured, as their respective interests may
appear. Each policy shall contain (i) a cross-liability endorsement,
(ii) a provision that such policy and the coverage evidenced thereby
shall be primary and non-contributing with respect to any policies
carried by Landlord and that any coverage carried by Landlord shall be
excess insurance, and (iii) a waiver by the insurer of any right of
subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment
under such policy or by reason of any act of omission of Landlord, its
agents, employees or representatives. A copy of each paid up policy
(authenticated by the insurer) or certificate of the insurer evidencing
the existence and amount of each insurance policy required hereunder
shall be delivered to Landlord before the date Tenant
<PAGE> 22
is first given the right of possession of the Premises, and thereafter
within THIRTY (30) DAYS after any demand by Landlord therefor. Landlord
may, at any time and from time to time, inspect and/or copy any
insurance policies required to be maintained by Tenant hereunder. No
such policy shall be cancelable except after TWENTY (20) DAYS written
notice to Landlord and Landlord's lender. Tenant shall furnish Landlord
with renewals or "binders" of any such policy at least TEN (10) DAYS
prior to the expiration thereof. Tenant agrees that if Tenant does not
take out and maintain such insurance, Landlord may (but shall not be
required to) procure said insurance on Tenant's behalf and charge the
tenant the premiums together with a TWENTY-FIVE PERCENT (25%) handling
charge, payable upon demand. Tenant shall have the right to provide
such insurance coverage pursuant to blanket policies obtained by the
Tenant, provided such blanket policies expressly afford coverage to the
Premises, Landlord, Landlord's mortgagee and Tenant as required by this
Lease.
b. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall
procure, pay for and maintain in effect policies of casualty insurance
covering (i) all Leasehold Improvements (including any alterations,
additions or improvements as may be made by Tenant pursuant to the
provisions of Section 12 hereof), and (ii) trade fixture, merchandise
and other personal property from time to time in, on or about the
Premises, in an amount not less than ONE HUNDRED PERCENT (100%) of
their actual replacement cost from time to time providing protection
against any peril included within the classification "Fire and Extended
Coverage" together with insurance against sprinkler damage, vandalism
and malicious mischief. The proceeds of such insurance shall be used
for the repair or replacement of the property so insured. Upon
termination of this Lease following a casualty as set forth herein, the
proceeds under (i) shall be paid to Landlord, and the proceeds under
(ii) above shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall
procure, pay for and maintain in effect workers' compensation insurance
as required by law and comprehensive public liability and property
damage insurance with respect to the construction of improvements on
the Premises, the use, operation or condition of the Premises and the
operations of Tenant in, on or about the Premises, providing personal
injury and broad form property damage coverage for not less than ONE
MILLION DOLLARS ($1,000,000.00) combined single limit for bodily
injury, death and property damage liability.
d. Not less than every THREE (3) YEARS during the Term, Landlord and
Tenant shall mutually agree to increase in all of Tenant's insurance
policy limits for all insurance to be carried by Tenant as set forth in
this Section.
SECTION 25. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against the other
and against the officers, employees, agents and representatives of the other, on
account of loss by or damage to
<PAGE> 23
the waiving party of its property or the property of others under its control,
to the extent that such loss or damage is insured against under any fire and
extended coverage insurance policy which either may have in force at the time of
the loss or damage. Tenant shall, upon obtaining the policies of insurance
required under this Lease, give notice to its insurance carrier or carriers that
the foregoing mutual waiver of subrogation is contained in this Lease.
SECTION 26. SUBORDINATION AND ATTORNMENT.
Upon written request of Landlord, or any first mortgagee or first deed of trust
beneficiary of Landlord or ground lessor of Landlord, Tenant shall in writing,
subordinate its rights under this Lease to the lien of any first mortgage or
first deed of trust, or to the interest of any lease in which Landlord is
lessee, and to all advances made or hereafter to be made thereunder. However,
before signing any subordination agreement, Tenant shall have the right to
obtain from any lender or lessor or Landlord requesting such subordination, an
agreement in writing providing that, as long as Tenant is not in default
hereunder, this Lease shall remain in effect for the full Term. The holder of
any security interest may, upon written notice to Tenant, elect to have this
Lease prior to its security interest regardless of the time of the granting or
recording of such security interest.
In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of the lease in which Landlord is lessee, Tenant shall attorn to the
purchaser, transferee or lessor as the case may be, and recognize that party as
Landlord under this Lease, provided such party acquires and accepts the Premises
subject to this Lease.
SECTION 27. TENANT ESTOPPEL CERTIFICATES.
Within TEN (10) DAYS after written request from Landlord, Tenant shall execute
and deliver to Landlord or Landlord's designee, a written statement certifying
(a) that this Lease is unmodified and in full force and effect or is in full
force and effect as modified and stating the modifications; (b) the amount of
Base Rent and the date to which Base Rent and additional rent have been paid in
advance; (c) the amount of any security deposited with Landlord; and (d) that
Landlord is not in default hereunder or, if Landlord is claimed to be in
default, stating the nature of any claimed default. Any such statement may be
relied upon by a purchaser, assignee or lender. Tenant's failure to execute and
deliver such statement within the time required shall at Landlord's election be
a default under this Lease and shall also be conclusive upon Tenant that: (1)
this Lease is in full force and effect and has not been modified except as
represented by Landlord; (2) there are no uncured defaults in Landlord's
performance and that Tenant has no right of offset, counter-claim or deduction
against Rent; and (3) not more than one month's Rent has been paid in advance.
SECTION 28. RIGHT OF FIRST REFUSAL.
In the event an offer to sell or buy ("Offer") the Project is made, Landlord
agrees to provide Tenant the right of first refusal on bona fide third-party
Offers the Landlord is willing to accept.
<PAGE> 24
Landlord is under no obligation to disclose the name of the prospective
purchaser and is only required to provide Tenant with a basic outline of the
material financial terms of the sale.
Tenant agrees that it will respond in writing three (3) business days after
Landlord duly serves the outline on Tenant in accordance with Section 32 of this
Lease. Tenant's acceptance must be unequivocal and on precisely the same terms
as set forth in the outline. Tenant's failure to respond in writing within three
(3) business days shall be deemed a failure to exercise the right of first
refusal, and Landlord may proceed as though no such right existed. Tenant agrees
it will take no steps to delay or materially adversely affect a sale and will
work in good faith with Landlord to promote a sale. Nothing contained herein
shall be construed as a limitation on Landlord's right to sell the Project or
any portion thereof.
SECTION 29. TRANSFER OF LANDLORD'S INTEREST.
In the event of any sale or transfer by Landlord of the Premises, Building or
Project, and assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of any and all liability and obligations
contained in or derived from this Lease arising out of any act, occurrence or
omission relating to the Premises, Building, Project or Lease occurring after
the consummation of such sale or transfer, providing the purchaser shall
expressly assume all of the covenants and obligations of Landlord under this
Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord
may transfer the security deposit or prepaid Rent to Landlord's successor and
upon such transfer, Landlord shall be relieved of any and all further liability
with respect thereto.
SECTION 30. DEFAULT.
30.1 Tenant's Default. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant ("Event of
Default"):
a. If Tenant abandons or vacates the Premises; or
b. If Tenant fails to pay any Rent or any other charges required to be
paid by Tenant under this Lease and such failure continues for FIVE (5)
DAYS after such payment is due and payable; or
c. If Tenant fails to promptly and fully perform any other covenant,
condition or agreement contained in this Lease, other than Rent or
other monetary obligations which are subject to subparagraph (b) above,
and such failure continues for THIRTY (30) DAYS after written notice
thereof from Landlord to Tenant; or
d. If a writ of attachment or execution is levied on this Lease or on
any of Tenant's Property; or
e. If Tenant makes a general assignment for the benefit of creditors,
or provides for an arrangement, composition, extension or adjustment
with its creditors; or
<PAGE> 25
f. If Tenant files a voluntary petition for relief or if a petition
against Tenant in a proceeding under the federal bankruptcy laws or
other insolvency laws is filed and not withdrawn or dismissed WITHIN
FORTY-FIVE (45) DAYS thereafter, or if under the provisions of any law
providing for reorganization or winding up of corporations, any court
of competent jurisdiction assumes jurisdiction, custody or control of
Tenant or any substantial part of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed or
unterminated for a period of FORTY-FIVE (45) DAYS; or
g. If in any proceeding or action in which Tenant is a party, a
trustee, receiver, agent or custodian is appointed to take charge of
the Premises or Tenant's Property (or had the authority to do so) for
the purpose of enforcing a lien against the Premises or Tenants
Property; or
h. Any other act or omission which allows for the termination of this
Lease as permitted or authorized by statute or common law.
30.2 Remedies. In the event of Tenant's default hereunder, then in addition to
any other rights or remedies Landlord may have under any law or in equity,
Landlord shall have the right, at Landlord's option without further notice or
demand of any kind, to do the following:
a. Terminate this Lease and Tenant's right to possession of the
Premises and reenter the Premises and take possession thereof, and
Tenant shall have no further claim to the Premises or under this Lease;
or
b. Terminate Tenant's right to possession, continue this Lease in
effect, reenter and occupy the Premises for the account of Tenant, and
collect any unpaid Rent or other charges which have or thereafter
become due and payable; or
c. Reenter the Premises under the provisions of subparagraph b, and
thereafter elect to terminate this Lease and Tenant's right to
possession of the Premises. If Landlord reenters the Premises under the
provisions of subparagraph b or c above, Landlord shall not be deemed
to have terminated this Lease or the obligation of Tenant to pay any
Rent or other charges thereafter accruing, unless Landlord notifies
Tenant in writing of Landlord's election to terminate this Lease. In
this event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or
any part of Tenant's Property in the Premises and to place such
property in storage at a public warehouse at the expense and risk of
Tenant. If Landlord elects to relet the Premises for the account of
Tenant, the rent received by Landlord from such reletting shall be
applied as follows: first, to the payment of any indebtedness other
than Rent due hereunder from Tenant to Landlord; second, to the payment
of any costs of such reletting; third, to the payment of the cost of
any alterations or repairs to the Premises; fourth, to the payment of
Rent due and unpaid hereunder; and the balance, if any, shall be held
by Landlord and applied in payment of future Rent as it becomes due. If
that portion of rent received from the reletting which is applied
against the Rent due hereunder is less than the amount of the Rent due,
Tenant shall pay the deficiency to Landlord promptly upon demand by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant
shall
<PAGE> 26
also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making
alterations and repairs to the Premises, which are not covered by the
rent received from the reletting.
Should Landlord elect to terminate this Lease under the provisions of
subparagraph a or c above, Landlord may recover as damages from Tenant the
following:
(1.) Past Rent. The worth at the time of the award of any unpaid
Rent which had been earned at the time of termination; plus
(2.) Rent Prior to Award. The worth at the time of the award
of the amount by which the unpaid Rent which would have been
earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(3.) Rent After Award. The worth at the time of the award of
the amount by which the unpaid Rent for the balance of the
Term after the time of award exceeds the amount of the rental
loss that Tenant proves could be reasonably avoided; plus
(4.) Proximately Caused Damages. Any other amount necessary to
compensate Landlord for all detriment proximately caused by
Tenant's failure to perform its obligations under this Lease,
or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, any costs or
expenses (including attorneys' fees), incurred by Landlord in
(a) retaking possession of the Premises, (b) maintaining the
Premises after Tenant's default, (c) preparing the Premises
for reletting to a new tenant, including any repairs or
alterations, (d) reletting the Premises, including broker's
commissions, and (e) storing and/or disposing of Tenant's
personal property.
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the rate of TEN PERCENT (10%) per annum.
"The worth at the time of the award" as used in subparagraph 3 above, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank situated nearest to the Premises at the time of the award, plus ONE PERCENT
(1%).
The waiver by Landlord of any breach of any term, covenant or condition of this
Lease shall not be deemed a waiver of such term, covenant or condition of any
subsequent breach of the same or any other term, covenant or condition.
Acceptance of Rent by Landlord subsequent to any breach hereof shall not be
deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have waived
any term, covenant or condition unless Landlord gives Tenant written notice of
such waiver.
30.3 Landlord's Default. If Landlord fails to perform any covenant, condition
or agreement contained in this Lease within THIRTY (30) DAYS after receipt of
written notice from Tenant
<PAGE> 27
specifying such default, or if such default cannot reasonably be cured within
THIRTY (30) DAYS, if Landlord fails to commence to cure within that THIRTY (30)
DAY period, then Landlord shall be liable to Tenant for any damages sustained by
Tenant as a result of Landlord's breach; provided, however, it is expressly
understood and agreed that if Tenant obtains a money judgment against Landlord
resulting from any default or other claim arising under this Lease, that
judgment shall be satisfied only out of the rents, issues, profits, and other
income actually received on account of Landlord's right, title and interest in
the Premises, Building or Project, and no other real, personal or mixed property
of Landlord (or of any of the partners which comprise Landlord, if any) wherever
situated shall be subject to levy to satisfy such judgment. If, after notice to
Landlord of default, Landlord (or any first mortgagee or first deed of trust
beneficiary of Landlord) fails to cure the default as provided herein, then
Tenant shall have the right to cure that default at Landlord's expense. Tenant
shall not have the right to terminate this Lease or to withhold, reduce or
offset any amount against any payments of Rent or any other charges due and
payable under this Lease except as otherwise specifically provided herein.
SECTION 31. BROKERAGE FEES.
31.1 Tenant warrants and represents that it has not dealt with any real estate
broker or agent in connection with this Lease or its negotiation except those
noted in Paragraph 2(c). Tenant shall indemnify and hold Landlord harmless from
any cost, expense or liability (including costs of suit and reasonable
attorneys' fees) for any compensation, commission or fees claimed by any other
real estate broker or agent in connection with this Lease or its negotiation by
reason of any act of Tenant. Landlord shall be responsible for paying the
brokerage fees to those brokers identified in Paragraph 2(c).
SECTION 32. NOTICES.
All notices, approvals and demands permitted or required to be given under this
Lease shall be in writing and deemed duly served or given if personally
delivered or sent by U.S. mail, postage prepaid, and addressed as follows: (a)
if to Landlord, to Landlord's Mailing Address and to the Building manager, and
(b) if to Tenant, to Tenant's Mailing Address; provided, however, notices to
Tenant shall be deemed duly served or given if delivered or mailed to Tenant at
the Premises. Landlord and Tenant may from time to time by notice to the other
designate another place for receipt of future notices.
SECTION 33. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities during the Term, both Landlord and Tenant shall be bound thereby. In
the event of a difference in interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord shall have
the right to enforce compliance therewith, including the right of entry into the
Premises to effect compliance.
<PAGE> 28
SECTION 34. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of its obligations under this
Lease, shall peaceably and quietly enjoy the Premises, subject to the terms of
this Lease and to any mortgage, lease, or other agreement to which this Lease
may be subordinate.
SECTION 35. OBSERVANCE OF LAW.
Tenant shall not use the Premises or permit anything to be done on or about the
Premises which will in any way conflict with any law, statute, ordinance or
government rule or regulation now in force or which may hereafter be enacted or
promulgated. Tenant shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force, and with the
requirements of any board of the insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord is a party thereto or not, that Tenant has violated any law,
ordinance or governmental rule, regulation or requirement, shall be conclusive
of that fact as between Landlord and Tenant.
SECTION 36. FORCE MAJEURE.
Any prevention, delay or stoppage of work to be performed by Landlord or Tenant
which is due to strikes, labor disputes, inability to obtain labor, materials,
equipment or reasonable substitutes therefor, acts of God, governmental
restrictions or regulations or controls, judicial orders, enemy or hostile
government actions, civil commotion, fire or other casualty, or other causes
beyond the reasonable control of the party obligated to perform hereunder, shall
excuse performance of the work by that party for a period equal to the duration
of that prevention, delay or stoppage. Nothing in this Section 36 shall excuse
or delay Tenant's obligation to pay Rent or other charges under this Lease.
SECTION 37. CURING TENANT'S DEFAULTS.
If Tenant defaults in the performance of any of its obligations under this
Lease, Landlord may (but shall not be obligated to) without waiving such
default, perform the same for the account at the expense of Tenant. Tenant shall
pay Landlord all costs of such performance promptly upon receipt of a bill
therefor.
SECTION 38. SIGNAGE.
a. Tenant shall not affix, paint, erect or inscribe any sign,
projection, awning, signal of advertisement of any kind to any part of
the Premises, Building or Project, including without limitation, the
inside or outside of windows or doors, without the written consent
<PAGE> 29
of Landlord. Landlord shall have the right to remove any signs or other
matter, installed without Landlord's permission, without being liable
to Tenant by reason of such removal, and to charge the cost of removal
to Tenant as additional rent hereunder, payable within TEN (10) DAYS of
written demand by Landlord.
b. Subject to Landlord's approval, signage criteria, and all applicable
federal, state, county and municipal laws, regulations, rules and
ordinances, Tenant is entitled to display a single two-sided plaque
(the "PLAQUE") upon the monument sign located in front of the Building.
The Plaque shall contain the words "WavePhore, Inc." or similar name
selected by the Tenant. The actual location of the Plaque shall be
determined by Tenant.
c. Subject to Landlord's approval, signage criteria, and all applicable
federal, state, county and municipal laws, regulations, rules and
ordinances, Tenant is entitled to place additional signs on the
Premises. All costs and expenses relating to the Plaque, or any other
Tenant signage, shall be borne by Tenant.
SECTION 39. MISCELLANEOUS.
a. Accord and Satisfaction; Allocation of Payments. No payment by
Tenant or receipt by Landlord of a lesser amount than the Rent provided
for in this Lease shall be deemed to be other than on account of the
earliest due Rent, nor shall any endorsement or statement on any check
or letter accompanying any check or payment as Rent be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of the Rent or
pursue any other remedy provided for in this Lease. In connection with
the foregoing, Landlord shall have the absolute right in its sole
discretion to apply any payment received from Tenant to any account or
other payment of Tenant then not current and due or delinquent.
b. Addenda. If any provision contained in an addendum to this Lease is
inconsistent with any other provision herein, the provision contained
in the addendum shall control, unless otherwise provided in the
addendum.
c. Attorneys' Fees. If any action or proceeding is brought by either
party against the other pertaining to or arising out of this Lease, the
finally prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, incurred on account of
such action or proceeding.
d. Captions, Section and Paragraph Numbers. The captions appearing
within the body of this Lease have been inserted as a matter of
convenience and for reference only and in no way define, limit or
enlarge the scope or meaning of this Lease. All references to Section
and Paragraph numbers refer to Sections and Paragraphs in this Lease.
e. Changes Requested by Lender. Neither Landlord or Tenant shall
unreasonably withhold its consent to changes or amendments to this
Lease required by the lender on Landlord's interest, so long as these
changes do not alter the basic business terms of the
<PAGE> 30
Lease or otherwise materially diminish any rights or materially
increase any obligations of the party from whom consent to such change
or amendment is requested.
f. Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State.
g. Consent. Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no claim, and hereby waives the right to
any claim against Landlord for money damages by reason of any refusal,
withholding or delaying by Landlord of any consent, accord or statement
of satisfaction, and in such event, Tenant's only remedies therefor
shall be an action for specific performance, injunction or declaratory
judgment to enforce any right to such consent, etc.
h. Corporate Authority. Each individual signing this Lease on behalf of
Tenant represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of the corporation, and that this
Lease is binding on Tenant in accordance with its terms. Tenant shall,
at Landlord's request, deliver a certified copy of a resolution of its
board of directors authorizing such execution.
i. Counterparts. This Lease may be executed in multiple counterparts,
all of which shall constitute one and the same Lease.
j. Execution of Lease; No Option. The submission of this Lease to
Tenant shall be for examination purposes only, and does not and shall
not constitute a reservation of or option for Tenant to lease, or
otherwise create any interest of Tenant in the Premises or any other
premises within the Building or Project. Execution of this Lease by
Tenant and its return to Landlord shall not be binding on Landlord
notwithstanding any time interval, until Landlord has in fact signed
and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations. In
order to induce Landlord to enter into this Lease, Tenant agrees that
it shall promptly furnish Landlord, from time to time, upon Landlord's
written request, with financial statements reflecting Tenant's current
financial condition. Tenant represents and warrants that all financial
statements, records and information furnished by Tenant to Landlord in
connection with this Lease are true, correct and complete in all
respects.
l. Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.
m. Mortgagee Protection. Tenant agrees to send by certified or
registered mail to any first mortgagee or first deed of trust
beneficiary of Landlord whose address has been furnished to Tenant, a
copy of any notice of default served by Tenant on Landlord. If Landlord
fails to cure such default within the time provided for in this Lease,
such mortgagee or beneficiary shall have an additional THIRTY (30) DAYS
to cure such default; provided that if such default cannot reasonably
be cured within that THIRTY (30) DAY
<PAGE> 31
period, then such mortgagee or beneficiary shall have such additional
time to cure the default as is reasonably necessary under the
circumstances.
n. Prior Agreements; Amendments. This Lease contains all of the
agreements of the parties with respect to any matter covered or
mentioned in this Lease, and no prior agreement or understanding
pertaining to any such matter shall be effective for any purpose. No
provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties or their respective
successors in interest.
o. Recording. Tenant shall not record this Lease without the prior
written consent of Landlord. Tenant, upon the request of Landlord,
shall execute and acknowledge a "short form" memorandum of this Lease
for recording purposes.
p. Severability. A final determination by a court of competent
jurisdiction that any provision of this Lease is invalid shall not
affect the validity of any other provision, and any provision so
determined to be invalid shall, to the extent possible, be construed to
accomplish its intended effect.
q. Successors and Assigns. This Lease shall apply to and bind the
heirs, personal representatives, and permitted successors and assigns
of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or remedy
of Landlord upon any default by Tenant shall impair such right or
remedy or be construed as a waiver of such default. The receipt and
acceptance by Landlord of delinquent Rent shall not constitute a waiver
of any other default; it shall constitute only a waiver of timely
payment for the particular Rent payment involved. Any waiver by
Landlord of any default must be in writing and shall not be a waiver of
any other default concerning the same or any other provision of this
Lease. Any waiver by Landlord of any default must be in writing and
shall not be a waiver of any other default concerning the same or any
other provision of this Lease.
t. Compliance. The parties hereto agree to comply with all applicable
federal, state and local laws, regulations, codes, ordinances and
administrative orders having jurisdiction over the parties, property or
the subject matter of this Lease, including, but not limited to, the
1964 Civil Rights Act and all amendments thereto, the Foreign
Investment in Real Property Tax Act, the Comprehensive Environmental
Response Compensation and Liability Act, and The Americans with
Disabilities Act.
u. Acceptance of Surrender. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant
before the expiration of the Term. Only a written
<PAGE> 32
notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of the Lease.
v. Landlord's Consent. Landlord's consent to or approval of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to
waive or render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.
The parties hereto have executed this Lease as of the date set forth below.
"LANDLORD"
FLOWER COURT GENERAL PARTNERSHIP
BY: ASPEN GENERAL PARTNERSHIP, ITS GENERAL PARTNER
BY: D.L. MEYERS, INC., ITS MANAGING GENERAL PARTNER
BY: ________________________________
DONALD L. MEYERS, PRESIDENT
DATE: _____________________________________________
"TENANT"
WAVEPHORE, INC.,
BY: _______________________________________________
TITLE: ____________________________________________
DATE: _____________________________________________
<PAGE> 33
EXHIBIT "A"
FLOOR PLAN SHOWING THE PREMISES AND RIGHT OF FIRST REFUSAL SPACE
(TO BE PROVIDED)
<PAGE> 34
EXHIBIT "B"
BASE RENT
Annual base rents for the Premises shall computed on the basis of:
Calendar Months of Term Amount
----------------------- ------
1-12 $213,361.50
13-24 $213,361.50
25-36 $213,361.50
37-48 $213,361.50
49-60 $213,361.50
$16.50 per square foot of Rentable Area of the Premises.
Annual base rents shall be payable in installments of one-twelfth (1/12) of the
annual base rent as computed above, plus any excise, privilege or sales taxes,
or any tax levied on the rental or the receipt thereof, except Landlord's income
tax, in accordance with Paragraph 5.1 of the Lease.
<PAGE> 35
EXHBIT "C"
LEASEHOLD IMPROVEMENT
Landlord agrees to provide Tenant $3.00 per square foot of Rentable
Area as the Leasehold Improvements Allowance. This money may be used at Tenant's
discretion. Tenant must obtain Landlord's consent for all Leasehold
Improvements. Landlord's consent shall not be unreasonably withheld so long as
the Leasehold Improvements conform to Tenant's use.
<PAGE> 36
EXHIBIT "D"
RULES AND REGULATIONS
1. Signs. Tenant shall not inscribe an inscription or post, place, or in any
manner display any sign, notice, picture, placard, or advertising matter
whatsoever anywhere in or about the Premises at places visible either directly
or indirectly as an outline or shadow on a glass panel from anywhere outside of
the Premises or from public and common areas within the Premises without first
obtaining from Landlord a written consent thereto and Landlord shall specify the
color, size, style and material to be used.
2. Showcases. No showcase shall be placed in front of or in the lobbies or
corridors of the Premises and Landlord reserves the right to remove all
showcases so placed and all signs other than those above approved without notice
and at the expense of Tenant.
3. Installation of Signs. All exterior and interior signs must be installed by
Landlord or someone designated by Landlord and the actual costs thereof shall be
paid by Tenant and all such signs are so placed at the risk of Tenant.
4. Telephone Connections. If Tenant desires telegraphic, cable television, or
telephone connections, Landlord will direct electricians where the wires are to
be introduced and without such direction no boring or cutting of wires shall be
permitted.
5. Submission of Plans. Tenant shall submit to Landlord for Landlord's approval,
a copy of its construction and equipment layout plans prior to commencement of
construction. In the event that Tenant is unable to obtain Landlord's approval
for said plans and layout, the Lease shall, at Tenant's sole option, be deemed
null and void and any amounts paid by Tenant to Landlord pursuant to this Lease
shall be reimbursed to Tenant without offset.
6. No Nuisances. Tenant shall not do or permit anything to be done in the
Premises which would be dangerous to life, limb, or which would tend to create a
nuisance or injure the reputation of the Project. Tenant shall not use burning
fluid, alcohol, kerosene or anything else to light or heat the Premises except
gas or electricity. Tenant shall not bring into the Premises or keep therein any
heating or lighting apparatus other than that provided by Landlord or in any way
injure, modify or tamper with any such apparatus in any manner or in any manner
in violation of the regulations of the Fire Department or with any insurance
policy upon said Project. Tenant shall not do or permit to be done in the
Premises any activity in conflict with any of the laws, rules or regulations of
any governmental agency or municipality.
7. Passageways. The sidewalks, passages, lobbies, corridors, elevators and
stairways shall not be obstructed by tenant or used except for ingress and
egress from and to the Premises. The doors, skylights, windows and transoms that
reflect or admit light into passageways or into any place in said Premises shall
not be covered or obstructed by Tenant.
8. Water Closets. The water closets and other apparatus shall not be used for
any purpose other than those for which they were constructed and no sweepings,
rubbish, or other substances
<PAGE> 37
shall be thrown therein. Any damage resulting to them from misuse shall be borne
by the tenant who caused it.
9. No Defacing or Offensive Business. Tenant and its employees and guests are
not to injure or deface the Project nor the woodwork nor the walls of the
Premises, nor to carry on upon the Premises any noisy or offensive business nor
conduct or action therein, nor interfere in any way with other tenants or those
having business with them.
10. No Lodging. No room or rooms on or about the Premises shall be occupied or
used as sleeping or lodging apartments.
11. Lock all Doors. Tenants shall, when leaving the Premises at close of
business or unoccupied at any time, lock all doors and windows and for any
default or carelessness in this respect shall make good all injuries sustained
by other tenants and by Landlord or by either of them for damages resulting from
such default or carelessness.
12. No Animals. No animal or bird shall be allowed in any part of the Premises
or project without the written consent of Landlord.
13. No Accumulation of Rubbish. Tenant shall not accumulate or store on or about
the Premises any waste paper, discarded records, sweepings, rags, rubbish or the
combustible matter other than the normal accumulation needed to conduct the use
of the Premises. Nothing shall be thrown by Tenant or employees or guests out of
the windows or doors or down the passages or skylights or over balcony rails of
the Premises or in the parking area.
14. Exclusion of Peace Disturbers. Landlord reserves the right to exclude from
the Premises or Project all drunken persons, peddlers, solicitors, persons of a
general character or conduct so as to create a disturbance and persons entering
in crowds or such unusual numbers as to cause inconvenience to tenants of the
Project.
15. Changes to Rules. Landlord reserves the right to change these rules and to
make such other and further reasonable rules and regulations either as it
affects one or all tenants as in its judgment may from time to time be needed
for the safety, care and cleanliness of the Project or the preservation of good
order therein or for any other cause. When such changes are made, such modified
or new rules shall be deemed a part hereof with the same effect as if written
herein, when a copy shall have been delivered to tenant or left with some person
in charge of the Premises.
16. No Live Christmas Trees. No live or fresh-cut Christmas Trees are permitted
on or about the Premises.
17. No Picnics. No outside picnics or bar-b-ques are permitted without the prior
written consent of Landlord.
18. No Outside Storage. No outside storage of any materials is permitted.
<PAGE> 38
19. No Smoking Policy. Tenant agrees that now and throughout the term of this
Lease, Tenant shall maintain and enforce a "no smoking" policy within the
Premises and Project common areas. Smoking will be allowed in designated areas
only. Failure of Tenant to abide by this rule shall be considered a material
default of the Lease and subject to termination of the Lease.
<PAGE> 1
EXHIBIT 10.2
LEASE
by and between
KAX CO.,
A GENERAL PARTNERSHIP,
as Landlord
and
WAVEPHORE NETWORKS, INC.
A DELAWARE CORPORATION
as Tenant
for
375 CHIPETA WAY
UNIVERSITY OF UTAH RESEARCH PARK
SALT LAKE CITY, UTAH
<PAGE> 2
INDEX FOR: 375 Chipeta Way
UNIVERSITY OF UTAH RESEARCH PARK
SALT LAKE CITY, UTAH
1. Leased Premises. .................................................. 4
2. Alterations. ...................................................... 5
3. Possession.......................................................... 5
4. Preliminary Term. ................................................. 5
5. Term. ............................................................. 5
6. Rent. .............................................................. 5
7. Escalation.......................................................... 6
8. Late Charges. ..................................................... 6
9. Financing. ........................................................ 6
10. Use and Occupancy. ................................................ 7
11. Utilities. ........................................................ 7
12. Taxes. ............................................................ 7
13. Fire and Casualty Insurance. ...................................... 7
14. Liability Insurance and Indemnity. ................................ 8
15. Maintenance and Repair. ........................................... 9
16. Signs. ............................................................ 9
17. Keys and Locks. ................................................... 9
18. Security System. .................................................. 9
19. Carpeting Damage. ................................................. 9
20. Forced Entry. ..................................................... 9
21. Destruction. ...................................................... 10
22. Condemnation. ..................................................... 10
23. Assignments and Subletting. ....................................... 10
24. Surrender and Rights Upon Termination. ............................. 10
25. Holding Over. ..................................................... 11
26. Right to Cure. .................................................... 11
27. Remedies. ......................................................... 11
28. Enforcement. ...................................................... 12
29. Notices. .......................................................... 12
2
<PAGE> 3
30. Quiet Enjoyment. .................................................. 12
31. Force Majeure. .................................................... 12
32. Waiver. ........................................................... 12
33. Accord and Satisfaction. .......................................... 13
34. Partial Invalidity. ............................................... 13
35. Representation Regarding Authority. ............................... 13
36. Entire Agreement. ................................................. 13
37. Miscellaneous Provisions. ......................................... 13
38. Security Deposit. ................................................. 13
39. Tenant Improvement Allowance........................................ 14
40. Option to Renew..................................................... 14
ACKNOWLEDGMENTS
LANDLORD ACKNOWLEDGMENT...................................................... 14
TENANT ACKNOWLEDGMENT........................................................ 14
EXHIBITS
EXHIBIT "A" SITE PLAN........................................................ 15
EXHIBIT "A-1" - FLOOR PLAN................................................... 16
EXHIBIT "B" - PROPERTY DESCRIPTION........................................... 17
3
<PAGE> 4
SUB-LEASE
(Research Park
Portion of A Building
Full Service)
THIS LEASE, made and entered into this 30th day of May, 1996, by and
between Kax Co., a Utah general partnership (hereinafter referred to as
"Landlord"), and WAVEPHORE NETWORKS, INC. a Delaware Corporation, (hereinafter
referred to as "Tenant").
RECITALS:
A. Landlord has heretofore obtained a long-term ground lease covering that
certain tract of real property situated in the University of Utah Research Park
in Salt Lake County, State of Utah, more particularly described in Exhibit "B"
attached hereto, together with certain easement for access rights. (Said tract
is hereinafter referred to as the "Property").
B. Landlord owns a building on the above described real property (hereinafter
the "Building") suitable for use a office/research and development space,
together with related parking facilities and other improvements necessary to
enable to the Building to be so used (the Building and related facilities and
improvements are hereinafter collectively referred to as the "Improvements").
C. Tenant desires to lease from Landlord a portion of the Building, together
with certain rights and privileges necessary for the full use and enjoyment
thereof.
NOW THEREFORE, in consideration of the premises and of the rents, covenants,
and agreements hereinafter mentioned and reserved to be paid, kept, and
performed by one or the other of the parties hereto, Landlord and Tenant hereby
enter into this Lease and agree as follows:
1. LEASED PREMISES. Landlord does hereby demise, lease, and let unto Tenant the
following-described areas, rights, and privileges (hereinafter collectively
referred to as the "Leased Premises"):
a. The south wing consisting of three floors of the building commonly
known as 375 Chipeta Way together with common access with other building Tenants
over the main building entry, central corridor, stairs and elevator, which space
is outlined in yellow on Exhibits "A" and "A-1" attached. The gross rentable
area of said space is approximately 30,120 square feet.
4
<PAGE> 5
b. Such nonexclusive rights-of-way, easements, and similar rights with
respect to the Property and the Improvements as may be reasonably necessary for
access to that portion of the Building described under item (a) above; and
c. The nonexclusive right to use for such purposes, along with all
other subtenants, occupants, and users of the Improvements (or of improvements
now or hereafter situated on any nearby tract now or hereafter leased by
Landlord from the University of Utah), those areas designed and suitable for
vehicular parking which are not reserved for the exclusive use of other tenants.
Landlord hereby reserves, however: (i) Such access rights over
and across the Property, such easements for utility lines, and such temporary
rights of occupancy for construction, repair and maintenance activities as may
be reasonably necessary to enable Landlord to fully develop, use, maintain and
enjoy this tract and any other nearby tract or tracts within the Research Park
which are being leased or which may hereafter be leased from the University of
Utah by Landlord; (ii) Such access rights through that portion of the building
described under item (a) above as may be reasonably necessary to enable access
to the balance of the Building by Landlord; and to enable Landlord to perform
its rights or duties under this lease; (iii) The right to install or maintain
meters on the Leased Premises to monitor use of utilities for Landlord's
records. In exercising such rights, Landlord will use its reasonable efforts so
as to not commit waste upon the Leased Premises and as far as practicable to
avoid annoyance or damage to Tenant when making modifications, additions or
repairs.
d. It is understood that there are 410 parking spaces for all
buildings at the 375-391 Chipeta Way project which amount varies 18 spaces from
zoning code, but which variance has been agreed to by Salt Lake City. Should
additional parking be desired by Tenant, Landlord shall attempt to lease
additional land area which may be available provided that Tenant shall pay any
additional land rental and provided that Landlord and Tenant agree to an
acceptable rate for amortization of improvement costs.
e. It is further understood that any reserved parking allocated to the
tenants of 375 Chipeta shall be done so on the basis of leasable space, and in
the areas identified on "Exhibit A". Although some stalls near the main building
entry shall be designated for visitor parking, all remaining parking shall be
for the general and non-exclusive use of employees and visitors of the building.
2. ALTERATIONS. During the term of this Lease, Tenant shall have the right,
at its sole cost and expense and so long as the change involved is not of a
permanent or structural nature, to make such alterations in or additions to the
Leased Premises as may be necessary to facilitate the use Tenant then desires to
make of the Leased Premises. Changes of a permanent or structural nature may be
made only with Landlord's prior written approval (not to be unreasonably
withheld). Unless the parties have otherwise agreed in writing, upon the
expiration or termination of this Lease, Landlord shall have the right, with
respect to each alteration or addition made by Tenant, to retain the item or
change concerned or to require Tenant at its
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expense to restore to its original condition that part of the Leased Premises
involved. Landlord shall not have the right to retain easily removable
furniture, cabinets, equipment, portable interior partitions, or other personal
property furnished by Tenant, but Tenant shall at its expense repair any damage
to the Leased Premises which may have been caused by the removal of such
personal property.
At any time during the term hereof, Landlord shall have the right
to make any modifications in or additions to that portion of the Improvements
which is not part of the Leased Premises, so long as Landlord's activities in
that regard do not substantially interfere with Tenant's use and enjoyment of
the Leased Premises.
3. POSSESSION. Landlord shall deliver possession of the premises to Tenant
upon execution of lease.
4. PRELIMINARY TERM. The period between the date Tenant takes possession and
the commencement of the "Term" will be designated as "Preliminary Term" during
which no rent shall accrue, although other covenants and obligations of Tenant
shall be in full force and effect.
5. TERM. The firm term of this Lease shall commence on August 1, 1996, and
shall continue for a period of 5 years thereafter to and including July 31,
2001.
6. RENT.
a. Tenant shall pay as monthly rental the sum of Thirty Two Thousand
Six Hundred Forty and no/100ths Dollars ($ 32,640.00). Said sums to be payable
in lawful money of the United States.
b. Tenant shall make monthly payments as set forth in Section 6a in
advance on or before the first day of each calendar month throughout the term of
the Lease. Each rental payment or other sum required to be paid by Tenant under
this Lease shall be delivered to Landlord, c/o Woodbury Corporation, 2677 East
Parleys Way, Salt Lake City, Utah 84109 or to such other address as Landlord may
hereafter designate in a written notice given to Tenant. All checks to Landlord
shall be made payable to KAX CO. (Fed ID# 87-0341891)
c. Rent for the first month (August 1996) shall be prepaid upon
execution of this lease.
7. ESCALATION. The monthly rent described in Section 6a shall be adjusted
based on the following schedule:
August 1, 1997 $ 38,905.00
August 1, 1998 40,160.00
August 1, 1999 41,415.00
August 1, 2000 43,915.00
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8. LATE CHARGES. In the event that Tenant shall fail to pay any rental
(including additional rental due hereunder) on or before the due date or within
five (5) days thereafter, Tenant shall pay interest from the due date on such
past due amounts to the date of payment, both before and after judgment at a
rate equal to the greater of eighteen (18%) percent per annum or two (2%)
percent over the "prime rate" charged by Zions First National Bank of Utah at
the due date of such payment; provided however, that in any case the rate of
interest charged shall not exceed the maximum non-usurious rate in accordance
with applicable law.
9. FINANCING. Tenant acknowledges that there presently exists a first
mortgage on the subject building. Tenant also acknowledges that from time to
time Landlord may desire to refinance the first mortgage loan which then affects
Landlord's interest in the Property and the Improvements. Accordingly, Tenant
agrees that its interests in the Leased Premises and all of its interest
hereunder are now and shall at all times be subject and subordinate to each of
the following encumbrances whether the same are now existing or are hereafter
created and without the need for any act or agreement by Tenant: (i) A first
position mortgage or trust deed and customary related instruments encumbering
Landlord's interest in the Property and the Improvements (which mortgage or
trust deed and related instruments are hereinafter collectively referred to
merely as a "Mortgage") and securing a loan obtained by Landlord for the purpose
of enabling construction of the Improvements, (ii) A first position Mortgage
encumbering Landlord's interest in the Property and the Improvements and
securing a loan which is obtained by Landlord to provide standing or permanent
financing for the same; and (iii) A first position Mortgage encumbering
Landlord's interest in the Property and the Improvements and securing a loan
which is obtained by Landlord for the purpose of refinancing any such
construction, standing or permanent loan; provided, however that so long as
Tenant continues to perform all of its obligations under this Lease its tenancy
shall remain in full force and effect notwithstanding Landlord's default in
connection with a Mortgage or any resulting foreclosure or sale or transfer in
lieu of such proceedings. Tenant shall not subordinate its interests hereunder
or in the Leased Premises to any lien or encumbrance other than the Mortgages
referred to in this Section 9 without the prior written consent of the lender
interested under the Mortgage then affecting Landlord's interest in the Property
and the Improvements. Any such unauthorized subordination by Tenant shall be
void and or no force or effect whatsoever.
Tenant agrees that, upon the written request of Landlord or of any
lender which is considering making or which has made one of the loans referred
to in this Section 9, and for the exclusive benefit of Landlord and such lender,
it will promptly deliver to Landlord or to such lender a written instrument
certifying as to any of the following facts or matters, to the extent the same
are then the case or applicable: that there are no existing defaults under this
Lease; that this Lease is then unmodified and in full force and effect; that the
Improvements have been completed and as constructed comply with the requirements
of this Lease, the date which constitutes the Completion Date hereunder; the use
which is being made of or which is proposed to be made of the Leased Premises;
and such other reasonable matters as to which Landlord or the lender makes
inquiry.
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10. USE AND OCCUPANCY. Tenant shall use the Leased Premises as office,
research, development and laboratory space and for purposes ordinarily
incidental to such use and only for such purposes and in such manner as are
permitted both by the Protective Covenants relating to the University of Utah
Research Park and by existing legislation concerning the Research Park. Tenant
shall not make any use of the Leased Premises which will cause cancellation or
an increase in the cost of any insurance policy covering the same. Tenant shall
not keep or use on the Leased Premises any article, item, or thing which is
prohibited by the standard form of fire insurance policy. Tenant shall not
commit any waste upon the Leased Premises and shall not conduct or allow any
business activity, or thing on the Leased Premises which is an annoyance or
causes damage to Landlord, to other sub-tenants, occupants, or users of the
Improvements, or to occupants of the vicinity. Tenant shall comply with and
abide by all laws, ordinances, and regulations of all municipal, county, state,
and federal authorities which are now in force or which may hereafter become
effective with respect to use and occupancy of the Leased Premises. Landlord
represents that to the best of its knowledge and understanding, the building in
which the Leased Premises are situated complies with all currently applicable
laws, ordinances and regulations of municipal, county, state and federal
authorities.
11. UTILITIES. Tenant accepts the utility connections in the premises "as
is". Throughout the term hereof Landlord shall pay all monthly or other periodic
charges required for the Leased Premises to be furnished with such utility
services as may be required by Tenant in connection with its use and occupancy
of the Leased Premises, including electricity, water, gas, heat, sewer service,
trash disposal, and snow removal, but not including telephone installation, use
and station equipment charges, which charges Tenant agrees to pay.
12. TAXES. Landlord shall pay all real property taxes, contributions in lieu
of taxes and assessments (all of which are hereinafter collectively referred to
as "Taxes") which are levied against or which apply with respect to the Leased
Premises. Tenant shall pay all taxes, assessments, charges, and fees which
during the term hereof may be imposed, assessed, or levied by any governmental
or public authority against or upon Tenant's use of the Leased Premises or any
personal property or fixtures kept or installed therein by Tenant.
13. FIRE AND CASUALTY INSURANCE.
a. Subject to the provisions of Section 14 below, Landlord shall
secure, pay for, and at all times during the term hereof maintain, insurance
providing coverage upon the Improvements in an amount equal to the full
insurable value thereof (as determined by Landlord) and insuring against the
perils of fire, extended coverage, vandalism, and malicious mischief. All
insurance required hereunder shall be written by reputable, responsible
companies licensed in the State of Utah. Landlord shall also maintain
appropriate general liability insurance with respect to Landlord's building.
Tenant shall have the right, at its request and any reasonable time, to be
furnished with copies of the insurance policies then in force pursuant to this
Section, together with evidence that the premiums therefor have been paid.
Landlord shall indemnify Tenant against and hold it harmless from any claims
arising out of loss or damage to building, except for damage resulting from the
acts or omissions of Tenant, its officers, employees or agents.
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b. Tenant agrees to maintain at its own expense such fire and casualty
insurance coverage as Tenant may desire or require in respect to Tenant's
personal property equipment, furniture, fixtures or inventory and Landlord shall
have no obligation in respect to such insurance or losses. All property kept or
stored on the Leased Premises by Tenant or with Tenant's permission shall be so
done at Tenant's sole risk and Tenant shall indemnify Landlord against and hold
it harmless from any claims arising out of loss or damage to same.
c. Tenant will not permit said Leased Premises to be used for any
purpose which would render the insurance thereon void or cause cancellation
thereof or increase the insurance risk or increase the insurance premiums in
effect just prior to the commencement of this lease term. Tenant agrees to pay
as additional rent the total amount of any increase in the insurance premium of
Landlord in effect prior to the resulting commencement of this Lease resulting
from Tenant use of the premises. If Tenant installs any electrical or other
equipment which overloads the lines in the Leased Premises, Tenant shall at its
own expense make whatever changes are necessary to comply with the requirements
of Landlord's insurance.
d. Each party hereto does hereby release and discharge the other party
hereto and any officer, agent, employee or representative of such party, of and
from any liability whatsoever hereafter arising from loss, damage or injury
caused by fire or other casualty for which insurance (permitting waiver of
liability and containing a waiver or subrogation) is carried by the injured
party at the time of such loss, damage, or injury to the extent of any recovery
by the injured party under such insurance.
e. Landlord shall be responsible for all exterior glass breakage from
any cause whatsoever except forced entry or Tenant's negligence and agrees to
immediately replace all glass broken or damaged during the term hereof with
glass of the same quality as that broken or damaged.
14. LIABILITY INSURANCE AND INDEMNITY. Tenant shall, during the entire term
hereof, keep in full force and effect a policy of public personal injury and
property damage liability insurance with respect to the Leased Premises, in
which the limits for such liability shall be not less than One Million Dollars
($1,000,000.00) per accident, and in which the limits for property damage
liability shall be not less than One Hundred Thousand Dollars ($100,000.00). The
policy shall name Landlord, any persons, firms or corporations designated by
Landlord and Tenant as insureds, and shall contain a clause that the insurer
will not cancel or change the insurance without first giving the Landlord ten
(10) days prior written notice. Such insurance may be furnished by Tenant under
any blanket policy carried by it or under a separate policy therefor. The
insurance shall be with an insurance company approved by landlord and a copy of
the paid-up policy evidencing such insurance or a certificate of insurer
certifying to the issuance of such policy shall be delivered to Landlord. If
Tenant fails to provide such insurance, Landlord may do so and charge same to
Tenant.
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Tenant will indemnify Landlord and save it harmless from and
against any all claims, actions, damages, liability and expense in connection
with loss of life, personal injury and/or damage to property arising from or out
of any occurrence in, upon or at the Leased Premises or from the occupancy or
use by Tenant of the Leased Premises or any part thereof, or occasioned wholly
or in part by any act or omission of Tenant, its agents, contractors, employees,
servants, sublessees, concessionaires or business invitees unless caused by the
negligence of Landlord.
Landlord shall likewise indemnify and hold harmless and defend
Tenant from and against claims arising from occurrences in parking or other
common areas around the premises known as 375 Chipeta Way occasioned wholly or
in part by any act or omission of Landlord, its agents, contractors, employees,
servants, sublessees other than Tenant, or business invitees.
15. MAINTENANCE AND REPAIR. Landlord shall maintain and repair: (1) the
premises outside the Building, including general landscaping, if any, parking
areas, driveways and walkways; (2) the Building structure including roof, walls,
floor joists; (3) the foundations of the Building; and (4) all plumbing,
electrical, heating, and air conditioning systems. However, if the need for such
repairs or maintenance results from any careless, wrongful or negligent act or
omission of Tenant, Tenant shall pay the entire cost of any such repair or
maintenance including a reasonable charge to cover Landlord's supervisory
overhead. Landlord shall not be obligated to repair any damage or defect until
receipt of written notice from Tenant of the need of such repair and Landlord
shall have a reasonable time after receipt of such notice in which to make such
repairs. Landlord shall plow snow from parking areas after each snow fall in
excess of three inches and shall keep the sidewalks and walkways reasonably
clear from ice and snow.
Tenant shall provide its own janitorial service including lamp
replacement. Tenant shall otherwise maintain the interior of the Leased Premises
and shall keep the same in a clean and sanitary condition. Tenant shall also be
responsible for the maintenance and repair of the floor coverings, wall
coverings, draperies and blinds unless the need for repair or replacement of
same is the result of structural or other causes which are the responsibility of
the Landlord.
16. SIGNS. Subject to the restrictions of the University Research Park,
Tenant, at its own expense, may place a suitable tenant identification sign on
the premises, including a monument sign near the south driveway from Chipeta
Way, provided that such sign shall be in the same general building location and
general design conforms to the same design and style of other tenant signs on
the building and provided that written approval of the sign design and proposed
location is obtained in advance from Landlord and from the University Research
Park. If any sign is erected prior to obtaining University Research Park and
Landlord approval or which does not conform to the condition herein specified,
Tenant shall be required to remove said sign and repair any damage caused
thereby at its sole cost and expense. At the termination of this Lease, Tenant
shall remove said sign and Tenant agrees that whenever its signs are removed,
Tenant shall repair any damage caused by the installation or removal thereof.
All work shall be completed in a good and workmanlike manner.
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17. KEYS AND LOCKS. Tenant may change locks or install other locks on doors
other than the common entry door, but if Tenant does so, Tenant must provide
Landlord with duplicate keys within twenty-four hours after said change or
installation. Tenant upon termination of this Lease shall deliver to Landlord
all the keys to the Leased Premises including any interior offices, toilet
rooms, etc. which shall have been furnished to the Tenant or are in the
possession of the Tenant.
18. SECURITY SYSTEM. Landlord herein consents to the installation by Tenant
of its own security system together with separate keys or locks, if any,
affecting all or a portion of the Leased Premises provided that such security
system does not interfere with the structural aspects or utility systems of the
building and provided that any damage occasioned by said installation is
repaired immediately. Upon termination of this Lease, Tenant may remove or
Landlord may require Tenant to remove said security system. In either case,
Tenant covenants to repair any damages occasioned thereby and to restore the
premises to the same condition as existed before said security system
installation.
19. CARPETING DAMAGE. Tenant agrees to take precautions not to damage
carpets in the leased premises and shall repair or replace such if damaged
beyond normal wear and tear.
20. FORCED ENTRY. Tenant shall be responsible for any damage to premises as
a result of forced entry into its space or burglary thereof to the extent such
damage is not covered by Landlord's casualty insurance.
21. DESTRUCTION. Either party hereto shall have the right to terminate this
Lease in the event of destruction of or damage to the Leased Premises which is
so extensive as to make impractical Tenant's use and occupancy thereof for a
period reasonably expected to be in excess of sixty (60) days or if more than
50% of the space is reasonably expected to be unavailable for use for in excess
of sixty (60) days. Such right of termination must be accomplished through
written notice to the other party given within thirty (30) days following the
date of destruction or damage. In the event of such termination there shall be a
proration of the rent called for herein and Landlord shall refund any excess
previously paid by Tenant. Termination shall be effective, and rent shall be
prorated as of the date on which written notice of termination is given.
In the event of any other destruction of or damage to the Leased
Premises, or in the event neither party exercises the above mentioned right of
termination, Landlord shall forthwith repair and reconstruct the Leased
Premises. During the period of damage and repair the rent required to be paid
thereunder shall be reduced proportionate to the amount of area which Tenant is
not able to occupy because of said destruction until such time as said area has
been repaired or reconstructed and written notice given to Tenant that such
space is available for occupancy. Whether or not this Lease is terminated as a
result of destruction of or damage to the Leased Premises, all insurance
proceeds realized under policies maintained by Landlord shall be the sole and
exclusive property of Landlord and insurance proceeds from policies maintained
by Tenant or Tenant's personal property shall be solely Tenant's.
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22. CONDEMNATION. As used in this Section the term "Condemnation Proceeding"
means any action or proceeding in which any interest in the Property or in the
Improvements is taken for any public or quasi-public purpose by any lawful
authority through exercise of the power of eminent domain or right of
condemnation or by purchase or otherwise in lieu thereof. If the whole of the
Leased Premises is taken through Condemnation Proceedings, this Lease shall
automatically terminate as of the date of taking. If in excess of twenty (20%)
percent of the Leased Premises is taken, either party hereto shall have the
option to terminate this Lease by giving the other written notice of such
election at any time within thirty (30) days after the date of taking. In all
other cases, or if neither party exercised its option to terminate, this Lease
shall remain in effect and the rent payable hereunder from and after the date of
taking shall be proportionately reduced on the basis of: (i) the area contained
in the Leased Premises which is capable of occupancy after the taking; and (ii)
the total area contained in the Leased Premises which was capable of occupancy
prior to the taking. In the event of any termination or rental reduction
provided for in this Section, there shall be a proration of the rent payable
under this Lease and Landlord shall refund any excess theretofore paid by
Tenant. Whether or not this Lease is terminated as a consequence of Condemnation
Proceedings, all damages or compensation awarded for a partial or total taking,
including any sums compensating Tenant for diminution in the value of or
deprivation of its leasehold estate, shall be the sole and exclusive property of
Landlord.
23. ASSIGNMENTS AND SUBLETTING. Tenant shall not have the right to assign
this Lease or any of its interest hereunder. Tenant shall have the right to
sublet the Leased Premises, or any part thereof, only with the prior written
consent of Landlord, which consent shall not be unreasonably withheld.
24. SURRENDER AND RIGHTS UPON TERMINATION. Upon termination of this Lease at
any time and for any reason whatsoever, Tenant shall surrender and deliver up
the Leased Premises to Landlord in the same condition as when the premises were
delivered to Tenant or as altered as provided in Section 2, ordinary wear and
tear excepted, and Tenant shall remove all personal property from the premises.
Tenant agrees to thoroughly clean the premises after surrender. The voluntary or
other surrender of this Lease by Tenant or a cancellation hereof with the
consent of both parties shall not automatically work a merger. Rather, such
occurrence shall, at the option of Landlord, either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
any or all of such subleases or subtenancies. Except as otherwise expressly
provided for in this Lease, as of and after the date of termination hereof for
any respect to each other, and of Tenant with respect to the Leased Premises,
shall cease. However, Tenant shall fully perform and fulfill all of its
obligations under this Lease relating to events occurring or circumstances
existing prior to the date of termination.
25. HOLDING OVER. Any holding over after the expiration of the term hereof,
with the consent of the Landlord, shall be construed to be a tenancy from month
to month at the rents and on the terms and conditions herein specified, so far
as applicable. During said month to month tenancy, Tenant agrees to give
Landlord thirty (30) days prior written notice of its intent to
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vacate the premises. Tenant agrees to completely vacate the premises upon thirty
(30) days prior written notice from Landlord.
26. RIGHT TO CURE. In the event of any breach, default, or noncompliance
hereunder by either party hereto, the other party shall, before exercising any
right or remedy provided herein or by law, given the defaulting party written
notice of the claimed breach, default, or noncompliance and allow thirty (30)
days after such written notice for the other party to cure except as may be
provide for elsewhere in this Lease, and except that Tenant shall be allowed
only five (5) days to cure a default regarding failure to pay rent or any other
sums hereunder. If the defaulting party is Landlord, and if prior to its giving
such notice to Landlord, Tenant has been notified in writing (by way of Notice
of Assignment of Rents and Leases, or otherwise) of the address of the holder of
the Mortgage (referred to in Section 9 above) then affecting Landlord's interest
in the aforesaid notice to Landlord, Tenant shall, by registered mail, transmit
a copy thereof to such holder. For the thirty (30) days following the giving of
the notice(s) required by the foregoing portion of this Section 26 (or such
longer period of time as may be reasonably required to cure a matter which, due
to its nature, cannot reasonably be rectified within thirty (30) days, the party
in default shall have the right to cure the breach, default, or noncompliance
involved. If Landlord has failed to cure a default on its part within said
period, the holder of the Mortgage then affecting Landlord's interest in the
Property and Improvements shall have an additional thirty (30) days within which
to cure the same or, if such default cannot be cured within that period, such
additional time as may be necessary if within such thirty (30) day period said
holder has commenced and is diligently pursuing the actions or remedies
necessary to cure the breach, default, or noncompliance involved (including, but
not limited to, commencement and a prosecution or proceedings to foreclose this
Lease shall not be terminated by Tenant while such actions or remedies are being
diligently pursued by said holder. If at the expiration of the applicable
period(s) provided for in this Section 26 cure has not occurred, the aggrieved
party may exercise any available right of remedy including the right to
terminate.
27. REMEDIES. In the event either party breaches or fails to perform any of
its obligations hereunder and fails to timely cure any such default with respect
to which a right to cure exists, so long as such default continues the other
party shall have the right, at its option, to exercise any of the following
applicable rights and remedies:
a. The party not in default may itself pay or perform or cause to be
paid or performed the obligation with respect to which the other is in default.
The cost of such payment or performance, including reasonable attorneys' fees
and all expense incurred, plus interest on all of said amounts at the rate of
eighteen (18%) percent per annum from the date of expenditure, shall be
immediately paid by the party in default.
b. In the event the party in default is Tenant, Landlord may terminate
this Lease, and enter the Leased Premises under due process of law. In the event
Landlord terminates this Lease pursuant to this Paragraph b, it shall also have
the right to recover from Tenant: (i) The present worth of an amount equal to
the difference between (a) all rent which would have been received hereunder
from the date of termination to the expiration of this Lease, and (b) the amount
of
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rental loss which Tenant establishes could have reasonably been avoided; and
(ii) All other amounts necessary to compensate Landlord for all damages caused
by Tenant's default or which would be likely to result from such default.
The remedies specified in this Section 27 are cumulative and are not
intended to exclude any other remedy or means of redress to which either party
may be entitled in the event of any default or threatened default by the other
with respect to any of its obligations under this Lease. The use by one of the
parties hereto of one of the remedies specified above or available under
applicable law shall not preclude such party from thereafter utilizing another
of said remedies.
28. ENFORCEMENT. In case of default by either party in the performance of
the covenants and obligations under this Lease, the defaulting party shall pay
all costs incurred in enforcing this Lease, or any right arising out of the
breach thereof, whether by suit or otherwise, including a reasonable attorneys'
fee.
29. NOTICES. Any notice required or permitted hereunder to be given or
transmitted between the parties shall be either personally delivered or mailed
postage prepaid by certified mail, return receipt requested, addressed as
follows:
To Tenant:
WAVEPHORE NETWORKS, INC.
375 Chipeta Way
Salt Lake City, Utah 84108
(801) 584-2800
To Landlord:
KAX CO.
WOODBURY CORPORATION
2677 East Parleys Way
Salt Lake City, Utah 84109
(801) 485 - 7770
Any notice which is mailed shall be effective on the second business
day following its date of mailing. Either party may, by notice to the other
given as prescribed in this Section 29, change the above address for any future
notices which are mailed under this Lease.
30. QUIET ENJOYMENT. Upon payment by the Tenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Leased Premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claimed by, through or under the Landlord,
subject, nevertheless, to the terms and conditions of this Lease, and actions
resulting from future eminent domain proceedings and casualty losses.
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31. FORCE MAJEURE. Any failure on the part of either party to this Lease to
perform any obligation hereunder, other than Tenant's obligation to pay rent,
and any delay in doing any act required hereby shall be excused if such failure
or delay is caused by any strike, lockout, governmental restriction or any
similar cause beyond the control of the party so failing to perform, to the
extent and for the period that such continues.
32. WAIVER. One or more waivers of any covenant or condition by Landlord
shall not be construed as a waiver of a subsequent breach of the same covenant
or condition and the consent or approval to or of any subsequent similar act by
Tenant. No breach of a covenant or condition of this Lease shall be deemed to
have been waived by Landlord, unless such waiver be in writing signed by
Landlord.
33. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of
a lesser amount than the amount owing hereunder shall be deemed to be other than
on account of the earliest stipulated amount receivable from Tenant, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or receivable or pursue any other remedy available under
this Lease or the law of the state where the demised premises are located.
34. PARTIAL INVALIDITY. If any term, covenant or condition of this Lease or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
35. REPRESENTATION REGARDING AUTHORITY. The persons who have executed this
Agreement represent and warrant that they are duly authorized to execute this
Agreement in their individual or representative capacity as indicated.
36. ENTIRE AGREEMENT. This Lease constitutes the entire Agreement and
understanding between the parties hereto and supersedes all prior discussions,
understandings and agreements. This Lease may not be altered or amended except
by a subsequent written amendment executed by all parties.
37. MISCELLANEOUS PROVISIONS. This instrument shall not be recorded without
the prior written consent of Landlord. The captions which precede the Sections
of this Lease are for convenience only and shall in no way affect the manner in
which any provisions hereof are construed. To the extent permitted by the
provisions hereof, all reservations, terms, conditions and covenants herein
contained shall be binding upon and shall insure to the benefit of the
respective heirs, personal representatives, successors, and assigns of the
parties hereto. In the event there is more than one Tenant hereunder, the
liability of each shall be joint and several. This instrument shall be governed
by and construed in accordance with the laws of the State of
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Utah. Words of any gender, and words in the singular number shall be held to
include the plural when the sense requires. Time is of the essence of this Lease
and every term, covenant and condition herein contained.
38. SECURITY DEPOSIT. The Landlord acknowledges receipt of $32,640.00
which it is to retain as security for the faithful performance of all the
covenants, conditions and agreements of this Lease, but in no event shall the
Landlord be obligated to apply the same upon rents or other charges in arrears
or upon damages for the Tenant's failure to perform the said covenants,
conditions and the leased premises for non-payment of rent or for any other
reason shall not in any event be affected by reason of the fact that the
Landlord holds this security. The said such, if not applied toward the payment
or rent in arrears or toward the payment of damages suffered by the Landlord by
reason of the Tenant's breach of the covenants, conditions and agreements of
this Lease, is to be returned to the Tenant without interest when this Lease is
terminated, according to these terms.
In the event that the Landlord repossesses the leased premises because of the
Tenant's default or because of the Tenant's failure to carry out the covenants,
conditions and agreements of this Lease, the Landlord may apply the said
security toward damages as may be suffered or shall accrue thereafter by reason
of the Tenant's default or breach. The Landlord shall not be obligated to keep
the said security as a separate fund, but may mix the said security with its own
funds.
39. TENANT IMPROVEMENT ALLOWANCE. Landlord shall prior approve plans and
contractor for Tenant's proposed improvements, including the remodeling of the
south dock area, as provided in Section 2 of this lease. Landlord agrees to
provide Tenant an allowance of $60,240.00 towards the cost of any and all
remodeling, and Tenant shall pay any costs in excess of $60,240.00. Said
allowance shall be disbursed directly to contractors or material suppliers, or
as reimbursement to Tenant upon receiving evidence of paid bills and Landlord's
inspection of completed work.
40. OPTION TO RENEW. Tenant shall have the option to renew this lease for
one additional 5 year period to and including July 31, 2006 by giving Landlord
written notice of its intent to renew on or before January 31, 2001. This option
is subject to Landlord and Tenant mutually agreeing on rents, etc. for the
renewal term on or before April 30, 2001.
16
<PAGE> 17
EXECUTED the day and year first above written.
LANDLORD: TENANT:
KAX COMPANY, WAVEPHORE NETWORKS, INC.
A UTAH LIMITED LIABILITY COMPANY A DELAWARE CORPORATION
By: By:
---------------------------------- ---------------------------
Orin R. Woodbury, Attorney-in-Fact Scott E. Calder, President
By: By:
--------------------------------- ---------------------------
Oliver M. Aston, Attorney-in-Fact Mitchell J. Rasmussen,
Vice President, Finance & CFO
17
<PAGE> 18
LANDLORD ACKNOWLEDGMENT
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On this day of , 1996, before me personally appeared
ORIN R. WOODBURY and OLIVER M. ASTON, to me personally known, who being by me
duly sworn, did say that they are Attorney-in-Fact of that certain partnership
known as KAX CO., and that the within instrument was executed by them, for and
on behalf of said partnership.
______________________________
Notary Public
Residing at: _________________
My commission expires: _________________
TENANT ACKNOWLEDGMENT
STATE OF UTAH )
)ss.
COUNTY OF )
On this day of , 1996 before me personally appeared
Scott E. Calder, and Mitchell J. Rasmussen, to me personally known to be the
President and Vice President, Finance & CFO of WAVEPHORE NETWORKS, INC, the
corporation that executed the within instrument, known to be the persons who
executed the within instrument on behalf of said corporation therein named, and
acknowledged to me that such corporation executed the within instrument
pursuant to its by-laws or a resolution of its board of directors.
______________________________
Notary Public
Residing at: _________________
My commission expires: _________________
18
<PAGE> 19
EXHIBIT "A" SITE PLAN
19
<PAGE> 20
EXHIBIT "A-1" - FLOOR PLAN
20
<PAGE> 21
EXHIBIT "B" - PROPERTY DESCRIPTION
PARCEL A
(Gap at Chipeta Way)
(University of Utah Lease to KAX)
Beginning at a point on the east line of Chipeta Way due West
570.417 feet and due North 14.022 feet from a monument at the Northeast Corner
of the Ft. Douglas Cemetery, said Northeast Corner being North 47 degrees 49
minutes 55 seconds West 3246.84 feet from the Southeast Corner of Section 3,
Township 1 South, Range 1 East, Salt Lake Base and Meridian, (according to
B.L.M. Survey) and running:
Thence northwesterly 165.106 feet along the arc of 2273.247
foot radius curve to the left (center bears South 53 degrees 09 minutes 41
seconds West and long chord bears North 38 degrees 55 minutes 10 seconds West
165.070 feet) along said east line;
Thence North 41 degrees 00 minutes 00 seconds West 34.045 feet
along said east line;
Thence North 2 degrees 22 minutes 30 seconds East 13.387 feet
Thence South 36 degrees 50 minutes 19 seconds East 209.289
feet to the point of beginning.
Contains 619 square feet, 0.0142 acres.
PARCEL C
(Remaining Portion of Parcel 2)
Beginning at a point South 67 degrees 14 minutes 36 seconds
West 188.786 feet from a monument at the Northeast Corner of the Ft. Douglas
Cemetery, said Northeast Corner being North 47 degrees 49 minutes 55 seconds
West 3246.84 feet from the Southeast Corner of Section 3, Township 1 South,
Range 1 East, Salt Lake Base and Meridian, (according to B.L.M. Survey) and
running:
Thence South 67 degrees 14 minutes 36 seconds West 79.784
feet;
Thence northwesterly 328.525 feet along the arc of 247.940
foot radius curve to the right (center bears North 22 degrees 45 minutes 24
seconds West and long chord bears North 74 degrees 47 minutes 51 seconds West
305.015 feet) to the east line of Chipeta Way;
Thence North 36 degrees 50 minutes 19 seconds West 256.677
feet along said east line to the proposed south line of Wakara Way;
21
<PAGE> 22
Thence North 2 degrees 22 minutes 30 seconds East 20.951 feet
along said south line;
Thence North 45 degrees 45 minutes 00 seconds East 253.875
feet along said south line;
Thence South 36 degrees 50 minutes 19 seconds East 565.559
feet to the point of beginning;
Contains 129,171 square feet, 2.9654 acres.
PARCEL D
(Gap at Wakara and Colorow)
(University of Utah Lease to Kax)
Beginning at a point South 67 degrees 14 minutes 36 seconds West 188.786 feet
and North 36 degrees 50 minutes 19 seconds West 564.383 feet from a monument at
the Northeast Corner of the Ft. Douglas Cemetery, said Northeast Corner being
North 47 degrees 49 minutes 55 seconds West 3246.84 feet from the Southeast
Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and
Meridian, (according to B.L.M. survey) and running;
Thence North 36 degrees 50 minutes 19 seconds West 1.178 feet
to the proposed south line of Wakara Way;
Thence North 45 degrees 45 minutes 00 seconds East 323.972
feet along said south line;
Thence South 84 degrees 48 minutes 19 seconds East 37.989 feet
along said south line to west line of the proposed Colorow Way;
Thence South 35 degrees 21 minutes 39 seconds East 637.162
feet along said west line;
Thence northwesterly 521.207 feet along the arc of a 2887.180
foot radius curve to the right (center bears North 48 degrees 31 minutes 28
seconds East and long chord bears North 36 degrees 18 minutes 14 seconds West
520.499 feet);
Thence South 53 degrees 09 minutes 41 seconds West 220.000
feet;
Thence North 86 degrees 50 minutes 12 seconds West 153.920
feet to the point of beginning
Contains 42,826 square feet, 0.9831 acres.
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,832
<SECURITIES> 0
<RECEIVABLES> 3,688
<ALLOWANCES> 669
<INVENTORY> 2,755
<CURRENT-ASSETS> 17,845
<PP&E> 3,038
<DEPRECIATION> 914
<TOTAL-ASSETS> 37,996
<CURRENT-LIABILITIES> 3,187
<BONDS> 1,680
25,200
0
<COMMON> 52,013
<OTHER-SE> (43,356)
<TOTAL-LIABILITY-AND-EQUITY> 37,996
<SALES> 8,648
<TOTAL-REVENUES> 8,648
<CGS> 5,301
<TOTAL-COSTS> 5,301
<OTHER-EXPENSES> 8,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,967)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,967)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> (.42)
</TABLE>
